US Pressure on Pakistan over the Construction of Iran-Pakistan Gas Pipeline
Abbas Hashemite, New Eastern Outlook, July 1, 2024 —
Two South Asian neighbors, Iran and Pakistan, had been planning to construct a gas pipeline between the two sides since the 1990s. The two sides finally decided to construct the pipeline in the 2nd decade of the century. Since then, the US sanctions on Iran are proving formidable for the completion of this project. Recently, the two sides once again decided to resume and complete this project. However, the United States have once again warned Pakistan of economic sanctions if it resumed the construction of the project.
Background and Context of the Iran Pakistan Gas Pipeline
The Iran Pakistan Gas Pipeline, also known as the Peace Pipeline, was a $7.5 billion project signed between the two countries in 2013. Since then, the project has been under construction and the progress on this project has been marred by US sanctions on Iran. More than 750 million to one billion cubic feet per day of natural gas is expected to be supplied to Pakistan for a period of 25 years to fulfill its energy requirements. The Iranian government has already completed its side of the project by investing almost $2 billion. Iran owns the second-largest gas reserves in the world, following Russia. However, the Western economic sanctions hindered its rise an exporter.
The pipeline can help Pakistan to overcome its energy needs. However, the progress on the Pakistani side has been subject to the US approval. Iran is one of the greatest rivals of the United States. Iran’s support to Hamas, Hezbollah, and Houthis in the persistent Israel-Hamas war has further aggravated this rivalry. There have always been solemn concerns about how Pakistan will fund this pipeline project, and it would circumvent the US sanctions.
Recently, the Late Iranian President Ebrahim Raisi visited Pakistan. This was the first visit of an Iranian President to Pakistan in the last 8 years. During this visit, both the sides pledged to strengthen their relations. The development and completion of the Iran Pakistan Gas Pipeline was also part of the discussion between the two sides. Previously, Pakistan always cited the US sanctions on Iran as an excuse for not starting the construction of the gas pipeline. In 2014, Pakistan sought a 10-year extension for the construction of the pipeline. This extension will expire in September this year.
Recent Developments and Political Implications
Iran can sue Pakistan in the International Court over any further delay on the construction of the project by the Pakistani side. There is a potential looming threat of an $18 billion penalty on Pakistan in case of failure to construct the Iran Pakistan Gas Pipeline. Moreover, Pakistan is in dire need of cheap LNG and energy for meeting its industrial and domestic needs. While its own reserves are dwindling rapidly and LNG prices are rising due to the Israel-Hamas war and Russia-Ukraine Conflict, this gas pipeline can serve as a savior for Pakistan.
Collectively, all these reasons make this pipeline project mandatory for the economic prosperity of Pakistan. Closure of industries in Pakistan due to the energy crisis triggered unemployment and inflation in the country. Furthermore, it also serves as one of the leading causes of the persistent, unprecedented brain drain from the country. Political instability is also triggered by the inflation and unemployment generated by this industrial closure.
After the recent meeting between the Pakistani Premier Shehbaz Sharif and the Late Iranian President Ebrahim Raisi, Pakistan demonstrated its seriousness in starting the construction of the project to meet all its energy requirements and avoid any penalty. According to some reports, the government of Pakistan has allocated and issued $152 million for building the project. Different institution in the country, such as the Special Investment Facilitation Council (SIFC), are also supporting the construction of the project.
Challenges and Future Prospects
However, just like the past, the US sanctions once again serve as the key obstacle behind the construction of the project. After the recent announcement of commencement of the construction of the Iran Pakistan Gas Pipeline by the Pakistani government, the US Department of State warned Pakistan of solemn consequences of engaging in any business deals with Iran. Vedant Patel, the spokesperson of the US Department of States, stated, in his briefing, “We advise anyone considering business deals with Iran to be aware of the potential risk of sanctions. But ultimately, the government of Pakistan can speak to their own foreign policy pursuits.”
Moreover, the Matthew Miller, another spokesperson of the US State Department, cautioned Pakistan of similar threats in his news briefing. However, when asked about the energy crisis in Pakistan by the journalists, he was unable to provide any satisfactory answer and countered these remarks merely with lengthy arguments about helping the country in developing Renewable Energy Sources. The United States holds a history of being unconcerned about the human rights and economic plight of the people in the developing and underdeveloped world. Under the US-led Unipolar world order, many nations have faced severe economic sanctions and turmoil due to its unilateral decisions and disregard for humanity.
This US behavior has expediated the decline of its hegemony over the globe. Pakistan’s increased dependence on the Bretton Woods Institutions could force it to commence the construction of the pipeline for the time being. However, Pakistan is stuck between the devil and the deep blue sea due to the potential threat of $18 bn and the US sanctions. Pakistani officials want to seek a US waiver over this project. Nonetheless, given the increasing rivalry between Iran and the US and the latter’s Middle Eastern proxy – Israel – and surging Houthi strikes on Israel bound ships in the Red Sea, it seems impossible that Pakistan could get a waiver on this project. Ultimately, Pakistan will have to look towards Russia and China to negotiate with Iran over the issue. This would bring Pakistan closer to the new and rising world order under the leadership of the two South Asian powers, Russia and China.
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Abbas Hashemite , is a political observer and research analyst for regional and global geopolitical issues. He is currently working as an independent researcher and journalist, exclusively for “New Eastern Outlook”.