Iran Threatens To Fine IP Pipeline Project $18 B

Iran has demanded that Pakistan build a portion of IP gas pipeline project on its soil, or else prepare to pay an $18 billion fine.

Iran Threatens To Fine IP Pipeline Project $18 B

In a recent development, Iran has demanded that Pakistan build a portion of the Iran-Pakistan (IP) gas pipeline project on its soil by the months of February and March 2024, or else prepare to pay an $18 billion fine.

According to a senior official of the Ministry of Energy, this was communicated to the visiting Pakistani delegation by the Tehran authorities about three weeks ago. During the visit, Iranian officials claimed that Pakistan was required by the revised agreement to build the (IP) gasline pipeline project on its territory until February or March 2024 and that US sanctions against Iran were unconstitutional.

Iran has already finished building a portion of the pipeline from the gas field to the Pakistani border on its own soil. The National Iranian Gas Company (NIGC) and the Inter-State Gas Systems (ISGS) of Pakistan signed a revised agreement for the construction of the gas pipeline between the two nations in September 2019.

The revised agreement stipulates that Iran won’t file a lawsuit against Pakistan or Iran in any international court if the pipeline’s construction is delayed until 2024. By the time Pakistan completes its pipeline in 2024, it will be able to import 750 million cubic feet of gas per day from Iran. According to the official, Iran reminded Pakistan that the project must be completed by February or March 2024 under the most recent scenario.

When contacted, a spokesman for the petroleum division acknowledged that a Pakistani delegation had recently visited Tehran, but he declined to provide any details regarding the visit’s results.

Earlier, the officials claimed that Tehran had formally informed Islamabad in February 2019 that it intended to take the matter to arbitration for Islamabad’s failure to instal the pipeline in Pakistan’s territory within the allotted time frame under the IP gasline project and had threatened to invoke the Gas Sales Purchase Agreement’s penalty clause (GSPA).

Although a 25-year GSPA was signed in 2009, the project never materialised. Since the agreement was signed almost 12 years ago, the pipeline’s three-year construction period on Pakistani soil has been wasted. According to the terms of the agreement, Pakistan was required to build a 781-kilometre pipeline across its territory, running from the Iranian border to Nawabshah.

Pakistan is required by the original agreement’s penalty clause to start making daily payments of $1 million to Iran on January 1, 2015. Pakistan would also be forced to pay billions of dollars in fines in the event that Iran filed a case in an arbitration court.

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. The project was to be completed by December 2014 and become functional on January 1, 2015.