Pakistan’s energy needs require imports from Central Asia and Iran but internal and external hurdles complicate its journey to energy security. The current fiscal year has seen a significant increase in energy prices in Pakistan as a result of several causes, including the post-COVID global recession, the crisis in Russia and Ukraine, the impact of the IMF program, and the increasing strain on the Pakistani rupee. In the wake of the ongoing energy crisis that has hampered Pakistan’s economic and social advancement, Pakistan’s need to import cost-effective oil and gas from its neighbors has become more critical. However, Pakistan is facing a multifaceted dilemma in its attempt to acquire oil and gas from Iran and Central Asia due to geopolitical tensions, regional rivalries, and economic constraints.

Pakistan’s persistent energy crisis stems from its inadequate energy and gas reserves. Pakistan, which is positioned at the crossroads of South Asia, Central Asia, and the Middle East, can take advantage of its strategic geographic location to boost and diversify its energy imports. The untapped potential of Pakistan’s strategic geographical location is a result of various challenges including security issues, diplomatic problems, financial limitations, and technical difficulties. The execution of cross-border energy projects faces numerous difficulties and obstacles, and frequently they never even reach operational status. One instance is the Iran, Pakistan, and India (IPI) gas pipeline, in which India withdrew as a result of US pressure, leaving Iran and Pakistan to amend the terms.

Pakistan’s strategic position for energy transit is jeopardized due to security threats, particularly stemming from Afghanistan’s instability. Pakistan is well-positioned to serve as a transit route for oil and gas pipelines due to its proximity to resource-rich areas like the Persian Gulf and Central Asia. However, numerous challenging obstacles stand in the way of Pakistan’s attempts to acquire oil and gasoline from Central Asian countries. Mainly due to security concerns the energy projects involving Pakistan and Central Asia are affected. Since Afghanistan’s geographical location lies between Central Asia and Pakistan, the volatile nature of this region coupled with consistent instability and threats pose significant challenges to the completion of energy projects. Moreover, the terrorism and insurgency threats emanating from Afghanistan and Pakistan pose a direct risk to critical energy infrastructure and transit routes passing through the country. As seen in 2019, when an attack occurred on TAPI construction workers in the Herat province of Afghanistan highlighting the vulnerability of energy infrastructure in the region.

Geographically, Central Asia’s rough topography and steep terrain make pipeline construction financially challenging for a country like Pakistan which is already a victim of a crippling economy. A significant investment in infrastructure, technology, and security measures is required to support Pakistan’s energy development projects which include importing energy resources from Central Asian nations. Due to their massive magnitude, these projects frequently encounter delays and financial limitations. For instance, The TAPI gas pipeline project in Pakistan encounters various financial obstacles, significantly hampering its advancement. The project’s enormous magnitude necessitates significant financial investments for pipeline construction, infrastructure expansion, and security measures, particularly in areas prone to armed conflict. Due to economic constraints, Pakistan faces challenges in obtaining the necessary funding for its share of the project. Moreover, the financial viability of the project is also still in question due to oil price uncertainty and changes in the world energy markets.

Despite Pakistan’s proximity to resource-rich Iran, it encounters formidable challenges in importing oil from its neighbor. Geopolitically, the interactions between Pakistan and the United States complicate Iran’s energy trade. The enforcement of U.S. sanctions against Iran has made it difficult for Pakistan to import oil without endangering its relations with Washington. Countries with significant economic and military might, such as China and India, have discovered ways to get over sanctions and have been buying Iranian oil. Pakistan bought costly LNG from throughout the world worth $3.4 billion in 2021, primarily from Qatar, and refined and crude oil worth $6.462 billion in 2020 as a result of its energy shortage. However, Pakistan can purchase less expensive gas from Iran rather than costly LNG from Qatar, but for that Pakistan needs to prioritize the completion of the Iran-Pakistan gas Pipeline. Pakistan has postponed building its portion of the Iran-Pakistan gas pipeline as a result of US sanctions against Iran and US pressure on Pakistan to reduce trading links with Iran. If the project is not finished by March 2024, Iran has decided to demand an $18 billion fine.

Pakistan has long found itself stuck in the middle of geopolitical conflicts between powerful nations, making the process of importing oil and gas from Iran a complicated matter. Saudi Arabia, a key ally of Pakistan, has historically been at odds with Iran, resulting in a regional rivalry between the two neighboring countries. Due to their shared economic interests, it is challenging for Pakistan to publicly trade energy with Iran without jeopardizing its relations with Saudi Arabia. For instance, Pakistan’s relationship with Saudi Arabia was strained in 2019 when Pakistan was forced to return a $3 billion Saudi loan after it expressed interest in investing in Iran’s Chabahar port.

Pakistan’s energy predicament, which revolves around its attempts to acquire oil and gas from Central Asia and Iran, continues to be a multifaceted problem deeply interconnected with geopolitical complexities. As Pakistan continues to negotiate this complex terrain, it must strike a delicate balance between its economic interests and its relationships with important allies, making sure that its pursuit of a variety of energy sources is consistent with its larger strategic goals and the necessity of meeting its increasing energy demands sustainably and securely. To lower its overall energy requirements and lessen its vulnerability to geopolitical unrest in the long run, Pakistan should concentrate on diversifying energy sources through the development of renewable energy, nuclear power, and enhanced local gas production. This strategy reduces geopolitical risks while ensuring a stable and sustainable energy future.