Col (r) Ikram Ullah Khan
Will Pak-Iran gas pipeline project ever see the light of day? This is a million-dollar question which remains unanswered.
The long-stalled Pak-Ian gas pipeline project which was conceived back in 1980s remained in limbo due to myriad factors. After having been put on the back burner for more than two decades, the project was revived in 2013 and the construction work on the Pakistani section of the pipeline was jointly inaugurated in March 2013 by the then president of Pakistan Asif Ali Zardari and former president of Iran Mahmood Ahmadinejad. The joint venture was projected to be completed in January 2015 but was put on ice again due to intense opposition from the US and Saudi Arabia.
Currently, the project has placed Pakistan in a quandary presenting a “to be or not to be” situation with grave economic and political implications. Pakistan virtually finds itself on the horns of a dilemma with undesirable choices having dreadful political and economic ramifications.
If Pakistan goes ahead with the project without further delay, it will only be at the peril of earning the ire of its key economic allies, the USA and the Kingdom of Saudi Arabia which it can ill afford given its economic vulnerability as both of them are not favourably disposed towards the implementation of the project due to distinct reasons specific to both the countries. In case Pakistan chicken’s out of the project under the duress of the USA and Saudi Arabia, it will have to face the wrath of its neighbour Iran which has already threatened Pakistan to take the case to International Arbitration Tribunal (IAT) that may make Pakistan pay the damages amounting to a staggering sum of 18 billion US dollars for violating the agreement reached between the two neighbours.
In this context, it may be mentioned here that Pakistan had already a distasteful experience in 2019 when it had to pay damages imposed by International Centre for Settlement of Investment Disputes (ICISD) amounting to 5.6 billion US dollars to a consortium of foreign investors in the Reko Diq copper mine in Balochistan for violating the agreement.
It also merits a mention here that initially, India also formed part of the project as Iran had proposed to extend the pipeline from Pakistan to India; but in 2009, India reviewed its decision and made an exit from the project over pricing and security issues and after the US managed to induce India with an offer of civilian nuclear deal which the latter accepted and signed in 2008, thus formally withdrawing from the pipeline project.
Pakistan was fearful of the project due to international sanctions on Iran and also due to fear of possible economic sanctions it can face in the event of carrying on with the project. According to political and economic analysts, it’s not only the fear of US economic sanctions but also because of Saudi Arabia’s pressure to not to carry out the project, that holds Pakistan back from continuing with the project.
As of now, the project remains substantially delayed with slim chances of completion due to the reasons mentioned earlier. While the Iranian section of the pipeline has long been completed, work on the Pakistani section is yet to start. However, very recently, in February 2024, government of Pakistan approved the construction of the pipe line amid fear of 18 billion US dollar penalty for failing to complete the project on the given timeline. Having said that, uncertainty still surrounds the project making the chances of its completion even slimmer.
Seen through economic lenses, this pipeline project makes economic sense. Pakistan\’s economy is highly dependent on natural gas which according to a conservative estimate hovers around 40% of its energy requirement while Iran has the world’s second largest gas reserves. Due to limited domestic gas reserves which are depleting with every passing day, Pakistan is forced to import liquefied natural gas (LNG) which is very expensive and billions of dollars are spent on its import which proves to be a big drain on the country’s fragile economy.
For the energy-starved country like Pakistan, this project means a lot, but Pakistan finds itself in a tight spot when it comes to the completion of the project. With the proverbial Sword of Damocles hanging over its head in the form of US economic sanctions and also when Pakistan is intensely engaged with IMF for securing a long-term bailout package which is not possible without the US active support, Pakistan may find it hard to carry on with the pipeline project.
