Pakistan’s mediator role between US and Iran yields strategic gains, risks

Islamabad, Pakistan – At the Burgenstock resort in Switzerland over the weekend, US Vice President JD Vance stood alongside Pakistani Prime Minister Shehbaz Sharif and Qatari Prime Minister Sheikh Mohammed bin Abdulrahman bin Jassim Al Thani.

A few meters away stood Pakistani army chief Asim Munir, whom Vance pointed to as he began his remarks. “Since General Asim Munir welcomed us with the Prime Minister in Islamabad (in April), I have joked that I have two very, very important people in my life, one Indian and one Pakistani. The Indian is my wife, and the Pakistani is General Munir,” he said to laughter.

Vance, whose wife Usha is the daughter of Indian immigrants, said he had spoken to Munir more than anyone else in the past three months. “We would not be here without his military and state leadership,” he said, echoing praise from US President Donald Trump for Munir.

The accolades have not been confined to Washington. Iranian President Masoud Pezeshkian arrived in Islamabad on Monday for a state visit — his first foreign trip since Iran came under attack from the US and Israel on February 28 — and expressed gratitude for Islamabad’s help in bringing Washington and Tehran to talks. The visit underscored how the past four months have repositioned Islamabad in Tehran’s calculations.

Over that period, Pakistan has acted as an indispensable intermediary between the US and Iran, facilitating backchannel communications, hosting negotiations in Islamabad, and managing political risks as it opened transit routes to Iran while balancing ties with Gulf states. The peace framework agreed on June 18 — which set a 60-day negotiation process now underway — was partly a result of those efforts. The question for Islamabad now is more concrete: What does Pakistan actually gain?

The economic picture

For Pakistan’s fragile economy, an answer cannot come soon enough. The country recorded GDP growth of 3.7% in the last fiscal year — the fastest in four years — while remittances rose 8.2% to $30.3 billion. The fiscal deficit also narrowed significantly. But Hina Shaikh, an economist at the International Growth Centre in Lahore, said the picture behind those numbers is less rosy.

“Pakistan’s mediation role may yield only limited economic benefits, mainly in the form of lower energy import costs when the Strait of Hormuz reopens and possibly renewed impetus for the Iran-Pakistan gas pipeline if sanctions relief holds,” she told Al Jazeera. “The recent growth was largely a result of reduced oil and gas imports due to the Hormuz closure rather than any production expansion,” she added, referring to the shutdown of the critical waterway during the US-Israel war with Iran.

Pakistan remains under a $7 billion loan programme with the International Monetary Fund — its 25th such arrangement since the 1950s — approved in 2024. Western governments have spoken positively about deepening economic ties with Pakistan, but diplomatic goodwill does not automatically translate into investment or structural relief, analysts say. Pakistan has been here before. After the September 11, 2001 attacks on the US, its alliance with Washington brought debt restructuring and multilateral support, but those measures did not fix the structural weaknesses that continue to weigh on the economy: a narrow tax base, weak exports, and chronic balance-of-payments pressure. Shaikh said those diplomatic ties still matter. “Pakistan’s economic constraints are not a consequence of geopolitics, nor can they be solved by diplomatic goodwill. But goodwill will certainly buy Islamabad breathing room — time it can use to accelerate reforms.”

Regional rewards

Within Pakistan’s policymaking circles, the argument is that the real reward lies in regional dividends rather than bilateral economic concessions, as a durable US-Iran deal could reshape Pakistan’s neighbourhood. Sanctions relief for Iran could reopen trade flows along the Balochistan border, which have been restricted for years. The Iran-Pakistan gas pipeline, stalled for over a decade due to US sanctions pressure, could return to the agenda. But the diplomatic picture is more complex than Islamabad’s public messaging suggests.

Umer Karim, an associate fellow at the King Faisal Center for Research and Islamic Studies in Riyadh who specialises in Gulf and Pakistan affairs, said Pakistan stepped into the crisis by filling a specific vacuum that may now be shrinking. “Pakistan entered this regional crisis as a communication bridge between the US and Iran at a time when the Trump administration did not trust any potential mediator. It was this gap that Pakistan filled, while being accepted by Iran and coordinating mediation with Egypt, Turkey, and Saudi Arabia — thus bringing all major regional players into the fold.” Karim said Pakistan’s influence remains limited. “Pakistan has integrated to a certain degree into the Middle East security framework, but has not yet achieved leverage that would allow it to pressure Iran into concessions or persuade the US to accept certain Iranian demands, while maintaining balanced relations with all Gulf players.”

Who benefits?

Another question runs beneath the diplomacy. Vance’s remarks in Burgenstock singled out Munir, who is not part of the civilian government. Observers say the institution that has benefited most visibly from the past four months is the military. The military has directly ruled Pakistan for more than 30 years in the country’s nearly 80-year history as an independent nation. It continues to dominate and influence domestic and foreign politics, with the army chief — and particularly Munir — seen by detractors as the country’s de facto leader. Some argue that the costs will fall most heavily on those farthest from the negotiating table.

Tughral Yamin, a retired brigadier and defence analyst in Islamabad, said the real domestic test will be whether any economic benefits reach Balochistan province, Pakistan’s poorest region, which has faced an over-two-decade armed campaign by separatist insurgent groups. “If economic benefits are shared with the people of Balochistan, the scourge of terrorism could be eliminated. We are at the threshold of a major economic opportunity, though we have missed too many opportunities in the past.”