Pakistan, Russia settle decades old $93.5mn trade dispute

• Russia and Pakistan signed an agreement to settle mutual financial claims and obligations on operations of the former Soviet Union.
• Pakistan will repay the debt to Russia in the amount of $93.5 million.
• Debt repayment will likely give Russia green signal to invest about $8mn in Pakistan's different sectors.

Pakistan and Russia have signed an agreement and finally settled decades old trade dispute between the two countries.

According to the Russian news agency Sputnik, Russia and Pakistan signed an agreement to settle mutual financial claims and obligations on operations of the former Soviet Union, according to which Pakistan will repay the debt to Russia in the amount of $93.5 million.

The agreement was signed between Deputy Finance Minister Sergey Storchak and Pakistan envoy to Russia, Ambassador Qazi Khalilullah. The debt repayment will reportedly give green signal to Russia to invest about $8 million in different sectors in Pakistan, including energy and steel.

Back in November, Pakistan authorized its ambassador in Russia to sign a deal with the country.

The trade dispute, which goes back to the days of Soviet era, involved $117 million and many unsuccessful efforts have been made in the past to end the dispute. Pakistan will now return $93.5 million to Russia within 90 days of the signing of the agreement and clear pending exporters' claims that sums up to $23.8 million as per the settlement agreements reached in 2016-17.

The trade dispute negatively affected the relations between Russia and Pakistan and it is hoped that the settlement would open doors for enhanced bilateral political, economic and diplomatic relations between the two countries.

Trade dispute's background

Back in 1980s, the then Soviet Union used to buy textile and other materials from Pakistan. For this purpose the USSR opened two bank accounts in the National Bank of Pakistan (NBP), with funds getting deposited in the accounts by the Economic Affairs Division through State Bank of Pakistan.

Upon the disintegration of Soviet Union, some exports payments were left unpaid and as the trade dispute got prolonged. Pakistani companies got stay orders in the Sindh High Court, barring the NBP from transferring funds of Russian banks held in its two accounts since 1996.