Pakistan's High-Wire Diplomacy: Balancing Between Washington and Tehran

Strategic Maneuvering Amid Trade Deals and Regional Tensions Highlights Islamabad's Complex Geopolitical Calculations

Pakistan finds itself walking a diplomatic tightrope as it simultaneously strengthens economic ties with both the United States and Iran, while navigating the treacherous waters of great power rivalry and regional conflict. Recent developments underscore the South Asian nation's delicate balancing act between its traditional ally America and its neighbor Iran, as both relationships carry significant economic and strategic implications.

The US-Pakistan Energy Partnership

In a significant diplomatic breakthrough, Pakistan and the United States concluded a trade agreement in July 2025 that extends far beyond traditional commerce. The deal, announced by President Donald Trump, centers on joint development of Pakistan's "massive oil reserves" and includes a reduction in reciprocal tariffs, particularly benefiting Pakistani exports to the US market.

The agreement marks a new phase in economic cooperation between the two nations, spanning sectors including energy, mining, information technology, and cryptocurrency. For Pakistan, this represents a crucial opportunity to attract foreign direct investment in its infrastructure and development projects, particularly in the mineral-rich but insurgency-affected province of Balochistan.

However, the relationship remains complex. Despite the trade deal, Trump ultimately imposed a 19% tariff on Pakistani goods as part of his broader "Liberation Day" tariff expansion, though this represented a reduction from the previously threatened 29% rate. The development illustrates the transactional nature of US-Pakistan relations under the current administration.

Pakistan's enthusiasm for American energy cooperation stems from its massive import dependency. With an annual oil import bill exceeding $12 billion and current production at just 60,000 barrels per day, the country sees US expertise as potentially transformative. The US Energy Information Administration estimates Pakistan holds up to 9 billion barrels of technically recoverable shale oil, primarily in Balochistan and Khyber Pakhtunkhwa provinces.

The Iran Factor: Deepening Economic Ties

Simultaneously, Pakistan has been strengthening its relationship with Iran through President Masoud Pezeshkian's landmark visit to Islamabad in August 2025. The two nations signed 12 agreements and memoranda of understanding, with the ambitious goal of increasing bilateral trade from the current $3 billion to $10 billion annually.

The Pakistan-Iran partnership encompasses multiple dimensions beyond trade. Both countries have committed to enhanced border security cooperation to combat terrorism along their shared 905-kilometer frontier. This cooperation has become increasingly critical given the volatile security situation in Balochistan, where both nations face challenges from separatist groups and cross-border militant activities.

Prime Minister Shehbaz Sharif's strong support for Iran's right to peaceful nuclear energy and his condemnation of Israeli strikes against Iranian facilities demonstrate Pakistan's solidarity with Tehran. This stance reflects both ideological affinity and practical considerations, as instability in Iran could have severe spillover effects on Pakistan's own security situation.

Strategic Calculations and Constraints

Pakistan's diplomatic balancing act reflects several key strategic considerations. First, economic necessity drives engagement with both powers. The country's fragile economy, dependent on external financial support from institutions like the International Monetary Fund and World Bank, cannot afford to alienate major potential investors.

Second, geopolitical positioning remains crucial. As US-China competition intensifies, Pakistan's historically close relationship with Beijing through the China-Pakistan Economic Corridor (CPEC) creates additional complexity in its relations with Washington. The country must carefully navigate between its "all-weather" partnership with China and its desire to maintain constructive ties with America.

Third, regional security concerns shape Pakistan's approach to Iran. The ongoing Israel-Iran conflict has created pressure on Pakistan to demonstrate solidarity with Tehran while avoiding entanglement in broader Middle Eastern conflicts. Pakistan's army chief's meeting with President Trump just days before US strikes on Iranian nuclear facilities highlighted the delicate nature of this balancing act.

The Challenge of Competing Alliances

Pakistan's foreign policy faces the fundamental challenge of managing relationships with powers that view each other as adversaries. The US increasingly sees China as a strategic competitor and views Pakistan's close ties with Beijing with suspicion. Similarly, America's support for Israel and its confrontational approach toward Iran creates tension with Pakistan's efforts to maintain good relations with Tehran.

The situation is further complicated by Pakistan's relationships with Gulf Arab states, particularly Saudi Arabia and the UAE, which provide crucial financial support but maintain their own complex relationships with Iran. Pakistan avoids antagonizing these benefactors while supporting Iran during periods of regional crisis.

Border Security: A Shared Challenge

One area where Pakistan and Iran have found common ground is border security cooperation. Both nations face threats from militant groups operating along their shared frontier, including Jaish ul-Adl and various Baloch separatist organizations. Recent high-level meetings between military officials have emphasized joint efforts to combat terrorism and enhance border control mechanisms.

This cooperation has taken on added urgency given the spillover effects of regional conflicts. The Israel-Iran war prompted Pakistan to close several border crossings with Iran while facilitating the return of Pakistani nationals. Such measures demonstrate the practical challenges Pakistan faces in managing the consequences of regional instability.

Energy Diplomacy and Economic Imperatives

Energy cooperation has emerged as a key pillar of Pakistan's relationships with both the US and Iran. With America, the focus is on developing Pakistan's untapped oil and gas reserves through joint ventures and technology transfer. This partnership could potentially transform Pakistan's energy security situation, reducing its massive import dependency.

Meanwhile, the long-stalled Iran-Pakistan gas pipeline project represents another dimension of energy cooperation with Tehran. Despite US sanctions concerns that have delayed the project, Iran has signaled willingness to engage in dialogue with Pakistan to resolve outstanding issues and move forward with implementation.

Looking Forward: Sustaining the Balance

Pakistan's ability to maintain its diplomatic balancing act will depend on several factors. Economic performance and political stability at home will provide the foundation for more confident foreign policy choices. The country's success in attracting investment from both the US and Iran while managing Chinese concerns will be crucial.

Regional developments, particularly the evolution of the Israel-Iran conflict and US-China competition, will continue to test Pakistan's diplomatic agility. The country's leadership will need to maintain strategic clarity while avoiding the trap of being forced to choose sides in conflicts that do not directly serve its national interests.

Pakistan's recent diplomatic achievements with both Washington and Tehran demonstrate that middle powers can still find space to maneuver in an increasingly polarized international system. However, sustaining this balance will require continuous calibration of policies and relationships as regional and global dynamics continue to evolve.

The stakes could not be higher for Pakistan. Success in managing these competing relationships could unlock significant economic opportunities and enhance regional stability. Failure, however, could leave the country isolated and vulnerable in an increasingly dangerous neighborhood. As Pakistan continues its high-wire diplomatic act, the world watches to see whether skillful statecraft can overcome the forces pulling the country in different directions.