IRAN Islamabad: Tehran gives ultimatum to build cross-border gas pipeline

Iran has threatened to appeal to the International Court of Arbitration if Pakistan fails to comply with the agreements. But the United States, opposed to the project, would apply sanctions, leaving Islamabad caught between two fires.

Islamabad () – Iran has ordered Pakistan to finish building part of the gas pipeline that should link the two countries, otherwise Tehran will turn to the International Court of Arbitration, the tribunal that deals with resolving trade disputes between states.

Islamabad is in a difficult position, however, because importing Iranian gas would immediately trigger US sanctions. Iran says it has spent $2 billion on building its 1,150-kilometer (720-mile) stretch of the pipeline, which it opened in 2013. Last year Pakistan claimed force majeure to avoid fulfilling its contractual obligations, but Iran refused to give any reason.

In February this year, Islamabad announced it was ready to begin construction of its 80-kilometer pipeline, but Donald Lu, the U.S. assistant secretary for South and Central Asia, sent a notice to Pakistan and work has since been suspended. Pakistan had requested a 10-year extension to build the pipeline in 2014. The deadline, scheduled for the end of the month, is approaching and Pakistani officials are trying to find a balance so as not to anger either Washington or Tehran.

“Pakistan has violated the terms of a bilateral agreement and can be sued,” economist Ikram ul Haq told Nikkei AsiaAnd if Pakistan loses the case, with its economy already in serious crisis, it could face a debt of up to 18 billion dollars.

However, local officials are hoping to find another kind of deal with Iran. In 2019, for example, Pakistan was ordered to pay $6 billion to Australia for cancelling deals on a copper and gold mine, but, thanks to a new deal, it only paid $1 billion.

Iran is rich in natural gas, but is isolated from the international community due to US sanctions. Despite this, according to experts, the illegal gas trade between Iran and Pakistan amounts to about $1 billion. “Pakistan is economically weak and depends on the International Monetary Fund” for loans, Haq said. “Unlike India, it is a country with a lot of resources.” [un importante aliado en la región contra los objetivos chinos]Pakistan cannot get any waiver from the United States.”

And US support is essential to continued liquidity, leaving Islamabad with little room to maneuver on the issue.