Iran and Pakistan: Back to Business

Discussion in 'Pakistan' started by Neo, Aug 20, 2015.

  1. Neo

    Neo Senior Member Senior Member

    Feb 17, 2009
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    Iran and Pakistan: Back to Business
    In the wake of the nuclear deal, the two countries get ready to do business.


    By Arif Rafiq
    August 19, 2015

    Last Thursday, Iranian Foreign Minister Javad Zarif visited Pakistan as part of a multi-country tour to explore opportunities for greater economic and security cooperation in the region following the landmark nuclear deal with the P5+1.

    The July nuclear deal likely clears the way for the completion of sanctions-delayed energy projects between Islamabad and Tehran, bringing relief to energy-starved Pakistan. It also creates an opportunity for cooperation between Iran and Pakistan to promote peace in their respective Balochistan regions, creating a virtuous cycle of economic growth and improved security.

    However, while Pakistan stands to be a major beneficiary of the nuclear deal, other countries, including Pakistan’s archrival India, will also gain from Iran’s opening to the outside world. Nonetheless, speculation of an Indian-Iranian entente, perhaps even including the United States, is overblown. The India-Iran relationship will continue to grow, but with China’s big bet on Pakistan – in the tens of billions of dollars – and Pakistan’s distancing itself from the regional sectarian war, Iran appears keen to partner with Pakistan rather than playing an antagonistic role in the country.

    The First Order of Business is Business

    The eventual lifting of U.S. and international sanctions on Iran will allow for the Islamabad-Tehran relationship to be increasingly driven by economic and geographic realities, rather than the interests of exogenous actors. Pakistan and Iran are neighbors. Pakistan is a net-energy importer. Iran is a net-energy exporter.

    In anticipation of the lifting of sanctions on Iran, Islamabad and Tehran are moving forward with two major energy projects: a natural gas pipeline and an electricity transmission line. Together, both projects will alleviate Pakistan’s crippling shortages in both electricity and vehicle fuel.

    Pakistan and Iran signed a $1.5 billion natural gas pipeline deal in 2013. The project has been in limbo as a result of international sanctions on Iran.

    In signing the agreement, Islamabad not only defied pressure from the West and Gulf Arab states, it also put itself in a vulnerable position vis-à-vis Tehran. The accord stipulates that Pakistan would be fined up to $3 million a day if it failed to complete construction of the pipeline by the end of 2014. While Iran has essentially completed its portion of the pipeline, Pakistan has not. In fact, construction of the Pakistan portion did not begin until this summer.

    The China Factor

    Importantly, Iran has not opted to exercise the gas deal’s penalty clause, indicating its keenness to become an energy partner with Pakistan. China may have also been a factor motivating Iran’s restraint.

    With a population of close to 200 million, Pakistan is a large and growing energy and economic market. But China is even bigger. And for southern Iran, Pakistan is a land-based gateway to China.

    Beijing is financing and constructing a $46 billion economic corridor that will connect Pakistan’s Arabian Sea port of Gwadar, located close to Persian Gulf shipping lanes, to China’s landlocked and economically underdeveloped Xinjiang province.

    Iran’s ambassador to China has expressed interest in eventually extending the Pakistan gas pipeline to China. Tehran may also be keen to exploit future land and rail routes connecting Gwadar to Xinjiang. Already, Iran is connected to Pakistan’s Gwadar by road; and a freight rail connection between Pakistani and Iranian Balochistan has been restored.

    Shared Stability in Balochistan

    Much like Pakistani Balochistan, Iran’s Sistan-Baluchestan province has faced periodic uprisings by segments of its Baloch community, which feels deprived by its central government. Prior to the 1979 Islamic revolution, Iran and Pakistan collaborated to subdue Baloch separatism. That cooperation subsequently waned as relations between the two countries soured post-1979.

    After the U.S. invasion of Afghanistan, a shadowy Iranian Sunni Baloch insurgent group, Jundullah, emerged onto the scene, engaging in several spectacular attacks on Iranian government officials and security personnel. Jundullah and its successor groups are believed to have operated from Pakistan. Similarly, after the U.S. invasion of Afghanistan, the insurgency in Pakistan’s Balochistan renewed. Baloch insurgents combating Pakistan benefited from safe havens in Afghanistan; and some militant leaders, like Allah Nazar Baloch, have been rumored to be aided by Iran.

