Facing Payment Challenges, Russia and Pakistan Turn to Barter Trade

To address mutual payment challenges, Russia and Pakistan have introduced a barter trade mechanism, as reported by TASS on Tuesday and covered in the Moscow Times. The agreement was formalised during the inaugural Pakistan-Russia Trade and Investment Forum in Moscow.

Under the terms of the agreement, Russian firm Astarta-Agrotrading will export chickpeas and lentils, while Pakistan’s Meskay & Femtee Trading Company will provide mandarins and rice in return. Specifically, Russia is set to export 20,000 tonnes of chickpeas, with Pakistan reciprocating by sending 20,000 tonnes of rice.

In a parallel deal, Russia will export an additional 15,000 tonnes of chickpeas and 10,000 tonnes of lentils in exchange for 15,000 tonnes of mandarins and 10,000 tonnes of potatoes from Pakistan.

Naseer Hamid, Pakistan’s Deputy Minister of Commerce, acknowledged that both nations face considerable difficulties in processing mutual payments, a situation exacerbated by international sanctions. “The two companies have decided to establish a barter trade mechanism to resolve these issues,” Hamid told TASS.

Avoiding Sanction Scrutiny

Barter trade arrangements allow businesses to circumvent conventional banking channels, which are subject to scrutiny by Western authorities monitoring compliance with sanctions. This system of direct exchange can thus help participating companies avoid the complications that arise from making cross-border payments, particularly in regions where financial transactions are under heightened surveillance.

Broader Barter Plans with China

Russia has also been exploring similar barter trade mechanisms with China, although progress has been slow. Sources told Reuters that while discussions began in late 2024, these exchanges are largely confined to specific companies and industries. The Russian Ministry of Economic Development has even developed a guide to facilitate external barter trade deals, offering multiple configurations, including trilateral agreements, to streamline such transactions.

A source from the payments sector, cited by The Moscow Times, noted that barter deals with China primarily involve metals and agricultural products, with prices set in advance. Special economic zones in China have been established specifically to facilitate the procurement of Russian commodities in exchange for Chinese goods.

Despite these efforts, significant challenges persist in broadening the scope of such agreements. According to the source, China’s interest in Russian goods remains limited to resources and agricultural products, offering little opportunity for diversification. Expanding these barter deals to include a wider range of Russian exporters would require complex coordination with the country’s metallurgical and agricultural sectors, further complicating the process.