The Iran India Gas Pipeline: A Geopolitical Energy Saga

Lilly Reichel 22 Jun 2025

The concept of the Iran India Gas Pipeline, often dubbed the "Peace Pipeline," represents one of the most ambitious and politically charged energy infrastructure projects ever conceived in Asia. For decades, it has remained a tantalizing prospect, promising to reshape regional energy dynamics and foster unprecedented economic integration. Yet, its journey has been fraught with geopolitical complexities, economic hurdles, and the ever-present shadow of international sanctions, leaving its future perpetually uncertain.

This article delves into the intricate history, the strategic implications, and the persistent challenges surrounding the Iran India Gas Pipeline, exploring why this monumental project has struggled to move from a grand vision to a tangible reality. We will examine the motivations of the key players—Iran, India, and Pakistan—and analyze the external pressures that have repeatedly derailed its progress, particularly the significant influence of the United States.

The Vision: A Pipeline Through Time
The "Peace Pipeline" Dream Takes Shape
- Initial Discussions and Agreements
- The Proposal for Indian Extension
India's Withdrawal: US Pressure and Sanctions
Pakistan's Segment: Challenges and Deadlines
- The IP Pipeline: A Segment in Limbo
- Financial Stakes and Diplomatic Efforts
Economic Benefits: A Win-Win-Win Proposition
Geopolitical Complexities and Energy Security
- The Geopolitical Chessboard
The Future of the Iran India Gas Pipeline
Conclusion: A Pipeline's Enduring Legacy

The Vision: A Pipeline Through Time

The ambitious idea of connecting Iran's vast natural gas reserves to the energy-hungry markets of South Asia is far from new. In fact, the genesis of what would become the Iran India Gas Pipeline can be traced back to the late 1950s. It was in a scientific article published by the Military College of Engineering, Pakistan, that the concept was first proposed, laying the theoretical groundwork for a monumental energy corridor. This early conceptualization highlighted the inherent logic of such a project: connecting a major gas producer with rapidly industrializing, energy-deficient nations. For decades, the sheer scale of Iran's natural gas reserves, ranking among the largest globally, has made it a natural candidate for significant energy exports. The challenge, however, has always been the logistical and political complexities of transporting this resource across thousands of kilometers and multiple national borders. The vision, though initially academic, quickly captured the imagination of policymakers and energy strategists, recognizing its potential to transform regional economies and geopolitical alignments. It wasn't merely about gas; it was about fostering interdependence and stability through shared economic interests, a concept that would later give rise to its moniker, the "Peace Pipeline." This long-standing vision underscores the enduring strategic importance of the Iran India Gas Pipeline, a project that continues to spark debate and diplomatic efforts despite its chequered past.

The "Peace Pipeline" Dream Takes Shape

While the idea of a gas pipeline linking Iran to South Asia had been circulating for decades, concrete steps towards its realization began in the mid-1990s. This period marked a significant shift from theoretical discussions to tangible negotiations, signaling a serious commitment from the involved nations to pursue this transformative project. The initial focus was primarily on connecting Iran and Pakistan, laying the groundwork for what was envisioned as a broader regional energy network.

Initial Discussions and Agreements

Discussions over the pipeline between Iran and Pakistan began in the year 1995, marking a pivotal moment in the project's history. These early talks were driven by Pakistan's burgeoning energy demands and Iran's desire to monetize its vast gas resources. The bilateral nature of these initial negotiations streamlined the process, leading to a swift agreement. Both countries signed an agreement in 1995, committing to the construction of the pipeline. It was initially decided that a pipeline would be constructed from the South Pars gas field, one of the world's largest natural gas fields located in the Persian Gulf, to Karachi, Pakistan's largest city and economic hub. This segment alone represented a massive engineering undertaking, traversing challenging terrains and requiring significant investment. The agreement underscored a mutual understanding of the economic benefits and strategic advantages that such an energy corridor could provide, particularly for Pakistan, which stood to gain a continuous transit income and the option to procure gas at a subsidized rate. This foundational agreement between Iran and Pakistan set the stage for the project's expansion, transforming it from a bilateral initiative into a potential trilateral energy artery for the region.

The Proposal for Indian Extension

The vision for the pipeline soon expanded beyond a mere bilateral arrangement between Iran and Pakistan. Recognizing the immense energy requirements of India's rapidly growing economy, it was later proposed by Iran that the pipeline should be extended to India. This extension would transform the project into a truly regional energy corridor, connecting three major South Asian economies and potentially fostering greater interdependence and stability. The prospect of the Iran India Gas Pipeline, often referred to as the "Peace Pipeline," was born from this expanded vision. Shortly after the rejection of a particular resolution (the context of which remains somewhat mysterious but seems unrelated to the pipeline's core agreement), a preliminary agreement was signed between India and Iran for the construction of this extended pipeline. This marked a moment of significant optimism, as the pipeline was seen not just as an energy conduit but as a symbol of regional cooperation and peace. The pipeline from Iran was envisioned to have an estimated capacity to funnel 750 million to around 1 billion cubic feet of natural gas per day [ft3/d], a substantial volume that could significantly address India's energy deficit. The potential for India to access such a large and reliable source of natural gas was immensely appealing, promising to fuel its industrial growth and meet the rising demand from its vast population. This trilateral dimension elevated the project's strategic importance, making it a subject of intense international scrutiny and diplomatic maneuvering.

