Iran, Pakistan seek $5bn trade volume in Imran Khan’s first official visit

Iran and Pakistan share more tha 1,000 kilometers of borders as well as deep historical ties since the latter’s independece in 1947. The two have had ups and downs in their relations but should their bilateral trade rise, Tehran and Islamabad can enjoy warmer ties as well.

Ali Dashti

@AdashtiAli
21 April 2019
ID : 21935
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Iran and Pakistan share more tha 1,000 kilometers of borders as well as deep historical ties since the latter’s independece in 1947. The two have had ups and downs in their relations but should their bilateral trade rise, Tehran and Islamabad can enjoy warmer ties as well.

Iranian President Hassan Rouhani, right, welcomes Pakistani Prime Minister Imran Khan on the second day of his official visit to Iran. (Credit: president.ir)

Pakistani Prime Minister Imran Khan has arrived in Iran in his maiden visit after he took office last August. On Monday morning, he was officially welcomed by Iranian President Hassan Rouhani in Tehran after his plane landed in the north-eastern city of Mashhad on Sunday evening where he visited the mausoleum of the eighth Shia Imam Reza. Although the fight against terrorism and narcotrafficking have vastly overshadowed Tehran-Islamabad ties, the two countries have huge trade capacities especially through their Chabahar and Gwadar ports.

Pakistani Prime Minster Imran Khan, left, holds talks with Iranian Health Minister Saeed Namaki on Sunday evening in the north-eastern city of Mashhad, the first stop in his two-day official visit. (Credit: IRNA, Abdullah Heydari)

The former Pakistani cricket player won the presidential elections last year and formed his government last August. Since then, at least three important security issues on the Pakistan-Iran border have marked his eight-month premiership.

Last October, the Pakistani-based Sunni jihadist group Jaish al-Adl (Army of Justice) abducted 12 Iranian security personnel near the border. Although several of the captives have been released, a number of them are still held by the terrorist group.

In February, a Pakistani suicide bomber was behind an attack that killed 27 Islamic Revolution Guards Corps (IRGC) in the southeastern province of Sistan-Baluchistan. Jaish al-Adl, known in Iran as Jaish al-Zolm (Army of Cruelty), claimed responsibility for the attack.  

And, this past week, an attack on a bus, carrying Pakistani armed forces, in Balochistan Province, left 14 people dead. Islamabad says a terrorist group, newly formed in Iran, was behind the attack.

Iran and Pakistan are no strangers to violence on their Balochistan borders, with each trading accusation about who should be blamed. This volatility has also taken its toll on land trade between the two countries, making many companies less eager to export by land passing Baluchistan frontier crossings. That said, still much of the two countries trade is done by land. 

Road transport

Despite the security problems, Islamabad and Tehran signed a Memorandum of Understanding (MoU) last December, according to Iran’s Road Maintenance and Transport Organization (RMTO) in a bid to promote more road land transport. 

“Both parties highlighted their deep relations as well as the trade volume and exchanged the data on mutual transport,” said Reza Nafisi, Managing Director of International Transport and Transit Office at the RMTO, who headed the Iranian delegation.

More than 60,000 lorries and 300,000 passengers crossed the two countries frontiers last year, according to Nafisi. “The two sides expressed their satisfaction at their growing cooperation in international road transit,” added the Iranian official.

Iranian and Pakistani lorries cross the two countries border near the city of Mirjaveh in the south-eastern Iranian Province of Sistan and Baluchistan (Credit: Tasnim News Agency, Vahid Ahmadi)

Also, in February, Islamabad said it would issue six-month multiple-entry visas to Iranian businessmen and women in a bid to boost trade between the two neighbours.

"We have resolved the problem of visas for Iranian business people," Pakistani Ambassador to Iran Riffat Masood told a joint business session between Tehran Chamber of Commerce and the Pakistan Embassy in February.

"According to one of joint border committee approvals, each Iranian businessman or woman who holds a business card, issued by chambers of commerce, can receive a visa for six months," Masood added. This is the first time in the last 70 years (Pakistan was founded in 1947) that Islamabad issues such visas for economic operators from Iran.

The first Iranian lorry entered the neighboring country under the TIR Convention-the Convention on International Transport of Goods Under Cover of TIR Carnets early this year.

$5bn trade target

The two neighbours annual bilateral trade volume stands at 1.19 billion dollars, according to the latest figures by Iranian authorities. They are now setting sights on raising their annual exchanges to $5b by 2021.

Iran exported industrial machinery, tile, construction materials and petrochemical products worth $1.19bn during the first 10 months of the last Persian year 1397 (21 March, 2018, 21 January 2019), showing a rise of 41% compared with the same period last year, according to Iranian trade attache in Pakistan.

