Energy Crisis In Pakistan
On July 7, 2022, Bloomberg ran a story with the headline “Pakistan’s $1 Billion Gas Tender Flop to Worsen Energy Crisis”. The author, citing traders, writes that state-owned Pakistan LNG received not a single offer in a $1 billion liquefied natural gas purchase tender. That indicates both the extent of the global fuel shortage, and also the reluctance of suppliers to sell to a country in the depths of an economic crisis.
Pakistan wanted to buy 10 LNG cargos from the spot market for delivery from July to September via the tender that was closed unsuccessfully. According to data compiled by BloombergNEF, Pakistan bought almost half of its LNG on the spot market last year, with the rest coming under long-term deals.
Most likely, no one wanted to take the risk because the country is in a serious economic crisis. Pakistan is under pressure from the International Monetary Fund, and the government is forced to seek compromise despite the strict demands of the neoliberal creditors. At the same time, frequent power cuts (leading to riots) are taking place throughout the country, and inflation has already surpassed 20%.
Meanwhile, gas prices in Asia have risen considerably over the past few weeks as some LNG flows are diverted to Europe where they are willing to pay more than in the Asian markets. Obviously, it is the thoughtless sanctions policy of the US and its satellites which has disrupted the supply chain, although Washington and its puppets are trying to blame everything on Russia.
But a legitimate question arises – why don’t the same Western partners or Muslim countries, such as Qatar, which is a major producer and supplier of LNG, come to Pakistan’s aid? Where is the solidarity in the support of the Organization of Islamic Cooperation? Pakistan’s neighbor, Iran, also has huge gas reserves, but in this case there are two serious limitations – the same sanctions and logistical problems. There is no pipeline between the two countries, and shipping by sea requires special ships.
Islamabad may not have realized yet that the West will not help them, and this situation is unlikely to change for the better, because now the very foundations of the current world order are being destroyed. The problem will not be solved by itself and it is obvious that it is necessary to make important decisions now that can save the country from collapse.
Russia can improve the situation in the energy sector which in turn will affect the economic resilience. It is not just about the possibility of supplying natural gas, but about comprehensive activities. And this will be beneficial both for Pakistan, because progress will be evident after a while, and for Russia as diversifying energy exports and providing services in a strategic perspective is in Moscow’s interests.
Russian President Vladimir Putin also said the day before that it is necessary to redirect the energy supplies to the South and East. This is exactly where Pakistan is located. In addition, Russia is already building the Pakistan Stream pipeline which, however, has a limited route within the country.
In broader terms, not only Pakistan will be interested in gas and oil pipelines, because a comprehensive approach can help to solve the problem of energy shortage in several countries, since the neighboring India and Afghanistan also need a reliable supply of hydrocarbons. There remain questions of political will of the leadership and technical decisions – how to lay the pipelines, since the mountainous terrain of the Pamirs presents certain challenges. If we take the northern part of Pakistan as the entry point, one of the lines may go to India through Jammu and Kashmir. And in this respect, Russia’s role would also be peacemaking, since there are irreconcilable positions between Pakistan and India on the ownership of Kashmir.
A more convenient route could connect Jalalabad on the Afghan side and Peshawar on the Pakistani side, passing through Pashtun lands.
In addition to the possibility of laying the pipelines, restructuring Pakistan’s outdated electrical networks with Russia’s help could bring tangible benefits. Moscow has a lot of experience in this issue.
In addition, Russia can participate in the construction of new nuclear power plants. Of the foreign partners so far, only China is working in this sector, but Islamabad can balance Beijing’s presence with new contracts. Pakistan’s Atomic Energy Commission has previously made ambitious plans to commission new commercial power plants (it was announced that 32 nuclear power plants would be operational by 2050), but in reality things are slow. Islamabad could study the experience of Turkey’s Akkuyu nuclear power plant (since the traditional bilateral ties between these countries are based on trust) and make the necessary decision based on this.
This kind of Russian participation in the Pakistani economy would also stimulate work in other sectors given the development of bilateral relations; Pakistan would therefore have greater opportunities for access to the Russian market.