Aletho News

US threatens sanctions if Pakistan continues gas pipeline project with Iran

By Ahmed Adel | March 28, 2024

Despite Pakistan dealing with a crippling economic situation, the US has shown little concern for its strategic ally’s issues and, instead of offering support, has threatened tough sanctions if Islamabad decides to continue with the Pakistan-Iran gas pipeline project. Ironically, though, such an action will only push Pakistan closer to China, which the US views as a greater threat to its hegemony than Iran.

“We always advise everyone that doing business with Iran runs the risk of touching upon and coming in contact with our sanctions, and would advise everyone to consider that very carefully,” a US State Department spokesperson told reporters in a press briefing on March 26.

“We do not support this pipeline going forward,” the spokesperson added.

Washington continually emphasises that Pakistan is one of its closest allies and a partner in the fight against terrorism, making the sanctions threat a major development in their bilateral relations. For this reason, Pakistan Petroleum Minister Musadik Malik said on March 27 that Islamabad would seek an exemption from US sanctions over the gas pipeline project.

The Pakistan-Iran gas pipeline, known as the Peace Pipeline, will transport natural gas from Iran to Pakistan. Despite the pipeline’s several years of delays and funding challenges, Pakistan and Iran signed a five-year trade plan in August 2023 with a target of $5 billion. Tehran is evidently desperate for the project to be completed, which had an original deadline of 2015, since it signed the trade plan and overlooked Pakistan not laying the pipeline when Iran has already completed the laying of its 900-kilometre pipeline.

Islamabad claims it could not lay the pipe due to the US sanctions imposed on Iran, but Tehran rejects this excuse. Pakistan is now in a difficult position with the latest US sanction threat when recalling that Tehran issued a third notice in January to Islamabad and announced intentions to go to arbitration court to receive $18 billion for breach of contract.

The threat of US sanctions or paying a huge fine to Iran is only compounding Pakistan’s difficult economic situation, especially as the country is seeking a 24th bailout from the International Monetary Fund.

Pakistani Prime Minister Shehbaz Sharif said on March 26 that his country needs another IMF loan programme to stabilise its fragile economy. An IMF mission that visited Islamabad for five days earlier this month said Pakistan had to meet IMF conditions, including revising its budget and raising interest rates, generating revenue through more taxes, and hiking electricity and gas prices.

Effectively, ordinary Pakistanis are going to suffer a lot more than they already are.

Islamabad and Washington have had longstanding relations rooted in their opposition to the Soviet Union. After the Cold War, the US became dependent on the South Asian country for supplies during its long occupation of Afghanistan. Due to the US’s double standard of using Pakistan as a security partner but also threatening to worsen the country’s economic situation, China has been able to fill the financial void.

Pakistani Foreign Minister Mohammad Ishaq Dar met with Chinese Vice Premier Zhang Guoqing on March 22 in Brussels, where the latter emphasised Beijing’s commitment to aiding Pakistan in addressing its financial challenges. However, just like the Pakistan-Iran gas pipeline, Islamabad continues to stall the implementation of the China-Pakistan Economic Corridor (CPEC), a flagship project of the China-proposed Belt and Road Initiative launched in 2013 to link the Gwadar port in southwestern Pakistan with China’s Xinjiang Uygur Autonomous Region.

Worsening the situation for CPEC is the constant stream of terror attacks against Chinese workers and nationals.

In the latest attack, on March 26, a suicide bomber in the Shangla district of Khyber Pakhtunkhwa rammed an explosive-laden car into a vehicle, killing five Chinese workers and engineers and their Pakistani driver heading to the Dasu Dam, the biggest hydropower project in Pakistan. Less than a week before the suicide attack, Pakistani security forces killed eight Balochistan Liberation Army separatist militants who opened fire on a convoy carrying Chinese citizens outside Gwadar port in the southwestern Balochistan province.

Given that Pakistan is facing a dire economic situation and needs to turn to the IMF and seek more funding from China, US sanctions would be a devastating blow. Sanction threats are especially contradictory for the US since it not only considers Pakistan an ally but overlooks the fact that India invests in the Iranian port of Chabahar, located only 170 kilometres from Gwadar port. Washington overlooks this contradiction since Chabahar rivals the China-funded Gwadar, signalling that the US views China as a much larger threat to its hegemony than Iran, which makes sanction threats more confusing since it will only push Pakistan to be even closer and more aligned with China.

Ahmed Adel is a Cairo-based geopolitics and political economy researcher.

March 28, 2024 - Posted by aletho | Economics | China, Iran, Pakistan, Sanctions against Iran, United States