The US has warned of potential sanctions for any country considering business deals with Iran hours after India signed a 10-year contract with Iran to operate the Chabahar port.

In a press briefing early this week, the country’s State Department Deputy Spokesperson when asked about the deal said that: “the US sanctions on Iran are still in place and that Washington would continue to enforce them.

Any entity, anyone considering business deals with Iran - they need to be aware of the potential risks that they are opening themselves up to the potential risk of sanctions.“

India did not take long to respond. Indian external affairs minister S. Jaishankar said, “I did see some of the remarks which were made, but I think it’s a question of communicating, convincing and getting people to understand, that this is actually for everyone’s benefit.

I don’t think people should take a narrow view of it.“ He added: “They (US) have not done so in the past. So, if you look at the US’ own attitude towards the port in Chabahar, the US has been appreciative of the fact that Chabahar has a larger relevance…we will work at it”.

Jaishankar further said that India had a long association with the project, but was not able to sign a long-term pact. He added that New Delhi was able to sort out the issues and sign the long-term agreement, which will benefit the entire region.

The Chabahar Port is an India-Iran flagship project that serves as an important transit port for trade with Afghanistan and Central Asian countries, which are landlocked countries.

India has been a key player in the development and operation of Chabahar Port. The Indian government has invested in the port’s infrastructure and has been involved in upgrading its facilities to make it a viable transit route for Indian goods bound for Afghanistan and Central Asia.

Through Chabahar Indian businesses are seeking direct access to the riches of Central Asia. Uranium from Kazakhstan, gold and rare earth metals from Uzbekistan, natural gas from Turkmenistan and minerals from Afghanistan.

With businesses come strategic and diplomatic alliances with all these countries. In focus would be Afghanistan with which it would have a direct land access for the first time.

Also on some other occasions, India had set aside the threat of US sanctions. It had been importing oil from the US sanctions-hit Iran. After some interruptions it is now considering resuming crude oil shipments from Iran, overriding sanctions.

With Russia, under Western sanctions since its war with Ukraine in 2022, India ramped up purchases of Russian oil to cash in on the opportunity of steep pricing discounts as a result of western sanctions.

Its imports grew from zero in January 2022, before the war, to 1.27 million barrels a day in January 2023. Moscow was the biggest crude supplier to India in 2023, accounting for more than 30% of its imports, and will likely remain so through early 2024.

Unlike India, Pakistan could not defy the US sanctions. Not only did it fail to reach a deal with Iran on Iran Pakistan Gas Pipeline project, it could not import oil from Russia at a time when it was available at a lower price.

Cheap sourcing of gas and oil, in these difficult times, means so much to Pakistan national and public interests. It could dramatically turn around the country’s economic and fiscal dynamics for the better with revival of industrial growth, availability of cheap electricity and transportation.

Iranian President Ebrahim Raisi’s visit to Pakistan last month put under the spotlight the gas pipeline deal between the two neighbours, which has faced delays due to geopolitical issues and international sanctions.

The two nations reiterated the importance of cooperation in the energy domain, including trade in electricity, power transmission lines and the IP Gas Pipeline project, a joint statement released following the culmination of the visit said. Tehran says it has already invested $2 billion to construct the pipeline on its side of the border, making it ready to export.

Pakistan, however, did not begin construction and shortly after the deal said the project was off the table for the time being, citing international sanctions on Iran as the reason.

Pakistan can be fined up to $18 billion for not holding up its half of the agreement. Faced with a potential fine, Pakistan’s caretaker administration earlier this year decided, in principle, to commence plans to build an 80km segment of the pipeline.

In March 2024, Islamabad said it would seek a US sanctions waiver for the pipeline. However, the US said publicly thereafter that it did not support the project and cautioned about the risk of sanctions in doing business with Tehran.

This case brings to surface a strikingly reality: it is the economic power of the nation which determines and sets its standards of bilateral diplomatic relations and influence in global politics. India has come up as the fifth largest economic power of the world and with this it is expanding its political muscles and global influence.

The US-led West needs India on their side. India is aware of it and therefore can manage to have its way in world politics.

Unfortunately, however, Pakistan has lost out on its economy and with it has lost its influence on world politics. Pakistan’s economy is struggling from one IMF (International Monetary Fund) programme to another.

The incumbent Prime Minister has stated that without IMF programme the economy of the country would not sustain. Washington’s support is crucial for Pakistan as the country looks to sign up a new longer term bailout program with the IMF in coming weeks.

With this economic bondage, Pakistan cannot have an independent foreign policy nor will it have its way in world politics.

Tradition of premature government exits has deprived the nation of continuity in economic momentum and political stability, and sanctity of its institutions. The over 200 million of people of Pakistan deserve something better.

Copyright Business Recorder, 2024

Farhat Ali

The writer is a former President, Overseas Investors Chamber of Commerce and Industry


Comments are closed.

Re=== May 18, 2024 06:36am
Well said. Other than the elites no one is benefiting from the current set up in Pakistan. When will IMF/CPEC loans be paid back? When will CPEC be operational? When will SIFC bring investments?
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Dr M Khan May 18, 2024 09:47am
Delusion of economics mixing with foreign policy or diplomacy is plain stupid. By the same logic, why did Chinese invest in bankrupt Pakistan? It's all about interests and how you pursue it.
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KU May 18, 2024 10:37am
Its simple, read last 100 years of US business history, all will be understood. We have an ugly profundity; threat to our chequered leaders ill gotten foreign assets vs future of 250 million people.
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Az_Iz May 19, 2024 03:33am
So true.
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Az_Iz May 19, 2024 03:36am
The gutless politicians will not take tough decisions, to raise revenues, reform the energy sector and plan for the future. They just want to get by with loans, remittances and some exports earnings.
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Az_Iz May 19, 2024 03:38am
Until you get economically strong, you will get kicked around. You choices to make independent and beneficial decisions will be compromised.
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Kashif ALI May 19, 2024 07:53pm
ECONOMICS 101 Pakistan had never had COMPARATIVE ADVANTAGE (CA) in global economy. No wonders, Pauper is the right word for us. Indian Brain was their CA that rules the Global Economy and business.
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