What could Pakistan gain from Free Trade Accord with Eurasian Economic Union

Graphic: CoPilot AI

ISLAMABAD: If Pakistan concludes a Free Trade Agreement (FTA) with the Eurasian Economic Union (EAEU), the biggest gains would likely be in exports, energy security, market diversification, and regional connectivity. 

According to Pakistan's Ambassador to Russia, Faisal Niaz Tirmizi, the agreement could be finalized within a timeframe ranging from a few months to two years. This means Pakistan has formally launched the process of signing a Free Trade Agreement (FTA) with the Eurasian Economic Union (EAEU), a move that could significantly boost trade and economic connectivity with Russia and Central Asia. 

Speaking this week, Tirmizi said Pakistan had already initiated discussions aimed at creating a free trade zone with the EAEU, which comprises Russia, Kazakhstan, Belarus, Kyrgyzstan, and Armenia. He noted that communication had already taken place between Pakistan's Commerce Minister and the leadership of the Eurasian Economic Union.

“We have already launched this process to create a free trade zone with the Eurasian Economic Union, as Pakistan is a natural partner in the International North-South Transport Corridor (INSTC),” Tirmizi said. “We will be able to reach a free trade agreement. It might take from a few months to a year or two, but no more than that.”

The ambassador said Pakistan sees itself as an integral part of the wider Eurasian region and wants to expand both commercial and people-to-people links with EAEU member states. He expressed optimism that improved regional connectivity through the INSTC could eventually allow easier movement of people and goods between Russia, Central Asia and Pakistan's major cities, including Islamabad, Karachi, and Gwadar.

Let's see what Pakistan can gain from access to a new market of more than 180 million consumers

The EAEU includes Russia, Kazakhstan, Belarus, Kyrgyzstan, and Armenia. An FTA would reduce or eliminate tariffs on many Pakistani exports, making them more competitive in those markets. A study cited by the Pakistan Business Council notes that Pakistan currently trades relatively little with EAEU countries despite their combined economy of around $2.6 trillion.

Boost for Pakistani Exports: The sectors most likely to benefit include:

Textiles and apparel

Rice and other agricultural products

Leather goods

Pharmaceuticals

Sports goods

Surgical instruments

The Pakistan Business Council study estimates export potential of more than $9 billion annually under a comprehensive agreement, although actual gains would depend on logistics, payments systems, and market access.

Cheaper Energy and Raw Materials

Pakistan could gain better access to: Russian crude oil, natural gas, diesel and petroleum products, fertilisers and metals and industrial raw materials.

This could help reduce import costs and support Pakistan's manufacturing and agricultural sectors.

Reduced Dependence on Traditional Markets

Pakistan's exports are heavily dependent on the United States, European Union, China and the Gulf countries.

An EAEU trade deal would diversify export destinations and reduce vulnerability to economic or political disruptions in any one region.

Greater Connectivity Through Central Asia

Pakistan hopes to leverage the International North-South Transport Corridor (INSTC) and its position as a gateway between South Asia, Central Asia and the Middle East. Better trade links could increase cargo movement through Karachi and Gwadar ports and strengthen Pakistan's role as a regional transit hub.

Food Security and Agricultural Cooperation

Pakistani officials argue that EAEU countries and Pakistan can complement each other in food supply chains. Pakistan can export agricultural products while importing grain, fertiliser, and other commodities when needed.

Challenges Pakistan Would Still Face

An FTA alone will not guarantee success. Analysts point to several obstacles:

1. Limited banking channels, particularly with Russia because of sanctions.
2. Transport and logistics challenges for trade with landlocked Central Asian states.
3. Lack of established supply chains.
4. Competition from local producers within EAEU markets.

For Pakistan, the strategic value of an EAEU FTA is not just increased trade with Russia. The larger prize is opening a new Eurasian market, securing alternative energy supplies, expanding textile and agricultural exports, and positioning Pakistan as a transit and trade hub linking South Asia with Central Asia and Russia. If implemented effectively, it could become one of Pakistan's most significant trade initiatives outside its agreements with China and South Asian partners.

Pakistan's strategic geographic position at the crossroads of South Asia, Central Asia and the Middle East has long been viewed as one of its greatest economic advantages. The country has been seeking to leverage that location to become a regional trade and transit hub, particularly through projects linked to the China-Pakistan Economic Corridor (CPEC) and other connectivity initiatives.

Agriculture remains the backbone of Pakistan's economy, employing around 42 percent of the workforce. Major crops include wheat, cotton, rice, sugarcane and mangoes. The country's textile industry remains its largest export sector and accounted for approximately 60 percent of total exports in 2023. Pakistan is also among the world's leading cotton producers.

Beyond agriculture and textiles, Pakistan has significant industrial and natural resource potential. Key sectors include chemicals, engineering, metallurgy, mining and manufacturing. The country possesses reserves of coal, natural gas, oil, copper ore, chromium ore, uranium, phosphates, marble, limestone and precious stones.

The government is also focusing on expanding the information technology sector, positioning Pakistan as a growing hub for software development and outsourcing. Officials have identified technology, automotive manufacturing, steel, cement and chemicals among the sectors targeted for future growth and investment.

Pakistan is already part of several regional and bilateral trade arrangements that provide preferential access to international markets. These include the South Asian Free Trade Area (SAFTA) and the China-Pakistan Free Trade Agreement (CPFTA). The country has also benefited from major Chinese investments under the Belt and Road Initiative, which have helped modernize transport and logistics infrastructure.

In addition, Pakistan is a member of the Shanghai Cooperation Organisation (SCO) and enjoys various trade preference arrangements with the European Union and the United States. Islamabad has also expressed interest in joining BRICS, although membership has not yet materialized.

With a population of approximately 255 million people, Pakistan's economy continues to show signs of recovery. The International Monetary Fund (IMF) projected real GDP growth of 3.6 percent for the fiscal year ending June 2026, citing successful completion of IMF programme reviews and improved investor confidence.

Analysts say a future FTA with the Eurasian Economic Union could open new export markets for Pakistani goods, diversify trade partnerships beyond traditional destinations and strengthen Pakistan’s economic links with Russia and Central Asia at a time when regional connectivity is becoming increasingly important.