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ISLAMABAD: The China-Pakistan Economic Corridor (CPEC) project has been mired with cost squabbles in political waters. But amid all this controversy over the CPEC route, New Delhi is rushing to seal deal after inking an MoU with Iran for extending a $150 million loan to develop its Chabahar port.
India plans to lease two docks for a decade that would give it access to Afghanistan and Central Asian energy markets – bypassing Pakistan. Moreover, in collaboration with Tehran and Moscow, India is looking to create a vast network of enhanced connectivity with the land-locked Central Asia and eventually Europe, through the International North-South Transport Corridor (INSTC).
Indian calculus on Pakistan
New Delhi is following a policy of ‘twin track’ by engaging Pakistan’s neighbours but circumventing Pakistan in trade partnerships; and at the same time, maintaining good ties with its civilian leadership. India is playing a similar ‘minus 1’ card in Saarc and now is looking for new regional groupings beyond South Asia.
But will the Chabahar agreement be a ‘real’ game changer and a direct threat to CPEC? Or like Saarc, the triangle would fall prey to Indian’s hegemony?
Yes and maybe. Designated as a free trade zone on the gulf of Oman, Chabahar is a direct competitor to Gwadar. However Indian-Iranian relations have no long-standing history of amity and harmony and as recent as 2014, Iran increased import duty on Indian rice from 10% to 45% while revoking visa-on-arrival for Indian citizens.
Now the deal between Tehran and P-5+1 (US, Russia, China, UK, France and Germany) over its nuclear programme has helped break the ice between the two countries and Modi’s government is now all set to steer the course of regional dynamics.
Iran could use this as an opportunity to grab oil market share from the Saudi-led OPEC, while the Iranian gas would help India diversify its energy mix. Indian companies are also ready to invest more than $20 billion in Iranian oilfields and petrochemical plants.
The deal will also give Afghanistan an alternate port for fulfilling its maritime needs and shall decrease Islamabad’s influence on its foreign policy. Afghan imports through Karachi port have already declined by more than 40% in Feb 2016 and according to estimates, Afghan-Indian trade volume could increase by a four-fold if modalities of a trilateral agreement materialise.
Weighing in on benefits: Implementing transit fee on CPEC routes
Previously in 2009, India built the “Route 606” to bypass Pakistan for commercial trade at a cost of $150 million. The road connects to the Iranian city Zabol whereas construction work on a Chabahar-Milak-Zaranj-Dilaram route from Iran to Afghanistan is already in progress.
Pakistan’s strategy
There is a need to advance comprehensive trade reforms for sustaining macroeconomic growth and to stop India from becoming a regional sheriff. The post-sanctions era in Iran presents multiple opportunities for Pakistan but pursuing them requires deep understanding of Iran’s complex social, economic and geo-political issues. At present, Pakistan needs to adopt a two-pronged strategy, at a national as well as regional level, to counter Indian threats and emerging geo-political challenges.
At a national level, Pakistan needs to assuage the concerns of smaller provinces whereas political parties need to show maturity and ownership of the CPEC programme. Stakeholders need a full agenda of shared objectives to start with.
At the regional level, the mistrust between India and Pakistan has prevented Saarc to become a model of regional cooperation like the Association of Southeast Asian Nations. Trade under South Asian Free Trade Agreement (SAFTA) is a mere 5% of South Asia’s total trade volume which is not very promising.
Pakistan needs to lobby with small states of Saarc and negotiate e-visa arrangements with states like Sri Lanka and Maldives that are popular tourist destinations. The Beijing-Islamabad axis is not a substitute to regional partnerships and Pakistan needs more cooperative relationships with its neighbours.
Pakistan also needs to sort out its differences with Afghanistan. India has not only shown keen interest in the development of Afghanistan’s natural wealth but has actually delivered on numerous infrastructure projects including the Salma dam and the Afghan parliament building. More than 10,000 Afghan students have studied in India on scholarships in the last decade. Public opinion polls confirm overwhelmingly favourable sentiments for New Delhi.
Islamabad should support Afghan government in developing its agricultural, livestock and industrial sectors.
