Building a new strategic relationship

Russia can pour big investment into energy sector, provide huge market for Pakistani goods

ISLAMABAD:

Strategic relations between states play a critical role in strengthening economic ties, which have become all the more important for enhancing the standard of living of people and ensuring prosperity of nations.

Keeping that in view, Pakistan and Russia are inching closer and their joint North-South Gas Pipeline project is going to deepen the strategic partnership between the two countries. There is a saying among diplomatic circles that emphasises “don’t put all eggs in one basket”.

This is what India followed in its foreign policy whereas Pakistan’s old foreign policy tilted entirely towards the United States. At that time, Pakistan severed all its relations with Russia and remained in the US fold, in effect “putting all eggs in one basket”.

After the end of the Cold War, Pakistan has realised that it should not solely rely on one country and must also develop relations with Russia, which is not only rich in energy resources but has also wide influence in international affairs. Russia also wants to establish its footprint in different areas of Pakistan’s economy.

The leadership of Pakistan also wants to bolster ties with the emerging strategic partner – Russia. As a first step, Pakistan’s government has resolved the dispute with Russia about exporters’ claims. After the breakup of Soviet Union, the export proceeds of Pakistani businessmen had got stuck, prompting Islamabad to freeze over $100 million of Russian money in National Bank of Pakistan.

According to the law, the Russian government does not offer any credit facility to the country with which it has some dispute. The decades-old exporters’ claims have now been settled and Russia can offer a credit facility to Pakistan.

However, uncertainty has still gripped the North-South Gas Pipeline, which will take gas supplies from south to north to feed Punjab industries. US sanctions on Russian companies and bureaucratic hurdles on the part of Pakistan have caused delay in executing the project. Pakistan and Russia signed the Inter-governmental Agreement for the pipeline project in 2015.

The two sides have made a lot of efforts to execute the project. About a year ago, the Supreme Court, while hearing a case pertaining to the Gas Infrastructure Development Cess (GIDC), also set a deadline of six months for kicking off work on the project.

However, the deadline has expired. There has been discussion in different circles that Pakistan should implement the gas pipeline project by laying a 56-inch diameter pipeline for gas transmission. But Sui gas companies have conveyed to the government that they do not have the expertise to build such a pipeline. They say they have the capacity to lay a 42-inch diameter pipeline.

Special Assistant to Prime Minister on Energy and Petroleum Tabish Gauhar has also written letters to PM Imran Khan and Energy Minister Hammad Azhar, advocating that Pakistani companies should build the gas pipeline. In the meantime, the US has opposed the project as it does not want to see Russia establish its footprint in Pakistan.

The US diplomat also met the energy minister of Pakistan a day before a Russian team and Pakistani officials were going to hold talks on the NorthSouth Gas Pipeline. However, Pakistan high-ups are on the same page and believe Islamabad should execute the North-South Gas Pipeline project in close cooperation with Russia for developing a better strategic partnership.

The project will provide both countries with equal opportunities for pressing ahead with many other schemes as well. Russia has planned to inject $8 billion into the energy sector of Pakistan. In addition to that, news reports have suggested that Pakistan and Russia are also working on a $9 billion defence deal.

Moreover, Pakistan has offered Russia and Central Asian states access to its strategic Gwadar Port. Pakistan needs Russia and the Central Asian Republics to turn Gwadar Port into a success story. Furthermore, Russia provides a big market for export of a significant number of Pakistani products, particular food items. During the standoff with the US and European Union on the Ukrainian issue, Moscow had imposed a ban on the import of $45 billion of food products from the EU bloc.

Pakistan can capitalise on such opportunities by offering its food products and merchandise at attractive prices to Russia. On the diplomatic front, in addition to China’s backing, Pakistan needs another strong voice of support in the international arena in furthering the cause of occupied Kashmir and dealing with the challenges posed by the global financial watchdog – the Financial Action Task Force (FATF).

In this case too, Russia can be a strong backer of Pakistan. Lastly, Pakistan has been engaging in projects with different countries, particularly China, on a state-to-state contract arrangement. It has awarded several hydrocarbon exploration blocks to Kuwait without inviting competitive bids to enhance the strategic partnership with the Gulf Arab nation.

In addition to that, Pakistan has executed a mega project of Pak Arab Refinery Limited (Parco) with the United Arab Emirates (UAE), offering a higher return of 25%. Such types of deals can also be struck with energyrich Russia, which also has expertise in the field of energy. Russia has demanded 18% rate of return, which is comparatively lower. So, the time is ripe to engage extensively with Moscow and bolster the strategic and economic ties.

THE WRITER IS A STAFF CORRESPONDENT