Regional trade and energy projects face existential threat amid Iran, Afghanistan, and Pakistan clashes

Security tensions in Iran, Afghanistan, and Pakistan are disrupting major regional trade and energy projects, risking delays and a shift towards alternative routes, with implications for Central Asia’s economic diversification strategies.

Military confrontations in and around Iran, Afghanistan and Pakistan are placing at risk a suite of ambitious projects that Central Asian governments have pinned to southbound trade and energy access, threatening plans to diversify a...

way from reliance on Russia and China and to reach Asian and African markets via the Arabian Sea.

The intersection of US–Israel strikes on Iran and renewed violence between Pakistan and Afghanistan’s Taliban administration has created both immediate security threats to transit corridors and a wider climate of investor caution that could delay or derail major rail, road, power and pipeline ventures. The combined effects include route insecurity, border closures, rising insurance and transport costs, and the prospect of financiers pausing commitments until stability returns.

Key initiatives now exposed include the proposed Uzbekistan–Afghanistan–Pakistan (UAP) railway, the Trans-Afghan rail plans, the CASA‑1000 electricity link and the Turkmenistan–Afghanistan–Pakistan–India (TAPI) gas pipeline. The 760‑kilometre UAP railway, envisaged to speed freight between Uzbekistan and Pakistani seaports by roughly five days and to cut transport costs dramatically, was the subject of a trilateral framework agreement to study feasibility signed in Kabul on 17 July 2025, according to reporting by Dawn and Pakistan Today. Pakistan’s leader has described the line as a regional breakthrough and said Islamabad would help attract financing based on the study and business plan, media in Uzbekistan reported. Yet construction and subsequent operations will be difficult to guarantee while Afghan‑Pakistani relations remain hostile.

The CASA‑1000 power corridor, intended to export surplus hydropower from Kyrgyzstan and Tajikistan to Afghanistan and Pakistan, resumed activity after a 2021 pause, with the World Bank announcing project resumption in February 2024. Kyrgyz state reporting noted substantial infrastructure progress on its section by late 2024, including completion of substation works and the erection of over a thousand transmission pylons. Still, the circuit’s viability depends on secure cross‑border transmission and on the cooperation of Kabul and Islamabad, both of which face increasing strain.

TAPI, which when finished would run some 1,814 km from Turkmenistan through Afghanistan to Pakistan and India with a design capacity of 33 bcm per year, has seen only incremental forward motion. Turkmenistan completed its segment by the end of 2024, while Afghan sections have been slated for progressive completion through 2026. The pipeline’s economics and security guarantees are vulnerable to breakdowns in Taliban–Pakistan relations and to the reluctance of India and other buyers to commit within a contested environment.

Beyond these headline projects, conventional road corridors and border crossings that form the backbone of current trade flows are under pressure. Routes through Pakistan such as the Khyber Pass and trunk roads to Karachi and Gwadar face higher risk premiums and potential closures; Afghan arteries linking Kabul with Jalalabad, Kandahar and Mazar‑i‑Sharif are exposed to operational slowdowns during security operations. Islamabad could also suspend elements of the Afghanistan–Pakistan Transit Trade Agreement as a lever against the Taliban, increasing the chance of sudden policy reversals that strand consignments and impede customs operations.

Iran’s destabilisation from strikes has compounded the problem. The wider crisis has disrupted tanker traffic through the Strait of Hormuz and prompted rerouting of aircraft and shipping, magnifying costs for regional energy and logistics. Projects that use Iranian territory, most notably the International North‑South Transport Corridor, the Southern Corridor rail upgrades and the Ashgabat Agreement’s Central Asia–Persian Gulf Multimodal Corridor, now face elevated operational and financing risk should Iranian ports or logistics nodes be targeted or subject to tighter sanctions. The Dauletabad–Sarakhs–Khangiran gas link, which already moves roughly 12 bcm annually into Iranian networks, and rail links being developed to connect Central Asia to Chabahar and Bandar Abbas are similarly sensitive to regional escalation.

Analysts and officials are increasingly considering alternative routes. The Trans‑Caspian or Middle Corridor through the Caucasus and the China–Kyrgyzstan–Uzbekistan rail axis offer options that avoid Iran and Pakistan but come with their own capacity limits, higher transit complexity and dependence on cooperation with Azerbaijan, Georgia and Turkey. China’s Belt and Road planning has been interrupted by the region’s instability, while Persian Gulf financiers may divert capital to reconstruction or defence needs, reducing available project funding.

The consequence for Central Asian states is twofold. Economically, exporters and importers confront longer transit times, higher freight and insurance charges, and greater uncertainty in supply chains. Politically, governments lose the strategic benefit of southward access that had been intended to provide alternatives to northern and eastern routes. Nargiza Umarova of the Institute for Advanced International Studies in Tashkent warns that the Southern Corridor is “critical for Central Asia,” but adds that active conflict could force delays, rerouting of freight, and suspension of services as neighbouring states close borders or airspace.

Some projects retain momentum despite the turbulence. The World Bank’s CASA‑1000 resumption and national milestones in Kyrgyzstan and Turkmenistan signal continued commitment by participating capitals. Yet investors and international lenders are likely to demand stronger security and state guarantees before underwriting work that crosses volatile frontiers.

If fighting persists or broadens, the practical outcome is likely to be a re‑orientation of trade flows toward safer, if sometimes longer, east‑west corridors and seaports under the control of more stable partners. That realignment would deepen Central Asia’s economic ties with Russia and China and with the Caspian–Caucasus route, while diminishing the near‑term prospects of an integrated north‑south network linking Central Asia with the Indian Ocean.

The fate of the region’s southbound gateway now hinges on a fragile political calculus: projects that can be shielded from cross‑border conflict and that attract patient, security‑aware financing may survive; those that depend on uninterrupted Afghan–Pakistani or Iran‑linked transit risk prolonged delay or permanent alteration. For policymakers in Tashkent, Ashgabat, Dushanbe and Bishkek, the immediate task is to safeguard existing corridors where possible while accelerating diversification plans that minimise exposure to active theatres of conflict.

Source: Noah Wire Services