How Long Will Pakistan Stay Vulnerable? Caught Between Saudi Arabia and Iran |
On the 28th of February, the US-Israel’s killing of the Iranian supreme leader, Ayatullah Ali Khamenei, sparked another episode of tensions between Iran and the US-Israel. The conflict is edging towards its third month, with one dialogue in Islamabad on 12th April, while the possibility of a second round looming after the US president announces sending his team to Islamabad; still, the path ahead is foggy. One of the unsettling aspects of this attack was the risk of rising fuel prices and the global inflation that followed. Even the slightest aggressive activity in the conflict pushed the prices, pressing the global economy to the precipice, as the IMF warned that the global inflation is projected to rise to 4.4%, while the UNDP stated that more than 32 million people will be plunged into poverty by the economic fallout.
It seems that the attack was not on Iran, but on the juggernaut of the global economy, as the Strait of Hormuz channels one-fifth of the global oil. The war has inflicted a $50 billion blow to the global economy due to supply disruptions, prices fluctuate daily, and overall prices have increased by nearly 50%. The toll of the swinging prices fell on the whole world, but the developing countries are the ones who are badly hit by it. Among them, one is Pakistan, a country with meagre foreign exchange reserves, a slower economic rate, and political turmoil at home.
A conflict in the Middle East is never good news for Pakistan, a country highly dependent on Gulf oil with 80% of its oil imports coming from the arab world. The oil prices surged, reaching $120 per barrel by March 9, after Iran blocked the Strait. Pakistan found it hard to pour the Forex reserves to subsidize fuel for the public, given that it is operating on a razor-thin margin on the monetary front. The unbridled global prices broke the internal prices bubble as the government announced a rise in the petrol prices by 55 rupees per liter on March 7 and later a hike of 130 rupees on April 2nd, though later decreased by 80 PKR per liter.
Among the barrage of questions popping up on screens, the least asked question is “For how long will Pakistan stay like this?” Despite the snail-paced growth, the boat of the economy is finding it hard to sail against the ruthless tides of the global geopolitics, among which the US-Iran conflict is a fresh addition. This article analyzes the complex diplomatic balancing Islamabad tries to undergo in the face of global conflicts and investigates whether the roots of the vulnerability stem from the broader geopolitical world or lie within its own courtyard.
Between the Two Regional Rivals
Among the most concerning factors that worry Islamabad is the long-standing rivalry between Saudi Arabia and Iran, both of them Pakistan’s strategic and economic allies. The Shia-Sunni Muslim conflict, exacerbated by the regional dominance over the oil trade, the 4-decade-old conflict is shaping the inner economic and political dices in Pakistan.
On one hand, Pakistan signed a defence pact with Saudi Arabia last year in September, strengthening the defence ties initiated in 1982, in which one of the articles states “an attack against one will be considered an attack........