Tuesday, 03 May, 2016

Pakistan should not lag behind in developing economic ties with Iran


By Zafar Bhutta, The Express Tribune

Iranian President Hassan Rouhani’s visit to Islamabad in March this year was a significant development in the wake of the removal of international sanctions from Tehran.

As part of intense diplomatic moves, it was aimed at kick-starting bilateral relationship that had become stuck over the past decade or so.

With the lifting of global curbs, foreign investors have flocked to Iran to grab a slice of the bonanza being offered by the $400-billion economy – the second largest in the Middle East after Saudi Arabia.

According to the World Bank, the gross domestic product – total national output – of Iran is expected to grow at a pace of 6% this year and almost 7% next year.

President Rouhani has embarked on a programme to diversify the excessively oil-dependent economy of Iran. It has three great strengths – natural resources including oil, gas and minerals, a population of nearly 80 million and a manufacturing base unrivalled in the Middle East. Oil and gas account for only 10% of its GDP.

About 150 companies from 50 countries have recently visited Iran, expressing interest in pumping capital into a country that is offering tremendous opportunities. Apart from this, Iran has struck a deal with European aircraft maker Airbus for the purchase of 114 new airplanes, estimated to be worth around $10 billion.

In this scenario, Pakistan must also capitalise on the opportunity and satisfy its growing energy appetite that causes a dent of 3% to the economy every year because of prolonged power outages.

Gas production has remained static in Pakistan at 4 billion cubic feet per day (bcfd) for a decade, though demand has jumped up to 6 bcfd. According to official estimates, the output is likely to drop by half to 2 bcfd because of exhaustion of existing gas fields.

Cooperation between Pakistan and Iran in the area of energy has bright prospects reflected in President Rouhani’s visit during which Iran showed its willingness to deepen ties despite some persistent problems.

Policy contrast

However, in stark contrast to efforts made to take the relationship with Iran to new levels, Pakistan has agreed to be part of a Saudi Arabia-led 34-nation anti-terrorist alliance that excludes Iran, Iraq and Syria. This move is likely to push Tehran not to consider Pakistan as an “all-weather partner and trustworthy neighbour”.

Obviously, Pakistan’s participation in the Saudi coalition in any form will severely hurt its ties with Iran, primarily cooperation in the area of economy.

According to experts, such vacuum in bilateral relations will be immediately filled by India that has already expressed extensive interest in developing trade and economic partnership with Iran.

India has already pledged investment of around $150 million in modernising Iran’s Chabahar port that is considered a competitor of Gwadar port and will allow India to open a direct sea route for Afghanistan without entering Pakistan’s waters.

At present, New Delhi and Tehran are actively discussing the building of a $4-5 billion Middle East to India deep-water pipeline.

Keeping all this in view, Pakistan should avoid fanning tensions with both Iran and Saudi Arabia, balance relations with them and pay more attention to resolving its internal problems including energy shortages by diversifying the regional ties.

IP pipeline row

During President Rouhani’s visit, the Iranian side also pressed Pakistan to meet its obligations pertaining to the Iran-Pakistan (IP) gas pipeline project and pledged to meet Islamabad’s energy needs.

As most sanctions have now been lifted, Pakistan should not miss this opportunity and take up the matter with US authorities to get the pipeline project cleared for execution.

At present, oil and liquefied petroleum gas (LPG) are being smuggled from Iran through Balochistan. Apparently to curb the illegal trade, Iran has offered to export oil and LPG. Apart from this, it has raised the prospect of exporting 1,000 to 3,000 megawatts of electricity to energy-starved Pakistan.

Iran has also expressed the intention of signing a free trade agreement with Pakistan that sits close to a much bigger economy that some experts call a goldmine.

Latest developments suggest that the Iranian economy will grow at a rapid pace in coming years and its neighbours could easily reap fruits of this expansion.

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