STREAM OF PARTICULAR SIGNIFICANCE

Pakistan was among the few states that refrained from condemning Moscow's actions in Ukraine during the recent UN General Assembly vote. The move may catch many as a surprise, as Islamabad has repeatedly and loudly condemned military interference in internal affairs. Surprise for many, but not for all.

Despite sanctions and warnings

Pakistan is one of the world's nuclear powers, an ally of Azerbaijan, and plays a very active role in the Islamic world, as well as in South Asia and Middle East. The country has been actively developing a dialogue with Moscow for years.  And even today, in this difficult historical moment, the dialogue between both countries continues. And there are reasons for this, and sometimes very good ones.

Pakistani Prime Minister Imran Khan paid a working visit to Moscow in late February. There he held talks with Russian President Vladimir Putin. This was the first visit of a high-ranked foreign guest to Moscow since the start of Russia's military operation in Ukraine. It was also the first visit of the Pakistani head of state to Russia in 23 years. This fact attaches special significance to the event in and of itself.

Preparations for the visit took about two months, and the two sides agreed on a date in advance. It is known that the talks focused on energy cooperation and major regional and international issues.

While in Moscow, Mr. Khan expressed hope that the current crisis in Ukraine could be resolved peacefully. Although a number of Western leaders had previously warned the Pakistani leader against a possible rapprochement with Russia, the warning did not bring a desired effect. Meeting between Imran Khan and Vladimir Putin came just hours after the US President Joe Biden and other Western leaders imposed tough economic sanctions against Russia. However, this did not diminish Islamabad's interest in cooperating with Moscow.

Save Pakistani Stream

Imran Khan is believed to have insisted on the acceleration of the previously delayed construction of the Pakistani Stream—a multibillion-dollar pipeline to be built in cooperation with Russian companies. US sanctions against Russian contractors have earlier been reported as the major reason for the delay. Today, with Western sanctions getting tight even further, it is essentially a question of saving the project as such.

The 1,100km-long pipeline with annual normal and maximum throughput capacities of up to 12.4 and 16 billion cubic metres (bcm), respectively, is supposed to connect the Karachi terminal in southern Pakistan with the city of Lahore in the north. The supplied gas will mainly cover Pakistan's own needs.

According to the Russian side, the construction will require an investment of $1.5-2 billion, while Pakistan estimates them at $3.5 billion. Moreover, according to agreements reached earlier, 26% of these will be funded by Moscow and the remaining 74% by Islamabad.

The pipeline is a rare example of Russian involvement without the state-run gas giant Gazprom. Its construction includes the Eurasian Pipeline Consortium, producer of steel pipes Trubnaya Metallurgicheskaya Kompaniya and Operational Services Centre run by the Russian Ministry of Energy. Meanwhile, Russian shareholders expect to recoup their investment through gas delivery charges.

The feasibility study for the project is under way, but the exact launch date has not been determined yet. According to Russian media, the shareholder agreement for Pakistani Stream is expected to be concluded soon. However, with the adoption of unprecedented sanctions against Russia, the meaning of ‘soon’ may become irrelevant.

Gas problems of Islamabad

Pakistani gas reserves are dwindling, and this causes a major supply problem, as gas still makes up a large part of the country’s energy balance.

According to the International Energy Agency, Pakistan's natural gas production peaked in 2009, with its share in the total energy supply has been rising steadily since then. This has led to a slow-moving crisis, as Pakistan is now struggling to patch the difference gap.

Major cities are increasingly suffering from prolonged supply cuts, which hits hard both the households and businesses. Last December, the government said the country would soon run out of local gas, increasing dependence on expensive imported gas.

The issue of supplying the country with gas assumes important political significance. Imran Khan, who is facing growing criticism at home, expects breakthrough solutions in this area.

Liquefied natural gas (LNG) imports are now seen as a quick solution to the energy crisis caused by falling domestic gas production. With the country's reserves dwindling by 9% annually, the increasing number of import companies are switching to LNG to keep production facilities running. Today, 60% of Pakistan's LNG is used by three power plants, while the remaining 40% is used by the industrial sector.

Earlier, Pakistan has tried to build a gas pipeline from Iran, but the project fell under US sanctions. Another pipeline project with Turkmenistan (TAPI) failed due to the deteriorating political situation in Afghanistan.

Pakistani Stream is therefore seen as the most likely alternative to existing and ever-existing projects.

Pakistan currently has two LNG terminals, Engro Elengy Terminal Limited (EETL) and PGP Consortium Limited (PGPCL) at Port Qasim, which were built in 2015 and 2017, respectively.

With the 2023 elections approaching, the government is desperately trying to solve the gas deficit by prime minister’s new instruction to the government to build a third terminal by the end of 2023.

Currently, Pakistan imports 4.5 million tonnes of LNG annually through Qatar Energy, which has long-term contracts with Pakistan. The country has previously bought large volumes of gas from Italian oil and gas giant Eni and commodity trader Gunvor. However, this winter, after both Eni and Gunvor defaulted on their deliveries, Pakistan had to buy gas from Qatar Energy paying an exorbitant sum to cover its demand—$30.6/MMBtu.

When Pakistani intentions and Russian plans match

Amid existing problems with gas supplies to the West, Russia is keen to secure new promising markets and push out potential competitors. The design capacity of the Pakistani Stream has everything it needs to do this.

The two countries are not only exploring the possibility of expanding gas supplies, as Russia also considers Pakistan as a prospective military-technical partner—something it has avoided in the past because of India's opposition.

Since 2016, Pakistan and Russia have conducted regular military exercises. On February 15, 2021, Russia and Pakistan signed a series of agreements to supply air defence systems, anti-tank missile systems and small arms. Pakistan is also buying Mi-35 attack helicopters from Moscow. Back in November 2014, they signed another agreement on defence cooperation, which contributed to active development in this area too.

In addition, both sides share the same views on key regional and international issues, including Afghanistan. After Taliban’s recent coming to power, Islamabad remains perhaps the most effective international partner for Moscow in dealing with issues related to Afghanistan, including regional security issues.

It is likely that the geopolitical turbulence spurred by the ongoing military action in Ukraine could make significant adjustments to cooperation plans between Moscow and Islamabad.

The world is going through challenging times. Amid increasing confrontation between Russia and the West, an expected dialogue between the two nuclear powers, Pakistan and Russia, is a crucial, if not decisive, condition for stability in Asia.