Iran has demanded that Pakistan complete its section of the Iran-Pakistan gas pipeline (IPGP) project in its borders by February-March 2024 or face an $18 billion penalty.
This was notified to the visiting Pakistani official delegation that visited Tehran three weeks ago.
Iran has already constructed its portion of the pipeline from the gas field towards the Pakistan border. In September 2019, Inter-State Gas Systems (ISGS) of Pakistan and the National Iranian Gas Company (NIGC) reached a new agreement for the building of a pipeline between the two sides.
Under the amended agreement, Iran would not go to any international court if construction was delayed, and Pakistan would not pay any compensation to Iran until 2024.
The Gas Sales Purchase Agreement (GSPA) signed in 2009 called for Pakistan to build a 781-kilometer pipeline from the Iranian border to Nawabshah over a 25-year period.
Unfortunately, the project has not been developed, and Pakistan is required by the penalty provision to pay Iran $1 million each day beginning 1 January 2015.
If Iran seeks arbitration, Pakistan will be forced to pay billions of dollars as compensation. The project was to be carried out in stages, with Iran putting down the pipeline on its side and Pakistan constructing the pipeline inside its border. The project was supposed to be finished by December 2014 and be operational by 1 January 2015.