Trade with Russia – Journal

PAKISTAN’S dependence on imported fuels represents a serious vulnerability to its energy security. This reliance on fuel sources that are largely adjacent to the West raises concerns about the degree of influence this reliance grants foreign states over Pakistani politics, while also increasing Pakistan’s exposure to market volatility. market.

In this context, recent discussions have focused on the import of fuel by Pakistan from Russia in order to ensure the satisfaction of domestic demand and to manage inflation; this proposal, however, raised concerns about the international sanctions regime applied to Russia and the risks for Pakistan if it decided to meet its fuel needs with Russian supplies.

While Article 41 of Chapter VII of the UN Charter empowers the UN Security Council to impose restrictions on economic relations in response to threats to international peace and security, these are unlikely given that Russia, being one of the five permanent members of the Security Council, enjoys the power to veto any binding UNSC resolution presented against it or against a trading partner. In the absence of effective UN sanctions, the anti-Russian coalition has therefore turned to imposing more specific sanctions regimes.

The heaviest such sanctions have been imposed by the EU on imports of Russian oil by sea. These represent a significant proportion of the bloc’s trade with Russia; however, the EU continues to import Russian oil through pipelines and has been reluctant to be more aggressive in its sanctions regime – largely because it depends on Russia for 40% of its regional gas needs – although committed to “phasing in” these sanctions, but in a way that minimizes their impact on EU economies. Meanwhile, the US has banned all Russian oil imports, while the UK intends to phase out Russian oil imports towards the end of 2022.

None of Pakistan’s international law obligations prevent the country from buying essential goods from Russia.

Financial restrictions were also decreed on the international exercise of Russian wealth. The assets of the Russian central bank have been frozen, preventing it from accessing its international reserves estimated at around $630 billion. A comprehensive transaction ban has also been imposed on four major Russian banks, with the country’s access to the Society for Worldwide Interbank Financial Telecommunications – a global communications system linking financial institutions – also cut. Russia will also likely be subject to an MFN suspension by the United States, a measure that will likely also be adopted by the EU, allowing Western economies to impose punitive import tariffs or quotas on Russian exports. The US Treasury Department’s Office of Foreign Assets Control is responsible for enforcing certain US sanctions against Russia imposed by a series of Executive Orders issued by the President and by federal legislation.

The United States and the EU are also debating measures to prevent other countries from trading with Russia. The two main measures under discussion are an attempt to develop a consensus among Asian countries to cap the prices of goods imported from Russia, with the aim of reducing Russian revenues, and the use of secondary sanctions intended to target countries and companies involved in trade with Russia. . These secondary sanctions, however, have not yet been imposed because, first, the sanctioning countries are unwilling to risk straining their ties with major non-Western economies such as India and China. Second, the imposition of such second-order sanctions would contribute to a global rise in commodity prices, which would impact the citizens of the very countries that seek to impose sanctions themselves.

It is therefore in this context that the national discussions concerning the trade of essential products – such as fuel or wheat – with Russia must take place. This discussion cannot necessarily take place in a diplomatic vacuum, and Pakistan must consider the political capital to be gained – or lost – by dealing with Russia in this way.

From an international legal perspective, none of Pakistan’s international law obligations prevent the country from buying basic necessities from Russia, especially to offset the domestic cost-of-living crisis. While Pakistan and the EU have signed bilateral agreements, such as a Partnership and Development Cooperation Agreement of 2004, and the Strategic Engagement Plan of 2019, and all Pakistan’s political actions in under these – and other – EU programs should comply with EU restrictive measures (i.e. sanctions), these measures are non-punitive and are intended as interventions aimed at preventing conflict or respond to emerging or ongoing crises. Regardless of how belligerent the EU may feel, buying essentials to stave off an emerging national cost-of-living crisis falls outside the scope of the measures.

The EU is one of Pakistan’s main export markets and has granted Pakistan a special trade status — ie the Generalized System of Preferences — to lower import duties on Pakistani exports. This GSP-Plus status for Pakistan, which is already under review for 2024-2034 since the current grant ends in 2023, is however entirely based on Pakistan’s status as a developing state and respecting it. international legal obligations relating to local issues of human rights, labor rights, environmental protection, drug control and anti-corruption programs. It is therefore unlikely that Pakistan’s purchase of Russian necessities is linked to the continued granting of GSP-Plus status to Pakistan.

Countries like the US, China, India, Sri Lanka and the EU bloc continue to trade with Russia despite imposed sanctions, and Pakistan should be able to do the same, at least in the future. predictable. Earlier this year, the White House itself clarified that India’s purchase of crude oil from Russia would not violate the sanctions regime; As recently as the end of May, the EU continued to engage with Russia on grain exports with the aim of alleviating global food shortages. While Pakistan has historically aligned itself geostrategically with the West, this recent cost of living crisis will force Pakistani policymakers to carefully consider the diplomatic costs of buying oil or wheat from Russia in the face of the specter very real of an economic collapse.

Sikander Ahmed Shah is a former legal adviser to the Pakistani Ministry of Foreign Affairs and a professor at Lums Law School. Abid Rizvi is an expert in international law.

Posted in Dawn, June 17, 2022

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