Pakistan-Russia economic relations have evolved steadily. There is a huge scope for them to expand further. The relations were at low ebb for a long time with only a few exceptions in economic, trade and investment cooperation in the 1960s and 1970s. Following a brief period of economic relations in the post-Cold War era, time for good opportunities is again ticking away. Moscow and Islamabad should act rationally under their common strategic and economic interests and their positions on matters involving regional and international sensitivities. Recent engagements between the two countries amid a changing geopolitical and a geo-strategic environment along with evolving inter-regional economic prospects and emerging threats to regional stability have brought them closer.
There are many arguments for Pakistan-Russia economic relations. As a permanent member of the United Nations Security Council, Russia enjoys the veto power. It is a leading member of the Shanghai Cooperation Organisation. Good relations with Russia can be crucial for Pakistan. Pakistan needs foreign capital inflows, direct foreign investment and access to the enormous energy reserves of Central Asia to revive its economy. Pakistan can benefit from Russian experience in infrastructure development, education, technology, trade and energy. Pakistan can also be a competitive source of agricultural and textile imports for Russia.
Falling global oil prices in 2014, leading to substantial revenue decline in energy-exporting states, possibly pushed Russian policymakers to explore more venues in politico-economic and strategic engagements with other regions of the world for exploring prospective markets for its manufacturing and investments to sustain its economy.
In 1956, the former USSR and Pakistan had established trade relations under an agreement, under which Pakistan exported cotton, jute and leather to Russia. The Soviet Union helped launch heavy industry in Pakistan by setting up the Pakistan Steel Mills.
In the post-Cold War era, Pakistan and Russia established an inter-governmental commission for trade and economy in 1999, and concluded a bilateral agreement on trade and economic cooperation to replace the 1956 agreement. Subsequently, the Pakistan-Russia Inter-Governmental Commission on Trade, Economic, and Scientific and Technical Cooperation was formed in 2009 to open up avenues of bilateral economic ventures. To stimulate commerce and tourism the Pakistan-Russia Business Forum was founded in 2009.The Business Council for Promotion of Trade with Pakistan is successfully operational since its inception in 2011, seeking to promote mutual economic collaboration.
Pakistan needs foreign capital inflows, direct foreign investment and access to enormous energy reserves of Central Asia to revive its economy
To this end, a Russian delegation visited Pakistan in September 2012, and concluded a few memoranda of understanding for undertaking Russian investment in fields of the Pakistan Steel Mills, metallurgy, railways, power, science and technology. Pakistan-Russia economic cooperation became institutionalised when two joint working groups on trade and energy were established during the fourth meeting of the IGC in 2015 to explore ways and means in their bilateral cooperation in various fields of mutual interests.
For promoting cooperation in fields of financial systems’ development, payment systems, financial infrastructure, and financial institutions’ supervision, the State Bank of Pakistan and the Central Bank of Russian Federation joined hands for bilateral central banking cooperation after signing an MoU in Moscow on January 15, 2018.
Pakistan-Russia trade is witnessing a gradual rise. In 1980, Pakistan-USSR bilateral trade amounted to $95 million. In 2017-18 it was $732 million. Pakistan-Russia economic rapprochement is being cemented gradually under inter-regional economic imperatives, involving trans-national mega projects like the BRI and its pilot project China-Pakistan Economic Corridor, EurAsEC and EAEU, the Central Asia Regional Economic Cooperation, and Iran-Pakistan Gas Pipeline. Being situated at the crossroads of the south, west and Central Asia, Pakistan can play an important role in realising the Russian vision of a Eurasian economic community.
A prominent area of cooperation in Pakistan-Soviet relations during the Cold War was the energy sector. It still forms the core of Pakistan-Russia economic collaboration. Moscow established an oil consortium called Pakistani Oilfields, in 1958.The former USSR also enabled Pakistan to establish the Oil and Gas Development Company (OGDCL) in 1961. In 2012, MOUs were signed for technical assistance for Guddu, Muzaffargarh and New Jamshoro power plants of 500 MW capacity, and the Tarbela-4 project. Russia will invest $2 billion and construct the North-South gas pipeline from Lahore to Karachi.
To promote mutual cooperation, joint ventures and use of sophisticated technology for energy sector explorations, the Gazprom International and Pakistan’s OGDCL concluded an MoU on July 3, 2017. This will bring an estimated $4 billion to Pakistan. Pakistan and Russia on February 6, 2019, signed an inter-corporate agreement for laying of more than 1,500-km offshore gas pipeline costing $10 billion; it would transport natural gas from the Russian gas company Gazprom’s sources in the Middle East to Pakistan with possibility of extending it further to South Asian countries.
The writer is a researcher at the Islamabad Policy Research Institute