The economy of Pakistan is under pressure, and several important economic indicators specify a dire scenario. The decision-makers must have a real debate about how they intend to take genuine action to address the difficulties ahead as the problems with oil, gas, and power worsen for the general public and the government. Unfortunately, we are mired in a political drama that never seems to let up.
The first shipment of crude oil and petroleum products is anticipated to enter Pakistan in late March after the completion of a definitive agreement between Pakistan and Russia. In Pakistan, to negotiate the contract, Russian Energy Minister Nikolay Shulginov said that we have already resolved to prepare an agreement to address all of the concerns that we have with respect to volume, payments, insurance, and transportation.
Even though certain important elements still need to be worked out, the agreement would greatly impact Pakistan’s economy and relations with the rest of the world if it were to go through. It is the first significant step that Pakistan and Russia have taken toward developing their bilateral cooperation in oil and gas trading. In the past, discussions in this respect remained at the level of first expressions of interest. Pakistan now intends to meet 35% of its whole crude oil need from Russia and start imports in a few months. If all goes according to plan, the trade may significantly alter the bilateral relationship, enabling both nations to better organize their interactions.
The possibility of importing gas and oil from Russia also gives Pakistan another outlet to acquire oil at a lower cost. This is crucial since Pakistan’s foreign currency reserves are adequate to pay for three weeks’ worth of oil imports, putting the country in a similar scenario to the default. Most of Pakistan’s imports are made up of energy, and the country would benefit from cheaper oil from Russia by being able to control its growing trade imbalance and balance-of-payments issue. To pay for Russian oil, Pakistan is anticipated to utilize the Chinese yuan. The joint declaration states that the oil and gas trade transactions would be set up such that both nations profit after an agreement on the technical specification has been reached. This may lessen some of the strain on Pakistan’s foreign exchange reserves.
The outcome is also a significant diplomatic victory for Pakistan. Following Russia’s invasion of Ukraine, it seems that Pakistan has discovered a means to evade the sanctions imposed by the West. Pakistan might not have gone this far in talks with Russia if it had been concerned that the agreement would upset the United States and its allies. This is especially significant since Pakistan is now in negotiations for another review to allow the release of significant money from the International Monetary Fund (IMF).
The speed at which Pakistan and Russia are closing a deal suggests that the United States may not oppose the two nations doing commerce. It’s also probable that Pakistan accepted American advice while deciding to acquire Russian oil. The United States and Pakistan’s usual Gulf energy suppliers have not yet made any public declarations objecting to Islamabad’s continuing talks with Moscow.
The U.S. seems ready to ignore the agreement. Ned Price, a spokesman for the State Department, said that “the U.S. was sensitive to the difficulty of stabilizing Pakistan’s economy. I know Pakistan’s collaboration with the IMF and other global financial organizations. We want Pakistan to be in a situation where its economy is stable”. According to reports, Washington has increased financial involvement with the present Pakistani administration. A team of top U.S. Department of Treasury officials is scheduled to visit Pakistan shortly to address various areas of financial assistance for Pakistan. In addition, the American embassy in Islamabad plans a seminar on energy security challenges for Pakistan in March.
For Pakistan, everything seems to be going well. It is encountering little opposition in its efforts to reach an agreement with Moscow. Now, Islamabad should concentrate on fulfilling all technical requirements to guarantee that Russian supplies reach Pakistan’s ports as soon as possible. Thus, the IGC session is crucial and significant. The general diplomacy in the Asian area around energy and gas has also caught Pakistan off guard. A power struggle between the two giants has developed out of what started as China’s economic sway over the ASEAN area. It is now being fueled by Russia’s attempts to advance east. India’s oil consumption appeared to have no boundaries as it devoured roughly 60 million barrels of Russian oil in 2022. Is India only trying to restock its oil supplies, or is it attempting to sway regional oil diplomacy on the Quad’s behalf? With the best U.S. oil refineries awaiting Russian oil supply, which has been speculated as another reason for the increased Indian oil supply, a ban on Russia from Europe does not have a significant impact on its oil and gas supply. The officials’ nerves will be tested as they attempt to clinch a successful deal, particularly with the IMF watching their every move intently.
Pakistan’s greatest failure has been the inability to recognize the actual problems that we are currently facing and the propensity of moving funds from one area to another over the last 75 years without truly paying our bills and commitments. The most recent Geneva Convention is a prime example of this pattern when Pakistan obtained bank and soft loans totaling more than $ 9 billion to avoid the looming economic crisis. The facilitators of Pakistani government machinery need to reevaluate several things, including their upcoming diplomatic commitments and agreements as well as our internal competence.