In a significant move, Pakistan has recently announced the official implementation of a barter trade mechanism with Russia. This strategic initiative aims to foster bilateral economic cooperation between the two nations. By adopting this innovative approach, Pakistan seeks to enhance trade relations and explore new avenues for collaboration with its Russian counterparts.
Pakistan has officially announced the implementation of a barter trade mechanism Russia among other states on specific goods, including petroleum and gas to strengthen the country’s foreign reserves and economy. The government order, called the Business-to-business (B2B) Barter Trade Mechanism 2023 and has listed goods that can be bartered.
The barter trade mechanism offers a unique platform for both countries to exchange goods and services without the need for traditional currency transactions. This novel arrangement allows Pakistan and Russia to leverage their respective strengths and resources, paving the way for mutually beneficial partnerships.
With the implementation of this mechanism, Pakistan envisions a diversified trade landscape that encompasses various sectors, including agriculture, energy, technology, and manufacturing. The exchange of agricultural products, such as Pakistan’s high-quality rice and Russia’s wheat and dairy products, promises to strengthen food security and meet the growing demand in both countries.
Furthermore, the barter trade mechanism opens doors for the exploration of energy collaborations. Pakistan, with its vast renewable energy potential, can offer clean and sustainable solutions to meet Russia’s energy requirements. Simultaneously, Russia can contribute its expertise and advanced technology in the energy sector, facilitating the development of renewable energy projects in Pakistan.
This progressive step also aims to foster technological advancements through knowledge transfer and research collaborations. The exchange of expertise in fields like artificial intelligence, aerospace, and information technology can pave the way for innovation and economic growth in both nations.
Deputy director of the Sustainable Development Policy Institute, said Pakistan could gain particularly from oil and energy imports from Russia and Iran without adding to dollar demand. He added that the barter opportunity is important considering the dollar shortages the countries face. The ‘business-to-business barter trade mechanism 2023’ was implemented. Both state-owned and private enterprises in Pakistan will have the opportunity to engage in barter trade with Russia, Iran, and Afghanistan.
The aim of the barter trade system is to stabilize the economy of Pakistan by increasing foreign reserves and expanding trade opportunities. To participate in this system, businesses must meet specific requirements, including registering with the Pakistan Single Window System, obtaining an import-export license, submitting trade applications via the Federal Board of Revenue’s (FBR) online portal, and getting verification from the relevant Pakistani missions in the respective countries.
Pakistan will export a diverse array of products under this mechanism. The list of exportable goods includes milk, cream, eggs, cereals, meat, fish products, fresh fruits and vegetables, rice, pharmaceutical products, chemicals, perfume, cosmetics, plastic, rubber, leather, wood products and furniture items, textiles, readymade garments, paper, footwear, iron and steel, electric fans, home appliances, sports goods, motorcycles, tractors, surgical products, and sports equipment.
Pakistan will acquire essential commodities. Pakistan will import fruits, vegetables, spices, dry fruits, minerals and metals, textile machinery, oil seeds, minerals, coal and its products, raw wool, iron, and steel articles. Additionally, imports from Iran will also include petroleum crude oil, LNG and LPG. From Russia, Pakistan will import coal and its products, petroleum oil, LNG and LPG, fertilizers, minerals, and metals, articles of wood and paper, plastic and rubber items, chemical products, iron and steel, and textile industrial machinery as well as pulses and wheat.
The implementation of this barter trade mechanism is expected to have a positive impact on Pakistan’s economy. The country of approximately 240 million people is facing significant challenges related to the balance of payments crisis and soaring inflation which reached an alarming rate of nearly 38 per cent in May 2023. Pakistan’s foreign currency reserves have dwindled to slightly above $4 billion, a level that can barely sustain imports for a month, according to central bank data.
Pakistan’s local business community and the Federation of Pakistan Chamber of Commerce and Industry (FPCCI) have welcomed the government’s efforts to activate the mechanism. The implementation of the barter trade arrangement with certain countries will help address the existing gaps in Pakistan’s import and export potential and contribute to economic growth. However, some experts argue that the conventional barter system, which has been in practice for centuries, is losing ground in a world driven by globalization and interconnected economies with modern trade mechanisms.
The import of Russian oil by Pakistan as a good omen and barter trade has benefits to both the countries. The first shipment of Russian oil to energy-deficient Pakistan was unloaded at Pakistan. Russian oil shipments will be paid for in yuan with Pakistan’s US dollar reserves dangerously low and Russia pivoting away from the greenback. This is the first-ever Russian oil cargo to Pakistan and the beginning of a new relationship between Pakistan and Russian Federation. Islamabad imports 84 percent of its petroleum products and has historically relied on friendly Gulf states for shipments. Coal imports from Afghanistan have also likely doubled under the Taliban government. The energy sector has suffered shortages for years due to mismanagement, a lack of storage facilities and a poor economy.
Hence, the official implementation of a barter trade mechanism between Pakistan and Russia signifies a bold stride towards strengthening bilateral ties. This innovative approach holds immense potential for expanding trade horizons and unlocking new opportunities for economic cooperation. With its inherent perplexity, this reflects the significance of this strategic decision, showcasing the complexity and dynamism surrounding Pakistan’s trade relations with Russia.
Asma Khan Durrani is an Islamabad-based expert in Strategic Affairs. She is a student of Defence and Strategic Studies. She has done M.Phil. from SPIR Quaid-I-Azam University Islamabad. She has also been published internationally. She tweets @AsmaKhan_47 Mailed @ firstname.lastname@example.org