Pak–Afghan trade standoff: Self-Inflicted Losses for Both Sides

The Pakistan–Afghanistan trade standoff is fast turning from a political dispute into an economic disaster. Both sides claim victory, yet both are bleeding revenue, jobs, and regional influence — while Iran and Central Asia quietly collect the gains.

The disruption in Pak–Afghan transit trade has become a contest of blame and bravado, but beneath the rhetoric lies a shared economic loss. Both countries are paying the price for political posturing.

Pakistan’s Defence Minister Khawaja Asif has termed the situation a “blessing in disguise,” arguing that reduced cross-border movement will curb smuggling, terrorism, and market distortion. Yet, the security argument offers little comfort to exporters whose businesses now stand still.

Since mid-October, border crossings have remained closed, leaving thousands of trucks stranded and trade worth over US$45 million in limbo. Exporters of cement, textiles, footwear, fruits, and food items in Khyber Pakhtunkhwa, Punjab, and Sindh are bearing the brunt. With more than 60 percent of Afghan imports already diverted to Iran, Central Asia, and Turkey, Pakistan risks losing both the Afghan and Central Asian markets.

For Afghanistan, Deputy Prime Minister Mullah Abdul Ghani Baradar’s call to find alternate routes may project defiance and independence, but the costs are real. Afghan traders rely on Pakistan’s ports and goods, especially for food and medicines. Turning to Iran or Central Asia will lengthen routes and raise costs, pushing prices higher for Afghan consumers.

Meanwhile, Iran, Uzbekistan, and Turkmenistan quietly emerge as the real beneficiaries. Their ports and overland routes are gaining traction as Afghanistan diversifies its trade options.

In the end, neither Islamabad nor Kabul wins. The prolonged standoff damages trade, jobs, and investor confidence on both sides. What could have been a bridge of mutual economic gain has turned into another front of economic self-destruction.

The message is clear: political posturing may please leaders, but it impoverishes nations.

GCC and Central Asian states share common interests

The Gulf Cooperation Council (GCC) countries and the Central Asian Countries (C5) — Kazakhstan, Kyrgyz Republic, Tajikistan, Turkmenistan and Uzbekistan — all member countries of the Organization of Islamic Cooperation, have shared values and historical ties, and possess significant oil and gas resources that qualify them to play an influential role in global energy security.

Hosting of the GCC-Central Asia Summit by Saudi Arabia reflects its keenness to boost existing relations, in conjunction with the GCC. It also reflects the interest of Custodian of the Two Holy Mosques King Salman and Crown Prince Mohammed bin Salman in developing relations between the GCC and C5 and increasing coordination between them on issues of common interest.

The GCC-C5 Summit held in Saudi Arabia is testimony to the participating countries' appreciation of the status of the Kingdom at the Gulf, Islamic and international levels, and their commitment to establishing a strategic partnership based on a common action plan for political and security dialogue, and economic cooperation and investment.

The first-of-its-kind summit reflects the keenness of the GCC countries, mainly Saudi Arabia, to establish partnerships with the international community to enhance the global status of the GCC.

The GCC Secretary General held the first high-level meeting with the ministers of foreign affairs of C5 countries in the Kazakh capital, Astana, on October 12, 2021; Bahraini Minister of Foreign Affairs Dr. Abdullatif bin Rashid Al-Zayani participated in it. The meeting highlighted the importance of the C5 region for GCC countries and the desire to start a strategic dialogue with it.

Participants in the high-level ministerial meeting stressed the importance of relations of Gulf-Central Asian countries and their aspiration to boost cooperation and coordination in areas of common interest, bolster bridges of communication and work to seize opportunities and develop processes of coordination and cooperation.

The First Ministerial Meeting of the GCC-Central Asia Strategic Dialogue was held in Riyadh on September 07, 2022. Chaired by Saudi Foreign Minister Prince Faisal bin Farhan bin Abdullah, the goal was to develop relations with a view to achieving common interests.

The ministers affirmed their commitment to establishing a strong and ambitious partnership among their countries, based on common values and interests, deep historical ties between the peoples, and the existing cooperation at bilateral and multilateral levels.

They also reaffirmed commitment to previously agreed-upon cooperation to support global economic recovery efforts and address the COVID-19 repercussions, help supply chains recover, support transportation and communication, food, energy and water security, develop green energy sources and technologies, address environmental challenges and climate change, education, and exchange of best practices and expertise in various fields, create business opportunities and support investments through appropriate business and investment mechanisms.

Moreover, the ministers underlined the relevance of the principles, goals and priorities stated in the context of Central Asian countries interaction, adopted by the heads of Central Asia states on July 21, 2022, in Cholpon Ata, Kyrgyzstan, and the GCC decision to establish cooperation with Central Asian countries.

