Since the previous government of Pakistan Peoples Party (PPP), which was in power from 2008 to 2013, Pakistan and Russia have seen some major developments in their relations, which had remained virtually frozen since the days of General Ziaul Haq due to the standoff over the Soviet invasion of Afghanistan.
The two countries signed a landmark deal for defence and military cooperation during a visit of Russian Defence Minister Sergei Shoigu in late November, which experts believe is a step forward and clears the way for enhanced bilateral economic ties.
During a meeting of the joint ministerial commission held recently in Moscow, Russia floated proposals that it could extend financing for a liquefied natural gas (LNG) pipeline in Gwadar, expansion of the struggling Pakistan Steel Mills, electricity import schemes and rehabilitation of energy projects.
This is a clear indication that the two sides are very enthusiastic about deepening bilateral relations, especially economic partnerships.
Furthermore, Russia has given the go-ahead to two state-run oil and gas exploration companies of Pakistan – Oil and Gas Development Company (OGDC) and Pakistan Petroleum Limited (PPL) – to search for hydrocarbon reserves in the energy-rich vast landscape.
On the other hand, Pakistan government has also allowed two Russian oil and gas exploration companies to find hydrocarbon reserves in the country.
With these developments, Russia is going to emerge as a key investor in Pakistan, after China, with the allocation of $8 billion, mainly for energy projects as well as other fields. This could give a boost to the economy of Pakistan, which has separately signed $45 billion worth of investment deals with China for energy and infrastructure projects.
Impediments
However, the recent plunge in crude prices is going to reshape the geopolitical and economic scenario and will bolster the interests of United States, pushing oil-exporting countries like Russia, Iran and Venezuela to the verge of financial collapse.
The oil market slump came following a surge in US shale oil production and sales and the refusal by the oil-producing cartel, Opec, to slash production levels to respond to the price fall.
The US wants to frame new geopolitical and economic orders by reducing the role of Iran and Russia in the Syrian conflict. This is why the US wants to destabilise the economies of Iran and Russia, which subsequently will hit their investment plans for different countries.
A 50% drop in the oil market since June and the resultant depreciation of Russian rouble have hurt its economy and may force it to reconsider its multibillion-dollar investment programme for Pakistan.
On the other side, the excessively cheaper crude oil is expected to send China’s economy soaring and with that comes a strong possibility that its investors will continue to pump investment capital into Pakistan. At present, Pakistan is experiencing acute energy shortages and needs a huge capital injection to explore and tap the untouched domestic hydrocarbon reserves. The energy deficit is said to erase 3% off the country’s economic growth every year. It also faces a dearth of finances and is receiving a cushion from the International Monetary Fund (IMF) in the shape of $6.7 billion Extended Fund Facility.
In this scenario, experts view the Russian investment offers as a big positive for Pakistan’s economy and could balance investment inflows. At present, China has a far higher share in investment promises, apparent from the $45 billion being poured into different sectors.
For the first time, there is a realisation among different circles that Islamabad is trying to maintain a balance between foreign and economic policies by reviving relations with Moscow.
The writer is a staff correspondent
Published in The Express Tribune, December 29th, 2014.
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