Tehran had indicated to Islamabad it may go for arbitration against Pakistan for unilaterally shelving the IP project and seek compensation of $1.2 billion as penalty
May 8, 2018 (BE2C2) — Pakistan has extended an invitation to Iran for holding crucial talks on Iran-Pakistan gas pipeline project which has remained stalled due to U.S. sanctions against Tehran, English daily ‘The News’ reported.
“Yes, we have invited authorities concerned in Tehran to come to Islamabad in the current month of May, and hold talks on [the] IP gas line project,” a senior official at Petroleum Division (Energy Ministry) told The News.
“The petroleum division has invited the Iranian authorities on the orders of the Prime Minister Shahid Khaqan Abbasi.”
Both sides would put their heads together to find out the way out how to proceed for implementation of the project in the presence of the US sanctions and hawkish attitude of the Trump administration.
President Trump on Tuesday announced he is quitting the Iran nuclear deal. In announcing his decision, Trump said he would initiate new sanctions on the regime. The sanctions could take months to go into effect as the US government develops guidance for companies and banks.
Pakistan and Iran have already agreed to open up and review the gas sales purchase agreement (GSPA) inked between the two in 2009 following the reduction in the prices at which Pakistan is procuring the LNG from Qatar and is having the imported product through spot purchasing and the price of gas settled under TAPI gas line.
Pakistan and Iran signed GSPA in 2009 under IP gas pipeline project in era of Pakistan People’s Party.
Since then the project could not get the shape. Tehran had already indicated to authorities concerned in Islamabad saying it has made up its mind to move arbitration against Pakistan for unilaterally shelving the project.
Tehran while threatening Pakistan had asked for the payment of over $1.2 billion as under the penalty clause, from January 1, 2015 onwards, Pakistan is bound to give penalty of $ 1 million per day if it fails to have intake of gas from Iran under IP project– the huge penalty of $1.2 billion which is equal to almost the cost of the project.
The ice melted when Iranian Foreign Minister Javad Zarif visited Pakistan in March, 2018 and held meetings with top political and military leadership. He raised the issue of shelved IP project with Pakistan’s prime minister in the meeting.
“Now both the parties have decided to find out the way forward for implementation of the project knowing the fact that there are still the US sanctions and Trump’s resolve to do away with the nuclear deal earlier done with the USA during the Obama regime,” the official said.
To avoid the US sanctions, the official said, earlier Petroleum Ministry headed by Federal Minister Shahid Khaqan Abbasi who is now the Premier of Pakistan had carved out the plan under which LNG pipeline was planned to be laid down from Gwadar to Nawabshah. Two LNG terminals were also planned at Gwadar Port and to this effect a Chinese company had been awarded the contract and the said Chinese company had also arranged the financial supply chain for completing the project.
Iran was told that whenever the sanctions are to be erased, then the pipeline will be extended to Iranian border from Gwadar and then it will be called as IP gas line.
“But the shelving of the project of LNG pipeline from Gwadar to Nawashah irked both Iran and China which is why Iran conveyed Pakistan that it is going for arbitration against Pakistan. So keeping in mind the said background the talks that are to be held between Pakistan and Iran would be of paramount importance.”