Pakistan Engages in Barter Trade with Iran, Afghanistan, and Russia

On Friday, the Pakistani Ministry of Commerce announced a special directive for bartering certain goods, including oil and gas, with Afghanistan, Iran, and Russia. The Pakistani government, struggling with insufficient foreign reserves to cover a month's worth of imports, is attempting to manage its balance of payments crisis and control inflation, which reached nearly 38 percent last month. The directive, named '2023 Barter Trade Mechanism,' was issued on Thursday and includes a list of goods eligible for barter. Government and private entities need to obtain government approval to participate in the barter mechanism. After Pakistan purchased discounted Russian oil in April, the country's oil minister stated that Islamabad only buys crude oil under a contract with Moscow, which does not cover refined products. The payment method for Pakistan's purchases from Russia is still unclear. According to the Pakistani oil minister, if the first transaction goes smoothly, the country's daily oil purchases from Russia could increase to 100,000 barrels. Pakistan's crude oil imports last year averaged 154,000 barrels per day, showing little change from 2021. The Pakistan Oil Traders Association reported last month that 35 percent of the diesel sold in the country was smuggled. The Pakistani government has also issued a similar directive to ban the smuggling of flour, wheat, sugar, and chemical fertilizers to Afghanistan. Saudi Arabia is investing one billion dollars in Pakistan. The economic crisis in Afghanistan is intensifying, with millions of dollars being auctioned by the Taliban. The collection of Iraq's 11 billion dollar debt to Iran remains uncertain. The challenge of currency transfer continues, as the Central Bank of Iraq does not allow the transfer of dollars to Iran. The issue is whether to collect debts or barter, as the possibility of an agreement with the West diminishes, prioritizing the barter trade policy with neighboring countries.