    India has also provided support to Baloch separatists. And Pakistan has alleged in the past that some of this assistance has come from the Indian consulate in the Iranian Balochistan city of Zahedan. The Iran-Pakistan border, much like the Afghanistan-Pakistan border, is porous, with overlapping populations and high levels of illicit activity, including smuggling.

    The Baloch insurgency in Pakistan is now fractured and waning. And there is indication that Iran is revising its approach toward Pakistani Balochistan by reverting to its pre-revolution policy of partnership with Islamabad to stabilize their respective Balochistans.

    Last week, Zarif linked the fates of Iranian and Pakistani Balochistan, saying: “We believe economic development both in Pakistan’s Balochistan province and Iran’s Sistan[-Balochistan] are fundamental to fight poverty and extremism.”

    Behind the scenes, there may be some bilateral security coordination. In March, Pakistan arrested Abdul Sattar Rigi, an Iranian Sunni Baloch insurgent leader. And some time this year, a Pakistani Baloch gang leader, Baba Ladla, wanted by Pakistani security forces, was reportedly killed by Iranian security personnel.

    Building trust between the Iranian and Pakistani security establishments is an uphill task, especially given Iran’s deep ties with India and Pakistan’s partnership with Saudi Arabia. But Islamabad-Tehran relations benefit from the absence of other complications common to the region; Iran and Pakistan have an established border that neither contest, in contrast to Pakistan’s borders with Afghanistan and India.

    In addition to the gas pipeline, Tehran is making additional investments in the stability of Pakistani Balochistan. Iran and Pakistan are close to finalizing a 1000MW electricity transmission deal that would supply the country’s Balochistan province, which faces the most severe electricity blackouts in Pakistan. To truly have an impact, Pakistan would have to broaden the last mile of its electricity grid, connecting more homes in Balochistan, and improve its customer bill collections rate.

    Iran, which presently supplies Pakistani Balochistan with at least 75MW of electricity, has expressed interest in expanding the soon-to-be-agreed-upon 1000MW supply to 3000MW.

    Avoiding Entanglements: The India and Saudi Factors

    In the 1990s, in the aftermath of the Iran-Iraq war and the Soviet withdrawal from Afghanistan, Pakistan was aligned with Saudi Arabia and India with Iran. The two axes supported opposing sides in the Afghan civil war; and Iran and Saudi Arabia patronized Sunni and Shia sectarian proxies in Pakistan.

    A similar regional context exists today. The United States has all but vacated Afghanistan. Sunni militants – some of whom are expressly anti-Shia – are filling the vacuum. And against that backdrop, there is yet another Iran-Saudi Arabia proxy war being fought in Iraq, Syria, and Yemen.

    But Pakistan has managed to insulate itself from the regional sectarian war. Sectarian violence and terrorism overall rose from 2007 to 2013. But since last year, as a result of military operations in North Waziristan and nationwide counterterrorism operations, terrorism, including sectarian violence, has plummeted.

    With the reduction in deaths of Shia civilians at the hands of Sunni extremists, the prospects for Iranian meddling in Pakistan are reduced. Pakistan’s decision not to play an active combat role in the Saudi-led Yemen war has, and will continue to have, the same mitigating effect on Iran.

    On top of all this, there is an alignment in how Iran and Pakistan view stability in Afghanistan. Iran has expressed support for the Pakistan-backed (and now stalled) reconciliation process in Afghanistan. Tehran has hosted multiple Afghan Taliban negotiations. And at the same time both Iran and Pakistan see the so-called Islamic State, which has an embryonic presence in South Asia, as a threat.

    As trade between Iran and Pakistan grows, New Delhi and Tehran aim to push forward the laggard Chabahar port project, which has been portrayed as a competitor to Gwadar and a means through which India can access Afghanistan and Central Asia without using the Pakistan-based land route. India and Iran also also looking to push forward rail and road projects connecting Chabahar to Afghanistan.

    But expectations of what New Delhi and Tehran can achieve together should be tempered by reality: Indian contractors are inefficient, and the bureaucracies of both countries are bloated, notoriously difficult to negotiate with, and move at a glacial pace.

