Introduction
Napoleon once remarked: “The foreign policy of a country is (largely) determined by its geography.” The geostrategic, geopolitical and geo-economic factors have always played an important role in bringing states together with the intent to maximize their burgeoning socio-economic and security interests. Similarly, due to their geographical proximity and long-lasting religious and cultural affinities, both Pakistan and Iran share a raft of convergent economic interests and are facing the same security issues and challenges in the region. After the historic Iran nuclear deal, the energy-rich country is widely projected to rapidly rise economically and, therefore, become a commanding military power in the oil-rich Gulf. If Tehran is included in the grand China-Pakistan Economic Corridor (CPEC), this will immensely increase bilateral trade between Pakistan and Iran and enhance security cooperation between the two countries. More importantly, closer Iran-Pak ties will enormously help Pakistan and China to safeguard CPEC from the disruptive and obstructive designs of India along with the US. The article is an attempt to spell out the prospects and benefits of Pak-Iran economic relations.
The crushing economic sanctions imposed by America, some West European countries and the UN Security Council obstructed the needed economic growth of Iran and brought about growing imbalance in trade, sky-rocketing inflation, double-digit unemployment and economic stagflation and stagnation. Therefore, a large number of highly educated and skilled Iranians went to search job opportunities in some western countries. In the same way, crippling military sanctions hindered Iran from modernizing its aviation and defense sectors. This situation has dramatically changed in the post-sanctions period. After circumscribing and limiting its clandestine nuclear programme, the US, the UNSC and the West European countries have continued to continually lift economic sanctions on the Islamic Republic.
As a result of the lifting of sanctions, Iran has been receiving its frozen money and is surrounded by a large number of economic opportunities to revivify its sanctions-hit economy and increase its military footprint in the region. Now, this is the opportune time for oil-rich Tehran and developing Islamabad to cultivate and foster robust economic and defense ties at the earliest. Pakistan is also fast developing on the economic front due to the 51.5 billion dollars investment by China in Islamabad’s rails and roads infrastructure, energy sector and the spread of optical fiber. This rising South Asia nuclear power possesses an economy worth 230 billion dollars and holds the seventh-largest and one of the most professional armies in the world. The indigenous production of sophisticated aircraft such as JF- 17 Thunder, Al-Khalid tanks in collaboration with China and other advanced weaponry have added to the military power and importance of Pakistan’s ever-modernizing defense sector. This is the most favourable time in the history of Pakistan and Iran that they are having potential economic and security vistas leading to a complete win-win partnership between the two.
A Short Historical Overview of Pak-Iranian Relations
After the establishment of Pakistan on the basis of the Two-Nation Theory in 1947, Iran not only became the first state that wholeheartedly extended recognition to Pakistan as an independent country but the Shah of Iran was the first head of state who came on a state visit to Pakistan in March 1950. This visit of the Shah was precipitated by “the May 1949 visit of Pakistan’s Prime Minister Liaquat Ali Khan. Despite simmering Shia-Sunni cleavages, Islamic identity became an important factor in shaping and invigorating Pak-Iranian relations, especially after the fateful Islamic Revolution in Iran in 1979.”i To further boost and solidify their relations aimed at maximizing convergent political, economic and security interests, “Prime Minister Liaquat Ali Khan and the Shah of Iran concluded a treaty of friendship in May 1950.”ii Trade and commerce have always played a pivotal and central role in bringing two sovereign countries together for centuries. Similarly, to boost economic ties to expedite their economic growth and socio-economic prosperity, “both countries granted the Most Favorite Nation (MFN) status to each other for trade purposes; the Shah also offered Iranian oil and gas to Pakistan on generous terms. iii The MFN status tremendously helped Pakistan and Iran in increasing the level of bilateral trade because a significant number of economic barriers such as tariffs and restrictions were eased to the maximum.
