Pakistani Prime Minister Nawaz Sharif (R-2) welcomes Iran's President Hassan Rouhani (L) at PAF Base Nur Khan following Iran's President's arrival for two-day official visit in Islamabad, Pakistan on March 25, 2016
The Silk Road Economic Belt and the 21st Century Maritime Silk Road initiatives were raised by Chinese President Xi Jinping during his visits to Central Asia and Southeast Asia in September and October 2013. The Chinese led ‘Silk Road Economic Belt’, the ‘Maritime Silk Route’ (often consolidated as the One Belt One Road – OBOR) and the ‘Vision for 21st Century Eurasian Connectivity’ will connect markets of Asia, Europe and beyond. The Silk Road is an important part of the Chinese history and civilization. OBOR initiative is based on the idea of reviving the old traditional Silk Road and re-building modern economic collaboration. The innovative concept of the OBOR aims at integrating the Asian and Central European continent, realize the connectivity of roads, trade, finance and people-to-people contact, so as to jointly build a platform for cooperation and development. Asian Infrastructure Investment Bank (AIIB) has been established parallel to Belt and Road initiative. AIIB has a pivotal role in supplying the funds in promoting the connectivity and integration. In advancing the Belt and Road Initiative, China’s strategy is to strengthen cross border connectivity and regional integration with the goal of creating strategic channels, trade and industrial hubs, and cultural exchanges.
The China-Pakistan Economic Corridor (CPEC) is also a part of OBOR. The corridor would link Gwadar to China’s Western city of Kashgar. China’s access to the markets of South Asia, Central Asia and Middle East would be enhanced. As CPEC is now (between China and Pakistan) is in implementation phase and is out of uncertainties, at this stage extension of invitation to Kazakhstan is a very bold move. I think motivation behind Pakistan in seeking more patrons for its CPEC is not the fears that trade and transit potential between Pakistan and China is not big enough to make Gwadar a world class shipping hub but the Chinese concept of regional integration.
Although, the economic ties between Pakistan and Iran date back to centuries, the progress achieved in this respect remain marginal because of different political and economic reasons. Both the countries have the potential to cater for the demands of each other and trade in the products which are being imported from rest of the world. In the financial year 2013 Pakistan’s export to Iran was US$ 69 million whereas Iran’s import from rest of the world stood US$ 54 billion leaving Pakistan’s share to mere 0.2% of the total imports. Furthermore, Pak-Iran trade faced a serious decline of around 26% from FY-2012 to FY-2013.
In the backdrop of possible lifting of sanctions from Iran by the international community Pakistan and Iran may well cooperate on the new China-Pakistan Economic Corridor (CPEC) project worth about $48 billion as it would link up Iran to China.. The CPEC was a significant development in Pakistan. Cameron Munter, former US Ambassador to Pakistan said on August 29, 2015 that the CPEC would increase Pakistan’s importance in the region and not just it but the entire region would gain from the corridor. Pakistan has invited Iran into trilateral China-Pakistan-Iran relationship with the hope to improve inter-regional trade and waiting for Iran decision. Iran's decision to join CPEC would help to improve everyday living across the Sistan-Balochistan region and could also be facilitating trade between Islamabad, Beijing, and Tehran. It also provides an economical gateway to the Gulf region for other regional countries like Russia and even India.
The lifting of economic sanctions from Iran provides trade opportunities for regional countries such as Pakistan, Afghanistan, China, Russia, and Central Asian Countries particularly, Tajikistan. The trade activity will generate billions of dollars not only for oil rich Iran but also for the countries having close economic relations with Iran.
On September 2, 2015 it was reported that Iran had agreed to consider linking with the CPEC in an effort to strengthen border markets and upgrade road and railway networks. During a meeting of the Pak-Iran Joint Working Group and Technical Committee on Trade, in the August 2015, the two countries had discussed trade and investment-related issues and how to frame a five-year strategic plan to enhance bilateral trade. On diplomatic front, Pakistan has already started seen the positive effects, for example; Pakistan and Saudi Arabia have historically been close allies, but following China's financial pledge, the country chose to remain neutral regarding Saudi Arabia's involvement in the Yemen conflict. Add the fact that Pakistan is coming out of diplomatic isolation as China's money is turnout be a game changer.
