Few infrastructure projects in South Asia have been as politically sensitive and economically promising as the Iran–Pakistan gas pipeline, often referred to as the Peace Pipeline. First conceptualized in the 1990s as a trilateral initiative between Iran, Pakistan, and India, it has since been reduced to a bilateral undertaking, with India withdrawing under pressure from its strategic partners. Decades later, the promise of the pipeline remains largely unrealized, buried under layers of geopolitics, regional volatility, and economic hesitation. Yet the underlying urgency has only grown stronger, especially for Pakistan, which faces a looming energy crisis that threatens to deepen its already strained economic landscape.
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At its core, the Iran–Pakistan gas pipeline is designed to transport between 750 million and 1 billion cubic feet of natural gas per day from Iran’s South Pars gas field to Pakistan. The route, which spans approximately 781 kilometers into Pakistani territory, is expected to reach the port city of Gwadar before connecting to inland distribution networks. For a country like Pakistan, where energy shortages are routine and industrial production is frequently disrupted by power outages, the pipeline offers more than just fuel, it offers a stabilizing economic force. The gas it would deliver could offset a significant portion of Pakistan’s rising energy demand, which the World Bank warns could increase by as much as 70 percent by 2030.
Economically, the pipeline has the potential to be transformative. Not only would it alleviate Pakistan’s energy shortfall, but it could also bring in considerable transit revenues and reduce dependency on more expensive, imported fuels. Moreover, for Iran, the project provides a rare opportunity to circumvent the international sanctions that have curtailed its oil and gas exports. Politically, successful completion would signal a recalibration in regional alliances, potentially rebalancing the power dynamics of South Asia and the Gulf.
However, these benefits remain theoretical, as progress on the pipeline has been lethargic at best. The most pressing obstacle continues to be the shadow of US sanctions on Iran. Since 2008, when the United States re-imposed sanctions targeting Tehran’s energy sector, Pakistan has struggled to commit to the project without risking diplomatic backlash or economic penalties. According to official Pakistani accounts, the threat of secondary sanctions has been the primary factor behind the decade-long delay, despite the fact that Iran completed its portion of the pipeline years ago. Now, with a deadline approaching in September 2024, the risk of legal action looms, with Iran threatening to claim up to $20 billion in penalties for breach of contract.
In addition to international pressure, the pipeline faces significant domestic and regional hurdles. The planned route passes through Balochistan, a province that has endured chronic unrest and insurgent violence for decades. A 2019 report by the Center for Research and Security Studies (CRSS) revealed that Balochistan accounted for more than 40 percent of Pakistan’s conflict-related casualties, highlighting the ongoing instability that makes infrastructure development risky and expensive. These threats are not merely hypothetical. Security concerns in both Iran’s Sistan-Baluchistan province and Pakistan’s Balochistan region present a tangible danger to pipeline infrastructure, workers, and overall operational viability.
Furthermore, funding for the pipeline remains elusive. Pakistan’s economic landscape, already mired in inflation, debt, and declining foreign reserves, is ill-suited to support such a capital-intensive project. Initially, the government intended to use the Gas Infrastructure Development Cess (GIDC) to finance the domestic segment of the pipeline. While this fund did help support the initial phase, it has proven insufficient for the remaining requirements, which are estimated to exceed $7 billion. The financial shortfall, coupled with waning investor confidence, has made it increasingly difficult for Islamabad to mobilize resources without external assistance, it cannot easily secure without confronting the sanctions dilemma.
The challenge is compounded by the widening trust deficit between Pakistan and Iran. While the two nations share a border and a long history of cultural ties, their geopolitical alignments often diverge. Pakistan’s close relationship with Saudi Arabia, Tehran’s principal rival in the region, has complicated matters. Conversely, Iran’s warming ties with India, Pakistan’s traditional adversary, have created further tensions. Diplomatic friction has been exacerbated by occasional border clashes and tit-for-tat airstrikes. The resulting climate of mutual suspicion undermines cooperation on large-scale, long-term projects such as this pipeline. The withdrawal of India from the original tripartite agreement in 2008 not only reduced the economic scope of the project but also signaled the geopolitical fragility surrounding it.
Additionally, competing pipeline proposals have further diverted attention and political capital away from the Iran–Pakistan initiative. The Turkmenistan–Afghanistan–Pakistan–India (TAPI) pipeline, which enjoys support from the United States and several multilateral institutions, presents a formidable alternative. Unlike the IP pipeline, TAPI is viewed as more aligned with Western interests and less vulnerable to sanctions. Moreover, Saudi Arabia’s proposal to establish a $10 billion oil refinery in Gwadar, an initiative widely interpreted as a counterweight to Iranian influence, has provided Islamabad with another energy lifeline, one that doesn’t come with the same diplomatic baggage.
Despite these challenges, recent developments suggest that Pakistan is reconsidering its position. In March 2024, the country’s Cabinet Committee on Energy approved the construction of an 80-kilometer segment of the pipeline from the Iranian border to Gwadar. This decision, while limited in scope, marks a significant policy shift and suggests that Islamabad is inching toward fulfilling its contractual obligations. Defense Minister Khawaja Muhammad Asif went so far as to confirm the government’s intention to proceed, signaling a potential breakthrough, albeit one that may still falter without diplomatic agility and financial support.
In this regard, Pakistan must explore all avenues to de-risk the project. Foremost among these is diplomatic engagement, not just with Iran, but also with the United States and Gulf allies. Securing a targeted waiver from U.S. sanctions would be a game-changing move, allowing Pakistan to import gas without inviting punitive action. Washington has, in the past, granted exemptions for similar projects in Iraq and India, suggesting that with the right diplomatic framing, such a concession is not out of reach. At the same time, Islamabad must communicate to Riyadh that the project is not a zero-sum game but a pragmatic response to national energy needs.
In addition, Pakistan must strengthen institutional cooperation with Iran to rebuild trust and ensure the project’s success. Revisiting the original terms of the agreement, renegotiating timelines, and clearly outlining mutual expectations would go a long way in restoring credibility. Both countries should also consider the establishment of joint security mechanisms to safeguard pipeline infrastructure in restive regions. Without reliable security, even the most well-funded project is unlikely to succeed.
Ultimately, the IP pipeline embodies both the promise and the peril of regional cooperation. It is emblematic of how energy, politics, and geography intersect in a complex web of interests. For Pakistan, the decision to proceed, or not, carries implications far beyond economics. It touches on the country’s foreign policy orientation, its energy future, and its ability to navigate the competing demands of allies, adversaries, and global institutions.
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While the risks are undeniable, inaction is also a choice, with its own costs. The penalties for failing to act could not only be financial but reputational. If Pakistan is seen as an unreliable partner, it may find itself excluded from future regional projects and opportunities. Conversely, a successful recalibration that enables the completion of the pipeline could reinforce Pakistan’s role as a regional energy corridor, reviving industrial productivity and stabilizing its energy sector.
In conclusion, the Iran–Pakistan gas pipeline remains one of the most consequential energy projects in the region. Its completion is not merely a technical or financial task; it is a test of political will, diplomatic skill, and strategic foresight. If Pakistan can summon the resolve to confront its challenges, negotiate smartly, and communicate its intentions effectively to the global community, the Peace Pipeline could live up to its name, bringing not just fuel, but stability and cooperation to a region in urgent need of both.
