Pak-Russia shipping service confronts obstacles as banks fearful to open LCs  

Trade relations between Pakistan and Russia face obstacles as Pakistani banks exhibit reluctance to facilitate the opening of Letters of Credit (LCs) for cargo under the recently established direct shipping service. 

This critical development, initiated in May this year, is the result of an agreement between Pak Shaheen (Private) Limited and Russian express liner service Neco Line, designed to provide Pakistani products immediate access to the Russian market.   

Under the agreement, payments are conducted through the local banking channel in Chinese yuan, offering a streamlined approach to conducting trade.

According to a report by The News, Pakistani banks are hesitant or even fearful to open LCs for the cargo under the direct shipping service, given the ongoing geopolitical complexities between the two nations.

One source stated that banks can pay in Chinese currency yuan and Russia accepts it as per the arrangement, devised for this shipping service between the two countries. However, banks are not showing the kind of facilitation, which is required to boost the trade with Russia.

Abdullah Farrukh, the CEO of Pak Shaheen confirmed the lack of facilitation on the part of banks and expressed the need to resolve these issues to unlock the full potential of this direct shipping service. While he acknowledged some improvement in bilateral trade since the service’s initiation, he stressed the vast untapped potential of the Russian market for Pakistani exports.

Farrukh noted that Russia’s interest in purchasing textiles, garments, yarn, towels, leather, kinnow, potatoes, and other goods from Pakistan presents a significant opportunity for industries in cities like Karachi, Faisalabad, and Sialkot to substantially increase their exports