Iran-Pakistan gas pipeline project: Another false start?

Here are the questions on everyone’s minds when it comes to the Iran-Pakistan (IP) gas pipeline. Is the project just cursed to fail? Or can Pakistan go through with it? Most importantly, does it truly want to?

It all began in 1994 with a Pakistan, India and Iran partnership, but by 1998, the US weighed in heavy on both South Asian states to abandon the project when it declared Iran a pariah in global affairs. India caved in to US pressure after oil minister Mani Shakar Aiyar’s initial resistance, and Aiyar and the IPI project both exited from India’s energy scene. 

Almost 30 years later, Pakistan though still with the project, has been less engaged than entirely disengaged with it. Beyond Pakistan’s mostly hallmark sluggishness, the shadow of US sanctions on Iran has prompted Pakistan to keep it on the back-burner. 

Beyond Pakistan’s mostly hallmark sluggishness, the shadow of US sanctions on Iran has prompted Pakistan to keep it on the back-burner. 

- Nasim Zehra

Some things do seem to be changing now. But how much and to what end?

Pakistan’s most definitive step since the 2004 project signing was 11 years ago when President Asif Ali Zardari went to the Iran-Pakistan border town to inaugurate the IP project construction. Pakistan was to build a 750 km pipeline. Now, in March 2024, Pakistan has after a decade of uncertainty, again signalled its intent to go ahead with the pipeline project. In fact, it was during the caretaker government’s tenure that four important steps were taken to signal Pakistan’s renewed intent to implement the pipeline project. 

One, after having been put on notice by Iran for the second time for violating the completion clause of the contract, Pakistan’s key military and civilian decision-makers re-engaged on the IP project. Two, Pakistan’s caretaker oil minister made two trips to Iran to pick up the threads on the IP project with Iran. With his counterpart in Tehran, the minister discussed details on logistics, modalities and implementation framework in the face of American sanctions on Iran. Three, the caretaker cabinet took the decision to restart the long-stalled IP project. Four, Pakistan’s caretaker foreign minister told the Iranian foreign minister that Iran must withdraw the notice served to Pakistan claiming demurrage for violating the project completion clause, since Pakistan had decided to complete the project.

With US sanctions still active, Pakistan needs to explore options for circumventing the impact of those sanctions. Countries like Turkiye and Oman are importing Iranian gas despite the sanctions. There are ample precedents of indirect options taken up by countries to avoid the sanctions. However, these require rigorous work by concerned countries to identify appropriate logistical, legal and financial steps to work those options. Whether Pakistan has taken such steps remains unclear. Not much is evident beyond verbal affirmations to actually pursue alternatives. For example, Pakistan still needs to thoroughly familiarize itself with the exact steps taken by Turkiye or Oman to take the barter route and go acquire Iranian gas.

Similarly, on the critical legal aspect, hard work is required by the Pakistan government. It must engage legal firms with international experience in the energy sector and with working on US sanctions regimes especially. Mere statements by senior Pakistani officials claiming that they have raised the sanctions issues with US officials is no measure of the government’s seriousness to actually deal with the US sanctions hurdle and actually acquire desperately needed gas for Pakistan.

Just last month, US State department official Donald Lou testified before the subcommittee of the US House Committee on Foreign Affairs and conveyed that Pakistan had not asked for a sanctions waiver to carry through with the Iran-Pakistan pipeline project. The administration, he also said, had no indication of Pakistan actually pursuing the IP project. Washington he said, hoped that Pakistan would go ahead with the IP project. Contrary to Lou’s statement, Pakistan’s officials had earlier claimed that Pakistan had actually raised the sanctions issue with the US ambassador in Islamabad.

Now following the Lou testimony, Pakistan’s newly elected energy minister maintained the country would formally approach the US administration for the sanctions waiver. However emphatically the minister may communicate Pakistan’s intentions to the Pakistani media, the real question is whether Pakistan has done its homework before approaching for a waiver.

Boisterous statements and a half-baked plea won’t work.

If these statements are not merely seeking a push-back on the roughly $18 billion Iranian fine that will be slapped on Pakistan if the IP project isn’t completed by September of this year, then Pakistan needs to thoroughly and professionally prepare its case for the sanctions waiver or find an alternative approach to completing the IP project.

Pakistan ought to step out of its reactive and fearful mode while handling this crucial project, and take it to its successful implementation.

- Nasim Zehra is an author, analyst and national security expert. Twitter: @NasimZehra