ISLAMABAD: Pakistan has sought the suspension of its contractual obligations in the multi-billion-dollar Iran-Pakistan (IP) gas pipeline project, Minister of State for Petroleum Dr. Musadiq Malik said in a testimony to parliament seen by Arab News on Monday, citing US sanctions on the project as the main hurdle toward Pakistan meeting its side of the bargain.

Discissions to build the 2,775-kilometer pipeline to deliver natural gas from Iran to Pakistan began in 1995 but it has not been completed yet mainly due to lack of funds in Pakistan and complications posed by US sanctions over Iran’s nuclear activities.

Under an agreement signed between the two countries in 2009, the gas pipeline project was to be completed by December 2014 and would deliver 21.5 million cubic meters (760,000 million cubic feet) of gas per day to Pakistan. It was to be constructed using a segmented approach, which means Iran had to lay down the pipeline on its side and Pakistan was supposed to build the pipeline on its territory.

In written testimony to the National Assembly, Malik said work on the pipeline was stalled due to US sanctions on Iran and project activities would begin once they the bans were removed and did not pose a danger to Pakistan’s state-owned entities.

“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,” Malik wrote, adding that Iran disputes the validity of the notice.

Force majeure is a clause included in contracts to remove liability for unforeseeable and unavoidable catastrophes that interrupt expected course of events and prevent participants from fulfilling obligations.

“The matter will be finally settled through arbitration, should Iran take this matter to arbitration,” Malik said. “The exact amount of penalty, if any, is subject to the outcome of the arbitration to be determined by the arbitrators.”

Malik said the Pakistani government was engaged with US authorities through diplomatic channels to seek an exemption from sanctions for the gas project.

“All necessary actions are being taken to construct the gas pipeline at the earliest,” he added.

Last week, during a visit to Pakistan, Iranian Foreign Minister Hossein Amirabdollahian urged Islamabad to complete its part of the much-delayed project. 

Under a penalty clause, Pakistan is bound to pay $1 million per day to Iran from January 1, 2015 for failing to complete the pipeline’s construction on its territory. If Iran takes the case to an arbitration court, Pakistan will likely to have to pay billions of dollars as penalty.