ISLAMABAD: Facing a potential $18 billion penalty in international arbitration, Pakistan has requested that Iran grant a fresh 10-year extension until 2035 for the implementation of the stalled Iran-Pakistan (IP) gas pipeline. The request cites continued and intensified US sanctions against Tehran under the Trump administration.
Islamabad is currently engaged in a legal battle with Tehran before the Paris-based Court of Arbitration under the French law over delays in the IP gas pipeline, while also pursuing parallel diplomatic efforts to secure an out-of-court settlement. A Ministerial Oversight Committee (MoC), headed by Deputy Prime Minister and Foreign Minister Senator Ishaq Dar, is evaluating multiple options to avert significant financial exposure.
Iran initiated arbitration proceedings in September 2024, accusing Pakistan of failing to construct its portion of the pipeline despite repeated deadline extensions and seeking damages of $18 billion under the Gas Sales Purchase Agreement (GSPA). The Attorney General of Pakistan, supported by the legal team of Inter State Gas Systems (ISGS) and backed by the Petroleum Division argue that Islamabad could not meet its obligations during the extended 180-day deadline due to international sanctions on Iran.
Officials expect the arbitration court’s verdict in 2027-28. However, sources indicate that leaders in both Pakistan and Iran are also engaged in high-level diplomatic efforts to resolve the dispute outside the courtroom. Pakistan is pushing for a 10-year extension until 2035, although no formal proposal has yet been presented, suggesting that talks are being conducted directly between the two governments’ top leadership.
When contacted, Federal Minister for Petroleum and Natural Resources Ali Pervaiz Malik responded that the MoC was exploring various options. “However, there has been no concrete breakthrough on the diplomatic front so far, but the legal proceedings are ongoing,” he said.
