Pakistan: A Lifeline for Russian Gas?
In the wake of Russia’s war with Ukraine, international interest in energy security has largely focused on the war’s consequences for Europe. Much of Europe is now energy insecure in the absence of Russian gas, while Russia itself has lost a key export partner. However, these developments cast a new light on one Russian-funded gas pipeline under construction in Pakistan that could link these two countries, reshape Russia’s relations in South Asia, and potentially open a new market for Russian gas.
South Asia’s energy demands are far from uniform. Despite significant advances in economic development, the World Bank forecasts that South Asia is in dire need of improving its resilience. Countries like India and Sri Lanka have improved their resilience through furthering imports of liquid natural gas (LNG), exploring domestic gas reserves, and expanding renewables. However, the story is significantly different in Pakistan.
Pakistan’s energy infrastructure is inadequate and suffers from poor resilience, as was recently proven by catastrophic floods that compromised key power stations— an economic crisis that left at least 33 million people without access to basic utilities, medical care, or food. In spite of Pakistan’s recent strides in domestic power production, particularly through Chinese-funded coal power plants, and expanding hydroelectric power to 27% of the country’s energy consumption, Pakistan remains acutely dependent on LNG imports.
Prior to the shocks to global energy posed by the pandemic and Russia’s invasion of Ukraine, Pakistan imported about 11.8 billion cubic meters (bcm) of LNG annually, at a steep cost for a nation with poor political and economic stability. For Pakistan, the chance to improve its energy infrastructure, stability, and resilience would be invaluable. Enter the Pakistan Stream Pipeline. Stretching from the cities of Karachi to Kasur, near Lahore, the pipeline aims to revolutionize the country’s infrastructure. Karachi, Pakistan’s largest city, is a port metropolis on Pakistan’s southern coast and the point of entry for Pakistan’s much-needed shipments of LNG. Lahore, meanwhile, is the heart of Punjab, the most populous province and the center of Pakistani industry and manufacturing. Constructing the pipeline would allow a staggering 12.4 bcm of natural gas to move through the power terminals that are to be constructed alongside the 683 mile pipeline. The pipeline is projected to cost 2 billion, but Pakistan’s persistent problems with inadequate infrastructure and political insolvency seem ill-fated to take on this cost. Pakistan’s solution, until 2022, lay with Russia.
From its inception, the Pakistan Stream Pipeline was Russian-funded and intended as not only a project for Pakistan’s energy needs, but also for Russia's export markets. By improving Pakistan’s ability to take in new imports of LNG, the Pakistan Stream Pipeline would seemingly also open a new market for Russia’s gas. However, in the most recent version of the two countries’ agreement, Russia had limited its shares to just over 25% and did not involve its state-owned gas giant Gazprom, which played a large role in the construction of the Nord Stream 1 pipeline to Germany that was damaged earlier this year. This apparently inexplicable decision to not maximize Russia’s potential profits betrays a different potential reason for Russia to aid Pakistan in solving its energy crisis: a strategy that, in 2022, is appealing for the exact opposite reason.
The Pakistan Stream pipeline’s goal of improving Pakistan’s energy infrastructure would raise domestic LNG demand and make this new Asian market all the more attractive, specifically to Middle Eastern LNG exporters who could reorient gas shipments towards ports like Karachi. If Pakistan’s share of export LNG from Gulf countries like Qatar grows, then naturally imports would need to fall for partners like European countries— leaving the opportunity open for Russian gas. The Pakistan Stream Pipeline, then, would be the perfect avenue for the Kremlin to strengthen its hold over European energy, while forging new diplomatic ties with Pakistan.
However, the situation in 2022 is quite different from 2015, when the plans for this pipeline were first revealed. Today Europe is, of course, no longer a competitive customer for Russian gas. The economic effects of Russia’s war, from crashing Russia’s stock market to prompting a mass exodus of Western multinational corporations, has changed Moscow’s priorities. Russia’s economy is in need of a willing customer for its gas. Then, should Russia turn back to Pakistan as a new partner?
Pakistan seems well-suited to a new partnership with Russia, having demonstrated renewed interest in making new inroads in continuing progress on the pipeline. Originally slated to open in 2020, construction had stalled due to Western sanctions on Russia, but is due to resume, per a statement from President Vladimir Putin in September. With Pakistan having joined India in abstaining from the UN Security Council’s motion to condemn the invasion, the question of boycotting Russia’s actions in Ukraine poses less of a problem for the deal.
However, therein lies one additional problem in transforming Pakistan into a key world destination for Russian energy exports: India. India and Russia’s historical alliance has not shown signs of dissipating in the wake of Russia’s invasion, which could complicate Russian hopes of furthering a relationship with India’s longtime rival. India, in addition to abstaining from condemnations of Russia’s war in Ukraine, has continued to enter multibillion dollar arms deals and pursue bilateral oil and gas expansion with Moscow. Nonetheless, Russia’s Gazprom confirmed last May that it was no longer interested in constructing a gas pipeline to India. With Indian general elections on the horizon and the international situation around Ukraine continually evolving, Russia may continue to feel emboldened in furthering ties with Pakistan.
Pakistan’s dire energy needs and the prior existence of the Pakistan Stream Pipeline project make the nation well-suited to assuming the demand for Russian gas lost from Europe. If Islamabad does grow closer to Moscow, the resulting shift away from a Russo-Indian alliance would consequently complicate the American relationship with Pakistan. American ties have already been strained by former Prime Minister Imran Khan’s allegations of a U.S. conspiracy behind his removal in April, coincidentally during the Russian invasion of Ukraine. Perhaps, India and the United States could use these developments to renew their relationship and further ties between two of the world’s largest democratic nations.