ISLAMABAD – Pakistan could be among the countries closely watching a major shift in global energy politics after US granted Iran 60-day license to export and sell its crude oil and petrochemical products, raising questions about whether Islamabad could benefit from access to its neighbour’s vast energy resources.
The temporary approval, issued by the US Treasury Department, comes amid ongoing technical-level negotiations between Washington and Tehran in Switzerland and follows a memorandum of understanding (MoU) signed by the two sides with Pakistan playing a mediatory role.
Under this arrangement, US agreed to ease restrictions on Iranian oil exports, while Iran committed to ensuring freedom of navigation through the Strait of Hormuz and allowing inspectors from the International Atomic Energy Agency (IAEA) access to its nuclear facilities.
For Pakistan, the development can reduce dependence on Gulf suppliers and tap into energy imports from neighbouring Iran. Pakistan currently imports big chunk of its fuel needs despite operating five domestic refineries. According to industry data for FY2025, the country consumed around seven million tonnes each of diesel and petrol annually.
Of this, nearly two million tonnes of diesel were imported while domestic refineries produced around 5 million tonnes. Petrol dependence on imports remains even higher, with local production standing at roughly two million tonnes against imports of about five million tonnes.
As of now, most of Pakistan’s crude oil imports come from Saudi Arabia and the UAE, while some supplies are sourced from the United States. Long-term supply agreements with Gulf producers also remain in place.
Federal Petroleum Minister Ali Pervaiz Malik has said the government will engage with Iran to assess how Iranian oil and gas can fit into Pakistan’s energy mix, adding that increased global energy supplies could help ease pressure on prices.
Will Petrol become Cheaper after this?
Despite public expectations, energy experts caution that sanctions relief does not automatically translate into lower fuel prices in Pakistan.
Iranian fuel has traditionally entered Pakistan through smuggling routes, particularly into Balochistan, where unofficially imported petrol and diesel are often sold at prices significantly lower than those available through licensed fuel stations.
Currently, Pakistan’s official fuel prices stand at Rs299 while Iranian fuel sold through informal channels in areas such as Hub in Balochistan is reported to be available for around Rs250 per litre. Those familiar with development hinted at advantage largely existed because sanctions forced Iran to offer discounted supplies.
Iran is now expected to sell its oil at international market rates rather than discounted prices, as buyers from across the world, including India and China, are likely to enter the market.
Pakistan may also benefit from lower freight costs due to geographic proximity, but any savings are unlikely to dramatically reduce retail fuel prices. Another factor complicating the equation is the nature of Iranian crude itself.
Iranian crude is generally heavier than the grades currently preferred by Pakistani refineries. Processing it produces a larger proportion of furnace oil, estimated at around 40 to 45 percent per barrel, which relatively limited demand and lower profitability.
Since many Pakistani refineries are designed to handle lighter crude grades, adjustments or upgrades may be needed before large-scale imports of Iranian crude become economically attractive.
US decision could nevertheless provide Pakistan with greater flexibility in managing its energy security. Access to Iranian crude and LPG supplies would diversify import options and potentially strengthen Islamabad’s bargaining position with existing suppliers.
