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Islamabad May Halt Iran-Pakistan Gas Pipeline Project Due To U.S. Sanctions

Birds sit on a gas pipeline with 'Peace' written in Persian during the inauguration ceremony of a gas pipeline in the city of Chabahar, south-western Sistan-Beluchistan province, March 11, 2013

Pakistan has informed Iran of its inability to abide by the agreement to build a gas pipeline planned to carry Iran’s natural gas to Pakistan and India, due to U.S. sanctions, Pakistan’s leading English language Dawn newspaper reported last week.

Construction work on the Pakistani part of the pipeline was inaugurated in March 2013 and was planned to be completed within 22 months. But the work could not get underway after six years.

Another leading Pakistani English language newspaper The News International, quoting Arab News, reported that Pakistan has informed Iran on Friday that it cannot execute the project as long as Tehran remains under the U.S. sanctions regime.

Quoting Managing Director of Pakistan’s Inter State Gas, Mobin Saulat, the report states that “it is impossible to execute the IP (Iran-Pakistan) gas pipeline project because of U.S. sanctions on Iran and we have conveyed it to them (Iran) in writing recently.”

In February this year, Tehran formally issued a notice to Islamabad warning of going to an arbitration court if Pakistan failed to lay down the pipeline as mentioned in the bilateral agreement.

Nevertheless, according to pro-government Daily Pakistan, Pakistan's Prime Minister Imran Khan has sent letters to the leaders of EU and the United States asking for their final views about the pipeline and Pakistan's plans to buy natural gas from Iran.

Pakistan officially had declared its inability to complete the project in a letter to Iran on Friday, May 10. However, the Pakistani Prime Minister told Western powers in his letter on Sunday that "Pakistan is committed to executing the project, but only if international sanctions on Iran are lifted," reported ARY News on Sunday.

The idea of the Iran-Pakistan pipeline, also called the Piece Pipeline, started in 1995 and India also agreed in 1999 to join the project. Eventually, the project which started between Pakistan and Iran under President Mahmoud Ahmadinejad in 2009 was frozen in 2013 due to the imposition of international sanctions against Iran. It was revived again in 2017 after the U.S. lifted most of its sanctions following the 2015 nuclear agreement.

Based on the initial contract, Pakistan should have purchased 21.5 million cubic meters of LNG per day from Iran since 2015. But the pipeline has not been laid yet on the Pakistani side although Iran has completed its part. Under the gas pipeline deal each party had to lay down the pipeline on its territory.

Iran has complained repeatedly that Pakistan should have paid $200 million per month for its failure in taking delivery of natural gas from Iran.

According to ARY News on Sunday, Pakistan replied to Iran’s legal notice over the delay in the completion of the pipeline, telling Tehran that there were obstacles in execution of the project, as Tehran is under U.S. sanctions. However, Imran Khan has reportedly directed Pakistani authorities to tackle the gas line project issue with Iran "in a conciliatory manner."