Unpacking the Trade Deal

The recent trade agreement between Pakistan and the United States has sparked significant interest, primarily due to its favorable terms for Pakistan. The deal includes a 19% reciprocal tariff on a wide range of Pakistani products, a reduction from the initially proposed 29% under an Executive Order. This adjustment offers Pakistan a slight competitive edge in the textile sector, where it competes with countries like India, Cambodia, and China. Despite this advantage, challenges such as poor industry practices and high base costs limit the potential benefits. The deal is a relief for Pakistan’s struggling economy but falls short of being a substantial reward.

The Elusive Oil Riches

In a surprising announcement, former President Trump claimed that the US and Pakistan had signed an agreement to exploit Pakistan’s ‘massive oil reserves.’ This statement caught many off guard, as official Pakistani sources remained silent on the specifics of these reserves. Historically, Pakistan has explored potential oil fields, notably in Kekra-1 off the Karachi coast, but these efforts have not yielded significant results. The narrative of vast oil reserves resurfaced in 2024 with speculation about Saudi Arabia’s involvement. However, major oil companies have shown little interest in investing due to security concerns and operational challenges.

The Real Agreement: Oil Imports

Amidst the oil reserve discussions, Pakistan has indeed signed an agreement to purchase crude oil from Vitol, a Texas-based company. This marks Pakistan’s first-ever crude oil purchase from this source, potentially impacting its usual imports from West Asia. The financial details remain unclear, but this move could strain relations with traditional suppliers like Saudi Arabia.

Foreign Policy Dynamics

Beyond trade and oil, the US-Pakistan relationship extends into foreign policy. A meeting between Foreign Minister Ishaq Dar and US Secretary of State Marco Rubio highlighted Pakistan’s role in mediating talks with Iran and offering counter-terrorism cooperation in Afghanistan. This strategic engagement aligns with US interests and signals a shift in regional dynamics.

Balancing Global Relations

As these developments unfold, Pakistan continues to navigate complex international relationships. The celebration of the People’s Liberation Army’s anniversary with Chinese officials underscores Pakistan’s balancing act between global powers. While immediate gains from these deals are limited, they reflect Islamabad’s strategic positioning on the world stage.