Pakistan Seeks 10-Year Extension for Iran–Pakistan Gas Pipeline to Avoid $18 Billion Arbitration Risk Amid US Sanctions

Pakistan has requested a fresh 10-year extension from Iran, pushing the start of the Iran–Pakistan (IP) gas pipeline to 2035, as it faces a potential $18 billion penalty in international arbitration due to US sanctions on Tehran. The federal government is currently contesting arbitration proceedings initiated by Iran before the Paris-based Court of Arbitration under French law, while simultaneously pursuing diplomatic efforts to reach an out-of-court settlement.

A Ministerial Oversight Committee (MoC) led by Deputy Prime Minister Ishaq Dar is reviewing legal and diplomatic options to limit Pakistan’s financial exposure. Iran initiated arbitration in September 2024, claiming that Pakistan failed to construct its portion of the pipeline despite multiple deadline extensions, seeking $18 billion in damages under the Gas Sales Purchase Agreement (GSPA). Pakistan’s legal position asserts that international sanctions on Iran made it impossible to meet the extended 180-day deadline.

The arbitration decision is expected around 2027–28, but Pakistan is continuing parallel diplomatic engagement to negotiate a settlement outside the court. The Federal Minister for Petroleum and Natural Resources has confirmed that the MoC is evaluating multiple strategies, with legal proceedings ongoing and no diplomatic resolution reached yet. The request for a 10-year extension reflects Pakistan’s efforts to mitigate financial risk while keeping the IP pipeline project alive despite geopolitical and regulatory challenges.