Pakistan considers shelving gas pipeline project with Iran, but offers revival if US sanctions waiver is secured: report

Pakistan has informed Iran of its decision to shelve the Iran-Pakistan (IP) gas pipeline project under an out-of-court settlement framework, but has also expressed its willingness to revive the project if a waiver from US sanctions on Iran can be secured, The Express Tribune reported, citing sources. 

The gas pipeline project has remained stalled since 2014 due to US sanctions on Iran, despite Tehran’s repeated extensions. Iran has also initiated legal proceedings against Pakistan for failing to meet the agreed timeline for the project. In a bid to restart the project, Iran has extended the gas sale agreement for another 10 years. 

Iran claims to have completed its portion of the pipeline, while Pakistan has yet to begin construction on its side. Despite this, Iran is still willing to extend the gas sale agreement, although Pakistan is seeking to shelve the project because of the ongoing US sanctions and domestic supply issues.

However, Pakistan has proposed an alternative plan, emphasising that the project can only move forward if the US sanctions are lifted, along with reduced gas volumes and lower prices from Iran.

“Pakistan wants the agreement extended if the U.S. grants a sanctions waiver, along with reduced gas volumes and lower prices from Iran,” Tribune cited a source close to the negotiations as saying. Backdoor diplomacy between the two countries has also been ongoing. 

Pakistan has made it clear that it intends to shelve the project due to the ongoing US sanctions and weak domestic gas demand. 

Pakistan had previously sought a waiver from the US to execute the IP pipeline, but Washington declined the request. US State Department spokesperson Matthew Miller had warned that the US would continue enforcing sanctions against Iran, advising any parties considering deals with Iran to be aware of the potential consequences.

Pakistan has explored alternative solutions to fulfill its gas needs, such as building an LNG pipeline to Gwadar, with an 80-kilometre extension to the Iran border. A Chinese company had shown interest in constructing the pipeline, but the project was eventually shelved due to US sanctions.