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Pakistan is facing penalties of as much as $18 billion if it fails to complete a gas pipeline project it is carrying out with Iran, local media have reported.
The project, which should supply some 750 million cubic feet of natural gas to Pakistan daily, has been fraught with difficulties, the chief among them being Pakistan’s failure to build its section of the infrastructure.
Iran has already built its own portion of the pipeline but Pakistan has to finish the one passing through its territory by 2024. If it fails to do that, Iran has threatened a lawsuit and compensation of $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”, including Iran and the United States, which prompted a heated reaction from the head of the Public Accounts Committee—a transparency watchdog for all ministries and public agencies.
“The US should pay the penalty if it does not approve of Pakistan and Iran going ahead with the gas pipeline project. The USA will have to do away with double standards — being lenient with India in meeting its energy needs while punishing Pakistan for the same,” Noor Alam Khan said, as quoted by Dawn.
U.S. sanctions on Iran and pressure from Washington on Islamabad have been named among the reasons for the pipeline completion delays. The gas that it would receive from Iran via the new pipeline is essential for Pakistan’s energy security, which should have provided enough motivation to complete the project but, it seems, it has not.
Last year, Pakistan suffered major blackouts 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.
By Charles Kennedy for Oilprice.com
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Charles is a writer for Oilprice.com