Pakistan bets on Russian LNG: What does it mean?

Editor's note: Mehmood Ul Hassan Khan, an Executive director of the Center for South Asia and International Studies in Islamabad, Pakistan.

Pakistan and Russia have been working together in the energy sector for years, but recently this partnership has gained fresh momentum. Pakistan is looking to secure its long-term energy needs and sees Russia as a key partner in achieving this. The ongoing discussions between the two countries are focused not just on the supply of liquefied natural gas (LNG) and oil, but also on exploring new ways to expand cooperation in various infrastructure projects . Given the current global challenges and geopolitical tensions, the relationship between Pakistan and Russia is becoming more crucial than ever.

Pakistan's energy collaboration with Russia dates back several years, and it's been steadily growing. In 2023, they signed a deal for energy supplies, and the first test shipment of 100,000 tons of oil was successfully delivered to Pakistan. This initial success has encouraged Pakistan to push for deeper ties with Russia in the energy domain. According to Mumtaz Zahra Baloch, the spokesperson for Pakistan’s Ministry of Foreign Affairs, the country is pleased with the outcomes of the recent talks and is keen to keep discussing the potential for long-term LNG supplies from Russia to meet Pakistan’s energy demands.

Baloch highlighted that the current cooperation has already yielded positive outcomes, and the ongoing discussions are reinforcing the desire to keep working together. Pakistan and Russia are looking into long-term LNG supply options, which Pakistan hopes will secure favorable and stable conditions for its energy needs. As Pakistan actively seeks to diversify its energy sources, collaboration with Russia is seen as a particularly valuable opportunity.

However, there are challenges to consider. A major issue is the payment mechanism for these supplies under the constraints of U.S. sanctions against Russia, which complicates matters for both sides. Pakistan and Russia will need to continue finding ways to navigate these restrictions and ensure steady supply chains. Additionally, Pakistan faces internal economic challenges, like a shortage of foreign currency and the need for better terms for importing energy resources. Despite these hurdles, both countries are committed to ongoing dialogue and working towards mutually beneficial solutions.
Pakistan’s interest in Russian LNG is driven by a strong desire to diversify its supply sources and reduce dependence on traditional suppliers. In the past, Pakistan has faced disruptions in LNG deliveries when suppliers chose to redirect their shipments to more lucrative markets, leaving Pakistan in a bind. Long-term agreements with Russia could offer a reliable solution, allowing Pakistan to plan and manage its energy resources more efficiently. Such deals would provide much-needed stability in energy supplies and enhance Pakistan's energy security.

A major opportunity for new agreements could come during the Shanghai Cooperation Organization (SCO) Council of Heads of Government meeting, which Pakistan will host in October 2024. Pakistan is anticipating a visit from Russian Prime Minister Mikhail Mishustin and hopes for active Russian participation in these discussions. Key issues on the agenda will include gas and oil supplies, and both sides aim to outline specific steps to broaden cooperation in these areas. This meeting could provide a unique platform for the two nations to discuss strategic interests and identify areas for further collaboration.

Working with Russia also involves looking at various gas supply routes, including the "Pakistan Stream" pipeline project and possible swap arrangements through Iran. These initiatives could greatly strengthen Pakistan’s energy security and contribute to the development of regional infrastructure. For example, the "Pakistan Stream" project plans to build a gas pipeline to transport gas from the south of Pakistan, where LNG terminals are located, to the north, where the major industrial consumers are. This would allow Pakistan to make more efficient use of its resources and reduce transportation costs.

Securing long-term LNG supply contracts with Russia remains a priority for Pakistan. As mentioned, the country is in talks with Russia about possible supplies that could cover up to 10% of its oil needs. This would be a major step toward ensuring Pakistan's energy stability. Long-term contracts would provide Pakistan with the necessary volumes of gas and help avoid supply disruptions that could hurt its economy.

The potential for expanding cooperation between Pakistan and Russia in the energy sector is clear. With the current geopolitical landscape and the need for diversified energy sources, Pakistan and Russia are poised to build a long-term partnership that could be beneficial for both. However, the success of these plans will depend on how well both sides can overcome existing challenges and adapt to the rapidly changing global environment. Only through mutual understanding and collaboration can stability and growth be achieved in the energy sector.

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