hile the uncertainty about the Nord Stream 2 pipeline—linking Germany with Russia via the Baltic Sea—continues to affect natural gas prices in Europe, the Kremlin looks eastward to expand its energy business. Early next year, Moscow and Islamabad are expected to sign a deal on the construction of the Pakistan Stream pipeline, stretching from the port city of Karachi in the south to the city of Kasur in Pakistan’s Punjab province.
What is behind the Kremlin’s decision to get involved in construction of the $2.5 billion project? Unlike in the case of Nord Stream 2, where Russia’s energy giant Gazprom is expected to provide 55 billion cubic meters of gas per year to Europe, in Pakistan Russian energy corporations will play a minor role. Russia’s Center for Operational Services of the Ministry of Energy, the Eurasian Pipeline Consortium, and the Pipe Metallurgical Company, are assigned to build the 1,040 kilometer (646 miles) long pipeline that should be completed by 2024. However, the very construction of the project is unlikely to bring enormous profits to the Russian Federation. At least not directly, and not immediately, which is why Russia's participation in Pakistan Stream seems to be more strategic than commercial.
According to reports, Russia’s Energy Minister Nikolai Shulginov and Pakistani Economic Affairs Minister Omer Ayub Khan agreed to develop and sign the shareholder agreement for the Pakistan Stream gas pipeline by February 15, as well as statutory documents of the Special Purpose Company (SPC) for the construction of the pipeline, by January 31. Initially, it was planned that the Russian side would own a controlling stake, assume 85 percent of the costs, and operate the gas pipeline for 25 years, but in the revised version of the deal, Pakistan's share will increase to 74 percent, while Russia's share will drop to 26 percent.
Pakistan Stream does not connect Russia and the Asian nation. There will be no direct pipeline linking the two countries that do not even have a common border. In other words, the pipeline, built by Russian companies, will run only through Pakistan and will be oriented towards the nation’s domestic demand. Indeed, the country is one of the fastest growing gas markets in Asia, and is energy-hungry. Islamabad plans to borrow the loan from Russian banks to cater to the needs of foreign component spending in the project, which will be used to purchase pipeline and compressors. It is, however, highly uncertain if Russian energy corporations will be selling natural gas to Pakistan at all.
The idea behind the Pakistan Stream pipeline, originally named North-South gas pipeline in 2015, is to increase natural gas consumption in the Asian nation. Gas to Pakistani seacoast will be delivered by liquefied natural gas (LNG) carriers. Hypothetically, Russian LNG, most likely from Sakhalin and Yamal, can be supplied to terminals in the south of Pakistan, but it is believed that Moscow’s ambitions in the “Land of Pure” are somewhat different. Technically speaking, Russia will develop Pakistan’s gas infrastructure so that Islamabad can receive energy from Russian competitors. From the Kremlin’s perspective, a new pipeline will increase the demand for gas in Pakistan, which means that nearby gas exporters—primarily Qatar—could decide to redistribute flows, reducing supplies to Europe. Some Russian experts believe that the Middle Eastern gas producer cannot significantly increase its LNG production, which means that in the future, Qatari gas supplies to Europe will undoubtedly fall. Such a scenario would be beneficial for Russia because a lack of competition in European markets would strengthen Moscow’s position as Europe’s major gas supplier.
Pakistan, for its part, is trying to implement two more significant energy projects. The first one is the construction of a pipeline from Iran, and the second project is Turkmenistan–Afghanistan–Pakistan–India Pipeline (TAPI). As a result of the sanctions the United States imposed on Tehran, the construction of the Iran-Pak pipeline project remains substantially delayed, which is why Islamabad seems to be more focused on the $10 billion TAPI project. According to Russian Foreign Minister Sergey Lavrov, the Kremlin is also interested in the construction of the TAPI pipeline, and the nation’s officials seem to advocate closer military ties with Pakistan.
"Pakistan is one of the few countries with which military cooperation is developing very actively this year, despite the complex epidemiological situation," said Valery Gerasimov, General Staff of the Armed Forces of the Russian Federation.
On the other hand, during Russian President Vladimir Putin’s recent visit to India, the two “special and privileged strategic partners” have concluded 28 different deals, including one for the manufacture of 600,000 Russian assault rifles for the Indian Army.
When it comes to energy, the Kremlin remains relatively reluctant in deepening ties with New Delhi, even though the two nations agreed to expand cooperation in the oil and gas sector. Still, Yelena Burmistrova, Deputy Management Board Chairperson and General Director of Gazprom Export LLC, pointed out in May that Russia’s energy giant is no longer interested in the construction of a gas pipeline in India. Thus, at least for the time being, in the Russo-Indian-Pakistani triangle, energy cooperation with Islamabad seems to be a priority for the Kremlin.
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How Russia Benefits from the Pakistan Stream Pipeline
Photo by Mike Benna via Unsplash.
