A tightrope for Islamabad

EDITORIAL: Pakistan’s calibrated response to Washington’s latest campaign of economic pressure against Iran is understandable. But given the country’s geographic, economic and diplomatic realities, Islamabad cannot afford to treat the threat of secondary sanctions as a matter for watchful waiting. It needs to prepare for the fallout while continuing to press for an end to the conflict that has created this predicament in the first place.

The US has announced what has been termed “Operation Economic D-Day”, warning that countries and entities maintaining commercial ties with Iran could face severe secondary sanctions and exclusion from the American financial system.

The measures reportedly extend across shipping, aviation, technology, gold and digital assets, with Washington seeking to cut off Iran’s remaining sources of revenue.

Pakistan’s Foreign Office has, for now, adopted a cautious position, stating that Islamabad will conduct trade with Iran in accordance with international law and its bilateral agreements, while hoping that economic issues will ultimately from part of a broader settlement between Washington and Tehran. This is a sensible formulation, reflecting the need to balance two important bilateral relationships.

While the US remains Pakistan’s largest export market and a major economic, diplomatic and geopolitical partner, Iran is its immediate neighbour, making workable, cordial relations with Tehran vital for both economic and regional reasons.

Crucially, Pakistan’s economic relationship with Iran is larger than what official trade figures suggest. While formal exports to Iran remain negligible, unofficial bilateral trade is estimated at around USD800 million annually, much of it conducted through informal channels and barter arrangements.

Rice and mango exports alone demonstrate the importance of the border economy. Around 1,209 trucks carrying rice crossed the Gabd Border Crossing Point during June and July, while approximately 1,121 trucks carrying mangoes travelled through Taftan. This trade already faces serious risks, with security along the Quetta-Taftan route remaining particularly precarious.

New US sanctions could add another layer of uncertainty, potentially disrupting traders and exporters who depend on border markets and complicating trade through the Iran corridor.

As reported in this paper, the absence of a concrete contingency plan at the commerce ministry is particularly concerning. Islamabad cannot afford to wait for the sanctions to take effect before deciding how to protect legitimate Pakistani commerce.

The ministry should urgently map the sectors, traders, border crossings and supply chains most exposed to the new measures and develop practical alternatives for exporters and businesses. This is especially important because Pakistan and Iran have only recently agreed on measures to facilitate formal trade.

At the Pak-Iran Joint Trade Committee meeting earlier this month, the two sides agreed to improve customs operations, expand border-crossing capacity, facilitate TIR and E-TIR arrangements, and strengthen railway and air-cargo connectivity. These efforts should not be allowed to become collateral damage of an ever-escalating confrontation between Washington and Tehran.

At the same time, the foreign ministry must use Pakistan’s relationship with Washington more proactively. Islamabad should seek clarity on exemptions and carve-outs for essential humanitarian and legitimate commercial trade, and make the case that indiscriminate secondary sanctions would impose disproportionate costs on the Iranian people.

There is, however, a larger point. Pakistan’s interests do not lie in choosing between Washington and Tehran. They lie in maintaining constructive relations with both. That requires careful diplomacy and economic preparedness.

The ideal outcome remains for the US and Iran to recognise the costs of prolonging a needless war and return to negotiations. Pakistan, alongside other regional countries, must continue using its diplomatic space to encourage that outcome. Until then, Islamabad must prepare for the consequences of a conflict it had little to do with but cannot afford to ignore.

Copyright Business Recorder, 2026