Iran Extends IP Gas Pipeline Deadline to 2035

In a recent diplomatic effort to resolve the impasse without immediate litigation, Iran has offered to postpone legal proceedings and extend the gas sale agreement for an additional ten years, effectively moving the deadline to 2035. Pakistan is currently exploring an out-of-court settlement and has indicated it might revive the project if it can secure a U.S. waiver or renegotiate the terms for lower gas volumes and prices to match its shifting domestic energy needs.

Iran has officially issued a final notice to Pakistan regarding the long-stalled Iran-Pakistan (IP) gas pipeline project, a move that could lead to a staggering $18 billion fine. This notice was served in August 2024 under the legal framework of the Gas Sales Purchase Agreement (GSPA), which was signed in 2009. Because the agreement is governed by French law, any legal disputes are handled by the Paris-based International Court of Arbitration, a forum that notably does not recognize U.S. sanctions as a valid reason for breach of contract.

The project, which was intended to supply Pakistan with 750 million cubic feet of gas per day, has faced more than a decade of delays. While the foundation stones were laid by the presidents of both nations in 2013 and Iran has successfully completed its 900-km section of the pipeline, Pakistan has struggled to begin work on its side. The primary obstacle remains the threat of U.S. sanctions, which has prevented Pakistan from securing the necessary international financing and led to repeated requests for a sanctions waiver that Washington has consistently denied.