by Laraib Ali Khan 30 July 2023
The war between Russia and Ukraine has posed a tricky balancing act for Pakistan, which has to safeguard its economic interests and security without alienating its strategic partner or provoking its adversaries. Pakistan has adopted a pragmatic and flexible approach combining dialogue, cooperation, and diversification. Pakistan has also tried to leverage its regional and international role as a mediator and facilitator of peace and stability. Pakistan hopes that the war will end soon and that a peaceful and lasting solution will be found that respects both countries’ sovereignty and territorial integrity.
The war triggered a surge in global oil prices, as Russia is one of the world’s largest oil producers and exporters. The US and its allies have imposed sanctions on Russia’s oil and gas sector, disrupting supplies and increasing uncertainty. Brent crude prices reached nearly $130 per barrel in March 2022, up 43 percent from February 2021. Pakistan, a net oil importer, has faced severe terms of trade shock due to the high oil prices. According to the World Bank, Pakistan’s oil import bill increased 75 percent in FY2022, reaching $18.5 billion. This has put pressure on Pakistan’s current account deficit, foreign exchange reserves, fiscal balance, inflation, and growth. Pakistan has tried to diversify its sources of oil imports, such as Saudi Arabia and Iran, and to reduce its oil consumption through conservation measures and alternative energy sources.
The war also affected global wheat prices, as Ukraine is one of the largest wheat exporters in the world. The US and its allies have imposed sanctions on Ukraine’s agricultural sector, affecting its production and exports. Wheat prices increased by 100 percent in real terms between June 2021 and April 2022. Pakistan, which imported 39 percent of its wheat for domestic use from Ukraine in 2021, has faced a food security challenge due to the high wheat prices. According to the World Bank, Pakistan’s wheat import bill increased by 150 percent in FY2022, reaching $3 billion. This has contributed to higher food inflation, poverty, and social unrest. Pakistan has tried to increase its domestic wheat production by providing subsidies and incentives to farmers and diversifying its sources of wheat imports, such as Kazakhstan and Australia.
The war has also affected Pakistan’s trade relations with Russia and Ukraine and other countries involved in the conflict. Pakistan’s trade with Russia amounted to $790 million in FY2021, with a trade surplus of $270 million. Pakistan’s main exports to Russia were textiles, fruits, vegetables, rice, leather, and surgical instruments. Pakistan’s main imports from Russia were iron and steel, fertilizers, machinery, chemicals, and minerals. The war has disrupted these trade flows due to sanctions, transport difficulties, currency fluctuations, and security risks. Pakistan has tried to maintain its trade ties with Russia by seeking exemptions from sanctions and exploring alternative routes and modes of transport. Pakistan has also attempted to enhance its trade ties with other regional countries, such as China, Iran, Turkey, and Central Asian states.
Pakistan’s trade with Ukraine amounted to $570 million in FY2021, with a trade deficit of $410 million. Pakistan’s main exports to Ukraine were textiles, fruits, vegetables, rice, leather, and sports goods. Pakistan’s main imports from Ukraine were wheat, iron and steel, machinery, chemicals, and edible oil. The war has disrupted these trade flows due to sanctions, transport difficulties, currency fluctuations, and security risks. Pakistan has tried to maintain its trade ties with Ukraine by seeking exemptions from sanctions and exploring alternative routes and modes of transport. Pakistan has also attempted to enhance its trade ties with other regional countries, such as China, Iran, Turkey, and Central Asian states.
The war has also created geopolitical implications for Pakistan’s security and foreign policy. Pakistan has a strategic partnership with Russia covers diplomacy, defense, nuclear energy, and technology transfer. Pakistan has supported Russia’s role in Afghanistan and sought cooperation on regional issues such as Kashmir and counterterrorism. Pakistan has also benefited from Russia’s arms sales and military training. The war has put this partnership at risk due to the US-led pressure on Pakistan to join the sanctions regime against Russia or face consequences. Pakistan has tried to balance its interests and expectations with both sides by adopting a neutral stance on the conflict and calling for a peaceful resolution through dialogue. Pakistan has also tried to leverage its partnership with China to counter the US influence.
The war between Russia and Ukraine, which started in February 2022 after Russia’s military aggression and annexation of parts of eastern Ukraine, has shaken the world and threatened global peace and security. The war has also had far-reaching economic consequences for many countries, especially Pakistan, which has a close relationship with Russia and a neutral position on the conflict. Pakistan has been hit hard by the war’s effects on oil prices, wheat prices, trade relations, and foreign policy.
About the author
The author is a researcher and a lecturer at the University of Peshawar. <[email protected]>