Before leaving for Russia on his maiden visit, Prime Minister Imran Khan gave an interview to Russia TV, in which he said that Pakistan would rather play neutral than support any bloc. He reiterated his stance of turning the wheel of Pakistan’s security policy from geo-security to geo-economics. On one of the similar days, Special Assistant to PM on Commerce and Investment Abdul Razak Dawood proposed improvement in trade ties with India to sustain Pakistan’s faltering trading prospects. A few months back, Pakistan unveiled its security policy modelled after geo-economic parameters. All these statements and initiatives indicate Pakistan’s seriousness to fashion economic relations with the world and shun the role of becoming a security bulwark for any partner.
During his one-to-one talk with Russian President Vladimir Putin and the Russian business leaders, PM Imran talked about Pakistan’s willingness to extend business and investment ties with Russia, especially in the energy sector. He further said that the upcoming investment conference in Pakistan in March would be an excellent opportunity for the Russian investors to explore Pakistan’s potential in metallurgical, energy, construction, and in the areas of oil and gas. He assured the Russian businessmen full support and ease of doing business. Talking about the potential of the connectivity of the Central Asian countries, Russia and Pakistan, Imran said it could change the region’s fate.
Though Pakistan has been working with Russia at various levels in the economic and business sphere, the most significant Russian investment has been the Pakistan Stream Gas Pipeline Project (PSGP). Initially inked in 2015 as the North-South Gas Pipeline Project, the venture was put on hold due to sanctions imposed by West on Rostec, a Russian state-controlled company. It was a major stakeholder in the project. Later Imran Khan’s economic team renegotiated the terms and conditions of the deal and renamed it PSGP. According to the new agreement signed in July 2021, Islamabad would finance 74 percent of the project and Moscow will fund the remaining 26 percent. Moscow has pledged to assist Pakistan in any further investment and expertise for the project’s development.
The 1,100-kilometre PSGP scheduled to be completed in 2023 will transport liquefied natural gas (LNG), supplied from Russia, from terminals in Karachi to Kasur in Punjab. The pipeline’s designed annual capacity stands at 12.4 billion cubic metres (bcm), with the possibility to be increased to 16 bcm.
Unfortunately, Pakistan’s energy sector has a deplorable picture to paint. Pakistan had expected to untangle its energy crisis with the advent of CPEC related power projects, but that too had suffered severe blows due to different reasons. Another trouble emanates from the dilapidating distribution lines because of which the quality and efficiency of the projects have reduced considerably. Things had become so bad that in 2020, Pakistan’s National Electric Power Regulatory Authority asked Imran Khan to declare a national power emergency to implement drastic reforms in the power sector. One finds an equally frustrating situation in the areas of gas. Pakistan faces a shortfall of gas at the tune of 1.5 billion cubic feet per day. Gas supply to industries was curtailed due to insufficient gas. Since 2015 Pakistan has increased the import of LNG to become the world’s ninth-largest LNG importer, with Qatar as its mainstay.
To fast-track gas infrastructure development, the PTI government plans to build two new LNG terminals and underground storage at Port Qasim in Karachi in the next three years. Pakistan seeks Russia’s assistance in this regard as well. Last year the seventh meeting of the Russian-Pakistan Intergovernmental Commission on Trade, Economic, Scientific, and Technical Cooperation was held from 24 to 26 November 2021 in Russia. During the moot, Russia showed interest in setting up new refineries and upgrading the existing refineries, virtual pipeline, onshore storage of LNG, and strategic oil reserves.
According to the Russian Federal Customs Services, trade between Russia and Pakistan increased in 2020 by 45.8 percent, taking the trade volume to 789.8 million US dollars. Other than the PSGP initiative, the Russian companies have moved proposals to expand ties with Pakistan in using nuclear energy for medicine and industry purposes.
Because of its strategic location, Russia views Pakistan as the zipper of Pan Eurasian Integration across South, Central, and West Asia. Moreover, Pakistan can fulfil Russia’s dream of becoming an economic leader in Asia, in line with China’s ambition. In this context, Moscow has also shown willingness to expand CPEC’s scope by merging it with Eurasian Economic Union. Moreover, Islamabad had agreed to give Russia access to the Gwadar port, which will give Russia and the Central Asian countries a passage to the Persian Gulf, the Arabian Sea, and the Indian Ocean. This trade route would become an alternative channel in case the Straits of Malacca in Southeast Asia is blocked for any reason.
Sixty percent of Russia’s export and 40 percent of its federal budget comes from oil and gas, making Russia one of the biggest oil and gas exporters. Its main client is Europe, where Russia has built a vast network of pipelines. Unlike Europe, Pakistan does not share a direct border with Russia; therefore, there is no other way to get gas supplied to Pakistan other than using energy carriers. The pipeline option is not feasible because of Afghanistan’s precarious situation. If the fate of Iran-Pakistan gas pipeline and the Turkmenistan-Afghanistan-Pakistan-India Pipeline (TAPI) is of any reference, then Pakistan’s effort should be directed at creating indigenous storage infrastructure for reliable and consistent access to gas from Russia.
Since Pakistan has distanced itself from siding with any bloc and has shown seriousness in building relations with the world on economic and trading terms, we should work out the halt projects such as the Iran-Pakistan gas pipeline. The same goes for trade with India that needs to be resumed without allowing geopolitics to become the barrier. We can beat domestic inflation if trade with India resumes on favourable terms and our depleting energy resources are replenished with affordable and convenient supplies.
