Iran-Pakistan gas pipeline

Author: Iftekhar A Khan

The common man and the middle class have been hit by the ever-escalating cost of mainly two utilities – electricity and gas. Frequent load-shedding of both is common, much to the dismay of the users of both facilities. We now hear about the work to start on the gas pipeline from Iran to Pakistan via Balochistan.

The relevant cabinet committee of the government has recently decided to build an 80km length of Iran-Pakistan gas pipeline, starting from the Iranian border to Gwadar. It will cost about Rs44 billion; otherwise Pakistan may have to a pay huge penalty amounting to $18 billion to Iran for abrogating the contract. Iran has already completed a major portion of the pipeline up to Pakistan’s border.

Discussions between the Pakistan and Iran governments began as far back as 1995 and an agreement between the two countries was signed. But the project was delayed for various reasons. At one stage, even Saudi Arabia opposed the project to purchase gas from Iran. Now the situation is different because of China’s mediation, two Islamic countries have set aside their differences.

If Mr Shahbaz Sharif takes over as the prime minister, his first priority must be to rejuvenate the economy of the country.

The problem is that we sign contracts with much enthusiasm with foreign companies but soon unexpected obstacles crop up. Recall the Reko Diq project. Its contract was signed in 1993 with a joint venture of an Australian mining company Tethyan Copper Company Ltd and Antofagast, a Chilean company. According to the agreement, the Joint Venture was to explore gold and copper at the Reko Diq mines. Understandably, the mines contained $260 billion worth of precious metals.

To our bad luck in 2013, the then CJP Iftikhar Muhammad Chaudhry cancelled the Reko Diq mining agreement for lack of transparency. Meanwhile the Australian company claimed to invest $250 million on import of machinery and equipment for the project. The company decided to approach the World Bank’s International Centre for Settlement of Investment Disputes against Pakistan for cancelling the mining agreement. The ICSID awarded a nearly $6 billion arbitration fine for violating the mining contract with the Australian company and its partner in the venture. In case of default, Pakistan’s assets abroad were to be seized. Thanks to former CJP Iftikhar Muhammad Chaudhry for landing the country in such a huge trouble. Believably, the honourable Chaudhry must be having a ball wherever he is.

A somewhat similar situation, if not more grievous, has developed now in case of the Iran-Pakistan gas pipeline project. The compensation Iran demands is three times that of the Reko Diq project. Iran contends that it had already completed its part of the pipeline and invested $2 billion on the project, which is capable of supplying 750 million cubic feet of gas per day to Pakistan. But Pakistan had been dithering over completing its part of the pipeline project. The main reason for Pakistan’s hesitation to start work has been the American sanctions on Iran to deal with the outside world. As a result, Pakistan suspended its participation in the project because of the apprehension of US sanctions imposed on Iran.

In a recent move, Pakistan has decided to complete 80 km of the gas pipeline from Iranian border to Gawadar port, costing about $158 million or nearly Rs44 billion. This is primarily to prevent the $18 billion penalty Iran may seek by lodging a complaint in the International Centre for Settlement of Investment Disputes against Pakistan for not honouring its part of the agreement. The Iran-Pakistan gas pipeline is not the only project that the US has stymied by its sanctions; the CPEC suffers because of the superpower’s direct or indirect interference in it.

In our national interest, I strongly feel we must look towards the east instead of the west. Consider the supply of gas in the country. Its cost is going out of the reach of the average household. Did the government have to increase the price of gas to a steep level of 64 percent recently, were we getting supply from the Iran-Pakistan gas pipeline?

If Mr Shahbaz Sharif takes over as the prime minister, his first priority must be to rejuvenate the economy of the country. And the CPEC called the lifeline of the country must get his top attention. As an achiever, he could secure billions of dollars of investment from our time-tested friend, China. Chinese investment on the CPEC, including the power projects could secure employment for millions of citizens who are out of jobs. Best of luck, Mr Shahbaz Sharif!

The writer is a Lahore-based columnist and can be reached at

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