Pakistan is hoping to secure a US sanction waiver to construct its portion of the Iran-Pakistan gas pipeline to avoid billions in arbitration following Iran’s threat of fines if Islamabad doesn’t complete its side of the pipeline this year. 

Signed in 2009, the project was supposed to be completed by 2015. However, the US sanctions on Iran made the undertaking challenging due to fear of violating the US sanctions. 

On Monday, March 25, 2024, Pakistan's Petroleum Minister Musadik Malik announced the government's decision to seek a waiver from U.S. sanctions on the Iran-Pakistan gas pipeline project.

"Pakistan will vigorously present its case and will try to obtain an exemption from U.S. sanctions by presenting technical and political arguments," Malik said during an informal media briefing.

The move comes amid pressure from Iran, which has threatened international arbitration and a potential $18 billion penalty if Pakistan fails to complete its portion of the pipeline within the extended deadline set to lapse in September 2024. 

While Pakistan argues that US sanctions impede its ability to complete the pipeline on its territory, Iran maintains that the sanctions do not apply and points to waivers granted to other countries like Iraq and Turkey.

Assistant Secretary of State Donald Lu warned Pakistan of "serious" consequences for the U.S.-Pakistan relationship if they proceed with the pipeline.

According to reports, Pakistan is expected to begin construction on its portion of the pipeline soon. The project involves laying an 81-kilometre section that would connect to the Iranian pipeline already built.