December 21, 2021
Russia is helping Pakistan to build out its natural gas infrastructure. Though this won't facilitate Russian exports of natural gas to Pakistan, the aid isn't altruistic. Russia expects Pakistani gas demand to divert Middle Eastern supply from Europe to Pakistan, increasing reliance on Russian gas.
W
hile the uncertainty about the Nord Stream 2 pipeline—linking Germany with Russia via the Baltic Sea—continues to affect natural gas prices in Europe, the Kremlin looks eastward to expand its energy business. Early next year, Moscow and Islamabad are expected to sign a deal on the construction of the Pakistan Stream pipeline, stretching from the port city of Karachi in the south to the city of Kasur in Pakistan’s Punjab province.
What is behind the Kremlin’s decision to get involved in construction of the $2.5 billion project? Unlike in the case of Nord Stream 2, where Russia’s energy giant Gazprom is expected to provide 55 billion cubic meters of gas per year to Europe, in Pakistan Russian energy corporations will play a minor role. Russia’s Center for Operational Services of the Ministry of Energy, the Eurasian Pipeline Consortium, and the Pipe Metallurgical Company, are assigned to build the 1,040 kilometer (646 miles) long pipeline that should be completed by 2024. However, the very construction of the project is unlikely to bring enormous profits to the Russian Federation. At least not directly, and not immediately, which is why Russia's participation in Pakistan Stream seems to be more strategic than commercial.
According to reports, Russia’s Energy Minister Nikolai Shulginov and Pakistani Economic Affairs Minister Omer Ayub Khan agreed to develop and sign the shareholder agreement for the Pakistan Stream gas pipeline by February 15, as well as statutory documents of the Special Purpose Company (SPC) for the construction of the pipeline, by January 31. Initially, it was planned that the Russian side would own a controlling stake, assume 85 percent of the costs, and operate the gas pipeline for 25 years, but in the revised version of the deal, Pakistan's share will increase to 74 percent, while Russia's share will drop to 26 percent.
Pakistan Stream does not connect Russia and the Asian nation. There will be no direct pipeline linking the two countries that do not even have a common border. In other words, the pipeline, built by Russian companies, will run only through Pakistan and will be oriented towards the nation’s domestic demand. Indeed, the country is one of the fastest growing gas markets in Asia, and is energy-hungry. Islamabad plans to borrow the loan from Russian banks to cater to the needs of foreign component spending in the project, which will be used to purchase pipeline and compressors. It is, however, highly uncertain if Russian energy corporations will be selling natural gas to Pakistan at all.
The idea behind the Pakistan Stream pipeline, originally named North-South gas pipeline in 2015, is to increase natural gas consumption in the Asian nation. Gas to Pakistani seacoast will be delivered by liquefied natural gas (LNG) carriers. Hypothetically, Russian LNG, most likely from Sakhalin and Yamal, can be supplied to terminals in the south of Pakistan, but it is believed that Moscow’s ambitions in the “Land of Pure” are somewhat different. Technically speaking, Russia will develop Pakistan’s gas infrastructure so that Islamabad can receive energy from Russian competitors. From the Kremlin’s perspective, a new pipeline will increase the demand for gas in Pakistan, which means that nearby gas exporters—primarily Qatar—could decide to redistribute flows, reducing supplies to Europe. Some Russian experts believe that the Middle Eastern gas producer cannot significantly increase its LNG production, which means that in the future, Qatari gas supplies to Europe will undoubtedly fall. Such a scenario would be beneficial for Russia because a lack of competition in European markets would strengthen Moscow’s position as Europe’s major gas supplier.
Pakistan, for its part, is trying to implement two more significant energy projects. The first one is the construction of a pipeline from Iran, and the second project is Turkmenistan–Afghanistan–Pakistan–India Pipeline (TAPI). As a result of the sanctions the United States imposed on Tehran, the construction of the Iran-Pak pipeline project remains substantially delayed, which is why Islamabad seems to be more focused on the $10 billion TAPI project. According to Russian Foreign Minister Sergey Lavrov, the Kremlin is also interested in the construction of the TAPI pipeline, and the nation’s officials seem to advocate closer military ties with Pakistan.
"Pakistan is one of the few countries with which military cooperation is developing very actively this year, despite the complex epidemiological situation," said Valery Gerasimov, General Staff of the Armed Forces of the Russian Federation.
On the other hand, during Russian President Vladimir Putin’s recent visit to India, the two “special and privileged strategic partners” have concluded 28 different deals, including one for the manufacture of 600,000 Russian assault rifles for the Indian Army.
When it comes to energy, the Kremlin remains relatively reluctant in deepening ties with New Delhi, even though the two nations agreed to expand cooperation in the oil and gas sector. Still, Yelena Burmistrova, Deputy Management Board Chairperson and General Director of Gazprom Export LLC, pointed out in May that Russia’s energy giant is no longer interested in the construction of a gas pipeline in India. Thus, at least for the time being, in the Russo-Indian-Pakistani triangle, energy cooperation with Islamabad seems to be a priority for the Kremlin.