To achieve their goals, the ministers endorsed the Joint Action Plan for Strategic Dialogue and Cooperation between Central Asian countries and the GCC States for the period 2023-27, including political and security dialogue, economic and investment cooperation, enhancing people-to-people contacts, and developing effective partnerships between business sectors in the GCC and Central Asia. The ministers also pledged to take the measures necessary for the proper implementation of the plan at bilateral and multilateral levels.

The value of trade between the GCC and Central Asia countries amounted to US$3.1 billion in 2021, about 0.27% of the total value of the GCC merchandise trade.

The value of GCC exports to Central Asia amounted to US$2.06 billion in 2021, while imports amounted to US$1.03 billion.

The maximum exports from the GCC to Central Asia reached 0.37% in 2020, while the maximum imports by the GCC reached 0.21% in 2021.

Electrical machinery and appliances constituted the major goods exported to Central Asia, at a value of US$0.98 billion, about 47.6% of the total volume of goods exported by the GCC to Central Asia, which amounted to US$2.06 billion.

Copper and its by-products constituted the major commodity imported from Central Asia, at a value of US$0.45 billion in 2021, or about 43.7% of the total commodity imports from Central Asia, followed by gold, precious metals and stones, and iron and steel, at about 24.3% each.

IRISL sets up offices in India

The Islamic Republic of Iran Shipping Lines (IRISL) has opened representative offices in various regions of India in order to facilitate shipping activities along the International North-South Transit Corridor (INSTC), Mehr News Agency reported.

Transit Trade

As reported, IRISL will ship India’s export products that have been transported from the east via railway to the western ports of the country, to deliver them to Russia and Commonwealth of Independent States (CIS) markets.

Considering that the Indian government and businessmen are very interested in developing business activities with Russia, CIS and Iran through the INSTC, the Islamic Republic of Iran Shipping Lines has launched regular container shipping lines from the western ports of India to the southern ports of Iran.

In the meantime, executive and marketing measures have been also taken to strengthen and develop cooperation with the Indian sides to transport the country's export and import goods to Russia and the CIS markets.

IRISL has taken effective steps in recent months to strengthen its shipping activity along the North-South corridor by managing the Russian port of Solyanka on the shores of the Caspian Sea as well as making huge investments in developing this port.

In early April, IRISL formed an operational working group for the development of transportation along INSTC and the company allocated 300 vessels to the transportation of goods through this corridor.

Currently, most of the commodities that are transported through Iran along the INSTC are shipments from Russia for India.

To be transited through the north-south corridor, cargos enter northern Iranian ports on the Caspian Sea shores and then transferred by road to the southern ports of the country on the Persian Gulf. From there they are loaded onto a ship and sent to their destinations in East Asia.

Trade between Iran and India

The value of Iran’s export to India increased by 40% in the first eight months of 2022 as compared to the same period in 2021, IRNA reported citing the data released by the Indian Ministry of Commerce and Industry.

As reported, Iran exported commodities worth US$407 million to India in the eight-month period of this year as compared to US$290 million in the same period.

Petroleum products and fruits were the major products Iran exported to India. Iran exported US$102 million worth of petroleum products and US$101 million of fruits to India.

During January-August of the present year, India’s export to Iran also increased by 56% to US$1.384 billion, while the figure was US$886 million in the first eight months of 2021.

Rice and tea were India’s major products exported to Iran, these included US$913 million worth of rice and US$63 million worth of tea to the Islamic Republic.

According to the Indian Ministry of Commerce and Industry, the value of trade between Iran and India was reported at US$1.791 billion during January-August 2022, rising 52% from US$1.176 billion.

Based on the mentioned data, India's imports from Iran in August doubled compared to the same month in 2021 reaching US$46 million. India imported US$23 million worth of goods from Iran last August.

Indian exports to Iran in August 2022 also increased by 80% to US$141 million from US$78 million in August 2021.

In late May, Iranian Ambassador to India Ali Chegeni said that Iran and India are trying to diversify the channels of payments to expand bilateral trade.

In an exclusive interview with Financial Express Online, Chegeni said, “We are trying to diversify the channels of payments and accordingly wish to extend and expand an already existing mechanism in order to cover all of the goods and services including all of the non-oil goods and to achieve this”.

“During the past two years, because of Covid restrictions, we pursue the issue via virtual dialogues and currently, our officials are following the matter through the exchange of delegations”, the envoy stated.

“We want to develop our economic and trade relations beyond energy and petrochemical products. Due to the complementarities of Iran and India's economies, an extensive range of non-oil trade exists between the two sides including trade on goods and services, investment, tourism, education, and … which may pave the way for multiplying our economic relations ten times more than current relations in mid and long terms”, Chegeni said.