Iranian President Ebrahim Raisi recently made trips to two South Asian countries, Pakistan and Sri Lanka. Though the visit was planned much before Iran attacked Israel, it added a new dimension to Iran’s geopolitical posture. Iran’s retaliatory drone and missile strike on Israel after its embassy was attacked in Damascus last month, killing two top generals, was criticised by the Western countries as Iran’s bid to escalate the conflict. However, given Israel’s Gaza war, Islamists worldwide welcome Iran’s retaliatory strike. In this context, Iran’s “Look East” policy to reach out to its two important partners is significant. Both Pakistan and Sri Lanka share good relations with Iran. Iran’s regional outreach in the Middle East is in crisis.

Pakistan and Iran

In January, Pakistan and Iran had a tit-for-tat missile exchange in their border region. Both countries accused each other of harbouring terrorists, especially when Iran held Pakistan responsible for terrorist group like the Jaish al-Adl, formerly known as Jundullah’s operation in Iran. They, however, were quick to de-escalate the situation that would have impacted their long-term geopolitical interests. It was known that Pakistan would retaliate, given its Army was under pressure and could not be seen as failing to defend the country’s territorial integrity. Moreover, Iran’s growing relationship with India and the development of Chabahar port has been a major concern for Pakistan. In this context, Islamabad cannot annoy Iran, and Iran also needs Pakistan’s support.

Ostensibly, trade and improvement of bilateral relations, especially in the context of the January cross-border attacks, were projected as the agenda of the visit, but many believe that it was also to garner support for Iran’s Middle East policy. Iran has remained an important bilateral partner for Pakistan.

Both countries initiated border trade worth $2 billion last year, in which Pakistan’s imports outweighed its exports to Tehran. A proposed gas pipeline is yet to materialise, as Iran is under US sanction. Tehran has threatened Pakistan to take the matter to the international court for violating the 2014 bilateral agreement on the construction of the pipeline. Tehran has already spent $2 billion on the project to Pakistan’s border, whereas work on Pakistan’s side is yet to begin, given the US’s threat to Pakistan not to go ahead with the project.

During Raisi’s visit, Iran and Pakistan inked eight MoUs/agreements and wanted to take bilateral trade to the next level. They are also negotiating a Free Trade Agreement. Both signed the Preferential Trade Agreement in 2004. They have also pledged to “fully operationalise barter trade mechanisms” in the Pishin-Mand border in the Balochistan region. They also plan to open five more border markets. These markets, which function on barter trade, would help them overcome US sanctions on dollar trade.

One Iranian media was critical of Raisi’s three-day visit to Pakistan and wrote he was not accorded the kind of reception President Rouhani received when he went there in 2016.

Sri Lanka and Iran

Sri Lanka’s relationship with Iran goes back to the Persian era. Raisi’s visit to Sri Lanka came after nearly one and a half decades. In 2008, Iranian President Mahmoud Ahmadinejad visited Colombo and supported Colombo’s war effort.

During Raisi’s visit to Sri Lanka, the Iranian President inaugurated his country-funded Uma Oya, 120-megawatt electricity project, and a $514 million irrigation project, which was delayed due to sanctions on Iran. Reportedly, Badulla, Moneragala and Hambantota, the south-eastern districts of Sri Lanka, would benefit from 39 million cubic meters of water for drinking and industrial purposes from the Uma Oya project. This will also contribute 290 GWh of electrical energy annually to the national grid.

The foreign ministers of both countries expressed their desire to deepen their bilateral relationship as Sri Lanka looks for foreign investment to boost its economy, and Iran wants to expand its relationship with Indian Ocean region countries. In 2007, former President Mahinda Rajapakse signed a $1.5 billion loan agreement with Tehran for infrastructure development, but this agreement was not implemented due to the war with the Liberation Tiger of Tamil Eelam (LTTE). There were also reports that Colombo went arms shopping in Iran to fight the Eelam war.

Iran has always stood behind Sri Lanka in the United Nations Human Rights Commission, which was critical of Colombo’s human rights record during the last phase of its Eelam war with the LTTE. Post-war, Iran supplied credit facilities to Sri Lanka to purchase crude oil. In 2021, the two countries signed an agreement—tea for oil—as Sri Lanka’s foreign currency reserve crisis was around the corner, and the US sanctions on Iran would not have allowed Sri Lanka to trade in US dollars with Iran. It exported around $20 million work tea to repay part of its $251 million oil bill. In 2012, oil/refined petroleum imports from Iran fulfilled 93 percent of Sri Lanka’s requirement, but it has since been replaced by the UAE, India, Singapore and other countries.

The Navies of the two countries also share good relationships. In 2015, the Iranian Navy’s 33rd naval fleet docked at the port of Colombo, and there were regular interactions between the navies of the two countries, which is important in the context of Indian Ocean geopolitics. Iran is concerned about the presence of several countries in the Indian Ocean and wants to protect its genuine commercial interest in this region.

Pakistan and Sri Lanka both depend on the International Monetary Fund to overcome the current economic crisis. They cannot afford to displease the US when they require a much-needed injection of funds that will enable economic recovery in those countries. While Iran has kept its options open by engaging with countries that are traditionally friendly with Tehran, economic-crisis-ridden Pakistan and Sri Lanka would be cautious in taking the relationship further.