Bilateral relations were further cemented when both countries jumped onto the American security bandwagon by joining the Central Treaty Organization (CENTO), originally known as the Baghdad Pact or the Middle East Treaty Organization (METO) which was formed in 1955 by Iran, Iraq, Pakistan, Turkey, and the United Kingdom. According to some noted historians of the region, Pakistan joined this organization due to the insistence of Iran. In his book “The Frontiers of Pakistan,” Iranian scholar Dr. Mujtaba Razvi noted that Pakistan would not have joined CENTO if Iran had not decided to do so. This makes it abundantly clear that Tehran and Islamabad had convergent security objectives in the region, and they were inclined to attain them in collaboration with each other. This trans-regional organization immensely helped Pakistan and Iran foster their security by procuring required defense equipment from the US and some other European countries. For regional connectivity and increase in trade, along with Turkey, they formed the Regional Cooperation for Development (RCD), which later became a larger group known as the Economic Cooperation Organization (ECO). Though this organization has not made significant economic strides due to lack of interest, it has somehow helped these three nations to come closer to each other in terms of exchanging cultural activities and political and diplomatic support whenever needed.
Both the countries took eight years to solidify their friendship into concrete initiatives through their border agreement. The two countries signed this on February 6, 1958, and after two years of negotiations, Tehran and Islamabad were finally able to agree on a common border. iv Alex Vatanka, a senior fellow at the Middle East Institute in Washington, in his book, “Iran and Pakistan: Security, Diplomacy and American Influence”, “For the Shah, Pakistan over the years morphed into a critical buffer zone, a line of defence against not only the Soviets but also the then Soviet-leaning India.”
It is interesting to note that at one point to strengthen the unity between the two nations, the Shah had proposed the idea of a confederation of Iran and Pakistan with a single army and with him as head of the state. v This dream could not come true because Pakistan was a strong and sovereign country having its distinctive political and ideological identity in the world.
Iran extended all-out financial and military assistance to Pakistan whenever the latter badly needed help during wars with belligerent India, especially during the Indo-Pak war in 1965. Malik Muhammad Ashraf, a former diplomat, penned down in The News International that: “The warmth and depth of ties between the two countries can be judged by the fact that during the 1965 war with India, Iran sided with Pakistan.” Iran played an important role in this war, providing Pakistan with nurses, medical supplies and a gift of 5,000 tons of petroleum. Iran also indicated that it was considering an embargo on oil supplies to India for the duration of the fighting.vi After the suspension of United States military aid to Pakistan, Iran was reported to have purchased ninety Sabre jet fighter planes from West Germany, and to have sent them on to Pakistan. vii
Iran again played a vital role in Pakistan’s 1971 conflict with India, this time supplying military equipment as well as diplomatic support against India. The Shah described the Indian attack as aggression and interference in Pakistan’s domestic affairs. viii
The two countries also supported each other in countering and flushing out insurgent movements across the border. When sophisticated arms and ammunitions had been discovered in the Iraqi Embassy in Islamabad, the then government of President Zulfikar Ali Bhutto alleged that these weapons were for Baloch rebels in the province of Balochistan. After dismissing the provincial government, President Bhutto had a rigorous military operation launched in Balochistan in 1973. The 1970s operation in Balochistan was a five-year military conflict that lasted from 1973 to 1978. Once again Iran under Mohammad Reza Pahlavi (1919–1980) came forward to lend a helping hand to Pakistan in rooting out and quelling the unfolding insurgency in Balochistan. “The Iranian government helped quash the insurgency in Balochistan,” wrote Ashraf. Iran, fearing the insurgency might spill over into its own Balochistan Province, offered large-scale support. Aamer Ahmed Khan wrote a piece for the BBC in 2005 saying that “The Iranians provided Pakistan with military hardware (including thirty Huey cobra attack helicopters), intelligence sharing, and $200 million in aid.” ix
Though Mohammad Reza Pahlavi refused to attend the Islamic Conference in Lahore in 1974 because Libyan leader Muammar Gaddafi had been invited to it, Iran played a vital and influential role by facilitating a rapprochement between Pakistan and Afghanistan in 1976.
Bhutto’s tilt towards the Arab world also annoyed the Shah. Bhutto played the Arab card very well. Before the Lahore Islamic Summit in 1974, Pakistan had not received direct financial aid from any Arab country; with a single stroke Bhutto changed that fact and Arab oil money started flowing in. This was the time when the romance between Iran and Pakistan went downhill.
