Iran gives Pakistan ‘final notice’ to complete gas pipeline or face arbitration

The Cradle, September 5, 2024 — 

Islamabad is facing $18 billion in fines for not completing the natural gas pipeline due to US sanctions on Iran.

Tehran gave its final notice to Islamabad that it will take Pakistan to the Paris Arbitration Court in September for not constructing its side of the IP gas pipeline, senior official sources told The News on 27 August.

Islamabad was given a 180-day extension to the March 2024 deadline to complete the 2,775-kilometer pipeline, which would facilitate Iranian natural gas exports to Pakistan of 750 million cubic feet per day.

In 2009, two countries signed the Gas Sales Purchase Agreement (GSPA) to build and complete the pipeline by 2014.

Tehran has completed the pipeline on its territory at a cost of $2 billion, but Islamabad has not completed its side due to threats from Washington, which says the pipeline would violate US sanctions on Iran.

The Inter-State Gas Systems (ISGS) of Pakistan and the National Iranian Gas Company (NIGC) signed a revised contract in September 2019 to allow Pakistan additional time to build the pipeline by March 2024.

Now that Pakistan has still failed to complete the project after the 180-day extension to the March deadline, Iran served its final notice to take Pakistan to a Paris arbitration court.

The penalties for Pakistan’s failure to complete the pipeline could amount to some $18 billion.

“We are simply unable to go with the project due to US sanctions,” senior government officials told The News. “We tried hard with Americans seeking US waiver, but the Bidden administration is against the IP gas line project.”

In March, a senior US government official revealed that Washington had set a “goal” to prevent the construction of the Iran-Pakistan (IP) gas pipeline, which had been delayed by almost a decade in large part due to US economic pressure.

“I fully support the efforts by the US government to prevent this pipeline from happening,” US Assistant Secretary Bureau of South And Central Asian Affairs, Donald Lu, said during a congressional hearing on 19 March. “We are working toward that goal,” he stressed.

“We are tracking this planned pipeline between Iran and Pakistan … Honestly, I don’t know where the financing for such a project would come from. I don’t think that many international donors would be interested in funding such an endeavor,” the US official added, highlighting that the White House “will uphold both in letter and spirit all sanction laws related to Iran.”

Due to Pakistan’s dire economic crisis, the nation experiences regular blackouts lasting 12 hours or more every day.