US sanctions: Pakistan refuses to work on gas pipeline project with Iran

ISLAMABAD: Pakistan on Friday informed Iran in writing that it cannot execute the Iran-Pakistan gas pipeline project as long as Tehran is under United States sanctions regime, the Arab News reported.

According to Mobin Saulat, the Managing Director of Inter State Gas, “Under present US sanctions on Iran, it is impossible to execute the IP [Iran-Pakistan] gas pipeline project and we have conveyed it to them [Iran] in writing recently.”

In February this year, a new round of negotiations were launched between Pakistan and Iran after Tehran formally issued a notice to Islamabad and said it is moving an arbitration court against Pakistan for failing to lay down the pipeline in Pakistani territory in the time frame stipulated in the bilateral agreement. “We have time till August this year to legally respond to Iran’s legal notice and settle the issue through negotiations,” Saulat said. “We are hopeful to find a solution through discussions with Iranian officials.” Saulat further said, Pakistan is still committed to executing the project, but only if international sanctions on Iran are lifted. “We cannot risk US sanctions by going ahead with the project as America has clearly said that anybody who will work with Iran will also be sanctioned,” he said. Saulat said, Iranian authorities are of the view that US sanctions did not apply to the IP gas project, adding that Pakistan had thus sent Tehran a questionnaire to ascertain exactly how that was the case. “We may not have a weak case if Iran moves the international court,” Saulat said. “We are trying to handle it professionally.”

President Donald Trump on Wednesday imposed new US sanctions targeting Iran’s revenue from export of industrial metals and threatened further action unless Tehran “fundamentally” changed its behaviour. According to the agreement signed between Pakistan and Iran in 2009, the Iran-Pakistan gas pipeline project was to be completed by December 2014 and would deliver 21.5 million cubic meters of gas per day to Pakistan.

The pipeline was to be constructed using a segmented approach, with Iran having to lay down the pipeline on its side and Pakistan to build the pipeline on its territory. Under a penalty clause of Gas Sales Purchase Agreement, Pakistan is bound to pay $1 million per day to Iran from January 1, 2015, for failing to build its part of the pipeline. If Iran takes the case to an arbitration court, Pakistan is likely to have to pay billions of dollars as a penalty.