In addition, Pakistan faces serious challenges in terms of cooperation with Iran, especially when Pakistan must balance relations between Saudi Arabia and Iran. The security situation in Balochistan and Pakistan Military assistance to Saudi Arabia in the midst of the proxy wars between Iran and Saudi Arabia in the region makes it difficult for Pakistan and Iran to broaden the prospects of their engagement or diversify it into other areas. In the current context, Pakistan is also in a difficult situation, as its engagement with Iran should not hinder its relations with Saudi Arabia and the United Arab Emirates, as Pakistan remains dependent on its regional rivals to keep its economy afloat. Iranian President Mohammad Khatami paid a three-day state visit to Pakistan from 23 to 25 December 2002, the first visit by an Iranian head of government since 1992.  It was a high-level delegation consisting of the Iranian cabinet, members of the Iranian parliament, the Iranian vice-president and President Khatami.  This visit should allow relations between Iran and Pakistan to make a fresh start.    It would also provide high-level discussion of the future of the Iran-Pakistan-India (IPI) pipeline project.  Khatami met with President Musharraf  and new Prime Minister Zafarullah Khan Jamali.   Several agreements were signed between Iran and Pakistan during this visit.  Khatami also gave a lecture on ”dialogue between civilizations” at the Institute for Strategic Studies.  The presidential delegation first visited Islamabad, followed by a visit to Lahore, where Khatami also paid tribute to the tomb of Allama Sir Muhammad Iqbal.  At the end of Khatami`s visit, a joint communiqué was issued by Iran and Pakistan.
 Upon his return to Tehran, Khatami considered the trip to be ”positive and fruitful”.  On 12 January 2001, Pakistan and Iran formed a body of the ”Pakistan-Iran Joint Business Council” (JPI).  The body supports privatization in Pakistan and economic liberalization on both sides of the country.  In 2012, bilateral trade exceeded $3 billion.  Official figures from the State Bank of Pakistan for the 2011-12 fiscal year show imports of $124 million and exports of $131 million, which had collapsed to $36 million in exports to Iran and less than $1 million in imports for the year to April 2015.