Iran Warns Pakistan of Moving Arbitration Court over Failure to Complete IP Gas Pipeline Project

Iran Warns Pakistan of Moving Arbitration Court over Failure to Complete IP Gas Pipeline Project
ISLAMABAD: In the latest development related to the unending saga of Iran-Pakistan gas pipeline and amid the increase in the US pressure on Iran, Tehran formally gave notice to Islamabad in February this for moving the arbitration court after Pakistan failed to lay down the pipeline in Pakistan’s territory in the stipulated time under the and threatened to invoke the penalty clause of Gas Sales Purchase Agreement (GSPA).

According to The News, the two countries during the two-day visit of Prime Minister Imran Khan to Iran on April 21-22 discussed the issues related to the IP gas line, particularly the scenario after the formal notice to Pakistan from Iran.

Earlier in 2018, the authorities in Iran had conveyed to Pakistan that it may move the arbitration court against Pakistan for unilaterally shelving IP gas line project invoking penalty clause of the GSPA.

The official sources said that during the visit of Imran, the top leadership said they would withdraw the notice only if Pakistan extended the construction period of pipeline of 781 kilometres from Iranian border to Nawabshah under signed GSPA.

The agreement was signed in 2009 for 25 years, but since then the project could not get the shape. Pakistan was supposed to complete the project in three years but Islamabad failed to get financing from any international agency due to the US sanctions.

The Iranian authorities want Pakistan to mutually extend this period under GSPA. Iran has already asked Pakistan to review the price of gas under IP, but no talks on this issue have been held so far.

Before the formal notice from Iran in February 2019, Pakistan’s legal firm had sent about 15 legal questions to Iran asking in the presence of renewed US sanctions against Iran on its nuclear programme how it is possible to materialise the gas transactions.

Iran was of the view that there are no sanctions on gas transactions, as it is exporting gas to some EU countries and importing the same from Turkmenistan. However, Pakistan legal firm had asked for mechanism under which EU and Turkmenistan are materialising the gas transactions.

However, instead of reply on the legal questionnaire, Iran in February 2019 sent a formal notice to Pakistan.

Under existing GSPA, Pakistan is bound to pay $1 million per day to Iran from January 1, 2015 under the penalty clause. And in case Iran moves arbitration court, Pakistan will have to pay billions of dollars as penalty.

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