Pakistan Pipeline Caught in U.S. - Iran Crossfire

By Malik Ayub Sumbal, July 11, 2014

States and the newly-elected Pakistan Muslim League government in Islamabad had a different view. The project has been stalled ever since, though Iran had already built a 900-kilometer section of the pipeline on its own territory (the total length of the trunkline is 2,100 kilometers), whereas Pakistan hasn’t even begun construction. 

Some point a finger at Pakistan’s Prime Minister Nawaz Sharif whom Washington offered during his visit to the White House to look into other energy options. The one he seemed more than interested in was the Turkmenistan-Afghanistan-Pakistan-India or TAPI gas project. Paradoxically, the Islamabad government considers the project that envisages a pipeline route via an unstable Afghanistan, a distant Turkmenistan and an unfriendly India to be a better option than the pending Iran-Pakistan project.

The hot issue here is what prospects Pakistan has to complete the current project and what consequences it would have to bear if it fails to honor its obligations.

Currently, Pakistan is already more than a year late in launching construction of the pipeline and it’s highly unlikely that it would meet the late 2014 deadline, which looks almost equally impossible as a U.S. troops pullout from Afghanistan by the end of 2014 does.

In case Pakistan opts to proceed with construction and push Iran to move the deadline, it may end up losing its construction contractors. These are mostly reputed global firms that would hardly want to risk being blacklisted by the United States due to sanctions imposed on Iran’s petroleum industry.

If Pakistan fails to meet the deadline, Iran could invoke the penalty clause in the contract as Iran’s Petroleum Minister Ali Majedi had threatened earlier. According to contract, Pakistan would have to pay a $1-million-per-day fine for violating the construction deadline.

On the other hand, if Pakistan decides to complete the project despite all odds, its  government may find the TAPI gas project redundant, and this could cause yet another rift among the parties involved. The United States could withdraw its pledge to provide financial aid if Islamabad continues to pursue the Iran-Pakistan project or shuns the TAPI project pipeline, making it difficult for Pakistan’s cash-strapped government to finance the IP trunkline construction on its own.

At the moment, Beijing’s support seems to be the sole viable solution to Pakistan’s financial concerns. With Chinese cash already in the project, this could be the only way out for Pakistan.

However, are conditions stable enough to move on with the project? The recent border incident between the two countries sparked some harsh statements and sentiments on both sides. Abduction of five Iranian border guards by Pakistan-based militants from the Sistan and Baluchestan province resulted in Iran’s Interior Minister Abdolreza Rahmani-Fazli threatening to send Tehran’s forces to Pakistan if the abductees weren’t freed. Pakistan’s Interior Minister Chaudhary Nisar replied with a serene statement offering to sort out the issues at the negotiating table.

The conditions seem very unfavorable for the project to continue. The penalties await in case of deadline violation and this is an