Regional economic connectivity

Our political and economic relations with Iran since the ouster of the monarchy in that country had remained lukewarm

There are many countries in the world which while not enjoying the best of bilateral political relations have established mutually beneficial bilateral trade and economic relations. However, our political and economic relations with Iran since the ouster of the monarchy in that country had remained decidedly lukewarm. But then, even when we had the best of political relations with Tehran during the Shah of Iran days, we did not have any significant trade and economic links with our closest western neighbour.

With the advent of Taliban in Kabul, Pakistan’s neighbourly relations with Iran had taken a very serious hit. At one point in time, it was almost touch-and-go as the armies of the two countries were seen facing each other in an eyeball-to-eyeball confrontation. Our close relations with Saudi Arabia and also our so-called ‘most allied ally’ kind of relations with the US, whom Tehran had considered its enemy number one had perhaps played a significant role in injecting a heavy dose of suspicion in the mind of Iranian leadership about our intentions.

Things, however, appeared to be perking up in 1995 as a preliminary agreement was signed between the two neighbours for the Pakistan-Iran gas pipeline. Interestingly, this was the time when political relations between the two had started deteriorating over their Afghanistan-related differences. And intriguingly, India also chose to sign up in the gas pipeline project in 1999 when New Delhi was materially backing the Northern Alliance along with Iran in the Ahmed Shah Masood-led war against the Taliban, who were being materially backed at that time, by both Pakistan and Saudi Arabia. And equally intriguingly, by 2001 the US had also started publicly backing the project, naming it as the ‘Peace pipeline’. But India withdrew from the project soon after the US imposed harsher sanctions against Iran in 2005, suspecting it of launching a nuclear weapons programme. So, a highly beneficial project for the three major players of the region had turned into a non-starter after having remained on the anvil for almost a decade.

There are many explanations as to why the project did not take off when its three powerful regional beneficiaries backed by the US were interested to get it off the ground at the earliest. But the one explanation that sounded more like cutting your nose to spite the face, held Pakistan squarely responsible for throwing a spanner in the works very early in the day. Pakistan is said to have kept delaying completion of its part of the paper work because it did not want the economy of its ‘enemy number one’ to get the fuel it badly needed to propel itself on the road to prosperity. This, we were supposed to have done at the cost of the $600 million annual fee, India would be paying us for the transport of gas through Pakistan and losing as well supplies from Iran of the much-needed gas whose domestic reserves were depleting fast. One wondered, could it be that the Saudis on whose dole we had come to depend so crucially, in the meanwhile had advised us against participating in the project?

During his recent two-day visit to Pakistan, the Iranian President had tried to revive our interest in the pipeline, stating that it was almost complete on the Iranian side. It is now for Pakistan to complete its part of the project so that the pipeline can be operationalised as soon as possible, thus, helping us meet our escalating domestic demand for natural gas. Also, we could consider linking the pipeline to CPEC and invite India as well to reconsider its decision about the project in the interest of connectivity for the larger economic good of the entire region.

Iran and Pakistan, in a welcome move, have also explored the possibility of sea trade through Pakistan’s Gwadar Port and Iran’s Chabahar Port. It was also decided to increase the annual bilateral trade to $5 billion within the next five years. On the Iranian side, this would involve the removal of non-tariff barriers on Pakistani textiles, rice, fruit and other agricultural products, and also at the same time rationalising the rates of tariffs. Pakistan, on its part, could consider in its own self-interest, increasing the import of crude oil from Iran as the physical proximity between the two would cut considerably the freight charges.

Published in The Express Tribune, April 2^nd, 2016.

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