ISLAMABAD: Pakistan has been bearing the brunt of a European plan to quit Russian fuel since the outbreak of the war in Ukraine, said a US-based media organization on Tuesday, since the ensuing situation in the global energy market is plunging the South Asian state into darkness.
Pakistani cities have to undergo planned power outages for several hours during a day, though the country had made significant investment in liquified natural gas (LNG) for the production of electricity by signing long-term contracts with suppliers in Italy and Qatar about a decade ago.
The agreements made to insulate Pakistan from price volatility in the international energy market, however, have not helped the country since its suppliers have defaulted on their commitments to Pakistan.
“There’s little reprieve on the horizon,” Bloomberg said in an article. “The cost of LNG has surged by more than 1,000 percent in the last two years, first on post-pandemic demand, then on the Russia invasion of Ukraine.”
The publication noted Russia was Europe’s biggest natural gas supplier, adding the continent was demanding more and more LNG to compensate for Russian fuel.
“So far this year, Europe’s LNG imports are up 50 percent from the same period last year and aren’t showing any sign of slowing down,” Bloomberg continued. “Policymakers in the European Union drafted a plan to significantly increase LNG deliveries as an alternative to Russian gas as they break ties with President Vladimir Putin’s regime over the war in Ukraine. Countries like Germany and the Netherlands are fast-tracking the construction of floating import terminals, with the first ones slated to start within the next six months.”
The increase in European consumption of LNG has led to its reduced supply to developing countries, making Pakistan’s LNG suppliers cancel more than a dozen shipments in recent months.
“Suppliers are usually loathe to cancel,” the write-up added. “It damages the business relationship, and it’s often very, very expensive. Developed markets typically demand ‘failure to deliver’ penalties of up to 100 percent.”
“Pakistan’s contracts called for a more modest 30 percent penalty for cancelation, most likely in exchange for lower prices overall,” it continued. “At this point, prices in the European spot market are high enough to more than offset those penalties.”
Bloomberg said industrial experts were criticizing European energy policies for creating “higher prices, economic scarcity and economic misery” around the world.
“It is ok for Europe to decide what they want within their borders,” the publication quoted one of them. “But it is unfair and unreasonable to export the mess abroad, especially to the developing world.”