Neighbourly relations: the importance of Iran-Pakistan detente

The recently concluded three-day visit to Pakistan by Iranian President Ebrahim Raisi is significant for both countries, but for different reasons.

It was the first official visit by the Iranian head of government to any country since it fired hundreds of drones and missiles at Israel on April 13, in response to the bombing of Tehran’s embassy in Damascus by Tel Aviv that killed 16 people on April 1.

For Pakistan, it was the maiden visit by any head of government after the February 8 general election that brought a coalition of political parties to power with Shehbaz Sharif as prime minister.

But above all, the high-profile visit served to repair the cracks that nearly destroyed the bilateral relations back in January when the two countries conducted air strikes into each other’s territories ostensibly to eliminate terrorist hideouts.

Speaking to TRT World, seasoned Pakistani diplomat Maleeha Lodhi said Raisi’s visit should be seen in the context of the January air strikes that plunged the bilateral relations to “an all-time low”.

“This visit is an effort to normalise relations between the two neighbours… it is a strategic compulsion for both,” says Lodhi who previously served as Pakistan’s envoy to the UK, US and UN.

Both Iran and Pakistan have accused each other of backing militant groups consisting of ethnic Baloch. In a missile strike on January 16 within Pakistan’s southwestern province of Balochistan, Iran targeted members of Jaish al Adl, a militant group that Tehran accuses of mounting attacks on its security forces in the border areas.

Tehran claimed hitting two bases of the militant group, but Pakistan insisted the unprovoked violation of the country’s airspace killed two children and wounded three girls instead.

Two days later, Pakistan conducted air strikes in Iran’s Sistan-Baluchistan province against members of the Balochistan Liberation Army (BLA), an ethno-nationalist separatist outfit, killing at least seven people. Diplomatic relations hit rock bottom for about 10 days with both countries recalling their respective ambassadors.

“The warm optics of the visit and substantive discussions have helped to mend ties between them and placed relations on a positive trajectory,” says Lodhi.

For Pakistan, Raisi’s visit is more important for bilateral reasons, she says, adding that the war on Gaza by Israel must surely have been discussed at length in official talks.

Analysts also see the high-profile visit as an effort by Iran to secure an “expression of support from Islamabad” as it stumbles deeper into a dangerous conflict with Israel.

According to security and foreign affairs expert Syed Baqir Sajjad, who attended the Iranian president’s hour-long address on April 22 in Islamabad, Raisi dedicated “90 percent” of his speech to the issue of Gaza.

“Iran wants to tell the audience, both home and abroad, that it’s trying to rally international support for the persecuted people of Gaza,” he tells TRT World.

Tackling terror outfits

The two countries vowed to ban terrorist organisations that operate in their respective countries and create instability in the border areas.

Sajjad says there’s some difference of opinion on the two sides of the border about the best way to tackle terrorism.

“Some tactical and geographic realities must be taken into account. It's a very vast border that’s porous and rugged. So operationally, it’s very difficult to take control of the entire space. Both countries are struggling,” he says.

Sajjad downplayed the view that at least some elements within these terror groups operate with tacit approval from their respective security establishment on either side of the border.

“One of the reasons why the two countries were quickly able to control damage after the January strikes was the clarity that it was not an issue of collusion, and that terrorists operate from those ungoverned spaces,” he says.

Underwhelming trade volumes

Trade between Iran and Pakistan has remained limited despite their geographic proximity, considerable GDP size and strong cultural and religious ties.

Only 1.2 percent of Pakistan’s total imports of goods in 2022 came from Iran. Official numbers don’t reflect the true extent of bilateral trade, however, owing to widespread smuggling, barter arrangements and informal business dealings across the border.

International sanctions on Iran have played a major role in deterring Pakistani companies from establishing business contacts across the border.

It’s difficult for any formal business to make or receive payments to Iran-based firms via banking channels because of the threat of sanctions by the US Treasury Department. Coming under the US sanctions means a company will lose its US-based or US-controlled assets while exposing financial intermediaries like banks to possible US enforcement action.

That’s one reason why Pakistan and Iran have yet to conclude negotiations for a long-delayed free trade agreement (FTA). The two sides have agreed to “expeditiously” finalise the FTA, as President Raisi termed the existing bilateral trade volume “unacceptable”.

There was an official announcement about taking the annual trade volume to $10 billion over the next five years. In the past, the two countries committed to growing bilateral trade to $5 billion by 2021 under a five-year plan, a target that they missed by a wide margin.

For now, authorities seem to be focused on growing bilateral trade via border markets. Jointly set up to cater to retail needs on both sides of the border, the first of the six planned markets became operational last year in the area between Mand town in southwestern Pakistan and Pishin city in southeastern Iran.

“This arrangement helps the authorities evade international sanctions. But even if they hasten the setting up of these markets, I don’t think they’ll be able to achieve the $10 billion target, which is a huge figure,” Sajjad says.

Energy partnership

Pakistan has long viewed its western neighbour, which boasts the world’s second largest natural gas reserves, as a potential supplier of affordable gas. The centrepiece of the energy cooperation between the gas-rich and gas-poor neighbours is the 2010 plan for a “peace pipeline” – energy infrastructure to transport at least 750 million cubic feet per day of natural gas from Iran to Pakistan for 25 years.

Pakistan backed off from the project in subsequent years fearing international sanctions, even though Iran continued to build its half of the pipeline at a cost of $2 billion.

Pakistan changed its position in March and committed to building its part of the infrastructure in view of the possibility that Iran may take Islamabad to international court over the construction delay – a scenario that could lead to an $18 billion fine on Islamabad.

A joint statement released at the end of the three-day visit by Raisi’s visit to Pakistan mentioned the Iran-Pakistan gas pipeline only in passing.

US caution

The United States has already made it clear that it does not support Pakistan’s plan to build the pipeline.

Saying that doing business with Iran “runs the risk of touching upon and coming in contact with our sanctions”, State Department spokesperson Mathew Miller cautioned Pakistan last month against going ahead with the pipeline project.

However, analysts say Pakistan may make another forceful case for a waiver from the United States to build the energy infrastructure given the severe gas shortages it faces every year.

“Pakistan has been in the so-called Western bloc for a long time, but there’s a feeling that the United States hasn’t been able to support it, particularly in meeting its energy needs,” Dr Syed Qandil Abbas, assistant professor of international relations at Islamabad’s Quaid-i-Azam University, tells TRT World.

“America has conveyed to Pakistan that its closeness to Iran will have certain consequences. But Islamabad seems to be almost ignoring American threats this time around,” he says, adding that the United States must realise that handling the energy crisis is a matter of national interest for Pakistan.