India's Withdrawal: US Pressure and Sanctions

Despite the initial enthusiasm and the signing of preliminary agreements, the ambitious Iran India Gas Pipeline project faced an insurmountable hurdle in the form of escalating geopolitical tensions. The primary external pressure came from the United States, which had long pursued a policy of isolating Iran through a stringent sanctions regime. This pressure ultimately led to India's withdrawal from the plan in 2009. India's decision to pull out of the project was significantly influenced by escalating U.S. sanctions against Iran, coinciding with India's signing of a civil nuclear deal with the United States. This nuclear deal was a landmark agreement that promised to integrate India more deeply into the global nuclear order, providing access to civilian nuclear technology and fuel. However, it came with an implicit understanding that India would align its foreign policy more closely with U.S. strategic interests, particularly concerning Iran. The U.S. administration made it clear that pursuing the pipeline with Iran would jeopardize the nuclear deal and other aspects of the burgeoning U.S.-India strategic partnership. For India, the economic and strategic benefits of the civil nuclear deal, coupled with the desire to avoid secondary sanctions and maintain good relations with its largest trading partners, outweighed the immediate advantages of the gas pipeline. The threat of financial repercussions and the potential for diplomatic isolation proved too significant to ignore. This withdrawal was a major setback for the Iran India Gas Pipeline, effectively halting its progress as a trilateral project and leaving Pakistan to pursue its segment of the pipeline bilaterally with Iran, albeit under similar international pressures. The episode vividly illustrated the powerful influence of global geopolitics on regional energy projects, demonstrating how external pressures can derail even the most economically logical initiatives.

Pakistan's Segment: Challenges and Deadlines

Following India's withdrawal, the Iran India Gas Pipeline effectively reverted to a bilateral project between Iran and Pakistan, often referred to as the Iran-Pakistan (IP) pipeline. While Iran has largely fulfilled its part of the bargain, Pakistan has faced persistent challenges in completing its segment, primarily due to the ongoing threat of U.S. sanctions. This has led to a precarious situation, with Tehran issuing deadlines and potential financial penalties.

The IP Pipeline: A Segment in Limbo

Iran has completed its portion of the project, which extends approximately 1,172 km from its gas fields to the Pakistani border. This achievement underscores Iran's commitment to monetizing its gas resources and its strategic vision for gas exports via pipeline to its eastern neighbors. The completion of the Iranian segment demonstrates the technical feasibility and Iran's determination to see the project through. However, the Pakistani side of the pipeline remains largely unbuilt. This critical segment is essential for the project to become operational and deliver gas to Pakistan's energy-starved economy. The pipeline from Iran will have an estimated capacity to funnel 750 million to around 1 billion cubic feet of natural gas per day [ft3/d], a volume that could significantly alleviate Pakistan's chronic energy shortages. The delay on Pakistan's end is primarily attributed to the fear of U.S. sanctions, which have cast a long shadow over any entity doing business with Iran's energy sector. Despite the clear economic gains for Pakistan, including a continuous transit income and the option to procure gas at a subsidized rate, the country has found itself in a difficult position, caught between its energy needs and the potential for severe international financial repercussions. This dilemma highlights the complex interplay of economic necessity and geopolitical constraints that continue to plague the Iran India Gas Pipeline.

Financial Stakes and Diplomatic Efforts

The prolonged delay in the completion of the Pakistani segment has led to increasing frustration from the Iranian side. Consequently, Tehran has issued Islamabad a deadline to finish the pipeline segment by March 2024 or incur financial repercussions amounting to nearly USD $18 billion. This staggering sum, which could prompt international arbitration, underscores the immense financial stakes involved and the seriousness with which Iran views the contractual obligations. For Pakistan, facing such a massive penalty is a daunting prospect, especially given its already fragile economic situation. The threat of an $18 billion fine adds immense pressure on Islamabad to find a viable solution, either by completing the pipeline or by negotiating a new arrangement with Iran. According to Iran's Consul General to Pakistan, Hassan Nourian, both Iran and Pakistan are exploring ways to complete the gas pipeline project, which has been stalled for over a decade due to sanctions concerns. Nourian told reporters in Karachi that Iran sees political determination from Pakistan to complete the project, suggesting ongoing diplomatic efforts to navigate the sanctions dilemma. This indicates a persistent desire on both sides to overcome the obstacles, acknowledging the mutual benefits of the pipeline. The situation highlights that the crux of the matter is that there are major politico-economic and geopolitical challenges that continue to impede the project's progress, requiring delicate diplomatic maneuvers and potentially creative financial solutions to avoid the looming penalties and finally bring the gas flow to fruition.

