In the past few months, protests have repeatedly erupted in the Pakistani port town of Gwadar against restrictions on trade, especially in Iranian oil across the Pakistan-Iran border. Part of an operation by Pakistani authorities against all informal trade activities in the country, the crackdown at the border is aimed at shoring up the country’s falling economy.
Pakistani government action against the informal foreign exchange market was reportedly successful as millions of dollars have been pouring into the country’s interbank network and open markets since September. This has encouraged it to ban the smuggled fuel trade between Pakistan and Iran.
Authorities have time and again identified the illicit trade of smuggled fuel as costing the Pakistani exchequer heavy losses. According to the Oil and Gas Regulatory Authority (OGRA), around 4,000 tons of fuel is smuggled daily into Pakistan and is causing a total revenue loss of around $35.6 million per month.
In September, caretaker Prime Minister Anwaar-ul-Haq Kakar drew attention to a “deep-rooted nexus” between smugglers and their benefactors in the oil trade. He also pointed out that unemployment in Balochistan is being used to justify the smuggling.
While the protesters, especially local businessmen in the border towns, acknowledge the argument about unemployment, they reject the notion that it is merely a pretext. Instead, they maintain that border trade, whether legal or illegal, which is locally referred to as formal and informal, is the sole economic opportunity available for people living in border towns in both countries.
“Thousands of people across the border rely on the Iranian fuel trade. A sudden halt to a major source of income that has been there for ages is depriving people of their livelihood,” said Shams-ul-Haq, president of the Gwadar Chamber of Commerce and Industry (GCCI). “They [government officials] are alleging that all the border trade is illegal and have made it a lot harder these days,” he added.
In the past few months, Haq has written several letters to the prime minister and the Federal Board of Revenue, stating that not all business at the border is illicit. His letters also show concern over a potential rising monopoly on the border trade.
“The crackdown has affected all kinds of businesses, not only the oil trade. One reason behind the recent crackdown may be larger businessmen from other parts of the country, especially those with connections in the government, want a monopoly over the profitable border trade and [want to] push aside the local businessmen,” said Haq.
According to Haq, with the recent crackdown on Iranian fuel, all other legitimate businesses have also been affected.
“The heavy police and interprovincial forces stationed at the border had earlier benefited from the illicit trade. They received a share of the earnings. Since that has been made harder now, they are directing their frustration towards all kinds of legal trades too,” shared Ilyas Baloch, a resident of Gwadar, who had worked at the border for some time.
Pakistan and Iran border share a 900-kilometer-long border. Cultural and economic ties have always flourished across this border. The Baloch predominantly populate the region on both sides of the border and a large number of them share familial relations. Family relations, trade, as well as cultural exchange flourished across the border for several generations as the national boundary was porous.
“Long before the Makran Coastal Highway that now connects us with the country’s metropolitan Karachi, we were completely dependent on goods from Iran through the border trade,” Baloch, the Gwadar resident, said.
Since 2004, despite a huge influx of goods from Karachi, particularly food commodities, a substantial quantity of goods continued to be sourced from Iran because of the closer distance as well as lower prices. Most of these were brought in through legal border crossings at Taftan-Mirjaveh, Mand-Pishin, and Gabd-Rimdan, but also from other border crossing points.
Pakistan’s trade with Iran is reported to be worth around $1.5 billion per year. In January this year, the two sides signed 39 memorandums of understanding (MoUs), which can increase trade value to around $5 billion per year. Both governments are also planning to set up at least six border crossings and markets between the two countries, but the plans are yet to be implemented.
Among all Iranian commodities, it is the trade in its petroleum and diesel that not only generates the most interest but also is the most profitable. Iranian oil is cheaper than the oil Pakistan officially imports particularly from Arab countries.
A major reason for the lower price is that, as a result of international sanctions on Iranian oil, gas, and other petrochemical products, Pakistan cannot officially import oil from its neighbor. It is therefore brought in through illegal routes, and this business has boomed since the 2013 U.S. sanctions on Iran.
Smuggled Iranian petrol and diesel are easily available in different parts of the province and even in other Pakistani provinces.
Despite the presence of security forces along the land and marine routes, neither side has shut down the smuggling of fuel. The border trade has provided people in sanction-hit Iran and Pakistan’s restive Balochistan with a source of income.
“Gwadar Port, where millions of dollars have been invested, has not benefited the local economy as yet, compared to the Iranian border trade,” said Bahram Baloch, a local journalist.
The recent crackdown is deepening unemployment and also triggering a rise in the prices of petrol, diesel, gas, and food commodities, including seafood. Fishermen previously relied on less expensive Iranian oil for their boats.
Many believe the recent crackdown is not just part of a government initiative to revive the economy but is motivated by the concerns of large companies such as Pakistan State Oil, which are losing business because of cheaper Iranian oil, The larger oil companies from other provinces are trying to gain monopoly control over the thriving border trade.
“In the name of an anti-smuggling campaign in the country, there might be plans to sideline us [local traders] and get the businesses from Karachi and Lahore in,” said Haq, the GCCI president.
Whether or not this is driving the crackdown at the Iran-Pakistan border, local populations on either side face uncertainties over price rise and unemployment, worsened by the failure of the government to provide them with alternatives.