Pakistan claims to be eagerly waiting for tangible progress in, and to benefit from, the process kick-started by the landmark deal in Vienna to lift sanctions and reintegrate Iran into the global economy.

It would revive the crucial system of financial settlements through banking channels to facilitate foreign trade and investment as soon as it becomes viable.

Pakistan has also been looking at widening and deepening the scope of the 2006 preferential trade agreement with the long-suppressed economy that is set to bounce back.

Experts have ruled out the possibility of sourcing oil supplies from oil-rich Iran because of long-term arrangements with suppliers in Saudi Arabia and Kuwait and the technical limitations of oil processing units in Pakistan. However, they say the country can serve as a dependable and cheaper source of LNG supply.

And while there was some discussion on the potentials of Pakistan-Iran trade and investment in the relevant circles, the kind of excitement reported in business quarters around the world was missing among their Pakistani peers.

An analyst, barred by his employers to take a public position on what they consider controversial matters with political underpinnings, blamed the lack of interest on the myopic mindset and petty politics.

“Saudi Arabian discomfort with the deal is not hidden. The Sharif brothers are too intimate with the Saudi hierarchy to afford a display of enthusiasm,” he said, hinting at the period of the PML-N leadership’s exile when they were hosted by the Saudi government.

“Besides, big Pakistani businesses are euro-centric and the flock follows the leader,” he added, holding the local business community partially responsible for the country’s below-potential trade within the region.

Pakistan’s balance of trade with Iran is negative. The total volume was a meagre $216m in FY2014-15. Our exports were $52m and imports from Iran were $164m. Pakistan exports primary commodities like grains, fruits and vegetables and imports chemicals and tiles etc.

The suspension of banking transactions is considered to be the key factor for the low level of trade. However, the private sector also blamed the government’s failure to evolve systems and secure exemptions managed by other regional economies to trade in food items and drugs with Iran. Some felt that imports from Pakistan were being actively discouraged by both tariff and non-tariff barriers.

Miftah Ismail, chairman of the Board of Investment and an active member of the ruling party’s economic team, dispelled the perception that the government was dragging its feet on normalising economic ties with Iran.

“We are very excited at the recent developments vis a vis Iran. Regional economic integration for growth and development is a cornerstone of the PML-N government’s economic policy guidelines. We are all set to complete our commitment to lay an 80km pipeline on our side of the border immediately by floating international tenders for financing the project,” he said over telephone from Islamabad.

“The constructed view that the Nawaz team is reluctant is wrong. In economic diplomacy, national self-interest is decisive. If you remember, Pakistan did refuse to put boots on the ground in Yemen at Saudi Arabia’s behest. It is up to the Middle Eastern nations to sort out their issues. We would like to balance our relationship with all brotherly nations on the principle of expanding mutual interests,” he added.

He added that the government had written to the State Bank to work with its counterpart in Iran to resolve issues regarding financial settlements. “The SBP will be in a better position to report on the progress on this front.” Atif Bajwa, CEO of Bank Alfalah and president of the Overseas Investors Chamber of Commerce and Industry, confirmed to this scribe that the issue has not been discussed formally at any forum with bankers.

“The SBP is carefully watching the developments related to [the withdrawal of] sanctions on Iran. As soon as these sanctions are lifted, the SBP will take appropriate actions to facilitate the normalisation of transactions through banking channels,” the SBP responded in a written reply to request for comment.

Commerce Minister Khurram Dastagir was on holiday. Fasih Ahmed, deputy secretary of the commerce ministry said “We are serious. A high-powered Iranian delegation will soon be in Pakistan to open a fresh round of talks on the preferential trade agreement and look at ways to do away with non-tariff barriers, reduce duties and identify possible cross-border investment opportunities”.

He added that the ground work has already been done. “To check the standards of exportable commodities such as rice and mangoes, Iranian teams have already visited Pakistan. Out of 15 hot water treatment plants in Islamabad, Karachi, Lahore and Faisalabad, nine were cleared by Iranian experts last week,” the official spokesperson told Dawn over phone.

Rubina Ather, another commerce ministry officer who had visited Iran three months back, said both sides are looking at a five-year plan to provide a solid framework for closer economic ties. She added that the Iranians are interested in investing in food processing units here.

Arif Azeem, federal industries secretary, said the process of the lifting of sanctions will move slowly and it will be phased.

“We consider it a positive development for Pakistan, and the ministry has created a committee headed by Tariq Eijaz Chaudhry, CEO of the Engineering Development Board, to develop recommendations in this regard. The committee has just been constituted and is looking at the issue. We will share the recommendations as soon as they are finalised”, he said.

But business leader Majyd Aziz lamented the government’s tunnel approach. He felt that Pakistani refineries should modernise if it is necessary to refine Iranian oil. “What if tomorrow Saudi Arabia refuses the facility? It is wise not to put all your eggs in one basket.”

Published in Dawn, Economic & Business, July 27th, 2015

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