Pakistan has hired two U.S.-based law firms to represent it at the International Court of Arbitration as it fights Iran’s bid to force the neighbor country to uphold its end of a gas pipeline deal or pay a large penalty.
Tehran and Islamabad signed a gas sales and purchase agreement (GSPA) in June 2009 for a cross-border pipeline that would supply as much as a billion cubic feet per day of gas to energy-starved Pakistan from Iran’s South Pars Field.
However, Pakistan has not started construction of the pipeline on its territory, primarily to avoid invoking U.S. sanctions.
In August, Pakistani media reported Tehran served Islamabad a final notice ahead of approaching the Paris-based arbitration body.
The two law firms; Wilkie Farr and Gallagher, and White & Case, will represent Pakistan in arbitration proceedings, a highly placed source in the Office of the Attorney General of Pakistan confirmed to VOA Wednesday. The official spoke on the condition of anonymity, because they were not authorized to speak to the media. VOA requested a comment from the law firms but have yet to receive a response.
Islamabad reportedly faces a penalty of up to $18 billion for delaying the project.
Background
In 2011, Iran announced it had completed construction of 900 kilometers of the pipeline on its side of the border between the two countries.
Two years later, Iran’s then-president, Mahmoud Ahmadinejad, and Pakistan’s President, Asif Ali Zardari, inaugurated the $7 billion project on Iranian territory.
In 2014, Pakistan asked for a 10-year extension on the project to avoid paying a penalty of up to $1 million per day starting in 2015.
In March 2024, close to the end of the extension period, Pakistan’s outgoing interim government rushed to approve construction of an 80-kilometer section of the pipeline from its border with Iran into the key southwestern port town of Gwadar in Balochistan province.
However, construction is yet to begin.
Last month, Pakistan’s minister for petroleum, Musadik Malik, told parliament that international sanctions stood in the way of proceeding with the cross-border pipeline.
“This is a deeply complicated matter and involves international sanctions," the minister said.
He rejected reports that the country could face a penalty of $18 billion but did not give a figure.
Hours before the minister’s remarks, U.S. State Department spokesperson Matthew Miller reiterated Washington’s warning against doing business with Tehran.
"We will continue to enforce our sanctions against Iran. We also advise anyone considering a business deal with Iran to be aware of its possible ramifications," the spokesperson said at a regular media briefing.
Iran is under U.S. sanctions for its nuclear and ballistic missile programs.
At times, Pakistan has signaled it will defy U.S. warnings but apparently has not done so operationally or publicly.
Although Pakistan can construct a pipeline within its border, it requires a sanctions waiver from Washington to purchase gas from Iran. Islamabad has not acquired the waiver.
