ISLAMABAD: The Saudi Arabian cabinet has formally approved a draftmemorandum of understanding with Pakistan focused on electricity sectorcooperation and electrical interconnection, marking a significant milestonein the longstanding strategic partnership between the two brotherly Muslimnations. This approval, announced in early January 2026 followingdeliberations in Riyadh, underscores Riyadh’s commitment to long-termenergy collaboration beyond conventional oil supplies. It comes as Pakistangrapples with chronic electricity deficits, where peak demand often exceedssupply by several thousand megawatts, leading to frequent load-shedding andeconomic losses estimated in billions annually. The MoU signals a shifttoward structured, sustainable joint initiatives that could stabilizePakistan’s power infrastructure and support Saudi Arabia’s push forregional energy integration.
The agreement builds upon prior engagements, including discussions duringhigh-level visits and the October 2025 launch of an Economic CooperationFramework prioritizing energy among other sectors. Reports indicate thatboth sides had been studying specific projects, such as an electricityinterconnection link, which would enable cross-border power exchange. Suchinterconnections are increasingly common in regional blocs, as seen in theGulf Cooperation Council grid, and could allow Pakistan to import surpluspower from Saudi Arabia’s expanding generation capacity while exportingduring off-peak periods. This potential linkage holds particular promisegiven Saudi Arabia’s investments in renewables and conventional power,contrasting with Pakistan’s reliance on imported fuels that strain foreignreserves.
Pakistan’s energy sector faces multifaceted challenges, including acircular debt exceeding trillions of rupees, inefficiencies indistribution, and a generation mix heavily tilted toward thermal sources.The country has pursued diversification through renewables, with solar andwind capacity growing but still insufficient to meet rising demand drivenby population growth and industrialization. The MoU provides a pathway fortechnology transfer, joint ventures, and Saudi investments in upgrades tothermal plants, grid modernization, and renewable projects. Saudi expertisein large-scale solar farms and energy efficiency could acceleratePakistan’s transition, potentially reducing reliance on costly liquefiednatural gas imports and mitigating environmental impacts.
From the Saudi perspective, the MoU aligns with Vision 2030 goals todiversify the economy, enhance energy exports, and foster internationalpartnerships in clean technologies. Riyadh has pursued similarcollaborations globally, including in renewables and hydrogen, and viewsPakistan as a strategic ally with significant market potential. Previoussupport mechanisms, such as deferred oil payments worth billions ofdollars, have already eased Pakistan’s fiscal pressures; this new frameworkextends that assistance into structural reforms. Officials emphasize thatthe agreement promotes knowledge exchange, skill development, and mutualinvestments, contributing to energy security for both nations amid volatileglobal markets.
The electrical interconnection aspect carries strategic importance,potentially creating a direct power corridor across the Arabian Sea region.Feasibility studies would need to address technical challenges likeundersea or overland transmission lines, voltage compatibility, andregulatory harmonization. Successful implementation could set a precedentfor broader South Asia-Middle East energy integration, enhancing resilienceagainst supply disruptions. For Pakistan, access to Saudi surplus—bolsteredby the Kingdom’s ambitious capacity additions—could alleviate shortagesduring summer peaks, supporting industrial output and household access.
This development occurs against a backdrop of strengthened bilateralrelations, including recent defense and economic pacts that reflect sharedinterests in regional stability. The MoU’s approval reinforces economicdimensions of the partnership, complementing humanitarian and labor tieswhere millions of Pakistanis work in Saudi Arabia. Experts anticipate thatfollow-up agreements will outline specific timelines, funding mechanisms,and pilot projects, transforming the MoU from intent to actionable outcomes.
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The move is expected to boost investor confidence in Pakistan’s powersector, attracting further Gulf capital amid reforms under internationalfinancial institutions. It also highlights the evolving nature of Saudiforeign policy, emphasizing pragmatic energy diplomacy to secure influenceand economic returns. As details emerge, the agreement could provetransformative for Pakistan’s quest for reliable electricity, fosteringsustainable growth and deeper interdependence with a key ally.
Source:https://timesofislamabad.com/01-Jan-2026/saudi-cabinet-approves-landmark-energy-cooperation-deal-with-pakistan
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