After the Islamic Revolution in Iran and the Russian invasion of Afghanistan in 1979, bilateral relations experienced a downward trajectory but the climate of trust and amicability continued. ‘After the revolution, Ayatollah Khomeini, the supreme leader of Iran, abruptly withdrew his country from CENTO and ended association with the US.’ x Being a religious centric, Pakistan’s military ruler Zia-ul-Haq declared Khomeini a symbol of Islamic resurgence. At that time, to further cement bilateral ties, especially religious bonds, ‘Foreign Minister of Pakistan Agha Shahi undertook a visit to Tehran on March 10, 1979.’xi Pakistan was also one of the few states in the region that refrained from supporting Iraq in the Iran-Iraq War from 1980-1988. Despite enormous pressure from the US and Saudi Arabia to back Iraq, Pakistan even went so far as to provide Iran with financial and operational support. xii Many Stinger missiles shipped to Pakistan for use by Afghan mujahideen were instead sold to Iran, which proved to be a defining factor for Iran in the Tanker war. xiii
After 1989, both states policies in Afghanistan became even more divergent as Pakistan, under Benazir Bhutto, explicitly supported Taliban forces in Afghanistan. xiv At that time, Pakistan was in the throes of an ominous and bloody Shia-Sunni sectarian conflict which resulted in deteriorating the law and order situation in the country. “But the Taliban capture of the city of Mazar-i-Sharif in 1998, killing of a large number of Shias there and the Taliban’s alleged massacre of 11 Iranian diplomats, 35 Iranian truck drivers and an Iranian journalist” xv put a drain on Pak-Iran relations. Iran considered the Taliban to have been receiving all-out assistance from Pakistan, this resulted in a major breach with Iran coming closer to India. “In 1995 Benazir Bhutto paid a lengthy state visit to Iran, which greatly relaxed relations. At a public meeting she spoke highly of Iran and the Iranian society.” xvi
In 1995, Prime Minister Benazir Bhutto paid a state visit to Iran to lay the groundwork for a memorandum on energy, and begin work on an energy security agreement between the two countries. This was followed by Prime Minister Nawaz Sharif’s visit to Tehran for the 8th OIC Summit Conference on 9–11 December 1997. Sharif held talks with President Khatami with a view to improving bilateral relations as well as finding a solution to the Afghan crisis. xvii Chief Executive General Pervez Musharraf paid a two-day visit to Tehran on 8–9 December 1999. He held talks with Iranian President Mohammad Khatam ixviii and with the Iranian Supreme Leader Ali Khamenei about bilateral cooperation to bring peace and stability in Afghanistan.
Pak-Iran Relations after 9\11 Incident
In April 2001, the Secretary of Supreme National Security Council Hassan Rowhani paid a state visit to Pakistan and met Pervez Musharraf and his cabinet. During this visit, Iran and Pakistan agreed to put their differences aside and agree on a broad-based government for Afghanistan. xix During his two-day visit to Islamabad from 29–30 November 2001, Iranian Foreign Minister Kamal Kharazi met with Foreign Minister Abdul Sattar and President Musharraf and both countries vowed to improve their relations and agreed to help establish a broad-based, multi-ethnic government in Afghanistan under U.N. auspices. xx The Iranian president Mohammad Khatami paid a three-day state visit to Pakistan from 23–25 December 2002. It was a high-level delegation, consisting of the Iranian cabinet, members of the Iranian parliament, Iranian Vice-President and President Khatami. Several accords were signed between Iran and Pakistan in this visit. Pakistan’s Prime Minister Zafarullah Jamali paid a state visit in 2003 where he held talks relating to economic cooperation, security of the region, and better bilateral ties between Pakistan and Iran.
