On Monday, Pakistan issued a notice of ‘Force Majeure and Excusing Event’ to Iran to suspend its contractual obligation, saying that the construction of the IP gas pipeline, also known as Peace pipeline, could resume only after international sanctions against Iran are lifted.
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Iran has said to have completed its side of the 1,150-kilometer pipeline for which groundbreaking ceremony was jointly conducted by then presidents Asif Ali Zardari and Dr Mahmoud Ahmadinejad on the Iranian site of Gabd, near Chahbahar in March 2013. Back then it was estimated to have a cost of $7.5 billion.
In January 2015 Pakistan had committed to complete its side of the project, however, in February 2014 then petroleum minister Shahid Khaqan Abbasi told the Pakistani parliament that the Iran-Pakistan project was “off the table” due to international sanctions.
Hence, it came as no surprise that Iran is not happy with Pakistan's latest announcement.
Iranians work
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Just last week, Iranian Foreign Minister Hossein Amir Abdollahian during his three-day visit to Islamabad highlighted the need for completion of the project saying it would serve the national interests of the two countries.
According to a report by Dawn, both the countries had agreed to increase bilateral trade to $5 billion in five years and Abdollahian said the two sides held talks on how to find solutions to some existing banking and financial problems between the two countries within the framework of the international rules and regulations.
Now it remains unclear what will Iran do having finished a functioning but useless gas pipeline, which had cost millions of dollars, time and man-power to construct? Sputnik India spoke with a former Brigadier in Pakistan Army and political observer, Ahmed Abbas, who shed light on the situation.
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"Pakistan's standpoint is weak and violative of the contractual provisions. In case Iran takes it to the Court of Arbitration, Pakistan might be clamped with heavy penalties apart from losing face," Abbas said.
Earlier, Tehran threatened to file an $18 billion lawsuit against Islamabad in international arbitration for non-fulfillment of its obligations under this project. In this regard, the Pakistani Foreign Ministry appealed to the United States to provide funds to pay a possible fine for an unfinished gas pipeline or to allow Islamabad to purchase gas from Tehran, but the US side left this request unanswered.
Looking at the US interference in Pakistan's decision regarding the gas deal with Iran, the observer told Sputnik India, "As it is, US sanctions have not deterred countries like China, India, Russia, EU, UAE, etc. from conducting trade activities with Iran. Pakistan should have shown more spine, considering its ongoing energy crisis apart from a deep economic recession."
However, since the early stage of this project with Iran the US was adamant at creating issues for Pakistan.
In January 2010, the US asked Pakistan to abandon the pipeline project, saying that if canceling the project, Pakistan would receive assistance from the United States for construction of a liquefied natural gas terminal and importing electricity from Tajikistan through Afghanistan's Wakhan Corridor.
However, in March 2010 in Ankara, Iran and Pakistan signed an agreement on the pipeline.
Then in 2012, it was reported through unnamed diplomatic sources in Islamabad that Saudi Arabia was offering to deliver an "alternative package" to Pakistan if the country abandoned its cooperation with Iran. In addition to oil the package would also include a cash loan and oil facility. The news came in connection with a visit to Pakistan by the Saudi deputy foreign minister.
Once again in 2013, the US consul general Michael Dodman threatened Pakistan with economic sanctions if it did not abandon the Iran-Pakistan gas project. Dodman explained that because Iran continued to violate the Nuclear Non-Proliferation Treaty, the US cannot support Pakistan pursuing the project.
However, US Ambassador to Pakistan Richard Olson at the time promised that the US State Department would be the primary sponsor of the prospective Bhasha dam, which he hoped would alleviate some of Pakistan’s energy crisis.
In late October 2013, Sustainable Policy Development Institute published a report in which the proposed Iran-Pakistan pipeline was termed as "death sentence" for Pakistan.
Hence, the project has been mired by controversies since a decade and now with its abandonment Pakistan is facing difficult circumstances because its indigenous gas supplies are depleting rapidly, whereas the demand of gas is increasing every year, thus widening the demand-supply gap.
According to the former brigadier, "Bilateral diplomatic efforts to placate Iran might be helpful and possibly the only solution in gaining more time or finding a compromise deal."