Iran serves new notice on Pakistan for delay in IP gas line project

ISLAMABAD: Iran has issued a third notice to Islamabad, renewing its intention to move the arbitration court for not laying the pipeline as part of the IP gas line project. The project has been facing delays since 2014.

Pakistan received the latest notice almost 10 days ago, top government officials told The News.

“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 waiver for importing petroleum products for its economy. 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 recognize the US sanctions.

“The top authorities in Pakistan have carved out a strategy under which it has been decided to partially implement the IP gas line project by laying down an 81-kilometer pipeline from Gwadar to the Iranian border, a point where Iran has already laid down its part of the pipeline from the gas field. This will help Pakistan avoid the expected penalty of $18 billion if Iran moves the Arbitration Court.”

When contacted, a spokesman for the Petroleum Division did not respond to the latest notice and any plan made by relevant authorities. He said both countries are very much on their toes on the project and that Iranian top functionaries may visit Pakistan soon.

As per the plan, the 81-kilometer pipeline will connect Gwadar with the IP gas line project and the gas will be used in Gwadar initially. If the US does not invoke any kind of sanctions, then the pipeline will be extended from Gwadar to Nawabshah. If Washington imposes sanctions, then Pakistan will have valid reasons to abandon the project and this is how it would escape the $18 billion penalty and arbitration court proceedings. To this effect, top-level leadership of both the countries is in constant touch at the ministerial level on a strategy to implement the project and the prime minister will be briefed by the authorities very soon and a go-ahead for the strategy will be sought. The Special Investment Facilitation Council (SIFC) has also been sensitised over the latest notice from Iran and the strategy carved out by the authorities concerned. According to top sources in SIFC, Pakistan has to show seriousness by March-February 2024 towards the Iran-Pakistan gas pipeline by laying down the 80-kilometer pipeline from Gwadar to the Iranian border or it would face the $18 billion penalty. To a question, they said that the Interstate Gas System (ISGS) has funds to lay down the 81-kilometer pipeline to partially become part of the project.