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Tuesday January 31, 2023

Blow to $3 bn gas pipeline project: Russia upset over new move by PD for renegotiation on settled issues

The 'powerful circles' had highlighted the suspicious involvement of some civil indenters who had ruined the project earlier

November 08, 2021
Workers are seen at the construction site of the Nord Stream 2 gas pipeline, near the town of Kingisepp, Leningrad region, Russia, June 5, 2019.File photo
Workers are seen at the construction site of the Nord Stream 2 gas pipeline, near the town of Kingisepp, Leningrad region, Russia, June 5, 2019.File photo 

ISLAMABAD: In a massive blow to the $3 billion Pakistan Stream Gas Pipeline project (PSGP), the flagship and strategic project of Pakistan and Russia, the Petroleum Division has opened a new Pandora's box asking for re-negotiations on issues already settled in inter-governmental agreement (IGA) and approved by the federal cabinet.

This has been asked from Russia in a letter that was written directly by the Joint Secretary, Petroleum Division, to the Deputy Director of Department of Foreign Economic Cooperation and Fuel Markets Development, Ministry of Energy of the Russian Federation. The direct letter to the Energy Ministry of Russia is also a negation of the protocol, which was finalized a year back when the-then SAPM on petroleum was Nadeem Babar. At that time, it was decided that the government-to-government communication would be made through foreign ministries of both the countries.

The 'powerful circles' had highlighted suspicious involvement of some civil indenters who had ruined the project earlier; unfortunately, they are again in the lead and want to sabotage the project. Unless the MoEs of both countries are directly communicating, this project will remain in trouble as civil indenters, who have managed inroads into the Ministry of Energy, have their own financial benefits attached to the project.

The letter has reportedly upset Russia as Moscow deems the letter asking for guarantees from Russian Nominated Entity. The EPC contractor is tantamount to a flagrant breach of IGA and Heads of Terms. And no one knows what authority the Petroleum Division has to initiate a re-negotiation of a government agreement without any input or approval from the federal cabinet.

Top sources said that the Russian delegation that was due to start talks on November 9-12 in Islamabad to finalize the remaining points of the shareholding agreement has been stopped by the authorities in Moscow.

They took the letter, the sources said, from the Petroleum Division as a shocking surprise and called back the Russian delegation to Moscow that was in Dubai to reach Pakistan on November 9, 2021.

Pakistan and Russia earlier held four-day talks to finalize the shareholding agreement in Islamabad on October 25-28, which ended inconclusively with the announcement that both sides would again hold more talks in Islamabad from the week starting from today (November 8) onward. Now the letter written on November 05, 2021 by Joint Secretary Development in Petroleum Division Syed Zakria Shah to Alexander Tolparov, Deputy Director of Department of Foreign Economic Cooperation and Fuel Markets Development, Ministry of Energy, Russian Federation, has compelled Moscow to stop its delegation from coming to Pakistan for talks on shareholding for the time being. “Russia wants the time for reaction to the letter and then it will make up its mind if it should visit Pakistan or not for talks on shareholding.”

Top sources said that the names of the parties to become shareholders of the project company have already been agreed in an inter-governmental agreement signed in October 2015 and amended in May 2021 (IGA). Pursuant to the clauses of this agreement, further commitments have been made between May and October 2021, including the signing of a Head of Terms of a Shareholder Agreement to be signed between the parties representing their respective governments. Now, the sources said that the Petroleum Division wants to unilaterally and independently re-negotiate major covenants already agreed to.

The negotiations have been taking place subsequent to the IGA between the Pakistan Nominated Entity, Inter State Gas System (ISGS) and the Russian Nominated Entity, PAKSTREAM LLC, a draft shareholder agreement was shared with the ISGS for their comments and discussions, on which ISGS is dragging its feet. In fact, any specific discussion points regarding the shareholders agreement should have been raised by the ISGS instead of the Petroleum Division writing to their Russian counterpart, that too bypassing all government norms and procedures.

Highest offices of the PTI government want this strategic project to happen in the best possible way but unfortunately incompetency and mala fide of the Petroleum Division is not letting it happen. Top men of the Petroleum Division must be made accountable why such a letter has been written when the IGA, which clarifies Russian entities had already been approved by the cabinet and why such big issues like security from Russian government, EPC contractor can’t be shareholder, are highlighted in the letter just two days before the Russian delegation was to arrive.

This scribe sent a questionnaire to secretary petroleum, saying that the PD has written a letter to the Russian ministry for re-negotiations of some issues settled in the IGA, which has been approved by the federal cabinet and to this effect JS Development wrote a letter to the Russian deputy director in breach of protocol bypassing the MOFA. In the letter, the PD asked Russia to provide sovereign guarantee knowing the fact Russia has 26pc shares and their banks will provide debt to Pakistan. “Don’t you think that this letter would prove detrimental for the talks on Shareholding Agreement and why the PD has bypassed the Foreign Ministry for such correspondence knowing that fact a year back it was decided that since the project is being negotiated under G2G arrangement and no one from ministry will talk to any Russian company involved in the project and correspondence will take place between the governments through MOFA. This scribe has reports that the Russian side has got annoyed and postponed the talks for an indefinite period scheduled from Nov 9.

The secretary petroleum said that this is all a misunderstanding and legal teams of both sides are working jointly and sharing with each other feedback. “Russians are planning to come again. Rest is all propaganda,” he said.

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