March 17, 2023
The National Iranian Gas Company (NIGC) has decided to go to the International Court of Arbitration (ICA) over Pakistan’s refusal to build the Iran-Pakistan Gas Pipeline Project, as it committed to do in a bilateral agreement.
Iran is demanding that Pakistan pay an $18 billion penalty.
“Islamabad has long been providing NIGC with lame excuses in breach of the terms of the gas import contract it signed with Iran in 2009. Enough is enough and filing a formal complaint against Pakistan should be a priority,” said Mehran Amir-Moeini, a board member at the Iran International Energy Studies Institute, affiliated to the Oil Ministry.
“Tehran has asked Islam-abad to lay a segment of the gas pipeline on its territory by February-March 2024, or pay a penalty of $18 billion,” he added, saying the decision to go to court is totally right, as Pakistan has no intention to import gas from Iran.
Talks are underway between Pakistan and Russia to extend a pipeline to replace the Iran-Pakistan gas pipeline, meaning Islamabad has misused cordial relations with Iran to buy time not to be sued internationally, he argued.
“They are determined to violate the terms of the agreement. Hence, they must be sued and brought before ICA in less than a year; otherwise, the National Iranian Gas Company will be deprived of all its legal rights,” he said.
Iran and Pakistan signed an agreement in 2009 to lay a pipeline to deliver 22 million cubic meters per day of gas from the South Pars Gasfield in the Persian Gulf to Pakistan’s Baluchistan and Sindh provinces.
The pipeline’s construction was to commence in 2012 and be completed in two years. Each country was to finance and build the part of the pipeline on its territory. However, Islamabad did not even start construction then, blaming financial constraints.
NIGC should invoke the penalty clause of the Gas Sales Purchase Agreement (GSPA) stipulated in the contract, Amir-Moeini said, noting that under the original agreement, Pakistan is bound to pay $1 million per day to Iran from January 1, 2015, (the date the gas flow was contracted to start) under the penalty clause. That penalty sum would have passed $2.6 billion in February. Iran did not explain where it got the $18 billion figure from.
Tehran long ago completed building most of the 1,172 km of pipeline from Asaluyeh on the Persian Gulf coast across the south of the country. But Iran has linked that pipeline to many cities and industries across the south, so it does not appear Iran could fulfill its part of the contract without cutting off most of those current buyers.
Some in Pakistan say US sanctions have prevented construction of the pipeline inside Pakistan. However, there were no such sanctions in 2016, 2017 and in 2018 until then-President Donald Trump re-imposed them, but Pakistan made no effort to build the pipeline in that three-year window.
According to Pakistan’s Dawn newspaper, more than half of Pakistan’s people either have no access to the already overstretched power grid or suffer over 12 hours of load shedding daily.