Iran has issued a final notice to Pakistan, stating it will take legal action next month if Pakistan fails to complete the pipeline under the Iran-Pakistan (IP) gas project. The deadline for this work is in September 2024, and Iran is now preparing to take the matter to the Paris Arbitration Court, a leading Pakistani newspaper reported on Tuesday.
The pipeline project has been delayed for a decade due to proposed U.S. sanctions. The Gas Sales Purchase Agreement (GSPA), signed in 2009, is governed by French law, and the Paris-based court will handle disputes. Notably, the French court does not acknowledge U.S. sanctions.
The revised contract between Pakistan’s Inter-State Gas Systems (ISGS) and Iran’s National Iranian Gas Company (NIGC), finalized in September 2019, set a new deadline for Pakistan to complete its portion of the pipeline by February- March 2024. Despite extending the deadline by 180 days, Iran reports that Pakistan has not met the new deadline.
If Iran does not act by September 2024, it will lose its right to pursue legal action. Previously, Iran issued a second legal notice to Pakistan in late 2022, demanding completion by early 2024 or facing an $18 billion penalty. In February 2019, Tehran had already indicated plans to move to arbitration and invoke penalty clauses.
Pakistan’s current administration is reportedly frustrated by this final notice and is consulting with foreign law firms to prepare its defense. Senior officials cite U.S. sanctions as a major obstacle, noting that the Biden administration is opposed to the IP gas line project. Despite attempts to seek a waiver, the U.S. Congressional panel has warned of severe consequences for Pakistan’s involvement with Iran on this project.
Tehran rejects Pakistan’s claims about the sanctions and points out that other countries, like Iraq and Turkey, have successfully negotiated waivers. Under the original agreement, Pakistan faces a $1 million daily penalty starting January 1, 2015, for non-compliance. Failure to resolve the issue in arbitration could result in Pakistan owing billions.
The project, intended to be completed by December 2014, has seen limited progress, including an 81-kilometer pipeline from Gwadar to the Iranian border, which also failed to meet expectations.
