Trade Test

Russia's latest expression of interest in expanding economic cooperation with Pakistan comes against a sobering set of trade figures. During Russian Interior Minister Vladimir Kolokoltsev's visit to Islamabad, both governments spoke enthusiastically of investment, energy and commercial opportunities. Yet bilateral trade stood at just $243.4 million in FY2025, against more than $1 billion a year earlier. The decline is particularly striking given the steady stream of diplomatic engagements and agreements between the two countries. Energy Minister Awais Leghari had previously attributed this to difficulties involving banking channels, payment arrangements, financing and shipping. These are formidable impediments to commerce, particularly where Russian financial institutions remain subject to international sanctions. At the end of the day, Pakistani importers need dependable settlement mechanisms, while exporters can hardly be expected to pursue markets where payments remain uncertain. The trade imbalance deserves equal attention. Pakistan's exports to Russia amounted to approximately $66 million in 2025, comprising leather goods and garments. Russian supplies have historically included petroleum, wheat and fertilisers. Such imports may help meet Pakistan's requirements, but a durable trading relationship must also provide meaningful opportunities for Pakistani businesses. Greater market access, competitive freight rates and reliable banking arrangements would serve exporters better than another round of official assurances. Energy offers considerable scope for cooperation, especially with Brent crude trading above $105 a barrel amid the Middle East conflict. Pakistan began importing Russian crude in 2023, hoping to reduce its petroleum bill. Further purchases must be justified by savings after freight, insurance, refinery processing and financing costs. Washington's recent relaxation of certain restrictions on Russian diesel does not amount to a general lifting of sanctions, and therefore, Islamabad must ensure that any arrangement is commercially competitive and legally compliant. Pakistan Steel Mills presents an even sterner test. The Soviet-built enterprise has remained idle since 2015. Revival protocols signed with Russia in 2025 were followed by expressions of interest from five potential investors. Construction-related work has been proposed for 2027, subject to a bankable engineering, procurement and construction contract. Meanwhile, disagreements between the federal and provincial governments over the revival arrangements have added another complication. Given the enterprise's costly history, fresh public commitments must be preceded by independent financial and technical scrutiny. Proposals for rail, road and cargo connections through Central Asia also warrant examination. Their viability depends on freight volumes, transit security, customs procedures and competitive transport costs. Afghanistan's uncertain transit environment further complicates matters as transport corridors require dependable commercial traffic to justify investment. Pakistan's limited fiscal room makes such scrutiny all the more necessary. Its latest staff-level agreement with the IMF could unlock approximately $1.2bn, subject to Executive Board approval. Islamabad can scarcely afford expensive undertakings whose financing and expected returns remain uncertain. Closer economic relations with Moscow can definitely serve Pakistan's interests without compromising other commercial partnerships. But after years of promises, both governments must recognise that trade is conducted through transactions, not communiqués. *