Pakistan shelves multi-billion dollar gas pipeline project with Iran under pressure from US: Report
Pakistan has temporarily shelved the multi-billion dollar gas pipeline project to import cheap energy from neighbouring Iran, apparently under pressure from the US which has imposed sanctions against Tehran over its nuclear programme, according to a media report on Monday.
The development comes as Pakistan struggles to put its cash-strapped economy in order with the help of the International Monetary Fund, which agreed to provide USD 3 billion in loan.
The project was initially conceived as an India-Pakistan-Iran gas pipeline, but later, India left it and became a bilateral project between Pakistan and Iran.
The sanctions imposed by the US on Iran over its nuclear programme have deterred Pakistan from constructing the pipeline.
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Pakistan has issued a Force Majeure and Excusing Event notice to Iran under the Gas Sales and Purchase Agreement (GSPA), which resultantly suspends Pakistan's obligations under the GSPA," according to a written testimony Minister of State for Petroleum Musadik Malik has given to the National Assembly.
In a policy statement placed on the floor of the lower house of Parliament, the minister also put on record that
Iran disputed the notice of force majeure and excusing event.
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The Iran Pakistan Gas Pipeline Project is stalled due to international sanctions on Iran," said Malik clarifying the project activities will begin once sanctions on Iran are removed and there is no threat that State Owned Entities (SOEs) would be hit by sanctions.
"Given that, no date and deadline can be given for the completion of the Iran-Pakistan Gas Pipeline Project," he added.
At the same time, the petroleum minister also conceded that Pakistan's notice of force majeure and excusing event and Iran disputing its validity
could only be finally settled through international arbitration, should Iran take this matter to arbitration.
As a consequence, "the exact amount of penalty, if any, is subject to the outcome of the arbitration to be determined by the arbitrators", he said.
The development comes as Pakistan struggles to put its cash-strapped economy in order with the help of the International Monetary Fund, which agreed to provide USD 3 billion in loan.
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Iran must initiate arbitration proceedings immediately. There are no relevant "international" sanctions against Iran that would prohibit Pakistan from complying with its obligations under the GSPA (only US sanctions + some EU sanctions).
