NHS Media recently had the privilege of engaging in a detailed conversation with Mr. Taimur Fahad Khan, a seasoned analyst well-versed in the intricacies of international relations. The focus of the discussion centred around the evolving dynamics of Russia-Pakistan ties, shedding light on the economic, political, and strategic considerations that shape this complex relationship.
- Pakistan’s limited refining capacity presents a significant hurdle, necessitating efforts to address this constraint and build a more robust infrastructure.
- India’s strategic partnership with Russia, coupled with its advanced refining capabilities, holds a central role in the regional context.
- The India-Middle East and Europe Corridor (IMEC) emerges as a strategic response, reflecting broader geopolitical strategies amid global infrastructure competition.
- Connectivity projects in Pakistan require tackling economic challenges, ensuring political stability, and creating an attractive environment for foreign investments.
Mr. Khan highlighted a critical aspect of global energy dynamics: oil pricing. He pointed out that the United States and the European Union had imposed a price cap of $60 per barrel on Russian oil. However, Russia has been skillfully navigating this constraint by exporting crude oil at prices below the stipulated cap to several countries. Notably, India, China, and Turkey were among the beneficiaries, securing oil at rates as low as $51 per barrel.
In contrast, Pakistan chose not to avail itself of this opportunity due to concerns over incurring secondary or primary sanctions by the US and its Western allies. Furthermore, the economic challenges confronting Pakistan, including currency depreciation and low reserves in the State Bank, played a pivotal role in this decision. Yet, the greatest hurdle lay in devising a secure payment mechanism. Ultimately, Pakistan decided to use the Chinese Yuan, establishing a Letter of Credit (LC) in a Chinese bank to facilitate transactions. However, Pakistan’s existing hydro-skimming refineries were ill-equipped to efficiently process Russian crude oil, rendering the endeavor economically unviable.
Mr. Khan emphasized that Pakistan’s capacity limitations constituted a major stumbling block. He observed that political statements from various quarters often served political expediency more than addressing ground realities. Pakistan currently lacks the refining capacity to meet the prevailing API standards. However, Mr. Khan noted that recent developments, such as the oil refinery policy, aim to rectify this situation. This policy includes discussions on developing deep-conversion refineries and upgrading brownfield and greenfield facilities. Until Pakistan upgrades its refining infrastructure, its efforts in this domain may remain rhetorical.
Shifting focus towards India, Mr. Khan underscored the enduring and strategic nature of India-Russia relations. Over the decades, these two nations have nurtured their partnership through numerous agreements spanning various sectors. Of particular note is India’s refining capacity, which enables the efficient processing of Russian crude oil.
Delving into regional geopolitics, Mr. Khan examined the India-Middle East and Europe Corridor (IMEC). While the corridor’s feasibility is evident, its successful implementation hinges on the unwavering political will of participating nations. He drew parallels with the U.S. Build Back Better World (B3W) proposal, which sought to counter China’s Belt and Road Initiative (BRI). Unfortunately, B3W faced challenges stemming from funding and alignment issues among partner nations. IMEC, he explained, is part of a broader effort to offer an alternative to BRI. Its realization, however, is contingent on the commitment of participating countries.
Mr. Khan provided insights into the International North-South Corridor, noting that it is a practical project with ongoing work. The project’s initial cargo reached India in May 2022, and its completion is anticipated by late 2023 or early 2024. This corridor promises to streamline and expedite trade. Success in this endeavor would be amplified by continued cooperation among Iran, Russia, and India.
Mr. Khan also highlighted several connectivity and transit projects, including KASA 1000 and TAPI. Regrettably, these opportunities have remained largely untapped due to Pakistan’s economic constraints, political instability, and national security considerations. To attract foreign investment, Pakistan must first ensure political, financial, and economic stability for these projects.
Regarding the possibility of conducting transactions in Chinese currency, Mr. Khan noted that Pakistan faced no inherent obstacles but lacked the required reserves in Chinese currency. He suggested that Pakistan should explore this option, but its feasibility depends on the country’s capacity.
Lastly, Mr. Khan revealed that Pakistan and Russia engage in regular discussions on capacity building. However, Russia’s existing sanctions pose a potential challenge. The success of such capacity-building endeavors, he argued, hinges entirely on Pakistan’s economic conditions.
Mr. Taimur Fahad Khan underscored the multifaceted nature of Russia-Pakistan relations. To make meaningful progress in this complex geopolitical landscape, Pakistan must address its economic challenges, enhance political stability, and create a conducive environment for foreign investments and connectivity projects. The dynamics between Russia and Pakistan, in turn, will continue to evolve in response to these domestic and international factors.