Pakistan has requested a 10-year extension from Iran to complete its section of the Iran–Pakistan (IP) gas pipeline. The extension would move the project deadline to 2035, amid risks of a potential $18 billion penalty in international arbitration.
The federal government is currently contesting arbitration proceedings initiated by Iran before the Paris-based Court of Arbitration under French law. Iran claims that Pakistan failed to construct its section of the pipeline despite multiple deadline extensions and is seeking $18 billion in damages under the Gas Sales Purchase Agreement (GSPA).
Pakistan’s legal position is that international sanctions on Iran made it impossible to execute the project within the 180-day extended deadline. The government is also pursuing diplomatic efforts to reach an out-of-court settlement and limit potential financial exposure.
A Ministerial Oversight Committee (MoC) under Deputy Prime Minister Ishaq Dar is reviewing legal and diplomatic options. The MoC is examining multiple strategies, but officials say no diplomatic breakthrough has been achieved so far.
The arbitration proceedings, initiated by Iran in September 2024, are expected to conclude in 2027–28. Meanwhile, Pakistan continues parallel negotiations with Iran to find a resolution outside formal legal channels.
The IP gas pipeline is a major energy project for Pakistan, aimed at meeting growing domestic demand. Delays caused by sanctions have complicated the project and increased the risk of financial penalties.
Officials emphasize that Pakistan is taking a dual approach: defending its position legally in arbitration while actively pursuing diplomatic solutions. The government aims to protect the country’s financial interests and secure a workable timeline for completing the pipeline.
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The outcome of these legal and diplomatic efforts will have significant implications for Pakistan’s energy security and regional cooperation with Iran.
