KARACHI — The Iran-Pakistan gas pipeline, which has faced years of setbacks and delays, continues to test Islamabad and Tehran ties. Initially launched in 2008 as the highly anticipated India-Pakistan-Iran pipeline, it became a bilateral project after New Delhi backed off due to the imposition of US sanctions on Iran.

Since then, two agreements have been clinched between Pakistan and Iran regarding the project, but though Tehran completed the 1,100-kilometer (680-mile) portion running from the Pars gas fields to its border province of Sistan-Baluchistan, Islamabad has failed to meet its pledge to build the 780 kilometers (485 miles) of pipeline planned to extend across its provinces of Baluchistan and Sindh. 

Last week, Tehran finally served a final notice to Islamabad, saying that since Pakistan had failed to meet its commitments Iran had no option left but to resort to the Paris Arbitration Court this month. Pakistan now faces an $18 billion penalty unless it implements its side of the deal by September 2024. Yet if dares to resume construction, it could be hit with painful US sanctions.

According to reports, Pakistan’s Petroleum Division has been working on a strategy for the last two weeks, and a foreign law firm will be representing Pakistan in its case in the arbitration court. According to some experts, the project could have been implemented under a segmented approach to avoid this penalty, whereby they constructed a "pipe" within Pakistani borders, without referring to it as part of this pipeline as a sanctions workaround. But with US sanctions being threatened, time is running out.