Pakistan-Iran Trade – OpEd
Pakistan,s trade volume has been low with its neighbors except China. Recently, the Mund-Pishin border was inaugurated by Prime Minister Shahbaz Sharif and Iranian President Ebrahim Raisi. This border connects the province of Balochistan with the Iranian province of Sistan Balochistan. Meanwhile, during the inauguration ceremony, an agreement between both countries was signed according to which Iran will provide 100 MW of electricity to Balochistan that will fulfill the power needs of the Makran division of Balochistan.
Iran has a huge potential of providing electricity to Pakistan. Pakistan is already purchasing 104 MWs with the addition of Pola-Gabd transmission lines it will be 204 MWs. Both states had initiated understanding on 5000 MWs earlier. If electricity is provided to Pakistan, it will be a win-win situation for both countries. On one side, the economic crunch of Pakistan will diminish while on the flip side, it will help in the economic growth of Iran which has already dwindled owing to American sanctions.
The new alignments are in the making in which China is playing a prominent role to isolate and rival America. China has been successful in brokering a peaceful atmosphere between Saudi Arabia and Iran. It has already taken steps to bring Ukraine and Russia to the table. Meanwhile, China also signed a 400 billion USD agreement with Iran last year. Seeing that, the CPEC could be expanded to Iran too. For Which, the Chabahar and Gwadar ports should not be rivals rather steps should be taken to connect both sister ports to help in regional connectivity.
Iran is the second biggest country in proven gas reserves and fifth in proven crude oil reserves. Pakistan, which is already struggling in the energy sector could take advantage of importing oil and Gas from Iran whose proximity further increases the availability of Oil and Gas for Pakistan. Iran has been wising to provide crude Oil and Gas to Pakistan. In a meeting between Pakistan and Iran delegations on the sidelines of the Shanghai Cooperation Summit (SCO) in September 2022, Ambassador Ali Hosseini reiterated Iran,s inclination to provide cheap supplies of gasoline, power, and natural gas to Pakistan to overcome the crippling energy situation.
In 2010, Pakistan had signed a gas pipeline of 7 billion USD which was to be completed by 2015. According to the agreement, Iran had to provide 40 billion cubic meters per year for 25 years. It was a pipeline of 2775 km of 56 inches of diameter in which the length in Pakistan was 785 km. Iran has completed the pipeline in its own country while Pakistan has failed to do so because of American sanctions.
Now, rumors are that Iran has a plan to demand a penalty of 18 billion USD from Pakistan for not completing its pipelines. The government of Pakistan should talk to America, if it is against this pipeline, then America should help in overcoming the energy crisis in Pakistan and pay the penalty. The government of Pakistan should also question the validity of American sanctions over Iran_ the Pakistan gas pipeline as a matter of fact India has been importing Oil from Russia despite American sanctions.
In this situation, China can play a vital role. Once, Pakistan starts receiving gas supply from Iran, it can be extended to China through CPEC. Providing Oil and Gas to China was the major aim of the 400 billion USD agreement between China and Iran. It would be again a win-win situation for Pakistan, China, and Iran.
Both countries have the potential for huge trade. Pakistan can take benefits from the Iranian economy in the field of hydrocarbon, petroleum, agriculture, plastic, and services. While, Iran can take advantage of the sports industry, Rice, Wheat, and the medical field. There is huge potential for a barter system that will help in market access to both states.
The economic relations between Iran and Pakistan are supervised by a joint commission known as Pakistan Iran Joint Economic Commission which was established in the year 1986. Pakistan and Iran signed 39 memorandums of understanding in January 2023 for enhancing business activities.
Both states had signed PTA (preferential Trade agreement). According to this, Pakistan enjoys concessions on 309 items while Iran enjoys concessions on 338 items. In 2016, during the visit of the Iraninan president, it was decided to increase bilateral trade to 5 billion USD in five years. The bilateral trade was 2 billion dollars in April 2023. Apart from this, there is around 1 billion USD informal trade. Once, formal trade routes are opened this illegal trade can be converted to legal.
Lo and behold. Istanbul, Tehran, and Islamabad rail networks were proposed in 2008 by the regional planning council of the ECO. This must be completed and enhanced in China. This network which will connect Asia with Europe will further extend trade enhancements. From the Chinese perspective, European integration is a new buzzword. With the addition of China to this Railway network, Chinese aims to reach European markets will further come closer.
Ending trade barriers such as the absence of banking facilities in both states, starting a barter system, making border arrangements easy, and engaging China to invest more through the CPEC could be game changers. At a time, when China has been cementing its feet in the region when China has been initiating warm relations between Saudi Arabia and Iran_ both Pakistan and Iran should harness this opportunity. Both Pakistan and Iran have prime strategic importance and are located at a juncture of Asia, the Arab world, Europe, and Africa. Trade cooperation between them and engaging China will have long-lasting effects on world politics.
