The Iran-Pak gas pipeline has been a thorn in the side of the Pak-Iran relationship ever since its inception. The plan itself is sensible and once completed, will serve to address the energy crisis of the country and will be the friendship pipeline it was supposed to be, but the inordinate delay taken over completion has led to potential legal and contractual troubles for Pakistan. A hefty fine for a daily penalty of $1 million since January 2015 has been accumulating, Pakistan still has reservations of the price of the gas imported – the TAPI pipeline is offering more competitive prices – and there is still construction work to be done.
It is positive then, that the country’s Federal Ministry of Petroleum and Natural Resources has finally sent amendments to Iran for the Gas Sale and Purchase Agreement (GSPA) regarding the gas pricing and extending the implementation schedule. It would have been better though, if the Economic Coordination Committee of the Cabinet approved this before it was forwarded to the Iranian side, especially since the Ministry had sent these changes in for review in July this year.
The GSPA stands suspended since December 2014, and this is all for the good, but this situation is by no means permanent. The contract still stands, due to which Pakistan must incur penalties even if we have not paid anything right now – the current penalty bill will be $730 million on December 31.
The GSPA has been often used as a potential stick in front of Pakistan by Iran in an effort to make Pakistan complete its half of the deal. It is all but obvious that this hasn’t worked, and Iran is now waving it about as a potential carrot; Pakistan should make sure that this opportunity is not wasted. The fines incurred since January 2015 are too much for Pakistan to pay anyway. By extending the project completion timeline, the fines will never have been incurred, Pakistan has an opportunity to complete the pipeline without undue pressure and can get more competitive pricing terms for the gas imported.
The price renegotiation has been under process since 2013, and the fact that it’s finally happening should be encouraged by the Cabinet, instead of being shelved for no apparent reason. Now that the Iranian sanctions have been lifted, Pakistan no longer has any excuses for delay on the pipeline. But renegotiating the deal means adhering to a new deadline, and this time Pakistan must not be complacent. The excuse of sanctions against Iran is no longer applicable. The State Bank of Pakistan has already issued a notification for transactions of Iranian banks to be accepted. No more dilly-dallying.http://nation.com.pk/editorials/10-Dec-2016/still-in-the-pipeline
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