PNN – Completing the peace pipeline and improving economic relations between Iran and Pakistan, in addition to increasing the country’s foreign exchange earnings, will provide the conditions for the failure of the American policy of excluding Iran from the oil and gas market. Also, Iran can use this country as a bridge to reach East Asian markets.
The President of Iran visited Pakistan at the head of a high-ranking political-economic delegation. This three-day trip was carried out with the focus of developing and strengthening economic and commercial relations, bilateral talks and regional consultations. A trip that is in line with the approach of the 13th government, which means interaction and cooperation with neighbors; In fact, the implementation of the mentioned policy, in addition to creating stability and security, realizes new paths for economic, cultural and political cooperation.
In this trip, Seyed Ibrahim Raisi recalled the agreements made between the two countries to expand relations at different levels and aim to reach the volume of trade exchanges to 10 billion dollars in the first step.
But why is the president’s visit to Pakistan and increasing political and economic relations between the two countries important?
In this regard, Iran’s eastern neighbor should be carefully analyzed. As a developing country, Pakistan has suffered from decades of internal political strife, low levels of foreign investment, and a costly and ongoing confrontation with its neighbor India.
Due to the foreign aid provided by the International Monetary Fund, Pakistan’s access to the world markets has been strengthened since the beginning of the 21st century. Also, the reform of the country’s economic policies, such as the reforms in the energy sector, has led to the improvement of Pakistan’s macroeconomic indicators. On the other hand, the measures taken have caused the reliable economic centers to declare the outlook of Pakistan’s economy positive and its eastern neighbor Iran to be the sixth largest economy in the world in 2075.
Although this prediction is very ambitious, it is not far from expected due to the average economic growth of 4% in the years 2012 to 2022 and the average inflation rate of 8% during the said period; On the other hand, according to the statistics of the World Bank, in 2022, Pakistan’s per capita gross domestic product (GDP) was equal to 1696 dollars. Also, its gross domestic product is 375 billion dollars, the unemployment rate is 6.4% and the inflation rate is 19.8%, as well as the total debt of the government of Pakistan is 274 billion dollars (equivalent to 73% of the country’s gross domestic product).
Pakistan, the key to the economic corridor between Iran and China
Due to the ambitious plans of China and the more effective presence of this country in the world economy, plans have been defined to improve the transit of goods by this country; One of these plans is known as the Belt and Road Initiative (BRI); A plan that will be accompanied by an investment of one thousand billion dollars of the world’s second economy.
In recent years, the discussion of abandoning the China-Iran road corridors and the international transit plans of Pakistan and Gwadar port have been mentioned as another corridor; In fact, instead of Chabahar port or other ports of the country in the eastern part of Iran, the ports of “Jabal Ali” and “Fujira” in the south, and the port of “Umm al-Qasr” in Iraq in the west of the country are considered as alternative destinations for Iran. However, each of the countries involved in this route are trying to make their desired corridor more active.
Pakistan’s urgent need for gas is a great opportunity for Iran
In the 1980s, Iran proposed the Iran-Pakistan-India gas pipeline, which was known as the “Peace Line”, with the aim of developing neighborly relations. However, in practice, this pipeline has been thwarted by the Pakistani authorities, and due to the gas imbalance in the country, this pipeline has not been completed despite the investment from Iran. The implementation of this plan will make it possible to neutralize the US policy of removing it from the oil and gas market.
In addition, Pakistan is highly dependent on the import of energy resources and products; In fact, most of the primary energy supply comes from oil and natural gas. Hydropower is the main source of renewable energy in this country, but the share of wind and solar energy is slowly growing. More than 40 million people in this country do not have access to electricity. The main sources of energy supply in Pakistan are respectively through biomass (a renewable source of energy that is obtained from biological materials. In general, waste of biological origin), natural gas, oil, coal, nuclear, hydroelectric, wind, Solar and other sources are provided.
It is interesting to note that in 2015, Pakistan had about 25 million cubic feet of gas reserves, but due to the country’s industries being dependent on gas from this time period, gas imports started in Pakistan for the first time; Therefore, the completion of the peace pipeline will provide a great opportunity for Iran.
On the other hand, according to official reports, more than 7 million tons of liquefied gas entered Pakistan in 2021. Most of this import was done through the Qatar Energy Company and the Italian multinational oil and gas companies ENI and Gunvor based in Singapore; Despite this volume of imports, Pakistan’s energy needs remain constant.
But this amount of gas import was not enough to meet Pakistan’s energy needs; Currently, the majority of household consumption in cities depends on liquid gas cylinders and in industries on diesel; Undoubtedly, due to Pakistan’s urgent need to import gas, strengthening bilateral relations and foreign investment in order to increase the production of gas and liquefied gas, Iran will be in a position to increase its foreign exchange earnings.
Fuel export instead of smuggling
According to official statistics, the share of Iran’s mineral fuel exports in Pakistan is nearly 2%; In fact, this country imports about 25 billion dollars of fuel, and Iran’s share does not even reach 600 million dollars. Of course, the declared figure is related to official exports and if we consider fuel smuggling from Iran to Pakistan, Pakistan’s fuel needs to Iran will be more than 15%.
Although the exact amount of gasoline and diesel consumption in Pakistan is not available, in recent years, according to the reports of Pakistan’s intelligence service, nearly 30% of fuel (diesel and gasoline) is supplied through Iran; In other words, more than 2.8 billion liters per year (about 5.7 million liters per day) of gasoline and diesel are smuggled from Iran to Pakistan.
Also, according to the statement of Jalil Salari, the CEO of Iran’s National Refining and Distribution Company of Petroleum Products, the amount of gasoline smuggling in the country is estimated at 5 million liters per day and the amount of diesel smuggling at 7 million liters per day. According to his words, considering the price of each liter of gasoline and diesel equivalent to 0.7 and 0.78 dollars according to the statistics of the Energy Exchange, our country loses 3.2 billion dollars annually from fuel smuggling.
On the other hand, the average price of gasoline in Pakistan is 250 rupees, equivalent to 58 thousand tomans, and the average retail price of diesel in this country is 288 rupees per liter, which is equivalent to 72 thousand tomans; Although diesel imported from Iran is sold at a price of less than 230 rupees per liter (46 thousand tomans).
Increasing the employment of border points by improving relations with neighbors
In total, the long border of more than 900 kilometers between Iran and Pakistan has created excellent conditions for production, exchange and trade; In fact, since Sistan-Baluchistan is known as one of the most deprived provinces in the country with an unemployment rate of more than 10%, the establishment of industries and production workshops in these areas will reduce smuggling and security threats and economic growth. Of course, the issue of the security of the common border between Iran and Pakistan requires the cooperation of both sides, and both countries have many concerns regarding its security. Pakistan promised Iran to take more measures in the field of border security.