The fall out of recent Iran – USA Israel war exposed, with shocking precision, how vulnerable Pakistan remains to disruptions in sea-borne energy supplies. Pakistan’s monthly fuel import bill nearly doubled, overnight when Iran closed the Strait of Hormuz. Saudi Arabia had to step in as an emergency supplier for Pakistan which had no fallback option of its own. That exposure was the starting point for any honest discussion of Iran-Pakistan energy cooperation in a post-war environment.
The two countries have long had a gas pipeline agreement that existed more on paper than on ground. The commercial agreement was signed in 2009 and the project was formally inaugurated in March 2013. This inauguration at Pakistan’s end, seemed to be more of a political ploy, for local audience, by a government which was completing its constitutional tenure, therefore, continuity of policy remained elusive and progress stalled. However, Iran completed its section of the pipeline, running over 1,100 kilometers from the South Pars gas zone through Sistan-Baluchistan to the Pakistani border, investing an estimated two billion dollars under a stringent sanction regime. Pakistan, required to build approximately 780 kilometers from the border to Nawabshah through Baluchistan and Sindh, announced construction of an initial 80-kilometre section in 2024 to avoid penalty payments, but that too failed to materialize. Legal demurrages were paid by Inter State Gas Systems to manage subsequent arbitration which crossed Rs 350 million in 2024-25 alone. By January 2026, Islamabad citing US sanctions, lower domestic gas demand, and Qatar’s LNG supply commitments, was attempting an out-of-court settlement to abandon the project entirely, which Iran refused and instead extended the gas sale agreement by another ten years.
An overland gas supply that cannot be disrupted by naval blockades, Hormuz closures, or shipping insurance hikes, carries a security premium that only price comparisons cannot capture.
This strategic overland gas pipeline sits entirely outside the Hormuz equation. Gas from Iran travels through Baluchistan directly into Pakistan’s national grid, requiring no tanker, no shipping lane and thus no chokepoint. The 2026 crisis has already manifested what maritime dependence costs in practice. An overland gas supply corridor answers a different but equally urgent question: what happens to Pakistan’s power generation and industrial gas supply when the next regional conflict ignites? The answer, without this pipeline, remains the same as it has always been. Nothing. An overland gas supply that cannot be disrupted by naval blockades, Hormuz closures, or shipping insurance hikes, carries a security premium that only price comparisons cannot capture.
The South Pars gas field, from which the pipeline draws its supply, sustained damage in Israeli strikes in March 2026. Four refinery sections were affected. However, Iran resumed production at three offshore platforms by late May 2026, with recovery described as partial but progressing. The offshore platforms themselves were undamaged. The constraint was onshore processing capacity, which is a work in progress. It manifests that the supply source is recoverable and not destroyed. It also brings in a new variable: Iran’s infrastructure will need reconstruction investment, and a committed long-term offtake agreement with Pakistan can result in Iran prioritizing pipeline restoration in its post war rebuilding program.
On the option of payment or barter, Pakistan does have a documented precedent. It already settles electricity imports from Iran partly through barter arrangements because dollar-denominated payments run into sanctions barriers. However, this precedent should not be overstated. Electricity imports to Gwadar are a localized, small-volume arrangement. Gas and oil at pipeline scale represent an entirely different order of value. Pakistan’s total bilateral trade with Iran stands at approximately two billion dollars annually. Full pipeline gas volumes would comfortably exceed that figure. Pure commodity barter at that scale seems arithmetically unworkable. What remains realistic is a mixed settlement model combining commodity exports from Pakistan, rice, wheat, textiles, pharmaceuticals and surgical instruments being the most viable candidates given Iran’s documented import requirements, with local currency settlement and structured deferred payment arrangements. It requires a massive, indigenous and uninterrupted supply of barter items, coupled with political will and a bilateral financial mechanism can be a big ask for Pakistan.
The gas pipeline case rests on supply security, not just price. Before the war, officials argued that Qatar’s LNG was cheaper than Iranian gas and domestic demand was soft. Both positions are harder to sustain after the war pushed monthly fuel import costs to nearly three times their normal level and left Pakistan scrambling for emergency supplies from Gulf states. The same logic applies to oil. Iran holds the fourth largest proven oil reserves in the world and sits on Pakistan’s border. Gwadar sits 89 kilometers from the Gabd border crossing into Iran and has been formally designated as a transit hub for Iran-bound third-country cargo under Pakistan’s April 2026 transit order. Its role in any Iran energy corridor is real but specific: western Baluchistan transit, storage, and re-export for third-country trade. It is not the practical gateway for Iranian energy imports destined for Karachi and Pakistan’s main consumption belt. Hub, located 40 kilometers from Karachi with existing industrial infrastructure, is the logical reception point for Iranian fuel cargo moving to Sindh and Punjab. Karachi and Port Qasim can handle bulk energy volumes.
For both gas and oil, the cost benefit case shifts from price to supply security and logistics efficiency. The 2026 crisis has highlighted the cost of depending on a single maritime supply artery. A formal energy agreement with Iran, structured around a mixed payment model combining commodity exports and local currency settlement, gives Pakistan a second artery that no blockade can easily sever.
The window for a serious discourse and decision is open in a way it has not been since 2013. US-Iran peace talks are underway. If sanctions lift, the price discount disappears along with the isolation and Iran is likely to price both its gas and oil at international market rates. Pakistan’s cost benefit case then shifts entirely from price to supply security. An overland energy supply remains an imperative for Pakistan. It is high time to tap the door and the pool, both.
The writer is a freelance columnist and can be reached at [email protected]