Why the gas pipeline with Iran is crucial for Pakistan?

The gas pipeline project connecting Iran and Pakistan, commonly referred to as the Peace pipeline or IP Gas, is a multifaceted endeavor influenced by geopolitical tensions, economic dynamics, and international sanctions. Originally conceived to facilitate the transportation of natural gas from Iran to Pakistan, the initiative has faced numerous obstacles since its inception.

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In March 2013, Presidents Zardari and Ahmadinejad ceremoniously launched the project near Iran’s Chabahar port, marking the commencement of the USD 7.5 billion endeavor. However, progress came to a halt due to US sanctions imposed on Iran, despite Iran fulfilling its obligations for its portion of the pipeline.

Pakistan has pursued various legal and diplomatic avenues to mitigate potential penalties and has sought a waiver from the US concerning the project. The successful completion of the pipeline holds significant importance for Pakistan’s energy security and its ability to address its escalating energy demands, thereby fostering economic and trade relations between the two nations. The pipeline aims to facilitate the transportation of natural gas from Iran to Pakistan, aligning with their bilateral trade aspirations outlined in a five-year plan signed in August 2023, which targets a trade volume of $5 billion. Leveraging imports and exports with neighboring countries often presents a more cost-effective solution.

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Recent reports from Reuters in March 2024 indicated the US’s opposition to the continuation of the Pakistan-Iran gas pipeline project, citing concerns about the risks associated with conducting business with Tehran. This stance contrasts with the waiver granted to India for a similar project in 2019.

The project’s outlook remains uncertain pending the resolution of Iran’s energy issues and the lifting of international sanctions. Iran’s reliance on gas exports, despite domestic scarcity and increasing demand, poses economic challenges and jeopardizes internal energy security. Addressing Iran’s energy crisis and easing sanctions are pivotal prerequisites for the viability and completion of the pipeline.

Despite persistent efforts through project management and diplomatic channels, significant barriers persist. While the pipeline’s completion holds the potential to benefit both nations by fulfilling Pakistan’s energy requirements and strengthening bilateral relations, its progress hinges on resolving Iran’s energy situation and the removal of sanctions.

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It’s noteworthy that Pakistan faces a substantial $18 billion penalty if it fails to fulfill its obligations regarding the gas pipeline project with Iran. While Iran has completed its segment of the pipeline, Pakistan is yet to conclude its portion within the agreed timeframe.

Pakistan finds itself in a challenging position, navigating between conflicting interests. Can Pakistan persuade the US to grant the waiver? Such negotiations typically entail concessions from both sides, implying that Pakistan must be prepared to offer concessions aligning with US interests.

Pakistan could offer to deepen security cooperation with the US, including intelligence sharing, military cooperation, or assistance in addressing regional security challenges. Other avenues can also be explored.

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The writer is a lawyer, academic and political analyst. She has authored a book titled ‘A Comparative Analysis of Media & Media Laws in Pakistan.’ She can be contacted at: yasmeenali62@gmail.com and tweets at @yasmeen_9

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