As the world scrambles to secure vital commodity supplies in the wake of conflict in the Black Sea, Pakistan seems to have engaged in contrarian play. Last week, Prime Minister announced that he had secured two million tons of wheat supplies from Russia during his visit to the country, not shedding any light on the timeline of these imports.
The purpose of this comment is not to opine on the virtues of Prime Minister’s high risk diplomatic gambit at a time when superpowers appear to be at the brink of war, but to gauge the probability of continued Pak-Russia trade when the latter faces severe economic sanctions from the West.
It may be fair of commentators to point to western hypocrisy of importing ever-larger volumes of gas from Russia while forcing developing nations to comply with sanctions. Unfortunately, ground realities leave no opportunity to engage in sanctimony. The western bloc (North America, EU, UK, and Japan) accounts for as much as 55 percent of Pakistan’s exports. And ramping up bilateral trade relations with Russia at a time when the West seeks to punish the northern bear may be fraught with risks that Pakistan can ill-afford.
Surprisingly, the safest bet would be to put any potential plans for wheat import from Russia in fifth gear immediately. Until such time that the West does not break off its own trade relations with Russia completely, Pakistan can make the case in western capitals that it too faces an essential commodity shortage back home (wheat), with few if any alternate sources available in the immediate term.
Yet, the greatest challenge in securing supplies from Russia may not be western sanctions. Finding secure trading route and payment mechanism may pose even greater risks, given the unwillingness of shipping vessels to accept insurance risk from Black Sea, and global banks’ unwillingness to accept LCs in favour of Russian counterparts.
While the payment problem may yet be resolvable if news of Chinese payment system opening doors to Russian businesses is confirmed, the challenge of trade route shall still persist. With Black Sea ports virtually off the table, any trade between the two nations through land route will have to transit through at least four countries (Central Asian republics and Afghanistan), and will highly depend on the transit nations’ willingness to accommodate such requests against western pressure.
Although Central Asian republics are historically considered to operate under Russian sphere of influence, government of Pakistan must not take any chances. The key will be to act fast and deploy diplomatic muscle in international capitals to ensure the proposal meets fruition. By reaching out to Russia at a critical time, the PM has played a major gamble. Now he must ensure that the country reaps the benefit from his bet while there is still time to. Russian wheat must not be allowed to turn into another Seventh Fleet that never arrived.
Meanwhile, Pakistan’s import requirements may yet remain unfulfilled even if the Russia deal comes through. An even more difficult choice than to import wheat from Russia would be to allow imports from next door. While wheat crop prospects have weakened in major producing countries such as China, Canada, and US; India is sitting on record carryover inventory, with another surplus crop close to harvest.
If Pakistan eventually is forced to import wheat from international traders in the second half of the year, imports originating from trading LLCs in UAE may in fact be Indian wheat. Except, GoP will have no choice but to pay a premium, for something it could have imported directly anyway.
With Russian and Ukranian wheat off the market, world import requirement of 190 million tons (excluding China and Pakistan) will have to be met from elsewhere. It is hard to fathom if Pakistan will be able to afford large volume orders from either Americas or Australia, considering competition from wheat deficit nations and high freight costs. Difficult choices lie ahead for Pakistan to address looming wheat shortage. Act timely.
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