Iran has issued a final notice to Pakistan, warning that it will take legal action in the Paris Arbitration Court if Islamabad fails to construct its portion of the Iran-Pakistan (IP) gas pipeline by the extended deadline of September 2024.
The IP gas project has faced a decade-long delay due to concerns over potential U.S. sanctions.
The Gas Sales Purchase Agreement (GSPA), signed in 2009 under French law, designates the Paris-based arbitration court as the forum for resolving disputes between the two nations. The court does not recognize US sanctions.
In 2019, Pakistan and Iran revised their contract, stipulating that Pakistan would complete its portion of the pipeline by 2024, enabling the intake of 750 million cubic feet of gas from Iran daily.
Iran extended a 180-day deadline for Pakistan to meet its obligations, which is set to expire in September 2024. However, Pakistan has yet to make progress on the pipeline.
Failure to meet the deadline could result in Iran taking the matter to the arbitration court, potentially leading to a penalty of $18 billion against Pakistan.
Tehran had previously issued a legal notice to Pakistan in late 2022, warning of the consequences of further delays.
The News reported, citing official sources, that some top officials in the Petroleum Division are reportedly strategising in response to Iran’s final notice. The government is considering hiring a foreign law firm to represent Pakistan’s case in the arbitration court.
Senior officials have expressed frustration over the US sanctions, stating that efforts to secure a waiver from the US have been unsuccessful.
Iran has dismissed Pakistan’s concerns about US sanctions, pointing out that other countries, including Iraq and Turkey, have continued to use Iranian gas with US waivers.
Under the original agreement, Pakistan was obligated to pay $1 million per day in penalties to Iran starting from January 1, 2015, if the project was not completed.
The IP gas pipeline was supposed to be operational by January 1, 2015, but delays on Pakistan’s side have stalled the project.
Plans to partially implement the project by constructing an 81-kilometre pipeline from Gwadar to the Iranian border also failed to materialise.
