Spearhead Analysis – 29.01.2016

Iran-Pakistan-China_MapPost sanctions Iran is on the move. It has sparked investor interest and is being keenly watched by the corporate and business world. Iran stands to get billions of dollars from frozen assets and even after boosting foreign exchange reserves and paying dues it will have substantial liquidity. Iran is set to double and possible triple its present 500000 barrels per day oil production and unlike Saudi Arabia oil is not the major factor for its revenues. Iran has already signaled its intent to expand its airline, upgrade its airports and rebuild and build much delayed infrastructure. Iran’s domestic situation is seen as secure and stable and it is moving fast to normalize external relations and link up with international institutions. The US – Iran deal has indicated to the world that Iran is pragmatic and that its leadership places national interest above all other interests. Iran’s potential is fully understood and by now it is clear that Iran will not get involved in Middle East turmoil at the cost of its strategic interests but will also not be pushed around or coerced into doing what it does not want to do.

“–  President Xi Jinping’s visit to the Middle East, the first by a Chinese leader in seven years, saw the signing of billions of dollars worth of agreements with Saudi Arabia and Egypt and a ten-fold expansion of trade with Iran over the next ten years. The significance may go far beyond commerce as Chinese interests align more with Iranian interests than those of Saudi Arabia–.”

China’s policy thrusts in the Middle East are more in line with Iran than Saudi Arabia. There is convergence on views on Syria and the Russia sponsored coalition. China does not see Iran in terms of sectarian projection but is wary of funding from Saudi Arabia that could link with Uighur unrest in its Sinkiang province. China with its vast experience of infrastructure development could help Iran develop its rail, road and ports network especially Chahbahar Port that is in close proximity of Pakistan’s Gwadar Port for which China has a 43 year lease as well as the Chahbahar-Zahidan road link. India has had a long standing memorandum of understanding with Iran for the development of Chabahar Port but has done nothing—this may be Iran’s first experience of India’s bureaucracy. Iran can be a link in China’s ‘one road one belt’ initiative in which Pakistan is a key player with infrastructure projects that could link with Iran.

Prseident Rouhani’s visit to France and Italy has led to several initiatives that can translate into contracts worth billions of dollars. The contract with Airbus is worth over 118 billion dollars. There is also the Peugeot car collaboration and contracts to France for airports development and up gradation and future joint ventures with Total. In Italy too there has been understanding over projects worth millions of pounds. This is just the beginning of Iran’s quest to realize its potential. No doubt this visit will be followed by other similar visits and there is also no doubt that investors will be making a beeline for Iran as opportunities unfold.

Media reports of contacts between Pakistan’s Baluchistan province and Iran’s Sistan-Baluchistan province are encouraging as is the prospect of trade going up to as much as 10 billion dollars. There are talks about road and rail links between Iran’s Chahbahar Port and Pakistan’s Gwadar Port and a ferry service from Karachi to Gwadar to Chahbahar. Markets on either side of the land border are being discussed and these can do away with cross border smuggling activity. Free trade zones being planned at Chahbahar and Gwadar can also be linked. These are good beginnings but much more can be done. Pakistan must act to exploit the opportunities that Iran offers for agriculture produce, urea production plants and petro chemical facilities as well as infra structure development projects. The Iran–Pakistan pipeline project must be pushed and revived. Power projects need to be inked. The automotive industry should evaluate Iranian requirements and possible joint ventures.

There is an urgent need to establish and institutionalize business, political, diplomatic and defense related contacts so that steady progress is made and this process can be jump started by high level visits. The Pakistan-Iran relationship should move to the strategic level as soon as possible and our bilateral relations with any other state should not be an obstacle.

(Spearhead Analyses are collaborative efforts and not attributable to a single individual)