In May 2014, the two countries agreed to joint operations against terrorists and drug traffickers in the border regions. xxi On 19 November 2010 Iran’s Supreme Leader Ayatollah Ali Khamenei appealed to Muslims worldwide to back the freedom struggle in Jammu and Kashmir, equating the dispute with the ongoing conflicts of the Greater Middle East region. xxii
On Iran’s nuclear programme and its own relations with Iran, Pakistan adopted a policy of neutrality, and played a subsequent non-belligerent role in easing the tension in the region. In a speech at Harvard University in 2010, Pakistan’s foreign minister Shah Mehmood Qureshi justified Iran’s nuclear program as peaceful and argued that Iran had “no justification” to pursue nuclear weapons, citing the lack of any immediate threat to Iran, and urged Iran to “embrace overtures” from the United States. Qureshi also observed that Iran had signed the Nuclear Non-Proliferation Treaty and should respect the treaty. xxiii
Prime Minister Nawaz Sharif and Chief of Army Staff General Raheel Sharif visited Tehran on 19 June 2016 ─ a day after holding meetings with the Saudi leadership in Riyadh in a bid to defuse tensions between the two countries that soared after the hanging of a Shia cleric by Saudi Arabia. xx This visit worked effectively by easing tension between Iran and Saudi Arabia.
Prospects of Trade between Pakistan and Iran
The economic sanctions, isolation from the international banking system and the loss of oil revenues have severely stunted Iranian economic growth. Iran’s currency, the rial, lost two-thirds of its value against the dollar since sanctions were tightened in 2011. According to the Word Bank, Iran’s GDP was 415.3 billion with estimated 1.5 percent growth in 2014, inflation stood at 23 percent, unemployment was 14.02 percent and the country lost 160 billion in oil revenue since 2012 due to mounting economic sanctions.
However, the nuclear agreement has proved to be of paramount importance economically for sanction-stricken Iran. As Iran re-enters the global economy, its consumer market of 78.5 million people will attract a number of international investments. By some estimates, Iran’s economy is expected to grow by an additional two percentage points to more than 5 percent GDP growth within a year. After an additional 18 months GDP growth could well reach 8 percent. Both Pakistan and Iran should avail this marvelous opportunity and enhance their bilateral trade. The following may be considered as unfolding opportunities for Pakistan and Iran to foster bilateral relations aimed at maximizing their economic objectives.
First, Iran has the fourth largest proven crude oil reserves in the world – estimated at 157.8 billion barrels. It already produces 2.8 million barrels per day. The International Energy Association forecasts that an end to sanctions will allow Iran to ramp up production by an additional 600,000 to 800,000 barrels per day within months, roughly four percent of global output. Moreover, it has 30 million barrels oil ready to be sold direct after the lifting of the sanctions. xxv Since Pakistan is an energy-deficit country and it needs more and more energy resources to fulfil its power requirement, both Iran and Pakistan can conclude an oil pipeline to supply oil to Pakistan. This will help Iran earn needed revenue while Pakistan will be able to obtain a large amount of oil to be utilized for producing electricity in the country. Before that, the IP gas project should be completed; in this regard Pakistan can seek Chinese financial and technical assistance to lay its share of IP portion in due course of time.
Second, Iran possesses 1,187.3 trillion cubic feet gas reserves. At present, it is immersed in finalising a $100 billion oil and gas deal. The lifting of the sanctions would open export avenues for Iran to sell gas at competitive prices to China, Pakistan, India and the European Union. Presently, the EU is looking forward to the successful finalisation of the deal owing to a faltering supply of Russian oil and gas due to the former’s strategic incursion in Ukraine. Moreover, Iran might seek US oil and gas companies in joint ventures to expedite energy exploration. Pakistan should not let India and other developing or developed countries from dominating the gas market of Iran. Islamabad should come forward with commitment and realistic intent to finalize and complete its portion of the IP gas pipeline as soon as possible. Any delay will result in depriving Pakistan of the projected share of gas. If Pakistan continues to exercise delay or reluctance in completing the pipeline, Indian will strive to come forward and dominate the Iranian gas market.
Third, the severe economic sanctions have left Iran with an ageing national airline inadequate in terms of quality and quantity. Iran’s transportation minister announced that the country would need to replace as many as 400 commercial aircraft over the next 10 years; that’s at least $20 billion in potential revenue for foreign aviation companies like Airbus and Boeing. In the post-sanctions period, Iran will be able to purchase the needed airplanes. Though it is clear that Pakistan’s aviation sector is facing a range of issues, it still has this opportunity to modernize its aviation sector by leaps and bounds and conclude some agreements with Iran to either jointly produce airplanes or support Iran in terms of consultancy in the field.