Iranian President, Dr. Hassan Rouhani’s visit to Pakistan from 25-26 March was a welcome sign that the leaders of the two countries are determined to provide a boost to Pakistan-Iran cooperation in political, economic, commercial and cultural fields, improve border security, join hands in overcoming extremism and terrorism, make an effort to coordinate their Afghanistan policies, and generally strengthen Pakistan-Iran friendship. The visit took place approximately three years after Hassan Rouhani’s election as the President of Iran in 2013. Meanwhile, Prime Minister Nawaz Sharif had visited Tehran twice, in May 2014 and earlier this year in January. During his visit, President Hassan Rouhani held talks with Prime Minister Nawaz Sharif, President Mamnoon Hussain, and General Raheel Sharif besides addressing a meeting of the Pakistan-Iran Joint Business Forum and a joint news conference with the Prime Minister in Islamabad.
The completion and operationalization of Pakistan-Iran gas pipeline would be the most important step that the two countries can take for the development of their economic ties. Hassan Rouhani pointed out that the pipeline was almost complete on the Iranian side. It is now for the government of Pakistan to fulfill its part of the deal so that the pipeline can be operationalized as soon as possible, thus, going a long way towards meeting our fast growing requirements for natural gas. We should go even further and link the Iran-Pakistan gas pipeline with the China-Pakistan Economic Corridor (CPEC) projects, which might facilitate the export of the Iranian gas to China through Pakistan and make Pakistan the hub of the regional trade and energy corridors. Pakistan can also import electricity from Iran to overcome its power shortage especially in Balochistan. Hassan Rouhani offered to export up to 3000 mw of electricity to Pakistan which is already importing about 100 mw of electricity from Iran for meeting the requirements of its border areas.
Interestingly, Pakistan offers geographical corridor between China and Iran. Therefore, Pakistan is in a position to facilitate the trade and economic activity by providing a safe land route to China and Iran. The China Pakistan Economic Corridor (CPEC) project has become more vital after latest trade accords between Iran and China. These are new opportunities of trade, and industrial growth for Pakistan. Iran’s Ambassador to Pakistan Mehdi Honardoost said the Islamic Republic of Iran is prepared to become part of China-Pakistan Economic Corridor (CPEC), an ambitious investment plan linking western China to the Arabian Sea. The Iranian ambassador described Tehran-Islamabad relations as brotherly and age-old, saying, “Iran is a time tested friend of Pakistan." He also said that the recent visit by Iranian President Hassan Rouhani to Islamabad was an “important milestone” in the ties of the two nations. For Pakistan, involving Iran in its lead project would be a good policy.
Iranian President Hassan Rouhani in a meeting with Prime Minister Nawaz Sharif on the sidelines of the UNGA on Wednesday expressed a desire to be part of the China-Pakistan Economic Corridor (CPEC) as both leaders expressed satisfaction over the positive trajectory in Pak-Iran bilateral ties. The proposed Iran-Pakistan pipeline will then run from Asaluyeh in Iran to the Pakistani port of Gwadar (built by China), which is the “nerve center” of the China-Pakistan Economic Corridor, and from there onward to Nawabshah in Sindh to the north of Karachi. In reality, though, we are just about to realize that the Iran-Pakistan gas pipeline is easily extendable to China, since the CPEC connects Gwadar and Xinjiang through not only road and rail links but also multiple pipelines. Pakistan is about to become the transit country for an Iranian mega gas pipeline leading to China. It will be the shortest route connecting China with Iran’s fabulous gas fields.
In fact, the inclusion of Iran would be a win-win situation for the three countries. Pakistan is currently faced with power and gas shortages and it can overcome them by importing gas from neighboring Iran by going ahead with the pipeline project. Similarly, this pipeline then can be extended up to the big Chinese market to fulfill its enormous energy requirements. Recently Iran and China have also signed several agreements for bolstering their trade to $600b mark, thus the western route of the CPEC would provide an easy way to Iranian products to reach China. We understand that those who up till now are throwing obstacles in the way of CPEC would one day realize the significance of this project and join it for enhanced trade with regional countries.
Saadat Hassan, a PhD candidate at Quaid-i-Azam University, is the expert on South Asia affairs. Contact him via firstname.lastname@example.org
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