By: William Persing
President Vladimir Putin considers bolstering Russia’s energy engagement outside of the traditional trading partners as a key objective of his broader energy strategy. At the 2017 Gas Forum of Russia, Putin stated, “Considering the instability and growing competition on global energy markets...we must also strengthen cooperation with our foreign partners.” One energy partner of particular interest to the Kremlin is Pakistan. Moscow’s energy dealings with its old Cold War rival illustrate the ongoing political transformation between Russia and Pakistan, as well as the budding economic interest Moscow hopes to play in the region.
Russia’s energy strategy is noticeable both in direct investment in Pakistan and in expanded Russian involvement in multinational energy projects in the region, specifically the Turkmenistan-Afghanistan-Pakistan-India (TAPI) Pipeline, Central Asia-South Asia power Project (CASA-1000) and the proposed Iran-Pakistan Pipeline. The projects represent a delicate balancing act between Russia’s new embrace of Pakistan as a security and energy partner, while also trying to manage the expectations of Russia’s traditional ally, India, and the ascendant economic power in the region, China.
Bloomberg New Energy Finance projects that the demand for natural gas, particularly LNG, will grow dramatically over the coming decade. Islamabad’s shifting prioritization of natural gas over oil for energy production will only further encourage this demand. “Fuel oil imports could decline by up to 60 percent by fiscal 2019-2020 as the power sector switches to gas feedstock,” according to a report by S&P Global. Domestic production, however, has failed to satisfy consumption rates. Additionally, an overreliance on Qatar as Pakistan’s primary LNG supplier has left the country strategically vulnerable. For this reason, Pakistan has been eyeing Russia as a potential partner in order to diversify its energy flows. The Russian government warmly received these proposals with Russian Foreign Minister Sergei Lavrov saying, “The flagship project is construction of the North-South gas pipeline from Karachi to Lahore. Other options are also examined, including deliveries of liquified natural gas to Pakistan by Gazprom.”
Beyond the rhetoric of cooperation, some progress has been made on boosting Russia-Pakistan energy ties. In October 2017, Islamabad and Moscow signed an Inter-Governmental Agreement launching gas trade between the two countries. This was followed by Pakistani energy officials announcing negotiations for 10 billion USD in energy development between the two countries. Concurrently, there has been significant development on the Lahore to Karachi gas pipeline, being built by Rostec, which is set to transit 12.3 bcm per year. Though relatively small when compared to the hundreds of bcms per year sold to Europe and China, ongoing investment in Pakistan can be interpreted as Russia’s attempt to diversify its natural gas trade toward Asia.
Additionally, Russia’s energy influence in Pakistan is not limited to direct foreign investment. Moscow continues to wield varying degrees of influence on major multinational energy projects in Central and South Asia. For example, through the CASA-1000 project Russia hopes to connect itself to energy markets to its south. In 2016, Pakistan invited Russia to sell surplus electricity along CASA-1000 during idle months from October to April when hydroelectric power generation is lower. CASA-1000’s design includes open access with an expressed desire for Russia and other nations to contribute in the energy market. In conjunction with this agreement, Russia is looking to invest in a 600 megawatt gas-fired power plant in Jamshoro, Pakistan. Long-term, Pakistan appears eager to include Russia on international development projects that will increase the country’s electrical capabilities. Moscow has shown support for projects like CASA-1000 where there is a direct benefit to its energy sector.
In comparison, the relationship between Russia and TAPI has been more opaque. The nearly two decade-long dream of a pipeline connecting Turkmenistan to India continues to face roadblocks and challenges. Moscow’s relationship to TAPI has been complicated, owing to the often-strained relations between Russia and Turkmenistan. Stroytransgaz, affiliated with Gazprom, is currently constructing the Turkmenistan section of the pipeline. Arguably, Russia remains largely skeptical of the project due to its undermining of Moscow’s pipeline hegemony in Central Asia. Although Moscow has toyed with selling gas to India and Pakistan through TAPI, there remains stronger interest in direct sales of LNG to Pakistan and India rather than pursuing a greater stake in TAPI.
Finally, Russia’s connection to Pakistan’s energy development also stems from its support of the Iran-Pakistan gas pipeline. Gazprom has negotiated with Iran and Pakistan over funding and support for the construction of the pipeline. However, much like TAPI, the Iran-Pakistan pipeline, which was originally supposed to include India, has stalled in recent years due to difficulties on the Pakistani side. The future of the project rests on the ability of the Pakistani government to get behind the pipeline and Russia’s resolve to invest. Additionally, the Trump administration’s willingness or ability to torpedo the project, due to political disagreements with Iran, will also dictate the project’s feasibility.
Russia-Pakistan energy relations has its fair share of challenges. However, Russia’s energy ambitions toward Pakistan are intertwined with the broader geopolitical discord in the region. Terrorism, political instability and economic fluctuations risk upsetting the progress made by Russia. Additionally, it is not clear how Russian investment in Pakistan will coexist with China’s Belt and Road Initiative. Finally, the expansion of Russia-Pakistan relations risks colliding with the historic ties between Russia and India. Putin’s ability to manage these obstacles will ultimately decide the success of these projects moving forward.
Overall, Russia has and will likely continue to expand its influence in Pakistan’s energy sector. With the expansion of LNG exports and a degree of participation in all three multinational energy projects that Pakistan is involved in, Russia has secured a degree of leverage to augment its impact in South Asia. Russia’s ambition to inflate its exports to Pakistan reflects both its growing interest in Asian markets as well as a desire to strengthen ties with Islamabad.
William Persing is an intern at the EastWest Institute and a graduate from Columbia University's Harriman Institute with a master's degree in Regional Studies: Russia, Eurasia, and Eastern Europe.