As an oil producing country, Iran enjoys a significant trade surplus which peaked at over $81 billion in 2012 and was less than half that in 20 16. Among countries that are top trading partners of Iran are China, South Korea, India, Japan, and Turkey that have continued to import oil over the last two decades and further back, despite US sanctions.
After Trump’s latest announcements regarding sanctions, India is being pressured to cut Iranian oil use. Throughout sanctions, India continued to import oil through its pseudo-barter system that exchanged rice for oil. India however is allowed to continue to invest in Chabahar port as it is in US’s interest to have an alternate means to access Afghanistan while by-passing Pakistan.
Sources inform that because of the confusion surrounding US sanctions, what form they will take and when, companies in Iran are already struggling. While some European companies doing business in Iran have gone ahead with cash payments through intermediaries, others have stopped replying even to emails. The threat of losing business in America is too big to try to salvage the Iranian market. On the flip side, China, Russia and come Central Asian countries have exploited the shift in US foreign policy to set up friendlier trade ties.
Admittedly, Pakistan is afraid to upset the apple cart with justifiable reasons. The country has been grey-listed on the FATF list, the IMF program looms ahead due to the current account deficit, and US is the top export destination for Pakistan’s textiles. Going ahead against sanctions may appear to be too risky a play here.
But there is another side of this story as well. Pakistan’s oil import bill has been soaring with petrol prices climbing higher and hitting the common man. This has reportedly resulted in a surge in smuggled Iranian oil. On the other hand, Iran has a huge basmati rice market which is largely serviced by India. Since India is in the United States good books while Pakistan is in the doghouse, India will likely bend under US’s pressure making room for Pakistan’s exports.
Sanctions may mean that Iran’s oil is available at more competitive prices that international rates, especially since the Iranian Rial is on a downward spiral. On the other hand, Pakistan’s exports of rice can use a boost. Both ways, Pakistan’s current account would benefit. Trump’s rhetoric of “do more” for Pakistan had belittled the role and the sacrifices that the country has made for what is essentially US’s war. In trying to be an ally, Pakistan has suffered. Situated next to oil rich country with short transit routes has been a benefit that Pakistan has yet to exploit. Maybe it is time to at least consider being a maverick.
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