THE apparent headway made with Russia for the purchase of its crude oil, petrol and diesel at discounted prices is a positive development for the country’s wobbly economy. Struggling with an unprecedented liquidity crisis and a severe energy crunch due to global price shocks and disruptions, the government must not let this opportunity pass, especially since the American sanctions on Moscow, after the latter’s invasion of Ukraine, have already been removed for low- and middle-income countries seeking Russian energy. Musadik Malik, the state minister for petroleum, who had led a government team to Moscow for exploring the possibility of Russian energy imports, did not specify at what price Russia will supply its discounted oil products, or say whether the oil imports would comply with a $60 per barrel cap imposed by the G7 nations and EU on Russian seaborne oil from this week. But he claimed that the price would be similar to the discount being given to other countries or even cheaper. With the details of the deal to be settled during the upcoming visit of Russia’s energy minister to Islamabad in January, some remain sceptical because of successive governments’ failure to protect the nation’s energy interests in the past. Mr Malik also revealed that Moscow had invited Pakistan to initiate talks on long-term LNG government-to-government contracts.
If there is one lesson that we must learn from the recent spikes in global energy prices and post-Covid supply disruptions exacerbated by the war in Ukraine, it is that we should quickly diversify our sources of energy procurement and lock long-term supply contracts to ensure price stability and availability. As the minister has pointed out, Pakistan requires at least 8pc to 10pc growth in energy supply each year if it is to achieve a 5pc to 6pc economic growth rate to create new jobs and alleviate poverty. But the recent international oil and gas price shock and supply disruptions mean that a country like Pakistan, facing chronic balance-of-payments troubles, with energy imports making up the largest portion of its import bill, will never be able to meet its needs unless it devises plans to reduce its reliance on expensive imported fuel. While we should definitely lock in long-term contracts for uninterrupted supplies, the longer-term and cheaper solution to our challenges lies in investing in the exploration of our own untapped oil and gas resources and encouraging work on renewable solar and wind power.
Published in Dawn, December 7th, 2022