Iran may seek $18bn penalty against Pakistan over delay in gas project

• The project has been facing delays since 2014.
• Coordination bodies from both sides to find doable strategy.
• Pakistan sees US sanctions on Iran as impediments in execution.

ISLAMABAD: Iran may approach the Paris-based International Arbitration against Pakistan seeking a penalty of $18 billion, if Islamabad fails to make progress in the Iran-Pakistan (IP) gas pipeline project for which Tehran has extended the deadline by 180 days till September 2024, The News reported on Monday citing government officials.

The officials said Iran has also extended an offer to send its legal and technical team to work out a win-win strategy with Pakistan in the given time in a bid to make the project happen and avert arbitration.

The Iranian technical and legal experts team was earlier scheduled to arrive in Pakistan on January 21 for talks to find a solution to materialise the much-delayed IP gas line project. But it could not reach Islamabad because of the recent tensions between the two countries.

Now the Iranian experts team, the officials said, would come to Pakistan in the second week of February. The coordination committees from both sides would find out a doable strategy to materialise the project. The Iranian team would comprise experts in international relations laws, legal frameworks and engineers.

The project has been facing delays since 2014. Pakistan received the last notice almost 25 days ago.

Iran earlier asked Pakistan in Nov-Dec 2022 in its second notice to construct a portion of the Iran-Pakistan Gasline project in its territory till Feb-March 2024 or be ready to pay a penalty of $18 billion. Before that, Tehran sent a notice to Islamabad in Feb 2019 to move an arbitration court for not laying down the pipeline in Pakistan’s territory in the stipulated period under the IP gas line project. It threatened to invoke the penalty clause of Gas Sales Purchase Agreement (GSPA). The GSPA was signed in 2009 for 25 years but the project could not take shape.

Pakistan has been arguing that it could not materialise the project in its territory because of the US sanctions imposed on Iran, a view which authorities in Tehran have never subscribed, saying the US sanctions are not justified. Iraq and Turkey have been using gas from Iran for long as they have managed waivers on the US sanctions.

Likewise, India also got a US waiver for importing petroleum products. Pakistan has, meanwhile, tried to contact the US authorities many times to know whether the US curbs on Iran would have any impact on Pakistan if it becomes a part of the IP gas line but the country has not received any response from Washington.

The GSPA (Gas Sales Purchase Agreement) was signed under the French law and the Paris-based Arbitration Court is the forum to decide disputes that arise between the two countries. The French arbitration court does not recognise the US sanctions.