Pak-Iran barter is a no-brainer

With Washington upping the ante on sanctions on Iran, barter has been a popular topic of discussion on the Tehran drawing board. Oil export is the spine of Iranian economy and the butt of US manoeuvre, hence a lot of the aforementioned barter has involved the proverbial black gold. Iran has recently offered China and India – its leading oil purchasers – oil in exchange for goods other than their local currencies like wheat, soybean meal and other consumer products. Even Uruguay has offered Iran rice in exchange for oil, since Iran has always been a major importer of rice from the South American country, while the former could do with some oil for their ever inflating industrial needs.
Now, while Pakistan might not be involved in oil exchanges as such, PSMA (Pakistan Sugar Mills Association) chairman Javed Kayani, has conjured up the idea of barter trade for urea procurement against sugar. Kayani has sent a letter to Federal Finance Minister Abdul Hafeez Sheikh, saying that the 300,000 tonnes of urea already approved from Iran can be procured against barter of sugar. This in turn would save a lot of precious foreign exchange. Kayani further stated the international price of sugar could “almost buy double the quantity of urea”. And therefore, pressing the accelerator on further urea procurement and taking it up a few notches to around 800,000 tonnes of urea. This number could then be exchanged for around 400,000 tonnes of sugar.
While the sugar exchange, is under discussion the word is that we have already tabled a wheat offer as a part of a barter deal. Shafqat Hussain Nagmi, Managing Director of Pakistan Agricultural Storage and Services Corporation (PASSCO) recently stated that Pakistan has offered one million tonnes of wheat and will get fertilisers and iron ore in return. Shafqat Hussain said that Pakistan would be getting around 600,000 tonnes of urea and 200,000 tonnes of iron ore – 30,000 of which is said to be lump ore while the remaining fraction is said to be constituted by fine iron ore. The latter would be of particular interest for the Pakistan Steel Mills.
This particular discussion was first put on the negotiation table during Iranian President Mahmoud Ahmadinejad’s meeting with President Asif Ali Zardari in February. The presidents wanted to take the mutual trade to around $10 billion, which could easily be achieved by barter trade.
Rice is another ingredient that has been thrown in the Iran-Pakistan trade cauldron in the past. When Iran’s deputy trade minister Abbas Ghobadi held meetings with business magnates and government officials, he expounded Iranian interest in importing 200,000 of Pakistani rice, as asserted by water and power minister Naveed Qamar.
Just like Iranian sanctions have hurt Iran’s trade numbers with just about every single country you could think of, the Islamabad-Tehran trade has also metamorphosed into repentant remnants of the once decent numbers. It once stood at $ 1.2 billion in 2009-10, and last year fell to merely $450 million. Barter trade would be an apposite way of posting higher numbers for both the nations that are suffering in one form or the other due to skewed American policies. The $10 billion trade touted in February by the presidents of Iran and Pakistan might seem akin to a leaf out of mythology as things stand, but both the nations can take a massive leap by using the wheat-urea barter and than mull over other goods along the same lines.
And then there is the small matter of the Iran-Pakistan pipeline as well. It seems both Pakistan and Iran would need each other’s support for a while now as far as digging themselves out of the fiscal quagmire is concerned. The intentions are there, the framework is there it’s only a matter of implementation now.