Post-sanctions Iran opportunity

Pakistan is going to urge Iran to enter into a Free Trade Agreement (FTA) with Pakistan during the scheduled visit of Iranian President Hassan Rouhani, says a report in this newspaper. Both sides will also discuss progress on a five-year strategic plan for comprehensive trade and greater investment cooperation. Piqued by falling exports, State Bank of Pakistan held a meeting with banks to prepare themselves and resume normal banking activities with Iran as per a notification by the federal government on the removal of United Nations sanctions. However, SBP needs to remove the confusion in the minds of banks that continue to depend on the Americans for their dollar clearing.
Pakistan saw its exports to Iran plummet from 400 million dollars to just over 40 million dollars as US sanctions started to bite into Iran's trade with Pakistan. On the other hand, India, China, Turkey, Japan and South Korea, in the meanwhile, despite US sanctions, continued to boost their trade with Iran. US was forced by its European allies to come to grips with Iran's nuclear ambitions and override Israelis opposition to get into a deal as European nations place trade ahead of political imperatives. Fearing that its West European allies could break ranks and join Russia and China - two major powers blocking the UN sanctions - US agreed, albeit reluctantly, to hold talks. Now with elections in US - the future of P5+1 (Germany) agreement is once again under clouds in the US. The federal government and the SBP have taken a stand that UN, not US, sanctions are binding on Pakistan. Lessons though need to be learnt from the Iran-Pakistan pipeline project. Pakistan went ahead and signed an agreement for supply of natural gas to Pakistan from Iran. However, no one was willing to finance the pipeline. A Chinese bank expressed its willingness but subsequently withdrew its offer once it realised the loss to its US business outweighed the gains from this 'controversial' venture.
Although we share a common border and geographic proximity for trade with Iran, it may also seem extremely promising our dependence on US for our defence needs and US willingness to use its influence in the Bretton Woods institutions - the International Monetary Fund (IMF) and the World Bank - to help us will keep us tied to the American purse strings.
Real sovereignty comes from economic strength which we sorely lack. Our willingness to join the Saudi-led military alliance shows our weakness and not economic strength. We need to learn from China. Beijing wants first to gain economic strength and is avoiding any overt military confrontation with its adversaries over the South China Sea dispute.
So we need to play a smart game. We do not need to give up our claim on Kashmir. But at the same time we need to make Pakistan a strong nation economically which at present we are not. Another sordid affair was the Iran deposit with KASB Bank. None of the big five network banks was willing to risk its dollar clearing and SBP was not willing to give a 'letter-of-comfort' for any support to the Iranian deposits. This non-willingness on part of the big 5 network banks forced SBP to rely on smaller institutions to help in bailing out a beleaguered KASB. At one stage the then US Ambassador to Pakistan, intervened and stopped Pakistan from entertaining any fresh business deal with Iran especially bank deposits of Iranian companies.
Our Saudi connection continues to be a sore point with Iran. Pakistan needs Saudi help as the kingdom has thousands of Pakistani expatriates sending their home remittances to the country from the oil-rich Gulf countries, particularly Saudi Arabia. So on one hand we need Saudi Arabia and on the other hand our economy needs America and its Western allies to help bridge the gap between resources and demands. Unfortunately, however, the post-revolution Iran has not been of much help. The Shah of Iran Mohammad Reza Pahlavi was interested in establishing a refinery in Gwadar, besides Pak-Iran textile unit in some other area of Balochistan. The Shah also invested in Security Papers. His support in our two wars with India was a source of strength. But his overthrow through a popular uprising brought everything to a screeching halt. Soon thereafter, Pakistan became the fighting ground in a proxy war between Saudi Arabia and Iran for influence. Iran's Islamic revolution and the Soviet-Afghan war put Iran and Pakistan in divergent religious sect, ideological and regional geostrategic camps. Major export opportunities for Pakistani export items to Iran include rice, cotton, minerals and organic chemicals do exist. Our policymakers must not lose sight of the fact that Iran is the second largest economy in the Middle East with a population of nearly 800 million. Hence the need for dealing with a post-sanctions Iran carefully, diligently, prudently, thoroughly, conscientiously, taking all aspects of Pakistan-Iran relationship into consideration.