Pakistan, Iran to boost trade as sanctions go

The Iran Pakistan gas pipeline project will be completed at a cost of $7.5 billion.
The Iran Pakistan gas pipeline project will be completed at a cost of $7.5 billion.

Both sides look to a possible FTA to increase trading volumes

By M.Aftab (Analysis)

Published: Sun 14 Feb 2016, 11:00 PM

Last updated: Tue 16 Feb 2016, 1:47 PM

Pakistan is all set to export over a $1billion worth, or more, of everything ranging from textiles to rice, and thousands of tonnes of its world famous fragrant mangoes as sweeteners, the moment the nuclear-related sanctions are lifted from trading with Tehran, and on completion of the Iran-Pakistan gas pipeline.
Alongside boosting trade, the move will also help Pakistan beat the energy crisis, raise output and shore up dwindling exports, as the stalled and sanctions-hit Iran-Pakistan (IP) gas pipeline project gets completed. On the trade front, Commerce Minister Khurrum Dastgir, and the Iranians have completed, their formalities to push the mutual trade up.
In addition, Shahid Khaqan Abbasi, Minister for Petroleum & Natural resources, is waiting for a signal to fly out to Tehran to ensure the fast-track completion of the project. The inflow of gas from the project will be yet another bonanza for energy starved Pakistan, while Iran will benefit from billions of dollars in terms of gas sales.   
The eagerly awaited IP gas project was unveiled in Islamabad in mid-2008 by former Iranian President Mahmoud Ahmadinejad. He had, at that time, welcomed the proposal for the inclusion of China in the project. Construction stared in March 2013 in Iran by President Ahmadinejad, and was attended by the then Pakistani President Asif Ali Zardari.
Iran had vowed to supply Pakistan with 4,000MW of electricity, of which it was already providing 200MW. Iran also announced plans to build a big oil refinery at the new South-Western Pakistan port of Gwadar. The two sides will move ahead on all these plans. The IP project, as confirmed by Iranian Foreign Minister Javad Zarif, in August 2015, in Islamabad had envisaged lying down 1,800km of pipeline from Iran to Pakistan at a cost of $7.5billion. Iran has already completed its portion of the pipeline in 2013.
Tehran-based Tadbir Energy Development Group is expected to lay down the Pakistan portion to the city of Nawabshah, which will cost $250 million, and will be completed in 15 months. Part of the financing will be done by Iran.
Javad, and his Pakistani counterpart Sartaj Aziz, had also proposed cooperation in several other fields, after the US sanctions are lifted. These included greater trade, and Iran building in Pakistani projects ranging from energy to petrochemicals, and food to fuel.
Khurram Dastgir has stressed that the first priority is to resume and boost trade. "We are waiting for the remaining sanctions to be struck down to start exporting to Iran on a fast track basis."
"We are just waiting for a signal from the Iranian Central Bank, and the commercial banks, to have straightened up all the requirements to transfer export funds to Pakistan," a spokesman of the State Bank of Pakistan said, while responding to a query. "The banking channels in Iran have to be fully streamlined to avoid any problems, which Pakistani exporters had faced in the past."
Khurram Dastgir is also very upbeat over Pakistan and Iran signing a Free Trade Agreement with Tehran to turn the trading volumes several folds. In the event of the proposed FTA getting signed, it will mean upgrading the existing, eight year old Preferential Trade Agreement, even though some Pakistani exporters and industrialists have their reservations over its working in the past.
Payments for large trade from Pakistan will now be quite feasible as Iran has ample cash in the form of Greenbacks and foreign exchange resources from its current forex earnings as well the unfreezing of its more than $100 billion funds which the US and Western banks, had kept frozen during the prolonged sanctions.
Islamabad and Tehran have completed their arrangements to resume full scale trade. This was stated by Khurram Dastgir and Mehdi Honardoost, the Iranian Ambassador in Islamabad.
"The lifting of sanctions has provided Pakistan with historic opportunities to raise mutual trade and investment as leaders of the two nations envisioned in 2014 when Mr Sharif had met the top Iranian leader," Dastgir said.
"New circumstances merit signing the proposed FTA for an enhanced cooperation for mutual benefit of the two countries. The banking sectors of Pakistan and Iran will establish active linkages within weeks to facilitate traders to get their payments." Iranian banks now have to handle much larger trade two-way inflows. Unlike in the past, they will now have larger dollar and hard currency resources to pay to Pakistani exporters.
The writer is based in Islamabad, Pakistan. Views expressed by him are his own and do not reflect the newspaper's policy.

Engr. Khurram Dastgir Khan, Privatization Minister speaks during an interview in Islamabad, Pakistan, on Tuesday, Oct. 8, 2013. Photographer: Asad Zaidi/Bloomberg
Engr. Khurram Dastgir Khan, Privatization Minister speaks during an interview in Islamabad, Pakistan, on Tuesday, Oct. 8, 2013. Photographer: Asad Zaidi/Bloomberg

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