    Even if India and Iran are able to do magic in Afghanistan and Central Asia, the region is moving away from zero-sum games and hard alliances. In fact, Zarif has said that Iran has no objections to Gwadar port and emphasized that no country, including India, could undermine Pakistan’s importance for Iran.

    A reversion to the hard Iran-India and Pakistan-Saudi Arabia alliances of the 1990s is unlikely. Iran-Pakistan relations are increasingly defined by economic realism – and that will produce dividends for the internal security of both countries.

    Arif Rafiq (@arifcrafiq) is president of Vizier Consulting, LLC, which provides strategic guidance on Middle East and South Asian political and security issues.
  3. Neo

    Neo Senior Member Senior Member

    Feb 17, 2009
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    Iran and Pakistan upbeat on gas pipeline, bilateral trade
    M. Aftab/Analysis
    Filed on August 24, 2015 | Last updated on August 24, 2015
    Iranian labourers work on a section of a pipeline - adorned with Iranian (L) and Pakistan (R) flags.
    (AFP file)

    This optimism on stepped up economic and business relations were voiced at the just-concluded visit to Islamabad by the Iranian Foreign Minister Jawad Zarif.

    Iran and pakistan have decided to complete the Iran-Pakistan Gas Pipeline on a fast track and to expand their bilateral trade manifold, besides cooperating in the massive China-Pakistan Economic Corridor project.

    The two countries are very upbeat over the pipeline and trade prospects on as Western sanctions are set for lifting by US and Western sanctions which were aimed at stopping Iran from producing nuclear weapons.

    This optimism on stepped up economic and business relations were voiced at the just-concluded visit to Islamabad by the Iranian Foreign Minister Jawad Zarif. He had detailed negotiations on these subjects with Sartaj Aziz, Advisor to Prime Minister Nawaz Sharif on National Security and Foreign Affairs.

    Iran and Pakistan negotiations led to several key decisions in sectors like energy, natural gas, trade, and specifically the ongoing Iran-Pakistan Gas Pipeline Project. Zarif and Aziz agreed that enhancing bilateral cooperation in the energy sector is one of the major areas of mutually beneficial cooperation. The Iran-Pakistan gas Pipeline should be completed in the shortest possible time.

    Zarif said "my visit to Pakistan, the second in four months, is significant because Iran wants cooperation with Pakistan in all sectors." He also said "technical work on Iran-Pakistan Gas Pipeline (IP-Gas) project is in progress in coordination with relevant ministries of the two countries. Economic relations between the two countries will further deepen as soon as decades-long Western restrictions on Iran are lifted, following the Nuclear Agreement with P5+1."

    Zarif, replying to a question also supported the ongoing completion of $47 billion plus China-Pakistan Economic Corridor, or CPEC. He said, "Iran supports growth and development in Pakistan and the entire region."

    Equally jubilant over the prospects of lifting of the sanctions, Zarif's counterpart Sartaj Aziz reciprocated, and said: "We have had positive discussions over expansion of the bilateral cooperation, and we will go ahead with full speed to achieve our goals and decisions." Aziz congratulated Tehran over Iran's nuclear agreement with the world powers, as implementation of the I-P gas deal will contribute to regional and international peace and security. It will also open new avenues of economic and commercial cooperation between Pakistan and Iran.

    Energy-starved Pakistan has been pinning great hopes over the US-Western and Iran nuclear talks because its vital I-P gas projects has been held up for two decades for one reason or the other. The project was initiated in 1994 to supply 5.6 billion cubic feet (bcf) of gas from Iran's South Pars gas fields. It included supply of 2.5bcf to India and 3.1 bcf to Pakistan. It had a projected cost of $7 billion at that time.The cost escalated rapidly to $10 billion in 2012.

    India pulled out of the project when US nuclear sanctions were applied against Iran, but Pakistan stood by the project. Iran and Pakistan decided to complete the project by 2014 at a cost of $10 billion.

    The project was re-activated in 2010. Former Pakistan president Asif Ali Zardari visited Iran in March 2013 and participated in the ceremony marking completion of the Iranian portion of the pipeline.

