The long-standing Pakistan-Iran gas pipeline project, also known as the Peace Pipeline, has been a focal point of geopolitical tension since its inception. Originally conceived in the 1990s as a means to secure energy for Pakistan and foster regional cooperation, the project has faced numerous delays and obstacles, largely due to international pressure, particularly from the United States. As of 2024, this ambitious venture remains a contentious issue, with Pakistan caught between fulfilling its energy needs and navigating the complex web of international sanctions against Iran.
In a recent development, the United States issued yet another stern warning to Pakistan regarding its involvement in the Iran gas pipeline project. During a press briefing, US State Department spokesperson Matthew Miller stated, “We will continue to enforce our sanctions against Iran.” He further cautioned, “As a matter of course, we also advise anyone considering business deals with Iran to be aware of the potential ramifications of those deals.” This warning underscores the persistent tension between Pakistan’s energy ambitions and the geopolitical constraints imposed by its relationships with global powers.
However, the political ramifications of moving forward with the project cannot be ignored. The United States has made it clear that any country engaging in significant transactions with Iran risks facing severe consequences. This warning places Pakistan in a precarious position, forcing it to weigh the benefits of the pipeline against the potential fallout from defying US sanctions.
If the United States were to impose sanctions on Pakistan for proceeding with the Iran gas pipeline, the impact on the country could be devastating. Sanctions could target Pakistan’s banking sector, effectively cutting it off from the global financial system. This would severely limit Pakistan’s ability to access international financial markets, secure loans, or engage in trade with other nations. Additionally, sanctions could disrupt Pakistan’s trade relationships, making it increasingly difficult for the country to import essential goods and export its products to international markets.
The imposition of sanctions would also have a chilling effect on foreign investment in Pakistan. With the threat of secondary sanctions, international companies and financial institutions may become hesitant to engage with Pakistan, further isolating the country economically. This would exacerbate Pakistan’s already struggling economy, leading to increased inflation, unemployment, and social unrest.
The concept of the Pakistan-Iran gas pipeline was first proposed in the 1990s as a trilateral project involving India. Initially dubbed the Iran-Pakistan-India (IPI) pipeline, the project aimed to transport natural gas from Iran’s South Pars field to Pakistan and India, providing a much-needed energy lifeline to both countries. However, due to geopolitical concerns and pressure from the United States, India eventually withdrew from the project in 2009, leaving it as a bilateral agreement between Pakistan and Iran.
Despite the setback, Pakistan remained committed to the project, recognizing its potential to alleviate the country’s chronic energy shortages. In 2013, Pakistan and Iran signed an agreement to move forward with the construction of the pipeline. Under the terms of the agreement, Iran was responsible for constructing the pipeline on its side of the border, while Pakistan would build the section within its territory. Iran completed its portion of the pipeline, a 900-kilometer stretch, at an estimated cost of $2 billion. However, progress on the Pakistani side has been slow, largely due to fears of violating US sanctions imposed on Iran.
Under the terms of the agreement, Pakistan was required to complete its section of the pipeline by 2014. However, citing difficulties in securing financing due to the threat of US sanctions, Pakistan failed to meet this deadline. As a result, Iran has the right to seek compensation for the delays under the terms of the contract. Although Iran has shown restraint in pursuing legal action, the possibility of a lawsuit for damages remains a looming threat for Pakistan.
The potential liabilities for Pakistan are significant. If Iran were to pursue legal action, Pakistan could be required to pay substantial damages, further exacerbating its already fragile economic situation. Moreover, the diplomatic fallout from such a scenario could strain relations between the two neighboring countries, complicating efforts to cooperate on other regional issues.
The Pakistan-Iran gas pipeline is of immense financial and political importance to both countries. For Pakistan, the pipeline represents a critical opportunity to diversify its energy sources and reduce its dependence on more expensive and less reliable alternatives, such as liquefied natural gas (LNG). The project could provide up to 750 million cubic feet of natural gas per day, significantly alleviating the energy crisis that has plagued Pakistan for years.
Politically, the pipeline has the potential to strengthen Pakistan’s ties with Iran, fostering greater regional cooperation and reducing the country’s reliance on traditional allies who have at times been reluctant to support its energy needs. For Iran, the pipeline is a means to break free from the economic isolation imposed by US sanctions and expand its influence in South Asia.
The Turkmenistan-Afghanistan-Pakistan-India (TAPI) Pipeline as an Alternative
Amid the uncertainty surrounding the Pakistan-Iran gas pipeline, Pakistan has shown renewed interest in the Turkmenistan-Afghanistan-Pakistan-India (TAPI) pipeline project. The TAPI project, which has been in the works for decades, aims to transport natural gas from Turkmenistan through Afghanistan and Pakistan to India. In August 2024, the CEO of TAPI announced that the project has made significant progress, thanks to the interest and support of Pakistan’s Ministry of Petroleum and the Special Investment Facilitation Council.
The TAPI pipeline offers a potential alternative to the Iran pipeline, allowing Pakistan to meet its energy needs without risking US sanctions. However, the project faces its own set of challenges, including security concerns in Afghanistan and the need for significant financial investment. Nevertheless, Pakistan’s involvement in TAPI underscores its ongoing search for viable energy solutions in a complex geopolitical landscape.
The Pakistan-Iran gas pipeline project stands at a crossroads, with Pakistan facing difficult decisions about its energy future. The recent warning from the United States highlights the risks associated with proceeding with the project, particularly in light of the potential for sanctions. Yet, for Pakistan, the pipeline also represents an opportunity to secure a reliable and affordable energy source that could alleviate its chronic shortages.
As Pakistan navigates these challenges, it must carefully balance its energy needs with the geopolitical realities of its relationships with global powers. The decision to move forward with the pipeline, seek alternatives like TAPI, or find a middle ground will have far-reaching implications for the country’s economic and political future. In the end, Pakistan’s ability to navigate this complex situation will be a test of its diplomatic acumen and strategic foresight.
The views expressed in this article are the author’s own and do not necessarily reflect Coverpage’s editorial stance
