Is Pakistan liable to pay penalty to Iran for not completing its portion of gas pipeline?

An interesting debate has initiated that Pakistan would have to pay US$18 billion penalty to Iran for failing to construct its portion of Iran-Pakistan gas pipeline.

The project, aimed at supplying around 750 million cubic feet of natural gas to Pakistan daily, ran into snags, the chief being imposition of sanctions on Iran.

Originally this pipeline was named, Iran-Pakistan-India (IPI) pipeline. Pakistan was responsible for providing transit and security to the pipeline and in exchange get transit fee and also draw a small quantity of gas. However, under the US pressure India abandoned the project. Iran and Pakistan went ahead hoping that sanctions imposed on Iran would be withdrawn by the time project is complete. The US not only withdrew from nuclear talks but also imposed new sanction in Iran when Donald Trump was the US President.

Reportedly, Iran has already built its own portion of the pipeline but Pakistan has not, the work was to be completed by 2024. If Pakistan fails in completing its portion, Iran will have a right to demand compensation of US$18 billion.

The pipeline should have been completed by 2019 but the two countries revised their original agreement to give Pakistan more time to build its portion of the pipeline.

The Pakistani foreign ministry said it was going to discuss the problems with relevant parties, i.e. Iran and the United States.

Under the prevailing conditions, looming US sanctions on Iran, Pakistan just could not dare to compete this pipeline and buy gas from Iran. Therefore, no penalty can be imposed on Pakistan.

Technically, United States becomes liable to pay the penalty or let Iran and Pakistan go ahead with the project.

This demand gets credence because the United States is following double standards — being lenient with India in meeting its energy needs while punishing Pakistan for the same.

The gas from Iran via this pipeline is essential for meeting Pakistan’s energy requirements. If India is allowed by the United States to buy crude oil from Russia, why restrictions on Pakistan on buying gas from Iran?

Last year, Pakistan suffered serious problems amid the surge in international LNG prices as European buyers who could afford the higher prices took all available LNG in, leaving poorer countries such as Pakistan out in the cold and dark.