Yours to ours: Pakistan wants to expand barter with Russia

Pakistan wants to expand barter trade with Russia to all sectors, the country's embassy in Moscow told Izvestia. Currently, this mechanism affects only food products. Earlier, Moscow and Islamabad successfully launched an exchange of agricultural products: Russia supplies chickpeas and lentils in exchange for tangerines and rice. Barter is possible even with energy supplies. Although, according to Izvestia, this is still unlikely. The situation is complicated by US sanctions against Russian energy companies. In addition, it is necessary to modernize Pakistan's refineries, which are not well adapted to processing heavy oil.

Russia and Pakistan are developing barter

In the near future, Russia and Pakistan may expand trade cooperation. In particular, to diversify barter supplies. Islamabad is at least interested in this, Izvestia has learned.

"Pakistan intends to continue barter trade in all goods, not just food," the country's embassy in Moscow told Izvestia.

Pakistan already has a regulatory act in place to facilitate barter trade. In addition, the Government has lifted restrictions on exported goods to facilitate barter trade between both enterprises and governments. It could be expanded by supplying Russian energy resources. In general, this possibility was also allowed by the Pakistani side itself. "Definitely, energy resources could become a commodity in barter trade between Russia and Pakistan. This also applies to large Russian companies, such as Lukoil," Abdul Alim Khan, the country's Minister of Privatization, Investments and Communications, said earlier.

However, such a scenario is unlikely now, informed sources told Izvestia. The situation has become more complicated due to the recent US sanctions. And in general, the need for barter trade arose due to fears on the part of Pakistan of falling under secondary sanctions, as well as due to the lack of reliable working mechanisms for making payments. The difficulties in transactions were also discussed in the Ministry of Trade of Pakistan.

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By the end of the decade, it may increase to $50 billion.

— If we talk about energy resources, the problem is not even payments or the fact that they have nothing to provide in exchange for energy resources, but the fact that Pakistanis do not know how to process Russian oil at their refineries. They were built to process Middle Eastern oil, in particular, from Iran and the Persian Gulf countries," Gleb Makarevich, an expert at the Valdai Club and a junior researcher at the IMEMO Center for the Indian Ocean Region, told Izvestia.

The country's refineries are initially set up to process lighter (low-sulfur) grades, whereas Russian oil is quite heavy.

So far, barter trade in the food sector has been established. A year ago, Russia and Pakistan concluded the first barter agreements in their modern history. The Memorandum of Understanding was signed at the first Pakistan-Russia Trade and Investment Forum on October 1, 2024. Far from the last Pakistani companies from various industries participated in it: in addition to food, these are pharmaceuticals, agriculture, textiles, logistics and tourism. The total volume of their exports to different countries was estimated at $500 million. More than 100 companies from Moscow and other regions represented Russian business at the forum. Representatives of the Russian public sector from the Ministry of Industry and Trade, the Ministry of Agriculture, the Ministry of Energy, Rospotrebnadzor, as well as the banking industry took part in person. As a result, the parties agreed to barter chickpeas, rice, tangerines, potatoes and lentils.

— In addition to food, Pakistan can offer leather goods, pharmaceutical products, surgical instruments, textiles and sporting goods such as soccer balls for barter trade. In the energy sector, Pakistan needs liquefied petroleum gas and crude oil, subject to the modernization of refineries, Rashid Wali Janjua, director of Research at the Islamabad Institute for Policy Studies (IPRI), told Izvestia.

At the same time, in addition to the sanctions restrictions, there are other difficulties. They are related to the need to register buyers and sellers, and then obtain permits from chambers of commerce and the government, the expert noted.

Prospects of relations between Russia and Pakistan

It is important for Russia and Pakistan to develop trade in national currencies. This is another way to protect trade from various economic shocks, including a huge number of sanctions, and avoid excessive de-dollarization. The share of the ruble, the Pakistani rupee, as well as the currencies of friendly countries in the structure of settlements between Russia and Pakistan is already about 80% — this only confirms that the value of the dollar and the euro in bilateral trade is steadily falling.

The fact that these tools really work is also evidenced by the volume of bilateral trade, which continues to grow. In 2023, the trade turnover between Russia and Pakistan reached $1.1 billion, although just two years ago it was $697 million. These are, of course, rather modest figures, taking into account the population of the two countries — more than 140 million people live in Russia, and more than 240 million in Pakistan. But that at least means a lot of potential. The growth was mainly due to increased purchases of Russian fuel. Pakistan imported more crude oil from the Russian Federation at reduced prices, which marked, in fact, the abandonment of traditional dependence on suppliers from the Middle East.

According to Albert Khorev, the Russian Ambassador to the republic, the parties continue to work on major economic initiatives, including the reconstruction of the Karachi Metallurgical Plant in Sindh province. All this will be discussed at a meeting of the Russian-Pakistani intergovernmental commission on trade, economic, scientific and technical cooperation, which will be held in Islamabad next week.

But trade and economic relations are far from the only point of contact between Moscow and Islamabad. The parties have expanded cooperation in the fight against terrorism and in the humanitarian field. Russia and Pakistan are also coordinating their actions on international platforms, such as the SCO. The leaders of the two countries regularly hold bilateral meetings during the organization's summits. After talks in Astana in 2024, Vladimir Putin and Shahbaz Sharif agreed to expand cooperation in trade, energy and agriculture. And so it happened. A year later, in Beijing, Putin invited the Pakistani leader to visit Russia. Sharif had not been to Russia for a long time, and therefore, accepting the proposal of the Russian president, he noted that he would like to indulge in "memories of his younger days."

— There is a stable formula in every Russian-Pakistani dialogue: unfortunately, there are no strategic relations between Russia and Pakistan, but there are friendly ones. And our goal is to look for some kind of basis for these strategic relations," Gleb Makarevich clarified.

Investments for the restructuring of oil refineries in the republic, and not necessarily Russian ones, could give an impetus to the dramatic development of Russian-Pakistani relations, the expert believes. After that, it will be possible to build close trade and energy ties with Russia. In the meantime, both sides are trying to find new opportunities for cooperation.