Pakistan’s decision to temporarily postpone the gas pipeline project with Iran due to pressure from the US, which has sanctions against Tehran aligns with the country’s efforts to stabilise its economy with assistance from the International Monetary Fund (IMF). Suspending the project could have several implications for Pakistan’s economy. The project was aimed at importing cheap energy which could have helped alleviate energy shortages and reduce energy costs in the country. Now it must prepare to face continued energy challenges, potentially impacting industries and overall economic growth. Additionally, the decision might strain relations with Iran, a neighbouring country that Pakistan has historically maintained good ties with. Furthermore, if Pakistan relies on other, more expensive energy sources to meet its energy needs, it could lead to higher costs for consumers and businesses, potentially contributing to inflation. This could pose challenges for the government’s efforts to stabilise the economy, especially because of its present economic struggles.
In the longer term, the decision could also impact investor confidence in Pakistan, as it might raise concerns about the stability of economic projects and the country’s commitment to its agreements. It is important to note that the full extent of these implications would depend on various factors, including how long the suspension lasts, the alternative energy sources Pakistan utilises, and the broader geopolitical context. Pakistan’s decision can be attributed to several factors. It has faced economic challenges for many years and has relied on international financial assistance, including loans from the IMF, to stabilise its economy. The US holds significant influence over international financial institutions and can use its leverage to influence Pakistan’s economic decisions. The US has imposed sanctions on Iran due to its nuclear programme, which has extraterritorial implications. This means that countries conducting business with Iran can also face US sanctions. Pakistan’s economy is fragile, and the consequences of facing US sanctions could be detrimental, leading the country to prioritise its economic stability over relations with Iran. Pakistan has a history of close ties with the US, especially in the context of its role in the region, including its involvement in the Afghan conflict. Maintaining these alliances might take precedence over certain economic projects. The US is a significant trade partner and source of aid for Pakistan. Trade and aid relationships can be leveraged to influence policy decisions. Cutting off or reducing trade benefits and financial assistance could put additional strain on Pakistan’s already fragile economy. Pakistan’s foreign policy is influenced by a complex web of regional and international dynamics. Balancing relations with Iran and the US, while also considering its relations with other regional players, can lead to difficult decisions based on diplomatic and strategic considerations. Pakistan might view maintaining a positive relationship with the US as essential for its own national security interests.