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Post Ukraine: Stressed Energy Markets

Fahd Humayun
Assistant Professor Department of Political Science, Tufts University

In 2023, the war in Ukraine will continue to rankle efforts geared towards global stabilisation, while casting an ominous shadow on prospects for post-pandemic economic recovery in large swathes of the Global South. For a Pakistan that is already mired in dangerous economic uncertainty borne of dwindling foreign reserves and a looming funding gap, and now worryingly low gas reserves, the downstream consequences of fraught geopolitics, stressed energy markets and disrupted global supply chains (which are dependent on Russian and Ukrainian metal exports), are likely to continue to coalesce in a lengthening arc of volatile unpredictability.

Some Pakistani officials have signalled their keenness on discounted Russian petroleum to ease domestic economic pains (as a result of the war, Russian crude oil is significantly cheaper to obtain compared to Brent), but these plans are not without technical and financial limitations, and it would be premature to celebrate just yet. The stakes could not be higher: more than half of Pakistan’s energy mix comes from energy imports. Furthermore, while LNG procurement is something that both the current and prospective Pakistani governments will likely want to make a policy priority, tangible imports from Russia are also unlikely to materialise until 2025. It is true that the possibility of a U.S. waiver on the supply of some Russia energy imports to low- and middle-income countries could help Pakistan avoid thorny sanctions imposed on Russia by the U.S. and its allies in Europe, but Pakistan’s ability to negotiate any future energy deals with Russia will also depend largely on the skill with which Pakistani diplomats are able to signal to the West the imperatives of economic security and solvency. To that end, avoiding the razor burn of engagement with Russia means working doubly hard to shore up Pakistan's bilateral relationship with the United States as well as engagement with international financial institutions such as the IMF – whose assistance Pakistan will continue to depend on.

On the diplomatic front, the ongoing war in Ukraine will likely compel a similarly careful dexterity that balances competing compulsions, and will require Pakistan to ensure it conducts a foreign policy that is clearly predicated on well-defined national interests, while unambiguously communicating that prolonged conflict is in no country’s interest. Multilateralism may not be an obvious strength of the new Cold War international system, but regional organisations such as the SCO, as well as secondary and tertiary groupings that involve the Near East and Central Asia, will continue to be of significant importance as, potentially, the only real international forums now capable of bringing Russia to, and keeping it at, the high table to negotiate an end to the war. That is where countries like Pakistan and India may be able to use some of their capital with an increasingly isolated Vladimir Putin to chart a path out of the conflict.

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