Romancing Russia

Disappointment over Russian president’s aborted trip must be set aside.

KARACHI:

We live in a world of extreme interconnectedness and interdependence. We are practically an interlinked global family and we cannot just ignore that fact.

A sliver of prudence and a streak of farsightedness would do us a world of good, considering how the dynamics of interdependence in the geopolitical arena have evolved over the years. We are no longer warring countries with physical might: sharp minds are more lethal than sharp weapons today.

The challenges that we face today are mostly economic: financial crunches, resource scarcity, security issues or trade imbalances. At the heart of all these is our foreign policy. The architects of our foreign policy have failed to realise that the brilliance of our economic prosperity shines through the diplomatic relations that the country enjoys with its trading partners and neighbouring countries.

Similarly, one of the ties that our foreign policy gurus have been negligent with is the one with Russia – a country with which we have experienced too many diplomatic troughs and peaks. We were looking forward to the Russian president’s recently-announced visit to Pakistan – the first such visit by a Russian head of state in 38 years; the trip was, sadly, postponed. Nevertheless, this should not be taken negatively and efforts must continue to cement our relations with Russia.

We need to learn from the history of this great country. We need to benefit from their expertise in areas which are clearly their strengths. Cooperation in the economic ambit goes a long way and is the most sustainable form of diplomacy. Being an agrarian economy, we can seek Russian expertise in mechanised farming: something in which they have proven their adeptness.

There is also a need to propagate trading ties between the two countries, as, not altogether surprisingly, current bilateral trade tilts in favour of Russia. As of 2011, bilateral trade between Pakistan and Russia amounts to a little over $700 million, with significant room for improvement. We also need to explore the possibility of establishing our financial institutions’ presence in the Russian banking landscape.

At this point, it should be noted that the State Bank of Pakistan (SBP) has taken some critical measures in furthering and facilitating trade with Turkey and China by introducing currency swap arrangements for the Turkish Lira and the Chinese Renminbi. The objective of this initiative has been to stimulate bilateral trade volumes in the respective local currencies, without draining precious foreign exchange reserves. The arrangement ensures liquidity of the other country’s currency in the onshore market, ensuring enough funds are available to finance trade transactions between the two countries.

This model needs to be replicated and built into our diplomatic ties with Russia. The SBP can play an instrumental role in establishing a currency swap with the Ruble. Transaction exchanges in hard currency are most taxing for countries like us, especially when cash reserves are scarce. Therefore, the swap agreement can come as a saviour. In bilateral talks, the need to establish a Pakistani banking presence in Russia must be pushed to support this arrangement.

Thus far, Pakistani exporters have commonly focussed on the European part of Russia. Eastern Russia is an oft-overlooked area. It has cities with sizeable populations and middle to lower income groups, and hosts excellent markets for exports with minimum competition from countries like Bangladesh and China.

It is high time we take advantage of the geographic proximity of our neighbours, particularly when they are extending an olive branch out to us. Our leadership must distance itself from the demons of distrust and move ahead.

The author is the CEO of Habib Metropolitan Bank

Published in The Express Tribune, October 15^th, 2012.