KARACHI, Pakistan
Once arch-rivals Russia and Pakistan are currently scrambling to ride out the latter’s increasing oil and gas demands, a move welcomed with caution by local analysts.
Pakistan’s State Minister for Petroleum Mussadiq Malik told a press conference on Thursday in the capital Islamabad that Russia had agreed to provide oil to Pakistan at discounted rates to meet Islamabad’s rising domestic and industrial energy needs.
From March onwards, he added, Pakistan would procure oil from Moscow at a discounted price as “all the formalities” with regard to the bilateral agreement would be finalized by then.
Pakistan, according to him, would purchase crude oil, petrol, and diesel from Russia.
Islamabad will also ink long-term contracts with Moscow for procurement of gas, he maintained.
The two sides reached the understanding after a series of bilateral visits in recent months, with the latest tour of Islamabad by a high-level Russian delegation led by Energy Minister Nikolay Shulginov last week.
Partial solution
The procurement of oil has long been at the center of local politics, particularly after the visit of former Prime Minister Imran Khan only a day before Russia launched its war on Ukraine on Feb. 24, 2022.
Khan, ousted through a no-confidence vote in parliament in April, claimed that his Moscow visit was one of the reasons behind his ouster.
Samiullah Tariq, a Karachi-based energy expert, reckons that the understanding with Russia would help Pakistan partially mitigate its rising energy demands, and oil import bill.
Nonetheless, he said, this would not be sufficient to resolve the issue to a large extent as it requires some “key steps” to be taken by Islamabad itself.
“The entire energy sector should be seen through a business prism,” Tariq told Anadolu.
Quoting last year’s oil import bill of $26 billion, he said the country needs an “as much as fast” shift to renewable energy sources, mainly solar and wind, to meet its requirements.
“Electricity production devours the lion’s share of the imported oil, which is causing cascading effects on the country’s already ailing economy. This share needs to be curtailed and shifted to local gas and renewable energy sources,” he said, calling for fresh gas explorations in the country.
‘US is unlikely to object’
Munawar Hussain Panhwar, an associate professor of International Relations at Quaid-I-Azam International University Islamabad, said Pakistan’s longtime ally the US is unlikely to object to the understanding, considering the ongoing serious energy crisis across the world after the Russian invasion of Ukraine last year.
“Several US allies from South America to Asia stood away from the Washington-sponsored sanctions resolution in the UN. They have kept their options open to meet their energy needs through Moscow,” Panhwar told Anadolu.
Therefore, he thought, there are slim chances of the US opposition to this move.
“In fact, I believe there is a tacit agreement between Islamabad and Washington on this issue,” he maintained.
Commenting on Moscow’s condition for payment of oil in the currencies of “friendly” countries, Panhwar observed it would benefit Pakistan, considering its depleting dollar reserves.
‘CPEC helped improve power capacity’
Power breakdowns are common in the South Asian nuclear country, primarily because of poor infrastructure and lax maintenance standards.
In summers, the country’s electricity demand jumps to 28,000 megawatts, leaving a supply gap of 4,000 MW to 6,000 MW.
In winters, the demand and supply gap stands at 8,000 MW.
Pakistan, Tariq observed, has significantly improved its power capacity by at least 14,00 MW, mainly after the implementation of the multi-billion dollars China Pakistan Economic Corridor (CPEC) project signed in 2015.
Power generation is the largest chunk of the 64 billion dollars mega project, followed by infrastructural development.
Farhan Mahmood, another Karachi-based economic and energy researcher supported the view, stating that the country has the capacity to cope with its energy demand.
Nonetheless, he said, the rising petroleum and gas prices and “primitive” distribution and transmission systems are major obstacles to meeting the actual requirements.
Speaking to Anadolu, Mahmood called for improving the “utilization” of power, especially in winters, through industrial activities.
“Pakistan has a lesser industrial activity compared to its power capacity. Power plants cost heavy operational charges even if they do not produce electricity, primarily in winters,” he said.
“Reduction in oil consumption and reliance on renewable energy sources will be a two-way benefit. It will not only reduce the flight of dollars but also prop up the country’s sluggish industrial sector,” Mahmood maintained.
