Pakistan Accelerates IP Pipeline Project to Avoid $18 Billion Penalty Despite US Sanctions


Islamabad: Pakistan has committed to completing the first phase of the Iran-Pakistan (IP) gas pipeline project within its territory to avoid a potential $18 billion penalty, despite facing sanctions from the United States. Iran has granted an extension of 180 days until September 2024 to complete the project, aiming to prevent litigation in international courts and maintain diplomatic relations.

To satisfy Iran, Pakistan has decided to proceed with the construction of the IP gas pipeline within its borders, despite the challenges posed by US sanctions. The Petroleum division is seeking approval from the cabinet to commence work on the project, and the Board of Gas Infrastructure Development Cess (GIDC) has been directed to expedite the financing process.

The government is displeased with fertiliser manufacturers who have accumulated funds intended for pipeline projects like IP but have not deposited them into the national exchequer. Despite court orders, they have refused to pay, leading to a shortfall in funds required for infrastructure projects.

Iran claims to have spent $2 billion on its part of the pipeline, while Pakistan has yet to commence construction. The decision to proceed with the IP pipeline project within Pakistan’s territory comes after previous plans to include it in the LNG Gwadar Pipeline project were shelved due to pressure from Saudi Arabia and the US.

Historically, Pakistan and Iran have maintained good relations, with past agreements such as the Gas Sales Purchase Agreement (GSPA) signed during the PPP government. However, challenges, including US sanctions and payment issues, have hindered bilateral cooperation in the energy sector.
Story by Zafar Bhutta

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