Economic Benefits: A Win-Win-Win Proposition

Despite the myriad challenges, the underlying economic rationale for the Iran India Gas Pipeline remains compelling for all parties involved. The project, if fully realized, promises significant benefits that extend beyond mere energy supply, touching upon job creation, economic prosperity, and regional integration. The potential for such a project to foster shared prosperity has always been a powerful driving force behind its enduring appeal, even in the face of political headwinds.

For Iran, the benefits of gas exports via pipeline to India are multifaceted and strategically vital. Firstly, it would provide a major boost for job creation and economic prosperity of the provinces on the pipeline route. The construction phase alone would generate thousands of jobs, while the long-term operation and maintenance would sustain employment in regions that could benefit significantly from economic development. Secondly, the enhancement of Iran’s strategic positioning and standing both regionally and on a global level would be substantial. As a major energy supplier to two of Asia's largest economies, Iran's geopolitical influence would undoubtedly grow, solidifying its role as a key player in global energy markets. This would also contribute to regional economic integration, fostering greater interdependence and potentially leading to more stable diplomatic relations. Monetizing Iran’s vast gas resources through such a pipeline is a crucial aspect of its long-term economic strategy, as highlighted in various analyses, including those discussing "Monetizing Iran’s gas resources and the debate over gas export and gas-based industries options" in publications like the Middle East Economic Survey. Such a project would provide a stable, long-term revenue stream, diversifying Iran's economy and reducing its reliance on volatile oil markets.

For Pakistan, the economic gains of the Iran gas pipeline project would be equally transformative. As mentioned, a continuous transit income from allowing the pipeline to pass through its territory would provide a stable and significant source of revenue. Furthermore, Pakistan would gain the option to procure gas at a subsidized rate, which is critical for its energy security and economic development. Access to affordable natural gas would fuel its industries, reduce its reliance on more expensive imported fuels, and help alleviate chronic power shortages that have plagued the country for years. This reliable energy source would be a boon for industrial growth, job creation, and overall economic stability. For India, the benefits are primarily rooted in energy security and economic growth. A direct pipeline from Iran would offer a stable and substantial supply of natural gas, crucial for meeting the energy demands of its rapidly expanding economy. This would reduce India's dependence on more expensive and logistically complex LNG imports, providing a more cost-effective and reliable energy source. Moreover, the pipeline could potentially strengthen economic ties between India, Iran, and Pakistan, paving the way for broader regional trade and investment. Indeed, India and Iran could well play a major part in giving the International North-South Transport Corridor (INSTC) the required boost to reap the benefits of resultant trade, integrating energy flows with broader connectivity initiatives. The economic arguments for the Iran India Gas Pipeline are robust, presenting a compelling case for cooperation despite the formidable political obstacles.

Geopolitical Complexities and Energy Security

The narrative of the Iran India Gas Pipeline is inextricably linked with the broader tapestry of energy geopolitics. Energy geopolitics is an approach that analyzes the interplay between energy resources, political power, and international relations. In this context, the pipeline is not merely an infrastructure project but a strategic instrument that could profoundly alter regional power dynamics and energy security paradigms. The challenges it faces are a testament to the intricate web of alliances, rivalries, and strategic interests that define the Middle East and South Asia.

The Geopolitical Chessboard

The primary geopolitical challenge for the Iran India Gas Pipeline has been the persistent pressure from the United States, which views Iran as a state sponsor of terrorism and has imposed severe sanctions on its energy sector. This has created a dilemma for countries like India and Pakistan, which need Iran's energy but also seek to maintain strong ties with the U.S. The U.S. has actively promoted alternative energy routes and suppliers, such as LNG from Qatar or pipeline projects from Central Asia, to reduce reliance on Iranian gas. This geopolitical chess game has forced India to diversify its energy sources, leading to increased LNG imports and a focus on domestic exploration. However, the sheer scale of India's energy demand means that a diversified portfolio is always beneficial, making the Iran India Gas Pipeline a perpetually attractive, albeit challenging, option.

