FOR the past several years, Pakistan’s economy has stood at a critical juncture, where the energy crisis, foreign exchange shortage, a widening trade deficit and sluggish economic growth have become deeply interconnected problems. However, Pakistan’s strategic, diplomatic and military successes, along with efforts toward a peace process to ease Iran-US tensions, have now turned this precarious turning point onto a path toward development and prosperity. Following the ceasefire with the United States and the easing of US economic sanctions on Iran, Iranian President Dr. Masoud Pezeshkian’s recent one-day visit to Pakistan is of immense significance. Undoubtedly, this marks the beginning of a new and bright chapter in the millennia-old Islamic, historical, cultural and civilizational ties between the two countries. Through its unprecedented reception of the Iranian President, Pakistan made it clear to the world that the two nations are not merely neighbors but the highest example of Islamic brotherhood, “one soul in two bodies.”
The purpose of the Iranian President’s visit was to pay tribute to the efforts of Pakistan’s Prime Minister and Field Marshal Syed Asim Munir in facilitating the US-Iran agreement and establishing peace in the region as well as to express gratitude on behalf of the Iranian people. On this occasion, Dr. Masoud Pezeshkian emphasized the need to establish a strong Muslim bloc. Meanwhile, both sides reaffirmed their commitment to further strengthening Pakistan-Iran historical fraternal strategic relations, promoting regional peace and stability and expanding bilateral cooperation across various sectors—which is indeed welcome. There is no doubt that Iran has now clearly recognized its true friends and adversaries in the recent Israel-US war. This was not merely a ceremonial visit but rather a vital link in a strategic chain.
If the ongoing diplomatic progress between Iran and the United States assumes a permanent character and US economic sanctions on Iran are further eased, Pakistan could gain a golden economic opportunity not seen in decades. The temporary easing of sanctions on Iran’s oil and petrochemical exports, along with the unfreezing of some Iranian assets, has opened new possibilities for regional economic activity. In that case, the 900-kilometer Pakistan-Iran border could transform from a hub of illegal trade and smuggling into a gateway for legal commerce. Currently, petrol, diesel and other oil products worth an estimated $1.2 billion enter Pakistan illegally each year, causing around $820 million in annual losses to the national exchequer while undermining legitimate businesses. Expanding legal cross-border trade would generate government revenue, curb smuggling and strengthen Pakistan’s energy security.
Iran, our Islamic brother and neighbor, ranks third among countries with the largest energy reserves, while it stands second in natural gas reserves after Russia. It can only be called the misfortune of this beloved homeland that despite such vast energy wealth lying adjacent to Pakistan’s borders, we are forced to rely on expensive international markets for our energy needs. The question is: why?
If sanctions are permanently eased, Pakistan could significantly expand the legal import of crude oil, petrol, diesel, LPG and other petrochemical products, while completion of the Iran-Pakistan gas pipeline could fundamentally reshape its energy strategy. Reduced dependence on expensive LNG imports and increased trade in naphtha, ethane and other petrochemicals could generate billions of dollars, with legal energy trade alone estimated at $9 to $14 billion annually. Cheaper energy would lower electricity production costs and strengthen industry. At the same time, modern fuel pipelines would reduce transport costs, improve supply chains and curb import losses, while developing Gwadar Port as Iranian energy storage, processing and transit hub could position Pakistan as a major regional energy trade center linking China, Central Asia and the Middle East.
It is not just energy—the petrochemical industry also holds extraordinary potential for Pakistan. On the basis of cheap Iranian gas and raw material, fertilizers, plastics, polymers and other industrial products could be manufactured, which would reduce imports and boost exports. In this way, Pakistan could also strengthen its industrial base. According to some estimates by economic experts, if all these opportunities are effectively planned and utilized, Pakistan could achieve a total economic benefit of $23 to $36 billion annually. While these figures are based on various assumptions, there is no doubt that legal energy trade, gas imports, transit fees and industrial development could create extraordinary economic possibilities for Pakistan.
However, challenges along this path are no less significant. The future of international sanctions remains uncertain; a shift in US foreign policy could alter the situation at any time. Meanwhile, inconsistent domestic policies, institutional complexities and weak investor confidence pose major hurdles. Therefore, diplomatic progress alone will not suffice; Pakistan must also undertake swift and coordinated reforms at the domestic level.
The government should provide sovereign guarantees for energy projects, establish a single-window system for investors, accelerate work on pipelines, refineries and related infrastructure and adopt a comprehensive strategy to develop Gwadar as a regional energy hub. Pakistan’s real challenge is not a shortage of rupees but of dollars and reducing costly energy imports would strengthen foreign exchange reserves, stabilize the rupee and improve the economy. The coming months could prove decisive. If sanctions on Iran are permanently eased and Pakistan acts wisely, potential economic gains of $23 to $36 billion annually could transform the 900-kilometer Pakistan-Iran border into a foundation for economic recovery and regional connectivity. Failure to act, however, could allow another historic opportunity to slip away.
—The writer is Chairman, Tehrik Jawanan Pakistan.
