Final notice to Pakistan: Iran to move arbitration court next month on IP gas pipeline

 

ISLAMABAD: In a shocking development, Iran has served its last notice on Pakistan informing that Tehran is left with no option but to move the Paris Arbitration Court in September 2024 against Pakistan for not constructing the pipeline under the IP gas project during the extended 180-day deadline, senior official sources told The News.

The project has been facing a 10-year delay since 2014 over proposed US sanctions on the project. “The GSPA (Gas Sales Purchase Agreement) was signed in 2009 under 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 US sanctions.”

“The Inter-State Gas Systems (ISGS) of Pakistan and the National Iranian Gas Company (NIGC) inked the revised contract in September 2019 and under that Iran would not approach any international court if there was a delay in the construction of the pipeline, however, Pakistan would erect its pipeline by 2024 after which it would have an intake of 750 million cubic feet of gas from Iran daily.” “Under the revised contract, Pakistan was bound to erect the portion of pipeline in its territory till February-March, 2024. Iran however facilitated Pakistan and extended the 180-day deadline that is to expire in September 2024, however, authorities again failed to lay down the pipeline. So, Iran served its final notice.

Under the French, if Iran does not exercise its right to move the arbitration court till September 2024, it would lose its right to initiate a legal battle against Pakistan.” “Iran earlier issued its second legal notice to Pakistan in November-December 2022 asking Pakistan to construct a portion of the Iran-Pakistan (IP) gas line project in its territory till February-March 2024 or be ready to pay a penalty of $18 billion. Earlier in February 2019 Tehran had notified Islamabad of its intention to move to an arbitration court and threatened to invoke the penalty clause of the Gas Sales Purchase Agreement (GSPA). The GSPA was signed in 2009 for 25 years.”

The top decision-makers of the incumbent regime, top officials said, are quite upset over the notice which is the final one and to this effect, the relevant authorities in the Petroleum Division put their heads to chalk out the strategy after the notice the country received some 10 days ago. The authorities are hiring one of the foreign law firms to prepare Pakistan’s case to be pitched in the Arbitration Court. “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 and the US congressional panel in March 2024 was told by Assistant Secretary of State Donald Lu that “We have warned Pakistan of serious consequences if it gets in bed with Iran on IP gas line project.”

However, the top mandarins of the petroleum division are tight-lipped and didn’t offer any comment over the final notice Iran sent to Pakistan. Tehran has never subscribed to Pakistan’s contention saying the US sanctions are not justified. Iraq and Turkey have been using the gas from Iran for a long time due to waiver from US sanctions. Likewise, India also got a waiver for using petroleum products. The French arbitration court does not recognize US sanctions. Under the original agreement, Pakistan is bound to pay $1 million per day to Iran from January 1, 2015, under the penalty clause. And in case Iran moves an arbitration court, Pakistan would have to pay billions of dollars.

The project was to be implemented under a segmented approach meaning that Iran had to lay down the pipeline on its side and Pakistan had to build the pipeline in its territory. It was to be completed by December 2014 and become functional from January 1, 2015. “The authorities in Pakistan had planned to partially implement the IP gas line project by laying down an 81-kilometer pipeline from Gwadar to the Iranian border to show its seriousness towards the project. But this strategy also could not be implemented.”