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Trade or Sanctions? US Reminds Pakistan of Economic Ties Amid Iran Deals

In a recent statement, the US State Department’s spokesperson issued a cautionary note to Pakistan regarding its burgeoning trade agreements with Iran, highlighting the potential risk of sanctions. This development comes as Pakistan and Iran seek to bolster their economic partnership, aiming to increase their trade volume to an ambitious $10 billion.

The spokesperson underscored the importance of being cognizant of the sanctions risk when engaging in business deals with Iran. Despite the historical and geographical ties that make trade between the neighboring countries beneficial, the involvement of Iran introduces complexities due to existing US sanctions.

Background of US-Pakistan-Iran Relations

The relationship between the US, Pakistan, and Iran has been a tapestry of cooperation and contention. Pakistan established relations with Iran on the day of its independence, and Iran was the first country to recognize Pakistan. Both nations have since collaborated on various fronts, including combating drug trafficking and insurgency in the Balochistan region.

During the Cold War, both countries were part of the Western Bloc and founding members of the anti-communist alliance CENTO. However, post the Iranian Revolution and throughout the subsequent conflicts in Afghanistan, the dynamics shifted, with Pakistan often mediating in the Iran-Saudi Arabia proxy conflict and expressing interest in Iran joining the China-Pakistan Economic Corridor.

Current Trade Dynamics and Sanctions Implications

The US has been one of Pakistan’s largest export markets and a significant investor for over two decades. The reminder from the US spokesperson about these economic ties serves as a diplomatic nudge to Pakistan to weigh its options carefully.

The recent visit of Iranian President Raisi to Pakistan, which resulted in the signing of eight bilateral agreements, has been a significant step towards enhancing political, economic, trade, and cultural ties. These agreements cover cooperation in areas such as veterinary and animal health, judicial support in civil cases, and security matters.

However, the US’s cautionary stance poses a dilemma for Pakistan, which must navigate its international trade relations without jeopardizing its economic interests with either the US or Iran.

Impact of Sanctions on Pakistan-Iran Trade

Sanctions have historically impacted trade between Pakistan and Iran. Despite the flourishing border trade worth around $1.5 billion per annum, security concerns and sanctions have often led to border closures, affecting the livelihoods of families living along the border and the regional economy.

The Preferential Trade Agreement (PTA) signed in 2004 aimed to boost trade but has not led to the expected rise due to high import taxes by Iran on Pakistani goods. The US sanctions on Iran and pressure on Pakistan to scale down trade ties have further complicated the situation.

Looking Ahead

As Pakistan and Iran reaffirm their commitment to strengthen bilateral relations, the potential threat of US sanctions looms large. The US State Department’s advisory serves as a reminder of the delicate balance Pakistan must maintain in its foreign policy and trade practices.

The future of Pakistan-Iran trade relations hinges on the ability of both countries to navigate the sanctions landscape while fostering economic growth and stability in the region.

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