The Shadow of Sanctions on the Iran-Pakistan Gas Pipeline Project; The U.S. Warns About the Risks of Trade with Tehran

At the end of Iranian President Ebrahim Raisi's visit to Pakistan, a joint statement was issued emphasizing the importance of cooperation in the energy sector, including electricity trade, power transmission lines, and the gas pipeline project. According to Reuters, the implementation of the major gas pipeline contract between the two neighboring countries mentioned in the statement has been delayed due to geopolitical issues and international sanctions. Meanwhile, the U.S. once again warned Pakistan about trading with the Islamic Republic given the international sanctions against Tehran. Vedant Patel, Deputy Spokesperson for the U.S. State Department, said on Tuesday, April 23, that any party intending to conduct business with Iran should be aware of the potential risks of sanctions. However, ultimately, the Pakistani government can act according to its foreign policy objectives. Reuters reported that the gas pipeline project between the Islamic Republic of Iran and Pakistan, also known as the 'Peace Pipeline,' was signed in 2010 and is intended to supply 750 million to 1 billion cubic feet of natural gas daily for 25 years from Iran's South Pars gas field to Pakistan to meet the country's increasing energy needs. The pipeline will be over 1,900 kilometers long, with 1,150 kilometers to be built inside Iran and 781 kilometers inside Pakistan. Reuters noted that Tehran claims to have currently invested $2 billion in constructing this gas pipeline in Iran and is preparing it for export. However, according to the report, Pakistan has not started construction on the pipeline and shortly after the agreement stated that due to international sanctions against the Islamic Republic, this project is currently not being implemented. In response, the Iranian Oil Minister at that time stated that Iran has fulfilled its commitments and expects Pakistan to adhere to its obligations. In this regard, Pakistan requested a 10-year extension for the construction of this pipeline in 2014, which will expire this summer. According to Reuters, Iran could file a lawsuit against Pakistan in an international court and seek compensation. In this context, local media reported that Pakistan could face fines of up to $18 billion for not adhering to the agreement. For this reason, the interim government of Pakistan issued a permit for the construction of an 80-kilometer section of this pipeline earlier this year to avoid a lawsuit from Tehran and consequently paying compensation. Subsequently, Islamabad stated in April this year that it is trying to obtain a waiver from U.S. sanctions for the construction of this pipeline, but the United States said it does not support this project and warned about the risks of sanctions in trading with Tehran. According to the report, the next phase of the pipeline construction plan included extending the pipeline to India, but New Delhi withdrew from it. Reuters pointed out that U.S. support is very important for Pakistan as the country seeks to sign a new long-term bailout program with the International Monetary Fund. This comes at a time when Pakistan, whose household and industrial consumers rely on natural gas for heating and energy needs, is in dire need of cheap gas. According to the global energy statistical review by British Petroleum, Iran has the second-largest gas reserves in the world after Russia, but Western sanctions, political turmoil, and construction delays have slowed the country's development as a major exporter. Simultaneously with Raisi's visit to Pakistan and Sri Lanka; Argentina called for the arrest of the Iranian Minister of Interior in Pakistan, Israel threatened to destroy Raisi, and the U.S. rejected the issuance of a sanctions waiver for Pakistan regarding the construction of the Iranian gas pipeline.