The Pak-Iran gas pipeline has been a contentious issue due to its decade-long delay, which has largely been attributed to concerns over potential US sanctions
TEHRAN: The long-delayed Pak-Iran gas pipeline project is now under intense scrutiny as Iran has issued a final notice to Pakistan, expressing serious concerns over the continued delays and warning of imminent legal action. Sources reveal that Iran is poised to approach the International Court of Arbitration in September if Pakistan fails to meet the extended deadline for completing the pipeline. The pipeline project, which has faced numerous delays since its inception in 2014, has been plagued by a series of obstacles. Iran’s recent warning highlights the urgency of the situation, with Tehran indicating that no further extensions will be granted.
The development comes in the wake of Iran’s earlier legal notice, which had already warned Pakistan of potential penalties amounting to $18 billion if the pipeline’s construction was not completed by February-March 2024. In response to these developments, Pakistani officials are reportedly exploring options to negotiate a resolution with Iran. The Petroleum Division is engaged in discussions to address the legal and logistical aspects of the project, aiming to find a viable solution and avoid further complications. The division’s efforts are focused on taking Iran into confidence regarding the project’s delays and future progress.
The Pak-Iran gas pipeline has been a contentious issue due to its decade-long delay, which has largely been attributed to concerns over potential US sanctions. The Gas Sales Purchase Agreement (GSPA) for the pipeline, signed in 2009 under French law, designates the Paris-based Arbitration Court as the forum for dispute resolution. Notably, this court does not recognize US sanctions. In September 2019, a revised contract was signed by Pakistan’s Inter-State Gas Systems (ISGS) and Iran’s National Iranian Gas Company (NIGC). Under this agreement, Iran had agreed not to seek international arbitration over delays, provided Pakistan completed its portion of the pipeline by 2024.
However, with the deadline rapidly approaching and a 180-day extension set to expire in September 2024, Pakistan has yet to meet its commitment. Iran’s final notice, received approximately ten days ago, has alarmed top decision-makers in Pakistan. The Petroleum Division is now strategizing to address the situation, including hiring a foreign law firm to prepare Pakistan’s case for presentation before the Arbitration Court. The outcome of these efforts will be crucial in determining the future of the Pak-Iran gas pipeline project and in avoiding potential financial penalties and international arbitration.
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