Russia is expected to finalize an agreement with Pakistan this summer to build a new steel mill in Karachi, according to Consul-General Andrey V. Fedorov. This marks the first official confirmation from a Russian representative regarding the long-discussed project.
The initiative would revive Cold War-era industrial ties between the two nations as Islamabad seeks new foreign investment and aims to strengthen its relationship with Moscow.
The Soviet Union originally built the Pakistan Steel Mills (PSM) in the 1970s, once considered a flagship symbol of the country’s industrial self-reliance. However, the facility has been inactive since 2015 due to chronic mismanagement, political interference, and mounting financial losses. By the end of the 2024 fiscal year, PSM had accumulated losses of Rs255.8 billion (approx. $902 million) and liabilities of Rs359.9 billion ($1.27 billion), while still employing over 3,500 workers despite being non-operational.
Now, Pakistani and Russian officials are engaged in advanced technical and diplomatic negotiations to lay the groundwork for a modern steel production facility. Russian experts have already inspected the proposed site in Karachi, with another delegation expected soon to finalize the technical roadmap.
“Our last negotiations were on May 27,” Fedorov told Arab News. “Our technical experts have already examined the facility, and another team may soon arrive to complete the preparations. Some proposals are on the table from both the Russian and Pakistani sides. We’re ready to develop a roadmap for the construction of a new steel mill in Karachi.”
While Fedorov declined to provide a timeline for the start of construction, he indicated that discussions had pointed to a summer agreement.
“We’re now at the start of summer, and I hope this summer brings positive outcomes. I expect we will soon reach an agreement,” he said.
The Russian envoy did not disclose the anticipated investment volume but confirmed that both parties are working on drafting “mutually beneficial contracts and agreements.”
“A completely new factory must be built,” Fedorov added. “This needs to be discussed at the expert level.”
Pakistan Stream Gas Pipeline: A Parallel Priority
Russia has historically contributed to Pakistan’s industrial infrastructure, including the construction of the Guddu Power Station in the 1980s. More recently, the two nations have expanded cooperation in energy and trade, even amid global tensions stemming from Russia’s invasion of Ukraine.
Energy collaboration has become a focal point. Pakistan, which heavily relies on imported petroleum and liquefied natural gas (LNG), received its first discounted shipment of Russian crude oil last year, signaling a shift away from its traditional Middle Eastern suppliers.
With domestic gas reserves dwindling, Pakistan imported over $4 billion worth of LNG and LPG by May in the last fiscal year. In FY24, this figure stood at $4.7 billion, mostly sourced from Qatar.
In December, Pakistan and Russia held the ninth session of their Intergovernmental Commission on Trade, Economic, Scientific, and Technical Cooperation. The talks included renewed commitment to the long-delayed Pakistan Stream Gas Pipeline project.
Originally signed in 2015, the project aims to transport imported LNG from Karachi to Punjab and other energy-starved regions. Despite its importance, progress has stalled due to unresolved issues regarding project structure, financing arrangements, U.S. sanctions on Russian firms, regulatory roadblocks, and Pakistan’s weak fiscal health.
Fedorov acknowledged the challenges but remained optimistic.
“We’re working to fix these issues, and I hope we can soon offer some positive surprises — for Pakistan, for Russia, and for the world,” he said.
When asked about the specific causes of delay, Fedorov declined to elaborate, stating that such sensitive projects “do not benefit from too much public discussion.”
“There’s nothing that could act as a firewall between Russia and Pakistan in executing this project,” he said.
Despite obstacles, Fedorov emphasized both countries’ commitment to moving forward.
“We know the problems, and we believe they can be solved,” he concluded.