Discuss in detail the Iran-Pakistan gas pipeline and challenges to it.

Introduction

The Persian poet Saadi wrote in Gulistan (1258): "Human beings are members of a whole, in creation of one essence and soul." Iran and Pakistan, bound by faith, culture and a long border, have long hoped that a gas pipeline would bind their economies too. Iran holds the world's second-largest proven gas reserves, while Pakistan faces a growing gas shortage. The Iran-Pakistan (IP) gas pipeline, once called the "Peace Pipeline", seemed a natural solution. Yet more than fifteen years after the agreement was signed, Iran has completed most of its section while Pakistan's side remains largely unbuilt, held back by sanctions, financing and politics.

Overview

The idea emerged in the 1990s as the Iran-Pakistan-India (IPI) pipeline, to carry gas from Iran's South Pars field to Pakistan and India. India withdrew around 2009, citing price and security concerns, after its civil nuclear deal with the US. Pakistan and Iran signed a Gas Sales and Purchase Agreement (GSPA) in 2009 for the supply of 750 million cubic feet per day (mmcfd) for 25 years. The groundbreaking of Pakistan's section took place at Gabd, near Gwadar, in March 2013. The Pakistani section, about 780 km from the border to Nawabshah, was to be completed by December 2014, after which a penalty clause would apply. In 2019 the two sides amended the agreement to extend the deadline, and in February 2024 Pakistan approved building an initial 80 km section from the border to Gwadar.

Significance of the Iran-Pakistan pipeline for Pakistan

1. Cheaper gas.

Pipeline gas from a neighbour is generally cheaper than imported LNG, which requires liquefaction, shipping and regasification. (Reference: International Energy Agency, Gas Market Report; Oil and Gas Regulatory Authority (OGRA), price notifications.)

2. Energy security.

Pakistan's domestic gas production has been declining while demand rises; a long-term pipeline supply would reduce shortages and price shocks. (Reference: Ministry of Energy (Petroleum Division), Pakistan Energy Year Book; OGRA, State of the Regulated Petroleum Industry.)

3. Power generation.

The 750 mmcfd of gas could fuel thousands of megawatts of electricity, reducing reliance on expensive furnace oil. (Reference: Inter State Gas Systems (ISGS), IP project brief; NEPRA, State of Industry Report.)

4. Industrial revival.

Reliable gas supply would help fertiliser, textile and other industries that suffer from gas load-shedding, especially in winter. (Reference: All Pakistan Textile Mills Association statements; Fertilizer Manufacturers of Pakistan Advisory Council.)

5. Balochistan's development.

The pipeline would pass through Balochistan, which could gain jobs, transit income and access to gas for its own towns. (Reference: Government of Balochistan statements; ISGS project route.)

6. Diversification of supply.

Along with LNG and the proposed TAPI pipeline, Iranian gas would give Pakistan multiple sources and reduce dependence on any one supplier. (Reference: Ministry of Energy, Integrated Energy Plan; Asian Development Bank on TAPI.)

7. Regional connectivity.

The pipeline could link with CPEC and, in future, extend to China, making Pakistan an energy corridor. (Reference: Statements of Iranian and Pakistani officials, 2015–2016; Long-Term Plan for CPEC.)

8. Stronger ties with Iran.

Economic interdependence would strengthen relations and border stability between the two neighbours. (Reference: Pakistan-Iran joint statement, 24 April 2024.)

Challenges to the pipeline

1. US sanctions.

US laws such as the Iran Sanctions Act and the Comprehensive Iran Sanctions, Accountability, and Divestment Act (2010) threaten penalties on entities investing in Iran's energy sector. In 2024, the US State Department warned Pakistan about the risk of sanctions. (Reference: Iran Sanctions Act of 1996, as amended; US Department of State press briefings and congressional testimony, March 2024.)

2. Financing.

International banks and investors avoid the project because of sanctions, and Pakistan lacks the fiscal space to finance it alone. (Reference: Ministry of Finance statements; ISGS project documents.)

3. Gulf and Saudi sensitivities.

Pakistan's dependence on Saudi Arabia and the Gulf for oil, deposits and remittances made it cautious about deepening energy ties with Iran during periods of Saudi-Iranian rivalry. (Reference: State Bank of Pakistan, remittances by country; Saudi Fund for Development agreements.)

4. Security in Balochistan.

Militant activity in Balochistan and on the Iranian side of the border poses risks to construction and operation. (Reference: Ministry of Interior; ISPR statements on Balochistan.)

5. Pakistan's indecision.

Successive governments have announced and then delayed construction, showing a lack of political will and consistency. (Reference: Senate Standing Committee on Petroleum proceedings, 2013–2024; Dawn reports.)

6. Penalty and arbitration.

Under the GSPA, Pakistan faces penalties for failing to complete its section on time; Iran has served notices and moved towards international arbitration, with potential claims running into billions of dollars. (Reference: Gas Sales and Purchase Agreement, 2009, penalty clause; statements of the Ministry of Energy (Petroleum Division), 2024.)

7. Pricing.

The gas price is linked to oil prices; when oil is expensive, the gas becomes costlier, raising questions about affordability. (Reference: GSPA pricing formula, as reported by OGRA and the Petroleum Division.)

8. India's withdrawal and Iran's own supply issues.

India's exit reduced the project's scale and economics, and Iran itself faces winter gas shortages, raising questions about supply reliability. (Reference: Ministry of Petroleum and Natural Gas of India statements, 2009; IEA on Iran's gas balance.)

Way forward

Pakistan should seek a sanctions waiver or an exemption from the US on humanitarian and energy-security grounds, as other countries have done for Iranian energy; build the initial section in phases with its own resources; explore barter or local-currency payment mechanisms; renegotiate the price and penalty terms with Iran; and coordinate security with Iran in the border region. The improvement in Saudi-Iranian relations since 2023 reduces one political obstacle. Ultimately, the project requires a clear national decision and consistent implementation.

Conclusion

President John F. Kennedy said in 1963: "Our problems are man-made, therefore they can be solved by man." The Iran-Pakistan gas pipeline is a sensible project in economic terms, offering Pakistan cheaper gas, energy security and stronger ties with a neighbour. Its obstacles, sanctions, financing, geopolitics, security and indecision, are man-made. With careful diplomacy, creative financing and political will, Pakistan can turn the "Peace Pipeline" from a symbol of missed opportunity into a source of energy and regional cooperation.