The writer is a Cambridge graduate and is working as a management consultant
Published in The Express Tribune, May 2nd, 2016.
India plans to lease two docks for a decade that would give it access to Afghanistan and Central Asian energy markets – bypassing Pakistan. Moreover, in collaboration with Tehran and Moscow, India is looking to create a vast network of enhanced connectivity with the land-locked Central Asia and eventually Europe, through the International North-South Transport Corridor (INSTC).
Indian calculus on Pakistan
New Delhi is following a policy of ‘twin track’ by engaging Pakistan’s neighbours but circumventing Pakistan in trade partnerships; and at the same time, maintaining good ties with its civilian leadership. India is playing a similar ‘minus 1’ card in Saarc and now is looking for new regional groupings beyond South Asia.
But will the Chabahar agreement be a ‘real’ game changer and a direct threat to CPEC? Or like Saarc, the triangle would fall prey to Indian’s hegemony?
Yes and maybe. Designated as a free trade zone on the gulf of Oman, Chabahar is a direct competitor to Gwadar. However Indian-Iranian relations have no long-standing history of amity and harmony and as recent as 2014, Iran increased import duty on Indian rice from 10% to 45% while revoking visa-on-arrival for Indian citizens.
Now the deal between Tehran and P-5+1 (US, Russia, China, UK, France and Germany) over its nuclear programme has helped break the ice between the two countries and Modi’s government is now all set to steer the course of regional dynamics.
Iran could use this as an opportunity to grab oil market share from the Saudi-led OPEC, while the Iranian gas would help India diversify its energy mix. Indian companies are also ready to invest more than $20 billion in Iranian oilfields and petrochemical plants.
The deal will also give Afghanistan an alternate port for fulfilling its maritime needs and shall decrease Islamabad’s influence on its foreign policy. Afghan imports through Karachi port have already declined by more than 40% in Feb 2016 and according to estimates, Afghan-Indian trade volume could increase by a four-fold if modalities of a trilateral agreement materialise.
Weighing in on benefits: Implementing transit fee on CPEC routes
Previously in 2009, India built the “Route 606” to bypass Pakistan for commercial trade at a cost of $150 million. The road connects to the Iranian city Zabol whereas construction work on a Chabahar-Milak-Zaranj-Dilaram route from Iran to Afghanistan is already in progress.
Pakistan’s strategy
There is a need to advance comprehensive trade reforms for sustaining macroeconomic growth and to stop India from becoming a regional sheriff. The post-sanctions era in Iran presents multiple opportunities for Pakistan but pursuing them requires deep understanding of Iran’s complex social, economic and geo-political issues. At present, Pakistan needs to adopt a two-pronged strategy, at a national as well as regional level, to counter Indian threats and emerging geo-political challenges.
At a national level, Pakistan needs to assuage the concerns of smaller provinces whereas political parties need to show maturity and ownership of the CPEC programme. Stakeholders need a full agenda of shared objectives to start with.
At the regional level, the mistrust between India and Pakistan has prevented Saarc to become a model of regional cooperation like the Association of Southeast Asian Nations. Trade under South Asian Free Trade Agreement (SAFTA) is a mere 5% of South Asia’s total trade volume which is not very promising.
Pakistan needs to lobby with small states of Saarc and negotiate e-visa arrangements with states like Sri Lanka and Maldives that are popular tourist destinations. The Beijing-Islamabad axis is not a substitute to regional partnerships and Pakistan needs more cooperative relationships with its neighbours.
Pakistan also needs to sort out its differences with Afghanistan. India has not only shown keen interest in the development of Afghanistan’s natural wealth but has actually delivered on numerous infrastructure projects including the Salma dam and the Afghan parliament building. More than 10,000 Afghan students have studied in India on scholarships in the last decade. Public opinion polls confirm overwhelmingly favourable sentiments for New Delhi.
Islamabad should support Afghan government in developing its agricultural, livestock and industrial sectors.
The writer is a Cambridge graduate and is working as a management consultant
Published in The Express Tribune, May 2nd, 2016.
