Pakistan To Proceed With Iran Gas Pipeline Despite US Sanctions

Mumtaz Zahra Baloch, the spokesperson for Pakistan's Foreign Ministry said, "It is a segment of the pipeline which is being built inside Pakistani territory. So, we do not believe that at this point there is room for any discussion or waiver from a third party."

The statement comes in response to remarks made by Donald Lu, the US assistant secretary of state for South and Central Asia, during a hearing of the House Foreign Affairs Committee on Wednesday. Lu indicated that the US was monitoring the planned pipeline and highlighted that Pakistan had not requested a sanctions waiver for engaging in gas trade with Iran. "We have also not heard from the government of Pakistan [on a] desire for any waiver for American sanctions that would certainly result from such a project," Lu remarked.

Pakistan's outgoing caretaker government recently granted approval to initiate construction on an 80-kilometer section of the pipeline. The decision was largely motivated by the desire to circumvent substantial penalties owed to Iran due to delays in the $7 billion project, which has been in discussions since the mid-1990s.

The Gas Sales and Purchase Agreement, signed between Pakistan and Iran in June 2009, aimed to address Pakistan's energy shortages by supplying gas from Iran's South Pars Field. However, the project faced numerous suspensions amid fears of incurring US sanctions for energy imports from Iran, which is subjected to US banking sanctions due to its nuclear program.

With Tehran repeatedly warning of international arbitration and imposing hefty penalties nearing $18 billion for breach of contract, Pakistan was under pressure to meet Tehran's deadline of commencing construction by March 2024. It is not clear how Tehran is planning to export more gas while its own consumers suffer from shortages. Lack of technology and investments steadily reduce Iran's gas production.