Fourth, Iran lags far behind in terms of technology and innovation. Last year the total estimated technology market in Iran was only $4 billion. The nuclear deal has induced a large number of mobile, computer and software companies to seek out Iranian partners and distributors to open their outlets in Iran. As a result, Iran’s tech market is expected to grow to 16 billion annually. Pakistan can benefit from the tech market of Iran. There is a sizeable number of experts in the field of information technology in Pakistan who are in search for job opportunities. Concluding accords in this sector will not only help Iran expand its market of information technology, it will also help Pakistan in developing its field of technology and providing jobs to its skilled youth.
Lastly, Iran can also take advantage by fostering its economic relations with China. China’s ‘One Belt, One Road’ initiative which envisions a chain of energy, infrastructure and maritime links from East Asia extending to Europe through the Middle East and Central Asia, is strategically important for Iran. Also, Iran’s location at the crossroads between these regions makes its participation in the initiative important for Beijing. An Iranian deputy minister claimed last year that China had already pledged to double its infrastructure investment in Iran to $52 billion. A good deal of that future investment by China may well focus on Iran’s energy sector. Improved Pak-Iran relations will provide Iran with chance to join CPEC. Making Iran part of this grand project will help Pakistan and China in further strengthening the security of the project.
Conclusion
Being developing countries, Pakistan and Iran share a large number of economic, cultural and security interests in the region. After the Iran nuclear deal, Tehran is projected to become a major economic and military power in the region. In this context, Iran needs the assistance and cooperation of Pakistan to expedite its economic growth and military power and vice versa. The need of the hour is that both countries should grab this opportunity with both hands and proceed to improve their economic and defense ties.
End Notes
i https://en.wjkjpe.dla.org/wiki/lran%E2%80%93Pakistan_relations
ii Ibid
iii Ibid
iv Muhammad Amir Rana, ‘Iran and Pakistan’s intertwined history’ Dawn, Jul
24, 2016, accessed on 11 December, 2016
http://www.dawn.com/news/1272879
V http://www.dawn.com/news/1272879
Vii https://defence.pk/threads/pakistan-renews-security-assurance-to-saudi-arabia.438062/page-4
Viii https://en.wikipedia.org/wiki/Iran%E2%80%93Pakistan_relations
ix https://news.bbc.co.uk/2/hi/south_asia/4182151.stm
Xi https://jafriedel.wordpress.com/2013/09/11iran-pakistan-relation/
Xii Ibid
Xiii https://books.google.com.pk/booksand+lran&hl=en&redir_esc=y#v=onepa ge&q&f=true
Xiv Hanif, Muhammad. “Pakistan-Iran relations: Future challenges” Islamabad Policy Research Institute. Muhammad Hanif, IPRI. 29 November 2012
Xv https://en.wikipedia.org/wiki/lran%E2%80%93Pakistan relations
Xvi https://en.wikipedia.org/wiki/lran%E2%80%93Pakistan relations#cite noteBenazir Bhutto in Iran .28Press Release.29-15
Xvii “Pakistan and the World (Chronology: October-December 1997)”. Pakistan Horizon. Pakistan Institute of International Affairs. 51 (1): 73-90. January 1998.
Xviii https://iranian.com/Times/1999/Decb/MahmoudAbad/news.html#93
Xix https://asianstudies.github.io/area-studies/SouthAsia/SAserials/Dawn/2001/apr2801 .html#chie
xx https://en.wikipedia.org/wiki/Iran%E2%80%93pakistan_relations
Xxii http://tribune.com.pk/story/64577/iran-doesnt-need-nuclear-weapons-qureshi/
Xxiii https://tribune.com.pk/story/64577/iran-doesnt-need-nuclear-weapons-qureshi/
Xxiv http://www.dawn.com/news/1233996
Xxv https://www.thenews.com.pk/print/62012-the-iran-nuclear-deal
