Pakistan-Iran relations: a perspective

Of late, some irritants had developed in Pakistan-Iran relations which have coincided with domestic, regional and international factors. In past October/November, border violations and cross-border firing on Balochistan-Seistan border together with threats by the Iranian government to chase down militants well into Pakistani territory were some of the worrisome developments.

Pakistani Balochistan and Iranian Balochistan were always peripheral parts of the Mughal and Safavid empires respectively, and both were historically neglected and impoverished. No wonder, militant groups such as the Taliban, Jaish-e-Muhammad and al Ahrar are operating in Pakistani Balochistan either due to a general rise in the militancy culture or external support by certain quarters.

The trade volume between the two countries remained low despite signing of a preferential trade agreement on March 4, 2004 which became operational on September 1, 2006. Nevertheless, the two countries have a much higher trade volume through informal channels, ie, smuggling and third country transactions.

Pakistan and Iran trade US $265 million worth of goods. This volume is expected to increase in the coming years. Trade between the two countries peaked to $1.32 billion in 2008-2009 but later declined and is presently around $265 million. At present, major commodities exported to Iran by Pakistan include rice, meat, paper, paperboard, textiles, fruits, sesame seeds, chickpeas, beans and surgical goods. Rice enjoys the lion’s share of approximately 35 percent, followed by meat 20 percent and paper and paper board nearly 19 percent. The major commodities imported from Iran include organic chemicals, plastic, minerals, oil, iron and steel.

Trade is the best way to strengthen and sustain mutual relations under the changing international scenario. The elected governments in both countries want to boost trade which has remained low due to international sanctions on Tehran. However, several other countries like China, Russia and India are able to resist these sanctions and maintain steady trade relations with Iran.

Pakistan has identified five places for setting up trading centres along the Pakistan-Iran border. They are: Taftan-Minjaveh, Ladgashtjalaq, Parome-Kuhak, Mand-Peshin and Santsar-Nobandan. The purpose of these common border markets is to sell goods at concessional rates of customs duty and other taxes in a bid to control growing cross-border illegal trade.

There should be no embargo on Pakistan-Iran trade as other countries of the world are also doing trade with Iran. The Iran-Pakistan (IP) gas pipeline, hopefully will further enhance economic co-operation between the two countries. It would ensure the supply of 750 million cubic feet of gas, if and when operational. The natural gas is necessary to keep industrial and commercial activity going.

The two countries have agreed to open bank branches and currency swap but the issues are still inconclusive. Iran had offered that its Bank-e-Milli and Pakistan’s National Bank could open branches on reciprocal basis but this process is delayed. The mode of business transactions is through the Asian Clearing Union (ACU), which is more time-consuming than a normal letter of credit (LC). Opening a letter of credit through Iran’s sister companies in Dubai also adds to the cost and benefits only Dubai banks. It would be far more profitable if trade was permitted in local currencies instead of dollars.

Both Pakistan and Iran have joint chambers of commerce with a number of countries. These forums mainly managed by the private sector go a long way in facilitating growth of bilateral commercial relations. Pakistan needs to have a joint Chamber of Commerce with Iran as well. It will facilitate greater interaction between the private sectors of the two countries. Moreover, both countries should try to divert informal trade to legal channels by checking smuggling, revision of trade policies and tariff and non-tariff barriers. It is difficult to check smuggling through administrative measures only. The best way is through elimination or reduction of tariff and non-tariff barriers.

Border control technologies need to be incorporated in manning cross-border checkposts and streamlining against smuggling and illegal cross-border traffic. The construction of walls to seal illegal movements or smuggling are no longer an enduring solution.

Where border trade and development takes place in enough quantum and frequency the issues of insurgency would subside, if not totally cease; at least it provides lesser temptation to outsiders in meddling or acting as spoilers.

Pakistan has good relations with both Iran and the Arab world. During the 1950s through 1970s, under the Shah regime Iran and Pakistan enjoyed very cordial relations and acted as central pillars of the US regional policy. The Shah had then vowed to guarantee Pakistan’s territorial integrity when Balochistan faced insurgency in the 1970s.

Pakistan tried to maintain a neutral position in the Iraq-Iran war; it has espoused Iran’s energy nuclear programme under UN aegis. It has urged restraint in the current Iran-Arab tensions and has opposed any military action against Iran by US/or Israel. During the post-Islamic Revolution, Pakistan’s neutrality was unfortunately connoted as siding with the US and the Arab world.

Balancing Iran-Arab relations is always difficult, especially when Pakistan faces difficult challenges. Pakistani guest workers are employed in the Gulf and it is mostly their remittances that keep the country’s economy afloat. However, notwithstanding these difficult circumstances, Pakistan can still do more. Greater people-to-people and cultural contacts, increased trade levels and border negotiations could help calm ruffled feathers on both sides. Pakistan has to remain neutral in the recently installed ‘Caliphate’ which is causing deep alignments on sectarian grounds. It has to be alert against the import of toxic ideology of fresh violence at home and take steps to stop any fighters going abroad.

Minor conflicts but greater co-operation in Pak-Iran relations. Generally, both countries have more to gain than lose as they need each other’s geopolitical support. Vast Central Asian markets lie mostly untapped for India, Pakistan, China and Iran via Afghanistan. Complex relationship, where glitches occur, can be overcome through adroit diplomacy. Impending upturn in Iran-US relations will hopefully smoothen minor irritants and lead to greater economic interaction in coming years.

Both Iranian Balochistan and Pakistani Balochistan are Achilles heels of the two countries as historical underdevelopment and poor border control complicate relations and lure the spoiler elements. Both countries need to be empathetic to each other’s concerns. Nations get a stake with the glue provided by trade, business and economic investments. Moreover, common challenges and experiences, problems of refugees, energy issues, insurgencies, disaster and weather control, smuggling, drugs and crime, are pressing issues that could draw both nations closer to each other. Besides, Pakistan and Iran need each other as strategic assets. The Pakistani public holds positive views about Iran and Pakistan, on its part, has to put its house in order.

Insofar as geopolitical rivalry over construction of Chahbahar (by India) and Gwadar (by China) is concerned, it is more imaginary than real and raises unnecessary concerns. Both ports can be complementary to each other; rather than competitive. Afghanistan has every right to choose its friends and allies in the region. The more the regional actors get engaged in Afghanistan for development the better it would be for the prospects for peace in the region. However, any military intervention involving physical footprints should be avoided at all costs.