ISLAMABAD: Islamabad and Tehran are discussing the setting up of a branch of an Iranian bank in Pakistan.

The opening of a branch of Bank Melli, Iran’s largest commercial bank, in Pakistan is on the agenda of the two-day 18th session of Pakistan-Iran Joint Economic Commission (JEC) that began here on Wednesday.

The bank, it may be mentioned, has been on the UN watch-list since 2008.

The commission is discussing cooperation between the two countries in the fields of industry, banking, oil and gas, communications, manpower, agriculture, education, culture and science and technology.

“We should provide better facilities to our people and we are duty-bound to cooperate with each other,” Iranian Foreign Minister Ali Akbar Salehi said at the opening session of the JEC. He expressed the hope that the meeting would prove a landmark in enhancing economic cooperation between the two countries.

Finance Minister Dr Abdul Hafeez Shaikh, who led the Pakistani side, noted in his inaugural remarks that warm bilateral relations provided a platform for enhancing economic cooperation.

The discussions assume significance because they are taking place against the backdrop of the UN Security Council Resolution 1929 adopted last year, which prohibits member states from “opening of Iranian banks in their territory … if there is reason to suspect the activities could contribute to sensitive proliferation activities in Iran”.

The Security Council had put Bank Melli, which has 18 overseas branches in 11 countries, on vigilance in 2008 for allegedly supporting Iran’s nuclear and ballistic missile programmes. However, the bank has not been blacklisted by the UN and has lately opened new branches in Iraq and Azerbaijan.

Iran has been aggressively trying to expand the international network of its banks to circumvent the impact of an array of international sanctions against its financial institutions.

Although it is unclear if the talks on establishment of the Bank Melli’s branch will make any headway at the JEC session, the issue is certain to raise eyebrows in the West, particularly in Washington.

Islamabad’s primary consideration for the proposal relates to its declining trade volume with Tehran. The bilateral trade had been on the decline since 2008, when the UN tightened its squeeze on Iran. It went down from $1,170 million in 2009-10 to a paltry $586 million during July-March 2011.

The drop in trade was specially referred to by both Mr Salehi and Dr Shaikh in their speeches at the JEC.

While there are a number of reasons for the decline, Pakistani officials say banking restrictions imposed by the UN, the US and the EU on Iran’s financial institutions affected Pakistani exports as Pakistani banks no longer accept letters of credit opened by Iranian banks.

Because of the sanctions much of the financial transactions between Iran and Pakistan now take place through the informal ‘havala’ system instead of the still available legal channel of Asian Clearing Union.

Additionally, the two countries are considering Iranian help for construction of Quetta-Taftan railway track and harmonisation of customs regulations for enhancing trade.

Iran is also seeking passage of its goods to India through Pakistani territory, which is potentially another intricate matter.

Gas pipeline: The two sides will also review the progress on a pipeline to provide Iranian gas to Pakistan.

Physical work on the Pakistan section is yet to start, but surveys and planning for the project have already been initiated. The pipeline, which is tentatively scheduled to be completed by 2014, would be used to import 750 million cubic feet of natural gas per day from Iran.

Resisting Western pressure, Pakistan signed a gas sale-purchase agreement with Iran in June 2009 in Istanbul.

Talking to Dawn, Minister for Petroleum and Natural Resources Dr Asim Hussain expressed satisfaction over the pace of work on the pipeline and said the law and order situation in Balochistan would not have any serious impact on the project.

“We are in a position to finalise the project by the end of next year, but there are certain technical issues relating to the sale of gas, which need to be sorted out,” he said.

Dr Hussain said the imported gas was planned to be utilised for power generation and industrial use and it would spare locally-produced gas for domestic consumption.

Amin Ahmed adds: Pakistan and Iran have decided to conclude an agreement for promoting cooperation in trading of agricultural products.

The understanding was reached at the fourth meeting of Pakistan-Iran Joint Working Group on Agricultural Cooperation held here on Wednesday.

The meeting finalised matters relating to trade of agricultural products, implementation of plant quarantine agreement, establishment of required plant quarantine offices, plant protection and other areas of interest in the fields of agriculture and livestock.

The ministry of science and technology being the administrative ministry of Pakistan Agriculture and Research Council hosted the meeting.