The recent visit of the President of Pakistan to Russia raises the prospects for increased foreign investment into our fragile economy. According to official sources, we are mostly contemplating energy projects like the Turkmenistan-Afghanistan-India (TAPI) pipeline and developing coal technology along with some financial services and social sector investments. We also begin to turn a corner in improving relations with a country that caused the militarisation of Pakistan after the Afghan invasion. And as we begin to put the past behind us we see that although we may still be paying the price of the invasion today, there are glad tidings of a new strategy to meet the objectives of Pakistan’s foreign and economic policies. Or so it would seem to those unfamiliar with the experiences of others who have done business with Russia.
The last time one had the opportunity to comment on the former Soviet Union in an earlier column (Arctic Antics), the energy markets were reeling at the news of the oil giant BP partnering with Russia’s state-owned Rosneft to explore natural resources in the Arctic region. Those opinions didn’t go down too well with the Russian Consul General in Karachi who not only took the time to read them, but also sent in his two roubles to give the comfort that the BP-Rosneft deal would seriously contribute to the exploration of oil and gas reserves and will provide Russia and Europe with additional energy resources. The Honourable Consul General also clarified that there wasn’t going to be any of that nasty Litvinenko-esque radioactive poisoning. If one was to take his Excellency’s word for it, then any overpriced Geiger counter selling on Ebay is starting to look like a real bargain right about now. For if we are to have new economic partners then Pakistan needs to learn a thing or two about doing business with them, thus necessitating an examination of the twists and turns of what could be BPs last tango in Russia, or anywhere else for that matter.
When BP signed on to the Rosneft deal in January, its financial situation was not unlike Pakistan’s predicament after the Abbottabad operation – dire. Faced with diminishing prospects for growth and a struggle to win back partners after the disastrous Deepwater Horizon oil spill in the Gulf of Mexico, the future of BP depended on clinching the deal in Russia. Under the terms of the original arrangement with Rosneft, BP would gain access to the icy backwaters of the Arctic Ocean – hailed by the energy industry as a new oil frontier. But the deal quickly hit a snag when Russian shareholders in another of BP’s own ventures successfully filed a legal action to scupper it. Just this week, the BP-Rosneft deal which the Honourable Consul General so admirably championed has officially collapsed after protracted negotiations to buy out the shareholder group of Russian oligarchs broke down. While one is pleased to not have to look sheepish about the matter, smugness is very becoming at times like these.
The only worrying thing is that Pakistan may share a similar fate if it starts jumping into the sack with corporate Russia. For example, if the invitations to participate in the Iran-Pakistan or the TAPI gas pipelines are accepted, Pakistan will have to guard itself against the increasing tendency of Russia to use energy as a political and corporate weapon. If companies like BP, in addition to countries as economically disparate as Georgia, Ukraine, Poland and Germany have all had to contend with Russia’s coercive tactics, someone had better be watching out for the interests of Pakistan before any chance of attaining energy security is obliterated.
If moving forward with Russia is the only option for Pakistan, our government needs to ensure that all decisions are transparent and involve whatever semblance of democracy we can muster. Accepted that we have a long way to go before foreign investment can be hammered into serving the national interest of Pakistan, Russia is no white knight either. Poor governance, violence and corruption are so rampant that it seems only Pakistan can give it a run for its money. Perhaps we may even teach them a thing or two. But the advice for our government and entrepreneurs remains the same as that for BP’s CEO Bob Dudley – keep one eye on your partner and the other one looking out for radioactive polonium in your morning cuppa.
The writer is a consultant on public policy.