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Pakistan-Iran business: 
A $10 billion question

It’s a $10 billion question! Sanction-hit Iran’s offer to do business with Pakistan. Iran is desperately trying to break out of the US-western strangle hold of a growing bundle of sanctions, to partly counter it President Ahmedinejad has offered Pakistan to push up its business from the current volume of $1.0-1.5 billion to $10 billion a year within “two months.”

But Iranian offers are beset with several problems ranging from its own resources crunch to Iran-applied trade tariff and non-tariff barriers.

Pakistan’s current exports, including rice, fruits and vegetable total $400-500 million a year, in return for $600-900 million Iranian items, half of which are petroleum products.

President Mahmoud Ahmadinejad, in his just-concluded Islamabad talks with President Asif Ali Zardari and Prime Minister Yousuf Raza Gilani, stressed the need for enlarging bilateral cooperation between Iran and Pakistan.

“This is important for promoting peace, stability and economic progress for the people of the region,” he said.

Zardari offered Iran to expand barter trade and undertake the business in Iranian and Pakistani currencies rather than dollars. Both countries face shortage of hard currencies, and have a difficult position as far as their external balances are concerned.

He also asked Iran to remove tariff and non-tariff barriers to trade. Zardari offered Iran a currency-swap arrangement. He also said both countries can benefit in undertaking trade in wheat, fertilisers, cement and other commodities.

President Ahmadinejad informed Zardari: “Iran is ready to enhance trade with Pakistan up to $10 billion within a couple of months.” The two leaders also decided to improve the management of their common border to facilitate transportation of goods.

Iran and Pakistan will also open a new border point at Gabd and Reemdan, along Pakistan’s Arabian Sea Coastal Highway. Besides other commodities, Iran is keen to import one million tonne of wheat and 200,000 tonnes of quality rice from Pakistan within weeks. Pakistan’s Consulate General will start operating at the key Iranian port of Bandar Abbas to facilitate the trade and travel which is expected to multiply within a short span of time.

Zardari reiterated Pakistan’s commitment for a speedy implementation of the ongoing multi-billion Iran-Pakistan gas pipeline project, 1,000mw transmission line to supply electricity to Pakistan, and another project, which will provide 100 megawatts of power to Pakistan’s key port of Gwadar, located close to the Iranian border.

The Chinese-built, strategically located Gwadar Port will be highly cost-effective for trade to the regional destinations including Dubai, Gulf, Iran, Afghanistan and West Asia. Despite US pressure, Islamabad has refused to give up Iran-Pakistan gas pipeline. Islamabad has decided to speedily complete the project to overcome energy crunch.

Iran also has agreed to remove tariff and non-tariff barriers on imports from Pakistan, a government spokesman said after the Ahmadinejad-Zardari talks.

The swap and barter deal between Tehran and Islamabad has gained a new urgency because US sanctions on purchase of Iranian oil in greenbacks have already forced many other countries — including India, Russia, and Sri Lanka — to pay Iran in gold or their own local currencies. In the wake of the new sanctions, Iran has stepped up purchase of food grains from the international market bypassing the banking system and doing away payment in dollars.

Iran and Pakistan hope these deals will materialise in the next few days, and will benefit both of them in their present difficult situation. In fact growing and successful currency swap arrangements can benefit other regional counties, too, and help them gradually shift their foreign trade away from dollar-based transactions.

Views expressed by the author are his own and do not reflect the newspaper’s policy