RUSSIA, PAKISTAN GAS PIPELINE

FT- MARCH 16, 2022 - Pakistan plans to finalise a Russian-built gas pipeline despite international pressure to isolate Moscow economically, as the US ally searches for alternatives to ease a domestic energy crunch. 

Finance minister Shaukat Tarin told the Financial Times that a deal with Russia to build the multibillion-dollar Pakistan Stream pipeline “is almost done”. Also known as the “North-South” project, it will transport liquefied natural gas from the southern port city of Karachi to Pakistan’s north. 

“We need a gas pipeline to transport LNG from south to north. That’ll become almost essential for us in the next two or three years,” he said. “Either there’s an alternative for us or we’ll go ahead with this deal . . . This is the best alternative as of now, and this was obviously done before Ukraine.” 

Pakistan, a western ally during the cold war and during the post-2001 “War on Terror”, has refused to condemn Russia’s invasion of Ukraine despite public pressure from the EU, UK and others. Prime Minister Imran Khan said he “regretted” the conflict but wanted to remain neutral. 

Islamabad has drifted closer to Moscow in recent years, partly as authorities look for ways to shore up energy security and believe jeopardising ties with Russia would be too costly. While Pakistan produces gas, in recent years it has also started importing from the Gulf as energy demands rise.

The EU, too, needs Russia’s energy sector, sourcing about 40 per cent of its LNG from the country. The bloc has announced plans to cut imports by two-thirds this year.

But Pakistan’s relationship with Russia risks straining links with the west. Khan visited Moscow on the same day Russia invaded Ukraine last month, the first visit by a Pakistani premier in more than 20 years.

The EU, UK, Australia and others “urged” Pakistan to condemn Russia in a UN General Assembly vote. Pakistan abstained from the vote, with Khan attacking the western countries at a campaign rally for treating Pakistanis like “slaves”.

Tarin said he hoped Russian officials would soon visit the country to finalise the deal for the Pakistan Stream pipeline following Khan’s Moscow visit. The pipeline, to be built by a collection of Russian companies, is estimated to cost more than $2bn.

Well before the latest surge in oil and gas prices, Pakistan was struggling with a widening current account deficit and double-digit inflation exacerbated by rising global commodity prices. Pakistan last month resumed a contentious $6bn IMF programme to stabilise the country’s balance of payments and shore up government revenues.

But Tarin said the conflict presented a new “crisis” that would push up the cost of imports including energy and wheat, which Pakistan previously sourced from both Russia and Ukraine. Higher prices following the US’s ban on Russian oil and gas imports would affect Pakistan “very negatively” unless Washington unlocked alternate energy sources, he said. Energy makes up about a quarter of Pakistan’s import bill.

He added that a nuclear deal between the US and Iran would allow Islamabad to revive a plan to build a pipeline delivering gas directly from Iran to neighbouring Pakistan, which is suspended because of international sanctions. “If there’s a deal . . . this is the cheapest [option]. It’s next door,” he said. “It’ll be very good for us.”

Tarin said it was “only fair that people should respect” Pakistan’s “neutral” stance. The west “have been our allies for a very long time. We’re listening to them, but we told them, ‘Listen, we don’t believe in taking sides. We’re with you as much as China and others’,” he added.

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