ISLAMABAD: Pakistan now faces another international arbitration case as Iran threatened to take the country to The Hague for unilaterally shelving the Iran-Pakistan gas pipeline.
Iran is invoking the penalty clause of the gas sales purchase agreement (GSPA) signed between the two countries in 2009, reported The News.
Iran has sought $1.2 billion in damages as per the penalty clause from January 1, 2015. As per the agreement, if Pakistan doesn’t take gas supplies from Iran, it is bound to pay a fine of $1 million per day, a top official of Petroleum Division said.
Considering the sensitivity of the situation, Secretary Petroleum Division has sent an internal note to Prime Minister Shahid Khaqan Abbasi warning him that Iran is planning to move the arbitrating court seeking damages of $1.2 billion against Pakistan’s failure to execute the project.
The IP gas pipeline has been in the rocks for over three years, since Iran completed its portion of the pipeline and in wake of news in late-2016 that Pakistan had shelved the IP project under pressure from a leading Gulf country.
Due to US and UN-led sanctions, Pakistan has been unable to raise any financing for the IP project, which it cited as the reason for not being able to go-ahead with the project.
As a result, Pakistan requested Iran for force majeure to avoid $1 million penalty per day as per GSPA. But Iran refused to listen to any reasons on which Pakistan had requested forced majeure, an official said.
As Iran’s patience faded over the persistent delays, Tehran has informed their Pakistani counterparts that it would be seeking a penalty of $1.2 billion via the arbitration court, which is almost equal to the cost of the entire project.
But Pakistan showed its willingness to go-ahead with the project and initiated Gwadar-Nawabshah LNG pipeline with the same specifications which were originally agreed with Iran and stated the pipeline would be named IP gas line.
The official shared after convincing Iran, it agreed to not charge the penalty due from January 1st, 2015. He said Tehran had shown the willingness to revise the gas price downward under IP gas pipeline since the last two years almost.
He said the Pakistan’s official team is still waiting for go-ahead to visit Iran for negotiation of downward gas price revision for IP gas pipeline, but no permission has been given to officials of Ministry of Petroleum and Natural Resources.
He added that the government cowed down to pressure from one of the Middle East countries, due to which it shelved the IP gas pipeline project. This also upset Beijing, as a Chinese entity had been given the contract of GNGP under government to government agreement for which it had set aside 85 percent funding.
