Pak-Iran trade in perspective | Pakistan Today

Pak-Iran trade in perspective

The time-honoured and window-seeking allegations of the west towards resource bearing economies, especially in the Middle East, have been the subject of several empathetic discussions. Wars were initiated through use of armed forces on the soils of Afghanistan and Iraq at the behest of covert whims when the west believed that it was sitting on mountains of money; incidentally the amount that will be spent during war on ‘terror’ in Afghanistan up till FY12 (approximately $500b) matches quite brilliantly with the euro debt figures revealed (more than $450b).
Conversely, in the line of bloody wars, Iran has had to suffer a rather subtle treatment for daring to flirt with a nuclear journey, whereby sanctions imposed prohibit development of trade relations, financial market expansion and progress on the petroleum resource aspect. Notwithstanding that the US, EU and UN are aligned in their understanding of these sanctions, Iran continues to export petroleum products, comprising about 90 per cent of the 25 billion euros worth of trade that takes place between Iran and the EU.
Against this backdrop when Pakistan is made an offer of gas, it faces a conundrum in terms of which way to go and whose side to take. During Fy11, Pak-Iran trade amounted to approximately $454 million [EX: $154m; IM: $302m] where as Pak-US trade arrived at about $5.2b [EX: 4.1b; IM: $1.1b]. Thus, the ostensible stakes seem high and the opportunity costs are obvious.
On the other hand, research from the invincible multilaterals indicates that power shortages have caused the economy to lose about two per cent of the GDP (value of domestic output) during the preceding fiscal year, which in dollar terms implies that Pakistani entrepreneurs could make $4.2 billion worth of more output had they received uninterrupted power supply. Currently, about 34 per cent of electricity is produced through gas, so the immediate benefit of the pipeline would amount to about $1.4 billion. Further, the complaints from the textile industry, (comprising about eight per cent of the GDP) link gas shortages with a 45 per cent decline in productivity. By extremely conservative estimates this could amount to about $5-6b during FY11. Additionally, one must not forget that about $2 billion worth of investment has been made by the CNG sector in infrastructure and equipment. This will have to be classified as sunk costs if corrective measures are not undertaken.
Additionally, in a utopian situation where there were no sanctions, Pakistan could, for the first time in history, make in roads into financial sector development of its neighbour, which could guarantee structured and predictable returns over the next century much needed by the choking economy. Such is the power of wishful thinking!
And thus my friend, the time to break free could not be more opportune. While the euro zone stands waist deep in bubble splinters, and the US is ready to swim across seven seas to save its dear friend, Pakistan could very well carve expeditiously a maneuverable space to enter into an energy sharing agreement with its neighbour. The grounds for explanation can not be simpler; the US needs to be convinced that if anybody’s nuclear assets and potential to fuel strategic wars (read: terrorism) needs to be feared, they should be its own. If the entire developed world, India and Pakistan possess nuclear arms, why can’t Iran? And considering the fact that Pakistan is always worrying about safeguarding its nuclear assets, physically and politically, from the US, the same can hold true for its neighbour.
And if it’s not nuclear assets, but lets say human rights abuses, the index is now extremely tired of being endlessly used as a pointer!

The writer is an economic researcher and freelance financial journalist. She can be contacted at [email protected]

Related posts