Easing Iran sanctions could lower energy costs, boost exports and expand bilateral trade
KARACHI: Pakistan could unlock significant economic opportunities and reduce its import bill if international sanctions on Iran are lifted, according to a new analysis by Topline Research. The report suggests that stronger economic ties with Iran could enhance Pakistan’s energy security, boost exports and improve the country’s external account position.
Analysts said the easing of sanctions would allow Pakistan to revive trade links with its western neighbour, creating opportunities in energy, agriculture, manufacturing and border commerce.
Bilateral Trade Once Exceeded $1.2 Billion
Trade between Pakistan and Iran was considerably stronger before international sanctions intensified in 2012. Bilateral trade exceeded $1.2 billion in FY2010, driven largely by Pakistan’s imports of petroleum products and industrial raw materials.
At the time, Pakistan recorded a substantial trade deficit with Iran, reaching $813 million in FY2010 due to heavy fuel imports. However, as sanctions tightened and imports declined, Pakistan’s trade balance gradually improved, turning into a surplus of $73 million by FY2013.
Since then, formal trade activity between the two neighbouring countries has remained limited.
Export Sector Could Gain Fresh Momentum
The report noted that Pakistan previously exported a wide range of products to Iran, including rice, fruits, textiles, pharmaceuticals and surgical instruments.
Rice remained the largest export category, generating around $285 million annually at its peak. Other notable exports included oranges, mangoes, dates and cotton yarn.
Analysts believe that lifting sanctions could enable Pakistan to regain lost market share in Iran and diversify exports beyond traditional destinations. Iran continues to import products in which Pakistan enjoys a competitive advantage, particularly agricultural commodities, textiles and pharmaceutical products.
Lower Energy Costs Offer Major Savings
One of the most significant potential benefits relates to energy imports. Pakistan imported nearly $17 billion worth of petroleum products and fuels during 2025, making energy one of the country’s largest import expenditures.
Historically, Iranian crude oil has been available at a discount compared with supplies from Gulf producers. Data cited by Topline Research showed Iranian crude traded between 6 per cent and 22 per cent cheaper than comparable grades from Saudi Arabia and the United Arab Emirates during FY2009-FY2011.
Current market prices continue to show a discount, with Iranian Light crude trading at approximately $76.30 per barrel compared with $78.69 per barrel for Arab Light crude.
According to the report, Pakistan could save between $170 million and $340 million annually if it sourced 10 to 20 per cent of its petroleum requirements from Iran after sanctions are lifted.
Meat Exports and Border Trade Prospects
Iran has also expressed interest in sourcing a substantial portion of its meat imports from Pakistan. Analysts said this presents another opportunity for export growth, particularly for the livestock sector.
Pakistan’s meat exports to Iran exceeded $27 million in FY2012, and industry experts believe shipments could increase significantly if formal trade channels are restored.
Both countries have previously expressed ambitions to increase bilateral trade to $10 billion through enhanced economic cooperation and the operationalisation of border Special Economic Zones (SEZs).
Gas Pipeline Still Faces Challenges
While the removal of sanctions could revive discussions on the long-delayed Iran-Pakistan gas pipeline, analysts cautioned that economic challenges remain.
Under the existing framework, gas pricing is linked to international crude oil prices, resulting in estimated costs of $9.5 to $10.8 per MMBTU. In comparison, Pakistan’s LNG imports from Qatar currently cost around $8.3 to $9.4 per MMBTU, while domestic gas production remains even cheaper.
Pakistan is also bound by LNG supply agreements until 2031, making any immediate revival of the pipeline unlikely without significant renegotiation of pricing and contractual terms.
Outlook
Analysts believe that lifting sanctions on Iran would be broadly positive for Pakistan by reducing energy costs, expanding exports and strengthening regional trade. However, the ultimate benefits will depend on the pace of sanctions relief, the establishment of banking and trade mechanisms, and the ability of both countries to negotiate commercially viable agreements.
If implemented effectively, renewed economic engagement with Iran could provide Pakistan with an important opportunity to improve trade flows, enhance energy security and support long-term economic growth.
