Iran and Pakistan back in business

Mar 28, 2016, 3:20 PM EDT
Iranian President Hassan Rouhani.
(Source: arif_shamim/flickr)

Iran and Pakistan have their sights set on massively increasing bilateral trade and infrastructure links. On Saturday, at the conclusion of a two-day summit, the two governments signed a number of agreements, whose capstone is a plan to boost bilateral trade from some $270 million per year now to $5 billion by 2021. Prior to the imposition of tighter Western sanctions against Iran over its nuclear program, bilateral trade between Tehran and Islamabad was notably higher: $1.32 billion in 2008-09.

Since January, when most Western sanctions against Iran were lifted as part of the nuclear deal sealed last summer, Iran has been rebuilding old economic ties and cultivating new ones. "Iran has the capability to help the development of the economic infrastructure of Pakistan including roads, railways, dams, and others," said Iranian President Hassan Rouhani at Saturday’s Pakistan-Iran Business Forum. The two countries also signed a MoU on banking cooperation, which included reintegrating Iran into the Asian Clearing Union (along with Pakistan, India, and Bangladesh).

A top priority is increasing Iran's electricity exports to energy-starved Pakistan, which currently total only about 100MW. (Pakistan regularly experiences 12 hours of power cuts per day, which hamstrings the economy and aggravates the public.) While the sanctions were in place, outstanding Pakistani debt (some $1.5 billion) for past electricity purchases could not be repaid to Iran. But now the path is clear, and furthermore, Iran has already agreed to export 40% more electricity to Pakistan. A larger deal to increase the capacity of electricity exports to 3,000MW is set for conclusion in May, when Pakistan’s water and power minister visits Tehran.

Rouhani also urged Pakistan to finish its side of the Iran-Pakistan gas pipeline, which Islamabad never completed due to the sanctions and international pressure. The pipeline may now come to fruition, although security risks remain.

In all of this, Pakistan's decision to be neutral in the Iranian-Saudi standoff has been vindicated. Although Pakistan is a majority Sunni Muslim nation and has very close ties with Saudi Arabia, it would only hurt itself by downgrading ties with its Shiite-majority neighbor Iran.

If only economic links outweighed sectarian divisions elsewhere in the Islamic world.