The lifting of the economic sanctions against Iran following its historic nuclear deal with the P5+1 on 14 July 2015 may prove the catalyst in the rise of the country as a regional economic powerhouse. It is buoyed by the prospects of a new era of growth and development. Nearly 10% of the total global oil reserves make Iran considerably wealthy in terms of global oil resources.[1] There seems to be a rush of foreign investors to Iran in search of business ventures which the country desperately needs.

The new situation has also brightened the prospects of the lingering Iran-Pakistan Gas Pipeline (IP). Work on the Iranian end was completed in July 2011, whereas Pakistan’s portion is to be completed by 2018. It is worth recalling that Hillary Clinton as former Secretary of State, too, had warned Pakistan of consequences if it went ahead with the construction of the pipeline. But, with the nuclear deal signed, this obstruction seems to be over and Pakistan now needs to show its resolve and complete this ambitious project that has been in limbo since the 1990s. Pakistan’s Minister for Petroleum and Natural Resources, Shahid Khakan Abbasi, expressed his relief too. According to him, the July 2015 US-Iran nuclear deal, Joint Comprehensive Plan of Action (JCPOA), opened the way for Pakistan to proceed on the project. Sanctions on Iran were a major hurdle in commencing the work on project, but now the work will be started within six months and will be completed by December 2017.[2] With the CPEC in full swing this would be the most opportune time to invite Iran as an important stakeholder in the mega project.

Iran-Pakistan relations are rooted in history, primarily because of geographical, religious and cultural proximity. Shia Muslims make up to 20 percent of the total population of Pakistan, the second largest Shi’ite population in the world after Iran. Another factor that connects the two countries are the Baloch that live on either side of the 909 km border.

Chance for Iran to Emerge from Isolation

Pre-revolution era Iran was the blue-eyed boy of the west and provided them with the counter-balance to the Arab nations. The post-revolution Iran, under Imam Khomeini, fell from grace and was hit by severe economic sanctions that curtailed its economic growth to a labored crawl. However, if recent developments in the Middle East are anything to go by, the west feels that Iran is a much potent threat to the ISIS/Daesh menace in the region than their Arab counterparts. This in turn has effected a shift in the region which may see Iran emerge as another power center in the Middle East. It is highly unlikely that Iran would squander this opportunity to strengthen its economy and would like to build on it further be it with its neighbours, the region or the west. To achieve this, Iran needs to form solid economic partnerships in the east vis-à-vis Pakistan and China while it continues to rebuild its trust with the west and vice versa.

Pakistan’s Energy Woes

Pakistan is an energy-starved country with power outages being reported to the tune of 10 to 12 hours per day and, as a result, the manufacturing and textile industries of Pakistan have taken a damaging blow. The US-imposed sanctions on Iran, along with Pakistan’s energy crisis, have played spoil sport causing the trade numbers to fall far below the desired threshold. Take for example the drop in trade between the two nations from $1.32 billion in 2008-09 to $432 million in 2010-11.[3] Pakistan’s trade figures since the drop are illustrated in the table below which clearly indicates a continuing decline in Pakistan’s exports to Iran. Both sides need to understand that there is a lot to be gained by encouraging an economic exchange that compliments each side in reaching their full potential.

^{Source: Ministry of Commerce, Pakistan}

In the current scenario, payments for large trade to and from Pakistan will now be quite feasible as Iran has ample cash in the form of Greenbacks and foreign exchange resources from its current forex earnings as well the unfreezing of its more than $100 billion funds which the US and Western banks had kept frozen during the prolonged sanctions. A spokesman of the State Bank of Pakistan said, “We are just waiting for a signal from the Iranian Central Bank, and the commercial banks, to have straightened up all the requirements to transfer export funds to Pakistan,” he further added that “The banking channels in Iran have to be fully streamlined to avoid any problems, which Pakistani exporters had faced in the past.”[4]

The latest expression of interest for cooperation came from the Iranian President Hassan Rouhani himself. In a meeting with Pakistan’s Prime Minister Nawaz Sharif on the sidelines of the 71st UNGA session, Rouhani expressed his country’s desire to join CPEC and also commended Pakistan’s vision on regional trade.

“We consider Pakistan’s economic development as our development,” the President was quoted as saying. “There is a need for defence cooperation between Iran and Pakistan as there is a history of defence cooperation between the two countries.”[5] Leaders of both nations are aware of the potential that this partnership promises and the completion of the Iran-Pakistan gas pipeline will be the first milestone towards future economic, strategic and defence collaborations.

China’s Quest for Energy

A renewed Pakistan-Iran trade cooperation can tie into China’s quest for alternative routes to import oil to shoulder its economic expansion. And if Iran joins CPEC, China can double down on its access to the Iranian oil. Moreover, the decades-old dream of the Iran-Pakistan gas pipeline can now be fully realized. Once the Pakistani portion of the pipeline is complete and operational, both countries should seriously consider extending the pipeline northwards to China. The Iran-Pakistan-China (IPC) gas pipeline would greatly benefit all the concerned parties, be it the mammoth energy requirements of Pakistan and China or Iranian desire for accessing the eastern parts of the region to market its oil and gas.

China’s vision of reviving the Silk Road will entail benefits for the entire region and it is about time that Pakistan, Iran and China start capitalizing on the new opportunities in the era that is being shaped by geo-economic interests. The linkage of Gwadar and the Iranian port of Chabahar, instead of competing with each other, could and should serve as connectors for all the three countries. If they both complement each other, it could bolster regional trade for decades to come.

“The philosophers have only interpreted the world, in various ways. The point, however, is to change it,” Karl Marx had said in his Eleven Theses on Feuerbach. It could play well in the favour of the three nations if they be the instruments of change in the region rather than being the mere interpretations of the status quo.

Pakistan, Iran and China have the opportunity to bring about this change in the regional trade and cooperation dynamics. The challenge – at least for Pakistan and China – will be how to include India in the new scenario. With India’s decision to seal all of its borders with Pakistan, expecting India’s cooperation in the aftermath of the Uri attacks at least for the time being does not seem like a possibility. The hope though needs to be kept alive at all costs to even start dreaming about a peaceful and prosperous Pakistan and by extension the region at large.

The author Mohsin Durrani is a Research Fellow at the Center for Research and Security Studies (CRSS).

[1] http://www.worldatlas.com/articles/the-world-s-largest-oil-reserves-by-country.html

[2] http://dunyanews.tv/en/SpecialReport/321360-Prospects-brighten-for-IranPakistan-Gas-Pipeline-

[3] http://www.presstv.com/Detail/2016/06/12/470044/Iran-Pakistan-gas-project

[4] http://www.brecorder.com/top-news/pakistan/278725-lifting-of-sanctions-to-raise-pakistan-iran-trade.html

[5] http://tribune.com.pk/story/1186433/iran-wishes-part-cpec-rouhani/