Pakistan, Iran Agree to Boost Trade to $10 Billion

Pakistan, Iran Set $10 Billion Trade Target with Connectivity Push

Pakistan and Iran have reaffirmed their commitment to further intertwining their economies along with the region and have set an ambitious annual trading target of a whopping $10 billion. The two nations are taking a step together as they seek to enlarge their trade networks, facilitate get-togethers, and unclog themselves from activities that are economically dominated by the West.

Expanding Trade Beyond Current Limits

The trade between both countries has been pegged at around 3 billion dollars, with maximum exports from Pakistan (rice, meat, and textile) and Iran (petroleum, LPG, and petrochemicals) being the major import and export commodities of the two nations. Even though they share a common border that is 900 kilometers long, they have cultural ties and complementary economies, yet both parties admit that the volume of trade is far less than it could be. Hence, they will probably develop infrastructure for road, rail, and sea transport, implement a barter system and come to a complete Free Trade Agreement (FTA) in near future.

Renewed Momentum Amid Sanctions

Even though the target of 10 billion trade has been discussed in the past years, the current momentum seems stronger. Iran, which is under US sanctions, is looking to form more regional alliances and promote local exchange or barter trade, while it sees Pakistan as an untapped market that can help to reduce its trade deficits.

The main element of this new drive is connectivity. The transport links between the Pakistani province of Balochistan and the Iranian province of Sistan-Balochestan are being improved in both the countries.

The major Taftan-Mirjaveh border crossing will be upgraded for trade purposes. Such markets will not only facilitate small-scale trade but also provide jobs and help in legitimizing the economic exchanges that were mainly affected by smuggling.

Strategic Border Crossings and Ports

Rimdan-Gabd border crossing, opened in 2020 and located next to Pakistan’s Gwadar port, has great importance from the geographic perspective due to its proximity to Iran’s Chabahar port. While historically they were considered as rivals, increasingly, they are going to be seen as partners with their combined economic power, thus linking the Middle East, South Asia, and Central Asia. By providing an uncontentious region in the development of ports as well as shipping companies, the parties can create a situation where the busy need for international shipping lanes would be reduced.

Railway communication also needs to be counted. Reactivation of the old colonial railway line from Quetta to Taftan to Zahedan will link Pakistan’s rail network to Iran’s and finally to the International North-South Transport Corridor (INSTC). When it is operational, it will give Iran access to the markets of China and Southeast Asia; and at the same time, the efficiency of Pakistani exports to Europe would be increased.

Both governments consider the need to formalize trade through institutional mechanisms another priority. The proposed barter system would allow Pakistan to export manufactured and agricultural goods in exchange for Iranian fertilizers, petrochemicals, and oil by circumventing hard currency and sanctions. This system is stable and reduces smuggling, which is particularly beneficial for the border population that is reliant on informal trade.

A comprehensive free trade agreement is currently being negotiated. It is expected that a full-fledged FTA would do away with trade barriers through harmonization of customs, reduced tariffs, and attracting investment in areas like manufacturing, energy, and agriculture. The PTA of 2006 made no progress due to bad infrastructure and red tape.

Besides, the trade project has tremendous geopolitical impacts. It played a significant role in favor of the China-Pakistan Economic Corridor (CPEC), which is the infrastructural project of the Chinese Belt and Road Initiative (BRI). The entrance of Iran into the Shanghai Cooperation Organization (SCO) will create more regional relations. The two countries could establish conducive environments to economic integration and development of infrastructure by virtue of cross-border trade, through SCO and BRI.

the diplomatic normalization between Iran and Saudi Arabia that was guided by China in 2023 has transformed the stage into a favorable one to multilateral cooperation.

Pakistan is now able to nurture relations with Tehran and Riyadh without being anxious of any geopolitical consequences. The role played by augmented Pakistan-Iran cooperation in enhancing the stability of the region is through enhanced connectivity and trade.

The Sistan-Balochistan of Iran and the Balochistan of Pakistan will be the biggest benefactors due to proximity. Cross-border trading would mean additional employment generation, better infrastructure, and logistic support for long-term victims of insurgency and poverty. Economic integration is a two-sided sword that can be used as one of the governmental objectives of development and as the tool of providing social stability.

But all in all, the trade project between Pakistan and Iran is not an ordinary business venture, but more of regional integration and sharing of wealth, to say the least. Both Islamabad and Tehran have the vision of transforming their frontiers into abandoned border posts and turning them into thriving business hubs through restoration of ancient trade routes using modern infrastructure.

It may require time, hard work, and faith between parties to hypothesize the $10 billion goal, yet that is not just an economic goal, it is a step towards regional peace, stability, and a progressive world in a unified sense.