Pakistan invites Iran for talks over stalled IP gas pipeline

Iran sought $1.2 billion in damages as per the penalty clause from January 1, 2015. As per the agreement, if Pakistan didn't take gas supplies from Iran, it is bound to pay a fine of $1 million per day

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ISLAMABAD: Pakistan has called on Iran to conduct pivotal talks over the Iran-Pakistan gas pipeline that was earlier abandoned by the government.

A senior official at Petroleum Division (Ministry of Energy) said relevant quarters have been extended an invitation in Tehran to pay a visit to Islamabad in current months before coming of Ramazan and hold talks on the IP gas pipeline project, reported The News.

He shared the Prime Minister Shahid Khaqan Abbasi had instructed the Petroleum Division to send an invitation to Iranian authorities for negotiating regarding the IP pipeline project.

Pakistan is facing 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.

It was reported at end of February 2018 that Iran sought $1.2 billion in damages as per the penalty clause from January 1, 2015. As per the agreement, if Pakistan didn’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 had 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 penalties 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 had 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.

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