The Pakistan government has approved the construction work on its section of the Iran-Pakistan (IP) gas pipeline to avoid paying a penalty of $18 billion.
The Cabinet Committee on Energy (CCoE) of the interim government granted approval for the initial phase of the 80-km segment within Pakistan. An official statement said, “The Pakistan government has approved the start of construction work on its segment of the Iran-Pakistan (IP) gas pipeline.”
According to reports, despite the US-imposed sanctions on Iran over its nuclear program, Pakistan has been compelled to initiate the work due to the fear of a potential $18 billion US dollar penalty for failing to complete the project on time.
Iran has granted a 180-day extension until September 2024, to avoid legal action in international courts. Experts warn that diplomatic relations between Pakistan and Iran could be strained if Iran pursues legal action to protect its rights regarding the pipeline project.
In March 2013, the groundbreaking ceremony for the project was held near Iran’s port city of Chabahar, with an estimated cost of $7.5 billion at that time. Both countries signed a Gas Sales Purchase Agreement (GSPA), which bound Pakistan to initiate construction on the IP project.
However, Pakistan failed to commence construction on its side, primarily due to pressure from the US and sanctions on Iran. Meanwhile, Iran claims to have spent $2 billion to complete its section of the pipeline within its territory. Last year, the country’s Public Accounts Committee was informed that Pakistan could face a staggering $18 billion penalty if it failed to proceed with the Iran-Pakistan Gas Pipeline project.