THE fast changing regional security situation warms relations between adversaries of the Cold War era. Pakistan supported the US during Cold War. Now it decides to strengthen diplomatic and economic ties with Russia. It has sought Russian cooperation in power generation, textile, construction, liquefied natural gas (LNG), oil and gas and petrochemical sectors. The current government of Pakistan also offers to set up a “Special Economic Zone” exclusively for Russian investors.
Pakistan contributes to enhance stability in the region and Russia has already acknowledged it. Both countries have decided to share information to choke terrorism financing and combat money laundering. The will to improve relations is being translated into economic cooperation. Both countries resolve to strengthen defence and economic ties besides cooperating in regional matters. Both countries have decided to set up five working groups on industry with a focus on Pakistan Steel Mills (PSM). The other groups include a finance and banking group, a food and agriculture group, a transport and logistics group and an education group. According to a statement by Finance Minister Ishaq Dar on Nov 20, 2015, both countries would hold joint navy exercises in Dec 2015.
Pakistan is facing a major issue of energy deficit. To cement cooperation in the power sector, Russia showed interest in becoming a partner in four-nation Central Asia-South Asia (CASA) 1000 electricity supply project. It wants to supply power through CASA transmission line during winter season when energy supplies from CASA partners will not be feasible. Pakistan also appreciates Russia’s largest investment through Inter-Government Agreement on North-South Gas pipeline. It is a 1100km North-South gas pipeline to link LNG terminals from Karachi to Lahore. Pakistan has worked on a similar model with China under which a Chinese firm would lay the Gwadar LNG pipeline to Nawabshah and build an LNG terminal at the deep-sea port at a cost of $2.5 billion. Pakistan wants to complete this $2 billion gas pipeline project by December 2017. It has also invited Russia’s President Vladimir Putin to inaugurate the North-South Gas pipeline project. This is first energy deal between the two countries after 30 years which shows the shift in Pakistan’s policy to attract investment to overcome its energy crisis. The primary task for both countries is to implement the North South Gas Pipeline project by ensuring supplies from Russia.
It has been decided between both countries that a joint coordination committee will be set up to follow progress on projects that have been picked for Russian investment. Russia is the second-largest producer of natural gas in the world, and is seeking to diversify its export markets. Russia may also finance seven mega energy sector projects. Russia’s largest energy company Gazprom is interested in supplying LNG to Pakistan. Russian investors are also interested in investing and entering into joint ventures for the manufacturing of heavy-duty trucks, passenger cars and other specialized vehicles, shipbuilding and manufacturing of gas turbines and compressors. The Trade Development Authority of Pakistan is planning to take a business delegation to Russia and ICCI members will also be part of the delegation that will look for business opportunities.
Pakistan wants to strengthen trade, economic, scientific and technical cooperation with Russia for mutual benefits. Its cooperation with Russia is the key to achieve its goal for better trade with Central Asia. Putin’s visit to Pakistan will be significant for moving forward in the areas of defence and trade. Such bilateral agreements would help to enhance the socio-cultural understanding of the two countries as well. However, this bond of cooperation for better future must be secured through strong economic ties and by bridging trust deficit between two countries.
—The writer works for Islamabad Policy Research Institute.