Fazeel Ahmad

Power rivalry is not the only aspect of international politics but also the opportunities that come about during crises. Pakistan has become a possible diplomatic linkage between the United States and Iran in the changing geopolitical landscape of the Middle East. When Pakistan is able to mediate between the two states in creating long term stability, then it can be able to strategically translate this diplomacy into economic and energy gains. Energy cooperation with Iran is one of the most significant aspects of this opportunity. The energy crisis in Pakistan has been in place since time immemorial, it has been characterized by a situation of gas scarcity, high electricity prices and reliance on imported fuel which is very expensive. Here better relations between the United States and Iran would enable Pakistan to rekindle the energy projects like gas imports and pipeline cooperation which would greatly boost its economy.

The Pakistani economy greatly relies on the imported energy sources. Increased demand of electricity, industrial output, and domestic use have constantly exceeded supply within the country. Consequently, the nation imports liquid natural gas (LNG) and crude oil at high global prices, thus adding fiscal strain and leading to inflation. Industrial output is also directly influenced by energy shortages. Higher production costs are experienced in the textile, manufacturing and agricultural processing sectors as a result of high-cost electricity and gas. This undermines the export competitiveness and diminishes foreign exchange earnings. Thus, energy security is not merely a technical problem but a structural economic challenge to Pakistan. The country of Iran in this case is a geographically and economically feasible partner in energy because of its closeness and vast natural gas reserves.

This concept of energy cooperation between Pakistan and Iran is not new. The Iran-Pakistan gas pipeline project was initially intended to export natural gas to Pakistan by Iran using a cross border infrastructure system. Nevertheless, the international sanctions against Iran and geopolitical pressure, especially that of the United States have left the project stalled. In spite of these difficulties, the project is still economically viable to Pakistan. Natural gas is relatively cheap in Iran compared to imports of LNG in the world market. With an improvement in diplomatic conditions, Pakistan stands to gain by going back to pipeline imports, which will lower the cost of their energy and enhance the stability of supply. In addition, cheap gas would enable Pakistan to produce electricity at a cheaper rate, which would lessen the impact on households and industries. This would also enhance industrial productivity and promote export-led growth.

The other significant sector of cooperation is the imports of crude oil. Pakistan is now dependent on costly oil imports to the Gulf markets that are subject to the price fluctuations and disruptions of supply chains around the world. By increasing economic ties with Iran, Pakistan may be able to bargain on discounted oil imports. A partial change to Iranian crude will help stabilize the domestic fuel prices. The reduced prices of oil would directly affect the transportation expense, agricultural output, and electricity generation. It would also assist in controlling inflation, which is one of the greatest macroeconomic problems in Pakistan since there would be a reduction in the prices of energy. Thus, energy cooperation with Iran goes beyond just supply to a wider economic stabilization.

Greater accessibility of cheap energy would have a multiplier effect in the economy. First, it would lower the production of electricity that is a necessity in the growth of industries. This would make the manufacturing industries (particularly the textile and export oriented industries) more competitive in the international markets. Second, reduced energy prices would promote foreign direct investment. Investors will find it easier to invest in a market that has stable and affordable energy supply. This may assist Pakistan in attracting investment in areas of industries and special economic zones.

Third, the welfare of the households would increase due to reduced electricity and fuel prices. This would boost the purchasing power and decrease social pressure due to inflation. Lastly, energy collaboration would enhance the trade balance of Pakistan as it would not rely on the expensive foreign energy supply by remote markets.

In addition to economic gains, Pakistan as a mediator between the United States and Iran can enhance its geopolitical standing. Diplomatic bridging countries are also strategic in international relations. In the case, Pakistan manages to be helpful in de-escalation, the relations with Washington and Tehran can be enhanced at the same time. Pakistan would be able to become relevant in the eyes of the United States, and possibly, negotiate economic or security concessions. Pakistan has the potential to enhance bilateral energy and trade with Iran. This moderating position would bolster the perception of Pakistan as a responsible regional player instead of a passive player in world politics. It also enhances its bargaining strength in subsequent international negotiations.

Notwithstanding these opportunities, there are a number of structural limitations that limit the strategy of Pakistan. Sanctions imposed on Iran by international bodies are the greatest challenge as they limit transactions between nations, trade, and investment processes. The implementation can be slowed down by legal and financial obstacles even in the case of political goodwill. The other weakness is the economic vulnerability of Pakistan. The large level of external debt and dependence on international financial institutions diminish its freedom to maneuver in its foreign policies. Moreover, the strength of powerful states can also affect global energy markets, and it is hard to make unilateral decisions. Thus, the opportunities are available, but they are subject to geopolitical processes at the larger scale, particularly, the US-Iran relations.

The possibility of Pakistan acting as a mediator between the United States and Iran is a geopolitical opportunity that is not very common. Provided that it is managed successfully, it can create energy cooperation avenues such as reviving gas pipelines and importing Iranian oil. The developments would save the Pakistani a lot on its energy expenses, stabilize its electricity prices and assist in industrial growth. Meanwhile the advantages are not entirely economic. Pakistan would be able to become more relevant in resolving international issues through diplomacy and become a central regional intermediary in global politics. The pace and magnitude of such opportunities are, however, curtailed by structural constraints like sanctions and world power politics. To sum up, the strategic challenge of Pakistan is not only to play the role of a mediator but also to transform diplomatic space into economic and energy benefits over the long term. When done well, this strategy would revolutionize the energy landscape in Pakistan, and become a stronghold in the changing world order.

Fazeel Ahmad

Student IR University of Okara