KARACHI: Trump’s surprise nod to China buying Iranian oil has triggered cautious optimism in Pakistan, where economists and policymakers say the move could lower oil prices, ease import pressures and potentially revive the long-stalled Iran-Pakistan gas pipeline — if sanctions are meaningfully relaxed.
On Tuesday, US President Donald Trump appeared to have taken an unexpected policy U-turn regarding US sanctions on Iran, giving China the green light to carry on buying its oil. Trump’s Truth Social post, a surprise to both domestic and global audiences, said that China can “continue to purchase oil from Iran” and that “hopefully, they will be purchasing plenty from the US, also”.
According to Bloomberg, this move could be an effort “to send positive signals to Beijing as he seeks a new tariff deal, and could potentially ease legal risks around China’s buying of Iranian oil, but its impact on actual oil flows is unclear”. But does this affect Pakistan? And if so, how?
For macroeconomist Ammar Habib Khan, this means that “sanctions on Iran will slowly be removed as Trump believes more in trade. For Pakistan, that would mean formal trade, he says, explaining that otherwise Pakistan’s trade with Iran “was informal, through smuggling”.
Analysing Trump’s Iran oil post, Dr Sajid Amin, senior economist at the Sustainable Development Policy Institute (SDPI), says that it suggests the “US may relax sanctions, while not fully removing them in the near future”.
Either way, says Dr Amin, this is a “positive step for Iran, China, and the world. While China was already buying oil from Iran, it can do so more easily and on a large scale” now.
Coming to Pakistan, Dr Amin says this could have “direct and indirect implications both”. In the near term, he says, “Pakistan is likely to have indirect benefits. Improved oil supply to the biggest global oil buyer, China, means less pressure on oil prices. We already saw a 6.0 per cent drop in oil prices after this statement. This means a lower import bill for Pakistan, as oil is one of the heaviest components of imports”.
Former finance minister Dr Miftah Ismail agrees that sanctions will be lifted, something he says Trump had been hinting at. According to him, that means Iran will then “be able to sell its oil without hindrance to any country. China already buys oil from Iran”.
For Pakistan, that would translate into the country being “in a position to build a pipeline,” says Dr Ismail, who adds a caveat: “provided international financial institutions are willing to finance it”. He also says that Pakistan, too, will be able to buy oil from Iran.
Dr Abid Qaiyum Suleri, who heads SDPI, takes a more cautious view of the situation. Talking to The News, he says that as far as Pakistan and its gas pipeline with Iran goes, “the sanctions being lifted off the pipeline depends more on how Iran takes its nuclear programme ahead and what terms and conditions are placed or agreed to in any negotiations (if there are negotiations) it has with the US and other Western countries or if Iran stays or not in the NPT”.
Dr Suleri feels that it is “too early right now to talk about whether this softer stance towards Iran that the US had would have any effect on Pakistan’s gas pipeline too. The one positive Pakistan can claim is that oil prices have come back down, so that will be a relief to both domestic consumers as well as the government, which has to put out more than Rs1 trillion in Petroleum Development Levy”.
Speaking to Geo’s Shahzeb Khanzada on Wednesday night, public policy scholar Dr Adil Najam said that Iran’s economy opening up would have “a seismic effect on Iran” and would “change the equation for everyone: Pakistan, the region, the Arab world, and China and Russia too. It would also affect Europe with whom Iran has had a trade relationship, which, however, is limited”.
But the biggest different for Iran in case this happens is that it will be able to claim that “it won”, he added.For Pakistan, he said it is worth noting that among our neighbours, we have no equal trade relations with anyone, other than China, but China is a different case from everyone else. “So this way, Pakistan will get a neighbour with whom it can trade”, said Dr Najam who also felt that “this will not be confined to oil or gas. We will be gaining a market with whom we can trade without smuggling”.
Last year, the Pakistani government had indicated that it would want to request a sanctions waiver for the Pakistan-Iran gas pipeline project from the Trump administration.
The Iran-Pakistan gas pipeline agreement, signed in 2009, envisions a 2,775-kilometre pipeline — 1,172 kilometres of it running through Iran, with the remainder to be built in Pakistan — to supply Iranian gas to Pakistan. While Iran has completed construction on its side with an investment of $2 billion, work on the Pakistani section has yet to begin.
US sanctions on Iran extend to the pipeline project, and Washington has so far refused to grant Pakistan a waiver, effectively stalling progress. Islamabad has repeatedly sought US approval to move forward with construction.
Meanwhile, China has responded to Trump’s post regarding Iranian oil by saying that it will be prioritising its national interests. “China will take legitimate measures to safeguard its energy security based on its own national interests” was the response from China’s foreign ministry spokesperson during a press briefing on Wednesday.
According to a report published this month by Deutsche Welle (DW), Iran remains a major player in the global energy landscape. The US Energy Information Administration says that Iran has the world’s second-largest proven natural gas reserves.
Iran also holds the world’s third-largest crude oil reserves — roughly 9.0 per cent of the global total. According to the Belgium-based data analytics firm Kpler, the country extracts about 3.3 million barrels of crude oil and an additional 1.3 million barrels of condensate and other liquids daily. Of this total, around 1.8 million barrels are exported.
Iran is also in the top three largest oil producers within the Organization of the Petroleum Exporting Countries (OPEC), with energy exports accounting for a significant portion of the country’s government revenue and foreign exchange earnings.Despite international sanctions, China has continued to be a key buyer of Iranian oil. Reuters figures show Chinese imports of Iranian crude reached 1.71 million barrels per day in March.
