Barter Over Dollars: Pakistan Finds a Way to Trade With Iran

Islamabad found a way to preserve economic activity with Tehran while completely ignoring threats of secondary sanctions from Washington.

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Pakistan Will Not Comply With US Sanctions

Pakistan declared that it does not legally recognize and does not intend to comply with unilateral economic sanctions imposed on Iran by the United States or the European Union. This was announced by Tahir Andrabi, an official representative of the country's Foreign Ministry. He confirmed that Islamabad considers itself obliged to comply only with sanctions approved by resolutions of the UN Security Council.

According to the minister, his country will continue and intends to expand trade and economic cooperation with Iran on the basis of existing bilateral agreements that do not violate Pakistan's international obligations. Islamabad also has long-term plans to increase bilateral trade to $10 billion.

The statement came in response to Washington's announcement of a new large-scale wave of tough sanctions against Tehran as part of the so-called Operation Economic Outcast. US Treasury Secretary Scott Bessent threatened secondary sanctions and exclusion from the dollar system against any states and organizations that refuse to sever their economic ties with Iran.

These threats did not frighten Pakistan, as its key economic ties and trade with Iran have already been restructured around alternative mechanisms independent of the US currency. To bypass the dollar system and the threat of secondary sanctions, Islamabad has legally established direct commodity exchange schemes, supplying Iran with textiles and rice in exchange for energy resources.

Besides Pakistan, China, a key buyer of Iranian oil, has also openly opposed these unilateral US sanctions. Its trade operations have long been conducted through its own settlement systems. The same applies to Russia's trade operations. Iraq and Turkey also do not intend to comply with the US ultimatum.

Iraq critically depends on supplies of Iranian natural gas and electricity. Without them, the country's energy system would face an immediate collapse and widespread rolling blackouts, especially during periods of peak summer demand. Unless the United States agrees to make an exception for Iraq, as it has always done before, the country could plunge into a crisis that threatens to bring down the government in Baghdad that remains loyal to Washington.

Ankara is also bound to Tehran by long-term contracts for the purchase of natural gas, which cannot be replaced without severe losses for Turkish industry. Turkey and Iran use a system of mutual settlements. Payments for Iranian gas are transferred not to Tehran but accumulated in special accounts at Turkish banks. Iran then uses these funds directly inside Turkey to purchase industrial equipment, textiles, medicines and agricultural products.

Other countries are also testing similar schemes.

The military campaign against Iran, which has now lasted for six months, has reached an obvious positional deadlock. By declaring an economic blockade, the administration of Donald Trump is attempting to shift attention away from a prolonged and unpopular war toward the "economic strangulation" of Iran, the results of which can more easily be declared a victory even when they are nothing of the sort.

But the American voter may well accept it.