Pakistan awaits the signing of the JCPOA to boost its regional role in Eurasia

Pakistan Prime Minister Imran Khan and the Iranian Supreme Leader Ali Khamenei (Credits: Khamenei.ir, CC BY 4.0, via Wikimedia Commons)
The possible signing of the JCPOA might support Pakistan’s desire to play a strategic and logistic role in the Eurasian energy market linking transit corridors and pipelines.

On March 17th, 2022, Pakistani Finance Minister Shaukat Fayyaz Ahmed Tarin stated that Pakistan will be interested in reviving its project with Iran as the JCPOA will be finalised. Furthermore, Islamabad will not stop the ongoing partnerships with Russian companies in the oil and gas field.

Pakistan is the world’s eleventh-largest importer of liquefied natural gas (LNG). To meet the internal demand, Islamabad built several LNG import terminals. The country has an extensive gas pipeline system of more than 100,000 km for domestic distribution. As imports of LNG is way more expensive than supplies through regional pipelines, Pakistan is looking forward to realising several infrastructural projects with neighbouring countries.

A plan to build a pipeline to import Iranian gas in Pakistan has been put on hold due to the sanctions imposed on Tehran. Pakistani Finance Minister, Shaukat Fayyaz Ahmed Tarin, said that the international agreement to renew the Joint Comprehensive Plan of Action (JCPOA) would allow Islamabad to resume its project with Tehran. Tarin underlined that it would be cheaper than importing LNG as it will be “next door”, benefiting the Pakistani economy (The Ukraine conflict can boost Iranian energy exports).

In recent years, Pakistan has moved also closer to Russia to improve its energy security. The country’s authorities believe that jeopardising ties with Russia would be too expensive. Tarin expressed hope that Russian officials would soon visit his country to finalise the Pakistan Stream gas pipeline deal following Prime Minister Imran Khan’s visit to Moscow last month. A group of Russian companies will build the pipeline, and its cost is estimated at more than 2 billion dollars.

Moreover, the Minister stressed that a joint pipeline project is already under construction by Russian companies and will transport LNG from southern Pakistan to its north. Tarin justified the agreement stating that it was signed before the Ukrainian crisis and that despite Western pressure on Russia, currently, this is the best alternative for Pakistan. The sanctions imposed on Russia might threaten the Pakistan Stream Gas Pipeline (PSGP) construction and the Russian state-owned energy company Gazprom’s pipeline project in offshore Pakistani waters.

Pakistan was also involved in the Turkmenistan-Afghanistan-Pakistan-India (TAPI) pipeline (TAPI Pipeline Project and the US-NATO Troop Withdrawal from Afghanistan. An interview with Ambassador Khaled Ahmad Zekriya). The project was delayed after the fall of the Ghani government in Afghanistan. The Islamic Emirate, which took power in the country, showed interest in reviving the project, and the Kremlin suggested that Russia might support it (Russian companies’ interests in Afghanistan and TAPI).

Why does it matter?

As an outcome of the ongoing Ukrainian crisis, the new European energy strategy caused the rise of oil and gas prices and the problematic availability of energy resources (Geopolitical scenarios of the Persian Gulf in the aftermath of the Ukrainian crisis).

Europe is looking to replace Russian gas with LNG from the United States, the Middle East, and Africa. As a result, due to the more attractive incomes, part of the oil and gas previously delivered to Asia was suddenly redirected to the Western world. The Gulf countries, from which also Pakistan is importing energy supplies, firmly stated that it is not possible to increase the production at the level that would have been needed in the current situation. Pakistan has a growing internal demand that the country meets with LNG imports. As it would be cheaper to import gas from neighbouring countries via pipelines, Pakistan is looking for partners in Eurasia who may fit its needs.

Regional actors might benefit from joint projects with Pakistan. The country has been part of the Central Asia Regional Economic Cooperation (CAREC) since 2010 and received investments from the Asian Development Bank (ADB). The CAREC corridor passes through China and Tajikistan, reaching Pakistan. Islamabad might provide Central Asian countries access to global markets through Gwadar, Qasim and Karachi ports. Nonetheless, Pakistan is probably the only country that could ensure corridors through Afghanistan. Notably, there are several CAREC projects regarding Afghanistan, such as the Kabul-Karachi economic corridor and the Peshawar-Torkham Expressway.

Pakistan aims to become a regional transit hub for energy and trade. As did Turkey, which developed its infrastructure to exploit its geostrategic position and become a link between Asia and Europe, Islamabad is developing its infrastructures to become a corridor for Eurasian markets, also exploiting the close relationships with China. In fact, China-Pakistan Economic Corridor (CPEC) is part of the Belt and Road Initiative (BRI). Islamabad has a free trade agreement with Beijing. Energy resources could go through Pakistan from Central Asia and the Middle East to Afghanistan and China. Landlocked Afghanistan will gain energy supplies and access to open sea waters, while China gains alternative roads to the disputed waters in the Indo-Pacific.

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This Monitoring article was written by Silvia Boltuc, Managing Director of SpecialEurasia.