Iran has issued a definitive warning to Pakistan regarding the long-delayed gas pipeline construction under the Iran-Pakistan (IP) gas project; if Pakistan fails to meet the extended 180-day deadline, it will resort to the Paris Arbitration Court under French law by September 2024.
The project, initially agreed upon in 2009 through the Gas Sales and Purchase Agreement (GSPA) signed under French law, has faced significant delays since its inception, with a commencement date in 2014 and continuous postponements since. According to senior government sources, the arbitration court in Paris, designated as the dispute resolution forum, does not acknowledge U.S. sanctions, adding complexity to the proceedings.
A revised agreement signed between Pakistan’s Inter-State Gas Systems and the National Iranian Gas Company in September 2019 stipulated that Iran would refrain from seeking legal recourse provided Pakistan completes the pipeline by 2024. Upon completion, Pakistan would receive 750 million cubic feet of gas daily from Iran.
Read: Pakistan Seeks US Waiver for Iran-Pakistan Gas Pipeline Project
According to this agreement, Pakistan was to have a pipeline segment on its territory completed by February-March 2024. However, Iran extended this deadline by another 180 days, ending in September 2024, during which Pakistan failed to progress.
Iran faces a critical deadline; if it does not pursue arbitration by September 2024, it will lose the right to take any legal action against Pakistan concerning the gas pipeline project delays. This situation follows a series of legal challenges from Iran, including a significant notice in late 2022 demanding the completion of a specific pipeline section by early 2024, under threat of an $18 billion penalty.
Tehran’s first warning came in February 2019, when it threatened to pursue arbitration and enforce penalty clauses if Pakistan did not adhere to the stipulated timeline for laying the pipeline.
