Pakistan is developing a strategic plan with a three-pronged approach with Russia. According to sources, the government is working on establishing government-to-government (G2G) frameworks and projects, fostering business-to-business (B2B) cooperation to boost trade and investment, and putting in place mechanisms to ensure safe trade and business operations.
The proposal has been endorsed by the Ministry of Foreign Affairs, as officials stressed the need for adopting viable strategies that could be taken up by a high-powered delegation set to visit Russia soon. However, the State Bank of Pakistan (SBP) has cautioned that doing business with Russian entities under sanctions could pose challenges.
The SBP noted that other nations, such as Turkey, have been able to conduct transactions with Russia using local currencies. This suggests that Pakistan may explore similar avenues to circumvent the threat of US sanctions and facilitate increased economic engagement with its northern neighbor.
The railways secretary outlined three crucial rail routes to build stronger connectivity with Russia and Central Asian countries:
Upgrading the Quetta-Taftan rail network: A memorandum of understanding (MoU) for this project was already signed in June 2024. A bilateral meeting is expected this month to implement the MoU and identify areas of cooperation.
Connecting the Kohat-Kharlachi rail network with Central Asian Republics through Afghanistan: This plan will be undertaken following a feasibility study.
Establishing the Minelik Express: This rail link will connect Reko Diq with Gwadar, providing a direct and cost-effective route to the Arabian Sea for accessing markets in Azerbaijan and Russia.
The minister for national food security and research, as well as the minister for industries and production, supported a proposal from the special assistant to the prime minister on foreign affairs to develop comprehensive plans for holding negotiations with Russia. They sought guidance from the State Bank of Pakistan (SBP) on engaging in trade and business with Russia.
The SBP clarified that transactions not involving sanctioned Russian entities would not face major issues, though banks would still be cautious due to the sanctions regime and Financial Action Task Force (FATF) compliance concerns. The central bank also suggested exploring a barter trade mechanism as a way to boost ties with Russia.
The Minister for Planning, Development and Special Initiatives, Ahsan Iqbal, highlighted numerous opportunities for enhancing exports to Russia. He also inquired about the trade practices followed by Turkey, the BRICS bloc, and other countries in their dealings with Russia.
The SBP noted that regional banks were trading in their own currencies and suggested that Pakistan could explore similar approaches to facilitate trade and business with Russia. The focus was on finding viable mechanisms to strengthen economic cooperation between Pakistan and Russia, despite the challenges posed by the sanctions regime.
The Additional Secretary (Europe) of the Ministry of Foreign Affairs informed the meeting that a report on establishing trade mechanisms with Russia would be shared with the Ministry of Planning soon.
The Planning Minister underscored the need to prepare three sets of documents: one on government-to-government (G2G) frameworks and projects, another on business-to-business (B2B) cooperation, and a third on mechanisms for safe trade and business operations.
The Ministry of Foreign Affairs recommended aligning the visit of a Pakistani delegation to Russia with the upcoming Inter-Governmental Commission meeting scheduled for September 2024.
Discussions at the Planning Commission meeting also touched upon issues related to the Pakistan Steel Mills (PSM). The Secretary of the Ministry of Industries and Production mentioned plans to establish an Export Processing Zone on a piece of land belonging to the steel mill, pending final approval.
The meeting participants noted that the Sindh government had expressed its intention to build a new steel mill on 700 acres of land. There was potential for collaboration with Russia on this proposed steel mill project.
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Additionally, the Director General of the Power Division suggested that Russian expertise should be leveraged for laying electricity transmission lines for ongoing hydroelectric projects located at high altitudes and in extreme weather conditions.
The Planning Minister gave a directive to conduct a feasibility study on electricity export to China, potentially involving the Three Gorges Dam. This was seen as an opportunity to explore collaborations and power-sharing arrangements with China.