Beyond U.S. sanctions, regional rivalries and security concerns also play a significant role. The passage of the pipeline through Pakistan, a country with historical tensions with India, adds another layer of complexity. While the "Peace Pipeline" moniker suggests cooperation, the reality of cross-border infrastructure in a volatile region necessitates robust security guarantees and trust-building measures. Despite these hurdles, the strategic imperative for energy security remains paramount for India. The country's rapid economic growth is heavily dependent on a stable and affordable energy supply, making it keen to explore all viable options. Interestingly, while the Iran India Gas Pipeline faces these challenges, Iran continues to pursue other energy export routes. For instance, fortunately, Iran and Oman signed a deal during Raisi’s recent visit to develop two gas pipelines, signaling Iran's proactive approach to monetizing its gas resources through diverse channels. This demonstrates Iran's strategic resilience and its determination to find markets for its gas, even if the direct pipeline to India remains elusive for now. The future of the Iran India Gas Pipeline will continue to be shaped by the evolving geopolitical landscape, where energy needs intersect with strategic alliances and regional stability.

The Future of the Iran India Gas Pipeline

The future of the Iran India Gas Pipeline remains shrouded in uncertainty, a testament to the enduring geopolitical complexities that have plagued its progress for decades. While the economic logic for such a project is undeniable for all parties involved, the political will and the ability to navigate international sanctions continue to be the primary determinants of its fate. The project's status as a "pipeline in limbo" highlights the powerful influence of external pressures on sovereign economic decisions, particularly for developing nations like India and Pakistan.

For India, the prospect of the Iran India Gas Pipeline still holds strategic appeal. Despite its withdrawal in 2009 due to U.S. pressure, India's energy demands continue to soar, and a direct, cost-effective pipeline from a neighboring gas-rich country remains an attractive proposition. However, India's foreign policy is now more closely aligned with Western powers, making any direct engagement with Iran on such a large-scale project highly sensitive. Future developments would likely depend on a significant shift in U.S.-Iran relations or a substantial de-escalation of sanctions, neither of which appears imminent. India has, in the interim, focused on diversifying its energy imports, including increasing LNG purchases from various global suppliers and investing in renewable energy. Yet, the long-term energy security strategy for a country of India's size often requires multiple avenues, and the Iran India Gas Pipeline, in an ideal geopolitical climate, could still play a role.

For Pakistan, the immediate future of the Iran-Pakistan (IP) segment is critical, given the looming March 2024 deadline and the potential for an $18 billion financial penalty. The determination expressed by Iran's Consul General Hassan Nourian, stating that Iran sees political determination from Pakistan to complete the project, suggests that diplomatic efforts are ongoing to find a resolution. This could involve seeking waivers from U.S. sanctions, exploring alternative financing mechanisms that do not trigger U.S. penalties, or negotiating a revised agreement with Iran. The challenge for Pakistan is immense, as it grapples with a severe energy crisis and a delicate economic situation, making the prospect of a massive fine particularly burdensome. The project's completion would offer Pakistan significant economic relief and energy security, making it a priority for Islamabad despite the external pressures.

Ultimately, the realization of the Iran India Gas Pipeline, or even just the Iran-Pakistan segment, hinges on a complex interplay of geopolitical shifts, economic necessities, and diplomatic breakthroughs. The project serves as a stark reminder that in the realm of energy geopolitics, economic rationale alone is often insufficient to overcome the formidable barriers posed by international relations and strategic rivalries. While the vision of a "Peace Pipeline" connecting the energy-rich Persian Gulf with the burgeoning markets of South Asia endures, its journey from aspiration to reality remains one of the most challenging and closely watched sagas in global energy infrastructure.

Conclusion: A Pipeline's Enduring Legacy

The story of the Iran India Gas Pipeline is a compelling narrative of ambition, economic necessity, and the intricate dance of international geopolitics. From its conceptualization in the late 1950s to the bilateral agreements of the 1990s and India's subsequent withdrawal under U.S. pressure in 2009, the project has been a microcosm of the broader challenges facing large-scale cross-border infrastructure in a world defined by complex alliances and rivalries. We've seen how the promise of immense economic benefits—from job creation and regional integration for Iran to energy security and transit income for Pakistan and India—has consistently been overshadowed by the formidable shadow of international sanctions and strategic considerations.

Despite the current impasse and the looming deadlines, particularly for Pakistan's segment, the underlying logic for the Iran India Gas Pipeline remains potent. Iran's vast gas reserves need markets, and South Asia's burgeoning economies desperately need energy. The "Peace Pipeline" continues to symbolize a potential pathway to shared prosperity and enhanced regional stability, even if its realization remains elusive. The persistent diplomatic efforts and the sheer financial stakes involved underscore that this is not merely a forgotten project but a dormant giant, waiting for the right geopolitical conditions to awaken.

What are your thoughts on the future of the Iran India Gas Pipeline? Do you believe a resolution to the geopolitical challenges is possible, or will the project remain a historical footnote? Share your insights in the comments below, and explore other articles on our site discussing regional energy security and geopolitical developments in Asia.

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