The writer works at the Islamabad Policy Research Institute (IPRI)
Iranian President Hassan Rouhani visited Pakistan on March 25, 2016, his first ever visit in four years. Earlier, the then president, Mahmoud Ahmadinejad, visited Islamabad in February 2012 for a trilateral summit with Afghani and Pakistani leaders. President Rouhani’s visit is part of the Iranian government’s international outreach for renewing ties with its traditional trading allies and partners after the Joint Comprehensive Plan of Action (P5+1 nuclear deal) came into effect, providing for lifting of the nuclear-related sanctions.
Addressing Pakistan-Iran Joint Business Forum, Rouhani pledged to take trade-volume between the two states to five billion dollars in the next five years. The current volume of bilateral trade does not reflect the enormous potential that exists between the two states. A look at trade and energy related cooperation between Pakistan and Iran shows that bilateral trade peaked at $1.3 billion in 2008-09, but later on declined to $893 million. Though leaders from both countries had expressed their resolve to increase bilateral trade to five billion dollars during the 2014 visit of Prime Minister Nawaz Sharif to Iran.
The main reasons for low trade-volume has been high non-tariff barriers in Iran; high custom duty on items in which Pakistan has comparative advantage such as textile; slow process of import approvals; lack of enabling infrastructure that could facilitate trade on Pakistan’s side; poor rail, road and air connectivity between the two countries and lack of land-border trade posts. During the 7th Pakistan-Iran Joint Trade Committee meeting, Pakistan’s commerce minister expressed concern over unilateral import bans, high textile tariffs and import authorisation system, calling for elimination of non-tariff barriers under the 2006 Preferential Trade Agreement. In this regard, both sides agreed to form working groups to discuss the widening of Preferential Trade Agreement of 2006 to enhance connectivity and to open new border trade posts at Mand-Pishin and Gabd-Reemdan.
Due to broad range sanctions against Iran in the context of nuclear programme, banking channel with Iran was suspended, and Pakistani banks were reluctant to do business with Iran. It was reported a month ago that the reestablishment of banking channels between Pakistan and Iran did not mean setting up branches of Pakistani banks in Iran, but it meant restarting banking transactions between Pakistan and Iran by renewal of correspondent banking — relationship among commercial banks on both sides for settlement of transactions.
As regards the energy trade, Iranian president said that Iran considered provision of Pakistan’s energy security (in the area of electricity and gas) its responsibility. He further said that Iran had constructed its part of gas pipeline and would be able to provide gas in a few months when Pakistan would complete construction of its side of pipeline. Iran is already supplying 1,000 MW of electricity to Pakistan, while it intends to increase it to 3,000 MW. Iranian president also showed interest in enhancing connectivity between Gwadar and Chabahar port through roads, railways and shipping lines; he also desired to extend these connectivity projects to China.
In addition to trade and connectivity issues, leaders of Pakistan and Iran discussed strategic issues regarding regional peace and stability. The Afghan reconciliation process and holding of trilateral talks among Pakistan, Afghanistan and Iran was also supported by the Iranian side. Regarding the Middle Eastern situation, Iranian president said that the use of military force in resolution of conflict is not a viable option.
Trade and economic cooperation in Pakistan-Iran bilateral relations can be enhanced when mutual concerns are addressed. Apart from trade-related hindrances, strategic issues such as Iran’s role in the region, particularly its relations with India and Afghanistan, has also been a cause of concern for Pakistan. As per reports, during a meeting between President Rouhani and Chief of Army Staff Raheel Sharif the issue of alleged Indian involvement in Balochistan was also discussed. The allged Indian involvement in Pakistan, particularly in Balochistan, has been a cause of concern for Pakistan and, in this regard, Indian presence in Iran for the infrastructure development for Iran-Afghanistan-India joint projects also matters. The long-term and sustainable cooperation between Pakistan and Iran can be achieved by addressing mutual concerns regarding trade and economic policies as well as strategic issues that eventually define the relationship among states.http://www.dailytimes.com.pk/opinion/07-Apr-2016/challenges-in-pak-iran-relations
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