Alerts. Real-time analysis of events occurring at the intersection of economics, finance and global security concerns.

On July 16, reports emerged that three out of six companies that have shown interest in the ongoing partial-privatization efforts for the Pakistan Steel Mills (PSM) are unspecified companies from Russia and China.  The government’s pursuit of a public-private partnership for PSM is intended to help revive the financially distressed mill, which is Pakistan’s largest industrial complex.

In this context, it is noteworthy that earlier this year, the Pakistani government removed the PSM rehabilitation project from the China Pakistan Economic Corridor (CPEC) framework – backtracking on Islamabad’s previous decision to allocate the country’s largest industrial unit solely for Chinese investors.  Although Pakistan has intermittently demonstrated an interest in diversifying away from its dependency on China, given the pace of recent large-scale projects between the two countries, it is difficult to characterize this earlier decision as being exclusively motivated by these considerations.  That said, Pakistan is seeking to walk a fine line when it comes to demonstrating a credible degree of separation from China.  PSM plays a central role in this saga, which could become more complicated with a serious Chinese bid for its purchase.

Overtures from Moscow regarding PSM are also significant, as they would invigorate a presently minimal bilateral economic relationship.  This would be consistent with the sentiment behind a February 2020 deal between the two countries, whereby a $93.5 million settlement agreement was reportedly reached to resolve a nearly 40-year trade dispute between the two countries, existing since the Soviet-era.  The settlement (which represented a Pakistani payment to Russia) has been characterized as impetus for more robust Russian investment in the country’s industrial sector.

Earlier, in December 2019, Russian officials at the intergovernmental level expressed interest in providing $1 billion in investment towards revival of PSM.