Pak-Iran ties: mired in politics

The construction of the Chabahar port and the recent Iranian Foreign Minister Javad Zarif’s visit may have brought Iran in the news in Pakistan, but on the whole, it remains an overlooked neighbour. High-level talks circled the usual meaningless rhetoric of brotherly ties, enhancing cooperation and fighting off terrorism together. Though there were some nuggets of information regarding inviting Pakistan and China to invest in Chabahar port, though it is unclear what that investment would entail and how it would benefit Pakistan.

While India found ways to circumvent the sanctions imposed on Iran through barter, Pakistan’s trade nosedived and remains there. As a result, Pak-Iran PTA has been more or less sidelined making the FTA that is in the process of being negotiated, even more unfeasible.

While the current bilateral trade is at $30 million, the two countries have set a target of $5 billion by 2021. The target remains hopelessly idealistic as even at the peak of bilateral trade, pre-US sanctions, it just crossed the $1 billion mark. The biggest impediment to trade is the lack of banking channels. The central banks of both countries have signed a Banking and Payment Arrangement (BPA) last year but no progress has been made on that front.

Another area of common interest is the Iran-Pakistan gas pipeline that could theoretically provide Pakistan with over a 100 years of gas resources. It is a project that could feed CPEC’s energy needs but remains frozen. Given the acrimonious Iran and US relations, the history of US sanctions, Trump’s views and posturing, and the persistent pressure from Saudi Arabia, it is not a project that is likely to take of any time soon.

Pakistan is suspicious of Iran ties with India while Iran looks with askance at Pakistan’s relationship with Saudi Arabia, a point that was brought up by the Iranian FM, albeit skilfully. Amidst all the politics, it is unlikely that bilateral trade or economic cooperation will be enhanced, regardless of the level of bonhomie between high level representatives of both countries.

Meanwhile, Iran will continue to make inroads into Pakistan’s lost Afghan trade while India leverages Chabahar port to do the same. All the while Pakistan’s current account will suffer because Pakistan uses trade policy as a political instrument rather than an economic one.