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Wednesday July 24, 2024

Islamabad mulling LNG pipeline deal with Moscow

This deal will only be possible if Pakistan can find a solution to avoid sanctions from the USA

By Mehtab Haider
July 11, 2024
Prime Minister Shehbaz Sharif (left) holds a meeting with Russian President Vladimir Putin in Astana on July 3, 2024. — YouTube screengrab/Geo News Live
Prime Minister Shehbaz Sharif (left) holds a meeting with Russian President Vladimir Putin in Astana on July 3, 2024. — YouTube screengrab/Geo News Live

ISLAMABAD: Amid an offer made by Russia for a liquefied natural gas (LNG) pipeline for Pakistan and India, Islamabad is mulling over different options to strike a multi-billion-dollar deal to fulfil its pressing energy requirements. This deal will only be possible if Pakistan can find a solution to avoid sanctions from the USA.

Russian President Vladimir Putin held an important meeting with Prime Minister Shehbaz Sharif on the sidelines of the SCO summit recently, during which he offered Pakistan the construction of an LNG pipeline via Iran to Pakistan and then connecting it to India. “Now different ministries are doing internal spadework and Minister for Petroleum Musadik Malik has been assigned to conduct a study and come up with viable options, keeping in view the sanctions imposed by the US on Russia and Iran,” top official sources confirmed while talking to The News here on Wednesday.

Pakistan and Russia’s bilateral trade stood at $800 to $900 million annually, and there is an ambitious plan to increase it to its real potential in the coming years. Pakistan’s relevant ministries have been assigned to assess this potential, considering regional and global realities, and come up with viable solutions to promote trade up to $20-$25 billion per annum. While this may seem like a wish list at the moment, there is significant potential that can be exploited in the years to come.

In the aftermath of the Russia-Ukraine war, Russia’s trade with European countries was reduced by 70 percent, leading them to seek new markets, including South Asia. President Putin’s meeting with Pakistan’s prime minister followed substantial groundwork, and one of the offers was related to the import of LNG from Russia through Iran to Pakistan and India.

Different routes are being studied to materialise this project, as previous efforts for regional energy connectivity in the form of both power and gas have not materialised despite considerable promotion over the last few decades.

On regional connectivity and promoting trade, Pakistan is also exploring options to strengthen trade ties with Azerbaijan, whose president is set to visit Islamabad. Pakistan’s exports to Azerbaijan currently hover around $7 million, with imports of $14 million per year. The Ministry of Commerce has prepared an ambitious plan, projecting that annual export potential could exceed $1 billion from the existing $7 million, though this projection was reduced after criticism from various ministries.

In 2015, Russia and Pakistan had agreed to build a 1,100-kilometre (683-mile) pipeline to deliver imported LNG from Karachi on the Arabian Sea coast to power plants in the northeastern province of Punjab. The pipeline’s designed annual capacity stands at 12.4 billion cubic meters (bcm) with the possibility of being increased to 16 bcm.

Sources said that Islamabad wants to materialise the Russian LNG project without antagonising the US, so different options are being explored to achieve a win-win situation for all parties concerned. On the one side, Pakistan seeks multi-billion-dollar deals with Russia and China, and on the other hand, it is aiming to strike a deal with the IMF within the ongoing month. There is no easy solution available, but Islamabad may have to replicate Turkey’s experience, whereby it had struck such a commercial agreement without facing the negative impacts of US sanctions.