Bounty on the cards?

Published February 21, 2022

BESIDES containing threats to global safety, the possible revival of the 2015 Tehran nuclear deal is likely to present a rare opportunity to Pakistan to reap rich dividends in case sanctions against Iran are no more in place. It will open up new avenues for closer economic engagement with a neighbour that has an energy surplus, oil and minerals.

Over the past few months, the US and Iran have been indirectly negotiating in Vienna to revive the deal that made Iran roll back its nuclear programme in exchange for lifting international sanctions on its economy.

According to credible media reports, the deal on the revival of the Joint Comprehensive Plan of Action (JCPOA) is expected early next month. To earn Iran’s trust and to convince the world of American intent, President Joe Biden has restored some sanction waivers early this month. These breaks would allow firms around the world to engage in civilian nuclear projects.

In 2018, the US had pulled out of JCPOA, imposing far-reaching sanctions and withdrawing all waivers.

The government and business leaders in Pakistan are probably too overwhelmed by political and economic challenges to follow the Vienna talks or strategies for the post-deal scenario. There was no indication of discussion on the subject during the recent visit of Iranian Interior Minister Dr Ahmed Vahidi. Media reports suggest the visit remained exclusively focussed on security-related issues along the common border.

With things better on the US-Iran front, Pakistan stands to benefit a great deal if it does its homework right

The private sector, aware of the US hostility towards Iran and its dominant position in the global market, particularly over capital flows through the banking system, prefers to be non-committal at this point. The Overseas Investors Chamber of Commerce and Industry politely excused, while the response of Pakistan Business Council, the elite platform of the corporate sector, did not reach Dawn till the filing of this report.

Razzak Dawood, advisor to the prime minister on commerce, did not divulge much on the possibility of visiting Tehran to explore possibilities. Responding to Dawn, he did not hide his lack of interest. “I am looking into it,” he wrote while responding to the request for sharing his assessment of the situation.

“The reports from Vienna are calming in a global environment of growing geopolitical rivalries threatening whatever is left of Covid-battered economies. If the growing energy insecurity amidst rising oil prices and vanishing fears of Western backlash kickstart the Pakistan-Iran oil pipeline project, it will be a real boon for the people and the private sector groaning under the burden of rising fuel prices,” hoped an incorrigible optimist.

Journalist-turned-politician Senator Mushahid Hussain Syed was hopeful of a positive outcome if the sanctions are lifted on Iran and the financial flows are eased. “US partial sanction waiver is good news for Pakistan as it will open up opportunities for boosting commercial cooperation between the two neighbours. Coupled with US humanitarian sanctions waiver for Afghanistan after January 23-25 Oslo meeting, this augurs well for lowering tensions in the region.

“While Iranian minister’s visit was linked more with cross-border security issues, especially terrorism in Balochistan, last year’s opening of a third border crossing point between Pakistan and Iran can provide an impetus for bilateral trade and travel.

“The biggest issue was that, fearing Western retaliation, Pakistani banks were not willing to open a letter of credit (LC) for legitimate overland trade. That may now change after the US waiver. And, perhaps, eventually, the Pakistan-Iran pipeline deal can also be revived. Iran can provide energy security to Pakistan which would strengthen the economy.

“An additional force multiplier for Pakistan-Iran economic ties is the China-Iran strategic economic agreement,” he responded in writing when reached for his input.

Dr Manzoor Ahmed, former ambassador of Pakistan to the World Trade Organisation, lamented limited trade, and implicitly blamed what he called a weak foreign policy and the risk-averse attitude of the business class for the underperformance despite the natural advantages of a shared border and complimentary features of Pakistani and Iranian economies.

“I think the nuclear talks are in their final stage. The partial lifting of US sanctions is a reflection of that progress. Pakistan has a very low trade volume. Pakistan’s exports of a few million dollars to Iran can be multiplied manifold. Despite sanctions, India’s exports crossed $3 billion as it allowed Iran to buy in Indian currency,” he said.

“Pakistan can buy cheaper oil and other petrochemicals from Iran. In the past, it was not US sanctions alone, but also the Saudi pressure that prevented Pakistan from deepening trade ties.

“Pakistan should start preparing for the post-sanction period. At least, it can diversify its energy import sources. We have a long border with Iran. We can look at opening at least two to three more border posts.

“We already have a preferential trade agreement with Iran. We can make it functional. It will be better if the Iranian minister’s visit is reciprocated by our commerce minister’s visit,” he advised.

Published in Dawn, The Business and Finance Weekly, January 21st, 2022

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