    Prime Minister Nawaz Sharif is very enthusiastic about the Iran-Pakistan project. "He is hopeful that the project will be taken up quickly," his Minister for Petroleum and Natural Resources Khaqan Abbasi said. The project in its current form entails lying down 1,800 kilometers (1,100 miles) of pipeline from Iran to Pakistan. Iran, started building the projected in 2012 and in 2013 completed it.

    Pakistan has been holding up on construction due to the sanctions. But now, Islamabad is reactivating it, as China is also financing the project. China is to lay the pipeline from Southern region of Nawabshah to the already operational deep-sea port of Gwadar, located just across the Straits of Hurmoz, which connects Pakistan with GCC countries. Gwadar is also close to Iran and its natural gas region of South Pars.

    Abbasi, said: "As soon as the Nawabshah-Gwadar portion of Iran-Pakistan projects is constructed, we will have to build only 80 kilometres of the pipeline for which work is in hand. We have drawn up plans to extend this pipeline with north-Western China, to benefit from China-Pakistan Economic corridor."

    Official and across the border unofficial trade between Iran and Pakistan has been growing fast, especially through the land route - from the Pakistani border town Chaman and Taftan, the Iranian border town. It includes huge, unofficial import of Iranian oil and petroleum products through trucks and buses carrying large oil cans. One estimate puts the official Iran-Pakistan bilateral trade at $1.0 billion a year.

    Alireza Haghighian, Tehran's Ambassador to Islamabad said: " Iran is ready to fulfill Pakistan's requirements of electricity, natural gas, crude oil and petrochemicals, besides cooperation in infrastructure projects like laying highways, and rail tracks, construction of dams, and setting up oil refineries and power plants." Pakistan's public and private sectors are likely to gab this offer, raising the two-way trade, investment and employment of manpower on the two sides, manifold. With all these plans in view, and the sanctions out of way, the two countries and the region have good prospects to expand business from energy to petrochemicals, and food to fuel.
    Last edited by a moderator: Aug 25, 2015
  4. Bheeshma

    Bheeshma Regular Member

    Aug 22, 2012
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    Yawn...come back when porkistan has begged and accumulated enough money to pay the Iranians.
  5. pmaitra

    pmaitra Moderator Moderator

    Mar 10, 2009
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    EST, USA
    Really, Mr. Rafiq? Or is this just wishful thinking?

    Iran agreeing to do business with Pakistan is more a result of Iran's quest to earn revenues, than new found love for Shia hating Sunni majority Pakistan that is in an unending sectarian boil.
    blueblood likes this.
  6. Neo

    Neo Senior Member Senior Member

    Feb 17, 2009
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    Pakistan, Iran eye $5bn trade
    Mubarak Zeb Khan

    ISLAMABAD: Ahead of a high-level technical delegation from Iran, the Ministry of Commerce on Monday explored various avenues to enhance bilateral trade to $5 billion in the next five years after lifting of international sanctions against Iran.

    A delegation from Iran will visit Islamabad on August 25-26 to revive the trade links. Pakistan has a narrow export basket to Iran because 63 per cent of exports comprised of rice alone.

    Pakistan’s exports to Iran fell to a low level of $43 million in 2014 from $182m in 2010. While Iranian imports fell to $186m in 2014 from $884m in 2010.

    Pakistan signed a preferential trade agreement (PTA) with Iran in 2006. Iran is not willing to convert PTA into a free trade agreement.

    Tariff concessions were granted to Iran on 309 tariff lines while Pakistan was offered concessions on 338 tariff lines. Major sectors covered under the PTA were rice, fruits, cotton, cotton yarn, pharmaceutical products and cutlery.

    In April 2015, Pakistan and Iran decided to prepare a five-year plan to enhance bilateral trade to the tune of $5bn. The visiting delegation will also discuss expansion of PTA. Experts predict that payment mechanism normalisation will pave way for diversification of exports to Iran.

    The meeting held on Monday in the commerce ministry was attended by officials from Federal Board of Revenue, State Bank of Pakistan and Trade Development Authority of Pakistan. The meeting discussed the trade complementarity with Iran and decided to actively pursue policies to enhance exports of agricultural products to Iran.

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