Iran-Pakistan Gas Pipeline: What's on the cards for the ambitious project?

The pipeline, worth $7.5 billion, having a capacity to carry 750 million cubic feet of natural gas per day was expected to be operational by 2014. (Representational Image)

The decades-long ambitious gas pipeline project between Iran and Pakistan might conclude after Pakistan hinted "active engagement" with Iran.

On August 9, Pakistan announced that they are actively engaged in talks with Iran to prevent international arbitration over the construction of a pipeline. While Iran has moved forward with its portion of the project, Pakistan is facing pressure from the US and Saudi Arabia and must prioritise its energy security. Nonetheless, as per recent reports, negotiations are ongoing.

History

The pipeline, worth $7.5 billion, with a capacity to carry 750 million cubic feet of natural gas per day was expected to be operational by 2014. However, the project has been under discussion between Iran and Pakistan since 1994. Iran signed a preliminary agreement with Pakistan in 1995. Later, on Iran’s suggestion, the countries planned an extension of the pipeline from Pakistan to India. Agreed upon, the countries signed a preliminary agreement with India in February 1999.

The project was termed as Iran-Pakistan-India (IPI) Gas Pipeline and many experts described it as a 'Peace and Prosperity Gas Pipeline'. The three countries held several meetings and agreed on prices and other related issues.

Fear of sanctions 

In 2008, India signed a nuclear deal with the US and the next year it withdrew from the project over pricing and security issues.

In January 2010, the United States asked Pakistan to abandon the pipeline project as Iran is considered to be the geopolitical foe of the US. According to reports, the Obama administration assisted Pakistan from the US with the construction of a liquefied natural gas terminal and importing electricity from Tajikistan through Afghanistan’s Wakhan Corridor if they abandon the project.

Moreover, in 2012, Saudi Arabia tried to pressure Pakistan to abandon the gas pipeline and offered oil supplies and also an oil facility and an oil terminal.

Iran is under three types of international sanctions regarding its pursuit of nuclear activities. One set of sanctions is imposed by the UN while the other set is US-backed sanctions, which have full support from the European Union.

In 2014, Pakistan gave the idea that the gas pipeline issue was off the table due to international sanctions on Iran.

Pakistan acknowledged that the US and the UN sanctions on Iran had deterred cash-strapped Pakistan from laying the pipeline from the Iranian border to Nawabshah in southern Sindh province since signing the agreement with the Iranian government in 2013.

According to the initial bilateral agreement, if Islamabad does not complete its part of the project by the end of 2014, it would have had to pay a daily penalty of $1 million to Iran until its completion.

Earlier this year, Tehran warned Islamabad that if it failed to complete its section of the project by March 2024, it would be required to pay a penalty of about $18 billion.

The first 902-kilometre (560 mi) part of this section runs from Asalouyeh to Iranshahr. The second 270-kilometre (170 mi) part runs from Iranshahr to the Iran–Pakistan border. In Pakistan, the length of the pipeline is 785 kilometres (488 mi).

Now what? 

During his recent visit to Washington, Pakistan's Minister of State for Petroleum Musadik Malik brought up the crucial issue with US officials. As per a report in Dawn citing diplomatic sources, Malik emphasised that his country is obligated to finish the project by March 2024 or incur hefty penalties amounting to billions of dollars. According to these sources, “Washington is still reviewing the request.”

"We are using all of our creative thinking, as well as the legal instruments available, as well as the foreign policy instruments available, to make sure that Pakistan under no circumstances comes under sanctions," said Malik.

"Pakistan was committed to the Pak Stream Pipeline project. The two sides are negotiating outstanding issues," the minister said, according to Dawn.

Iranian Foreign Minister Hossein Amirabdollahian, who was on a three-day visit to Islamabad, spoke on the matter during a televised news conference with his Pakistani counterpart and host Bilawal Bhutto Zardari.

“We do believe that the completion of the Iran-Pakistan gas pipeline is definitely going to serve the national interests of our two countries,” Amirabdollahian said.