Pakistan postpones multi-billion dollar gas pipeline project with Iran

Islamabad, Aug 7 (EFE).- Pakistan has postponed its multi-billion gas pipeline project with Iran until international sanctions on Iran are lifted, official sources said Monday.

Minister of state for energy, Musadik Malik, said no date or deadline could be given to resume the project as the country would abide by the sanctions imposed on Iran, mainly by the United States.

“Currently the project is stalled due to international sanctions on Iran and we have been compelled to put it on hold,” Malik told EFE.

The minister, addressing the lower house of the parliament, on Friday, disclosed that Pakistan had called upon Iran to suspend its contractual obligation on the Iran-Pakistan (IP) gas pipeline project due to external factors.

“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 said before the National Assembly.

In legal terms, force majeure is a provision in a contract that frees both parties from obligation if an extraordinary event directly affects one or both parties.

However, Malik added that Iran had disputed the validity of the notice leading to the possibility of settling the issue through international arbitration if Iran took that route.

He said “the exact amount of penalty, if any, is subject to the outcome of the arbitration to be determined by the arbitrators.”

The minister revealed that despite being fully committed to its contractual obligations, Pakistan had been unable to start construction of the pipeline due to the sanctions on Iran.

“The Government of Pakistan is engaged with the US authorities, through diplomatic channels, to seek exemption for the project,” added the energy ministry.

Last week, Iranian Foreign Minister Hossein Amir-Abdollahian, during his three-day visit to Islamabad emphasized the need for completion of the project saying it would definitely serve the national interests of the two countries.

At the conclusion of the visit, the two countries agreed to increase bilateral trade from $2 billion to $5 billion in five years.

Pakistan and Iran signed an agreement for the 2,700km Iran-Pakistan gas pipeline in 1995.

Iran claims it has completed the construction work on its side, and is waiting for its neighbor to do its part.

If not completed, Pakistan may face a potential $18 billion penalty for failing to abide by the agreement. EFE

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