Spearhead Analysis – 27.03.2019
By Hira A. Shafi
Senior Research Analyst, Spearhead Research
Pakistan- Iran ties witnessed a glitch when a suicide attack led to the killings of 27 Islamic Revolutionary Guard Corps personnel -on 13th February at Zahedan-Khash road in Iran. Reportedly, Jaish-e Adl claimed responsibility for the act. The gruesome attack prompted a quick blame game as the dominant cause perceived by Iran was alleged cross border movement from the Pakistan side of Baluchistan. Jaish e Adl has operated on both sides of the border in the past and is banned in Pakistan.
The next day came the Pulwama incident in Indian Occupied Kashmir by a local Kashmiri youth and India immediately blamed Pakistan without even a cursory investigation. India the proceeded to whip up a frenzy using fake media. On 16th February, Iran’s Deputy Foreign Minister Abbas Araghchi met with India’s External Affairs Minister Sushma Swaraj and both reportedly agreed on close cooperation to combat terrorism in the region. The significance of the meeting was that both Iran and India had suffered violence and both had chosen to blame Pakistan and that the meeting was at India’s request.
Also significant is the fact that these events took place on the eve of Prince Muhammad bin Salman’s visit to Pakistan. India has developed Iran’s Chabahar Port and infrastructure to connect it to the Central Asian States (CARS) through Afghanistan and seeks to promote regional connectivity sans Pakistan.
Iranian-Indian ties have gained significance owing to India’s interest in the development of Chabahar port in Iran and due to India’s growing energy needs. Pakistan has dubbed Chabahar a sister port to Gwadar. Gwadar is the southern terminus of the China Pakistan Economic Corridor (CPEC) part of China’s One Belt One Road (OBOR) vision. India opposes CPEC but Iran stands to gain from it and has good relations with China. Earlier the Indian spy Kulbushan Yadev was captured by Pakistan and admitted to operating from Iran to undermine Baluchistan.
Reportedly, the US sanctions against Iran along with certain differences between India and Iran on the terms of the project have impeded progress somewhat. However, in November 2018, the Trump administration exempted Chabahar port from the sanctions— this managed to resuscitation of the project. Despite the exemptions, the US sanctions have had an adverse impact on Iran’s oil exports, shipping and banks. Reportedly, Iran’s oil exports have dropped by nearly 1 million barrels a day, slashing its main source of revenue. More than a hundred big international oil companies, major banks and oil exporters have reportedly pulled operations out of Iran. The sanctions have also spooked several international businesses- which places the Chabahar related developments in difficulty. As an attempt to further diversify its energy options, Indian Oil Corp., recently announced the signing of an annual contract for the purchase of U.S. crude under which it will import three million tons of oil worth about $1.5 billion in the fiscal year beginning April 2019. Without naming the supplier, the company said in a statement that it was the first time that a government oil company has finalized an annual contract for the import of U.S.-origin crude oil.
Saudi Pivot to Asia:
In the wake of the re-imposition of sanctions on Iran, Saudi Arabia has quickly moved in to fill in the gap— Riyadh has boosted its oil production to ensure stable energy supplies and capture a bigger share of the market. Whereas, Iran, is said to be reverting to decade-old prices to retain its foothold in Asian markets and compete with Saudi oil and maintain trade.
In line with the Kingdom’s economic vision- the Saudi Crown Prince visited three major energy hungry hubs- Islamabad, New Delhi and Beijing- in February 2019. Saudi Arabia announced its plans to invest in refineries in Gwadar. Gwadar will provide access to mainland China in just seven days and is poised to become a main base station for Saudi Arabia, the Middle East and Africa.
At the same time, Saudi Arabia is also expected to invest $100 billion in projects in India- in the areas of energy, refining, petrochemicals, infrastructure, agriculture, minerals and mining. MBS’s recent visit to India also paved the way for prospects of deepening defense and intelligence collaboration between the two states.
According to Saudi Gazette : “ Crown Prince’s successful visit to Pakistan and India, both of which are having exacerbated tensions over Kashmir, is a new proof that the Kingdom’s efficient policy can contain tensions between sisterly and friendly countries that share deep-rooted and historical relations with the Kingdom. Both prime ministers in Pakistan and India broke the reception protocols and welcomed the Crown Prince at the airport. The Kingdom’s efficient policy has manifested itself in China, the last country visited by the Crown Prince during his tour. Riyadh and Beijing share profound relations; Add to that, China is a permanent member of the United Nations’ Security Council and together with the Kingdom have unwavering commitment to the policy of non-interference in domestic affairs of others.”
The CARs integration and India:
The recent past has witnessed a deepening of Indian engagement with the Central Asian states. India’s main imperatives in the CAR the regions are the natural resources- – that are proving to be even more essential due to the unrest across Middle East, rising oil prices and now the sanctions on Iran. India also aspires to enhance its connectivity and trade with the CAR and beyond. To that end, India has also deepened its engagement in the construction of the North South Trade and Transport Corridor (NSTC) – that aims to connect India’s Mumbai port with Russia. The Central Asian States and Iran are considered as major components of the NSTC. India sees the NSTC as an alternative to CPEC.
The US- China factor:
There is a perception that the various US and Indian supported connectivity projects in the Central Asian region are meant to balance the OBOR. However, the Central Asian states need the support of the U.S. to build power networks, as well as the support of China countries to improve other important infrastructure.
The CAS (Central Asian States) also have close ties with Russia. China, Russia, Turkey and Iran are being seen as a possible alliance against the US, Saudi Arabia, UAE, India and Australia. Indi has developed close ties with the US and has been drawn into the “Indo-Pacific region” but it has a long standing relationship with Russia and a growing trade relationship with China.
India appears to be carving out two roadmaps simultaneously: one entails establishing a link from Iran, Afghanistan, the Central Asian states to Russia- this would open up venues for Indian energy demands and also boost Indian trade. However, owing to the US sanctions on Iran, and contentions between Iran and some Middle Eastern states; the other major alternate for India- under the patronage of the US- is to deepen its footprint in Afghanistan, CAR and enhance relations with some Middle Eastern states. In the Asian framework- Saudi Arabia is looking to diversify its economic venues and fill in the gaps created due to sanctions on Iran. Presently, Iranian economy appears to be in tight spot. After a slight glitch in ties, Iran and Pakistan are reportedly working to address common issues such as border fencing- there is also a need for both countries to explore options for enhancing economic activity- keeping CPEC as an integral link. The tensions between Pakistan and India, and the aggressive Indian postures continue to place big ticket projects such as TAPI in jeopardy thereby undermining overall regional connectivity. As the US is considering a lessening of its military footprint in Afghanistan, it is essential for the regional powers to engage in serious dialogue on increasing interdependence and promote mutual growth. There is also a perception that a reduced US military footprint does not translate to a US exit from the region- the overall development of the Eurasian landmass is perhaps not a feasible ability for a specific power to undertake. It is essential for major powers to cooperate on the development and reconstruction efforts of the array of states- while ensuring that indigenous socio-political and economic activity genuinely flourishes.
Pakistan is well placed to influence events in Afghanistan and develop trade ties with the CAS. Pakistan has a strategic relationship with China and a growing relationship with Russia. Pakistan needs to develop and nurture ties with Iran.