Pakistan prime minister begins Iran visit today as government issues force majeure.
The government has issued a ‘force majeure and excusing event notice’ regarding the Iran-Pakistan gas pipeline project to stave off hefty fines by citing threat of American sanctions as virtually insurmountable hurdle in pushing through the project.
This feature as an important item of Prime Minister Nawaz Sharif’s agenda in talks with Iranian leadership during his crucial trip to Iran beginning Sunday. Under an agreement, Pakistan is bound to pay a penalty of $3 million per day if it fails to finish the project by the deadline of December 2014. Iran has built the pipeline almost up to the border but there is hardly any progress on the Pakistani side.
The accord was signed last year with great fanfare by former president Asif Ali Zardari a weeks before the May 11 polls. The PML-N which came to power accuses Zardari of inking the difficult agreement with stringent conditions to claim credit and leave an embarrassing legacy for the new government.
Iran has been insisting all along that the pipeline could be constructed despite the risk of US curbs and points out that Pakistan was fully aware of the geopolitical situation at the time of signing the deal. “The government has declared force majeure, which is usually enforced in war or emergencies, when it is unavoidable,” a Foreign Office official said.
The two countries initialled a government-to-government cooperation agreement on December 1, 2012 in which the Iranian government nominated Tadbir Energy as the engineering, procurement and construction (EPC) contractor and offered a loan of $500 million.
However, officials said the new Iranian government backed out of the financing offer and the contract with Tadbir was terminated.