In the meantime, imports from Pakistan decreased 31%, going down from 365 million dollars to $236m during the same period. Paper, sugar, red meat and grains are the main items that Iran imports from Pakistan.

Iran positive trade surplus with its eastern neighbour even under the renewed US sanctions has left the Pakistani ambassador wondering. “I’m amazed that Iran has been able to maintain its positive trade surplus with Pakistan although it's been under sanctions," the Pakistani envoy Riffat Masood said.

Energy products

Due to weak and non-existent infrastructure, Islamabad imports electricity from Iran since 2002 to illuminate its Balochistan province. The imported power amounts to 100 megawatts currently.

"Pakistan is ready to hold negotiations on the renewal of the agreement on 100MW electricity import to Balochistan province,", Pakistani Federal Minister for Power Omar Ayub Khan told Iranian Ambassador to Pakistan, Mehdi Honardoost, in Islamabad last December.   

The two sides stressed the need to continue joint efforts in the power sector on both power generation and transmission.

Gwadar and Chabahar: sister ports

Many observers believe the Pakistani port has been built to overshadow Iran’s newly-inaugurated Chabahar Port, each serving one of the regional players: Gwadar for the transit of Chinese goods and Chabahar for the Indian ones.

Saudi Arabia has also joined the geopolitical struggle for more strategic gateways. During a recent visit by Saudi Crown Prince Mohammed bin Salman, Riyadh announced it planned to build Pakistan's largest oil refinery near Gwadar port, the flagship project of the China-Pakistan Economic Corridor (CPEC). The oil refinery is part of Saudi Arabia's new commitment to invest $15 billion in Pakistan over the next three years. Reports say it could fuel competition with Beijing for economic leverage given China's significant investment there under CPEC.

However, Iran has never been trying to build the Chabahar Port, 76 nautical miles from Gwadar, in a bid to overshadow the Pakistani port. As Iranian President Hassan Rouhani inaugurated the first phase of the Chabahar port in 2017, Pakistan’s Minister for Ports and Shipping Hasil Khan Bizenjo was standing next to him.

“This was no coincidence, as Hasil Khan Bizenjo was asked to stand next to Rouhani in a carefully choreographed move,” the Pakistani news portal Express Tribune reported regarding the minister’s presence on the occasion despite the fact that Pakistan is not part of the project.

Pakistani Minister for Ports and Shipping, Hasil Bizenjo, second from right, stands next to Iranian President Hassan Rouhani at the inauguration ceremony of the Shahid Baheshti Port in Chabahar back in 2017. (Credit: ISNA, Hamid Amlashi)

The Chabahar port opens a new strategic route connecting Iran, India and Afghanistan, while bypassing Pakistan, and reflects growing convergence of interests among the three countries, Hindustan Times reports.

The port is considered a gateway to golden opportunities for trade by India, Iran and Afghanistan with central Asian countries besides ramping up trade among the three countries in the wake of Pakistan denying transit access to New Delhi.

Pakistani Foreign Office Spokesman Muhammad Faisal said in 2018 that Chabahar and Gwadar are sister ports and complement each other in promoting future trade, transit and connectivity.

“Our minister of maritime affairs participated in the inauguration of a part of the Chabahar port. We will continue to work with Iran for deepening connectivity between the two ports,” he said.

Banking ties

Soon after the Iran nuclear deal was signed in 2015 and little by little US and European sanctions on Iran were lifted, Iran and Pakistan agreed to ditch dollar in their bilateral trade exchanges, using their national currencies.

Back in 2016, Pakistan’s Federal Minister of Commerce Khurram Dastgir Khan supervised the signing of a memorandum of understanding with Iran’s Ambassador Mehdi Honardoost in Islamabad, local media reported on Wednesday.

“The two sides agreed in principle to open bank accounts in their respective central banks for trade transactions in their local currencies,” an unnamed official at the Pakistani Ministry of Commerce was quoted as saying.

Also in 2017, the two countries central banks signed an agreement to help raise trade to $5bn. The State Bank of Pakistan (SBP) and Central Bank of Iran (CBI) reached an agreement on banking and payment.

SBP Deputy Governor Riaz Riazuddin and Gholamali Kamyab, the CBI deputy governor for forex affairs, signed the agreement on behalf of their respective central banks in the Iranian capital Tehran.

The agreement seeks "to provide a trade settlement mechanism to promote trade between Pakistan and Iran. This mechanism will be used for the payment of trade conducted via letter of credit (L/Cs) and in accordance with international laws and regulations," said an official statement released by the SBP.

Iranian and Pakistani businessmen and women will engage in Business to Business (B2B) meetings on Monday on the last day of Imran Khan's first official visit to Iran. The two neighbours need to show more willingness, ease barriers and push for highger mutual trade should they aspire to hit their $5bn target.  

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