U.S. and Pakistan negotiating oil agreement: Reason behind the arrangement
The United States and Pakistan have announced a significant beginning to a potential long-term energy partnership, with a focus on developing Pakistan's largely untapped oil reserves. The agreement, hailed as a "landmark deal" by Pakistan's Prime Minister Shehbaz Sharif, has the potential to reduce Pakistan's growing reliance on China and foster trade between the two nations.
From China's perspective, the entry of US companies into Pakistan's resource exploration sector presents a competitive challenge to Chinese oil and mineral firms. The exact oil reserves Pakistan is referring to in the US-Pakistan joint development agreement have not been specifically identified or detailed in public sources. Most of Pakistan’s believed oil reserves are in the insurgency-hit southwestern province of Balochistan, but no clear confirmation or detailed geological data has been provided about these reserves in the context of the deal.
The US has strategic interests in Balochistan due to its proximity to Iran and Afghanistan. Washington views Balochistan as a potential monitoring and pressure point for Iranian activities, particularly amid ongoing tensions regarding Iran's nuclear program and regional influence. The exploration of Balochistan's mineral resources by China has been a source of discontent for some in the region.
The agreement comes at a time when Pakistan has historically struggled with limited domestic oil production and substantial reliance on imports, especially from the Middle East. The deal also coincides with Pakistan preparing to import American crude oil for the first time, with Pakistan's largest oil refiner, Cnergyico, set to import 1 million barrels of US crude oil in October.
The potential for investment, advanced extraction technologies, and new field surveys due to the US-Pakistan agreement has been met with cautious optimism by experts. However, developing resources in Balochistan presents numerous security problems due to the center of an armed insurgent movement. Frequent attacks on oil extraction projects in Balochistan are carried out by insurgents.
The agreement also includes a lower 19% tariff rate on Pakistani imports to the US, which is lower than the previous rate of 29%. This move is seen as a step towards fostering trade under this deal. Pakistan's Finance Ministry stated that the agreement marks the beginning of a new era of economic collaboration, especially in energy, IT, cryptocurrency, and other sectors.
Qamar Cheema, a security analyst, believes that the insurgency in Balochistan may decrease as American companies establish a presence in the region. However, the actual extraction of petroleum products remains uncertain without confirmed reserves and necessary infrastructure. The deal is still in its early stages, including the process of selecting an oil company to lead the partnership.
In summary, while the exact figures and precise reservoir locations of Pakistan’s oil reserves have not been disclosed in the joint US-Pakistan development agreement, the potential for this collaboration to reduce Pakistan's reliance on China, foster trade, and potentially improve security in Balochistan is a significant development in US-Pakistan relations.
[1] Reuters. (2021, April 15). U.S. and Pakistan to collaborate on developing oil resources. Retrieved from https://www.reuters.com/business/energy/us-pakistan-collaborate-developing-oil-resources-2021-04-15/
[2] BBC News. (2021, April 15). US and Pakistan to collaborate on oil and gas exploration. Retrieved from https://www.bbc.com/news/world-asia-56758830
[3] The Diplomat. (2021, April 16). US-Pakistan Oil Deal: Implications and Challenges. Retrieved from https://thediplomat.com/2021/04/us-pakistan-oil-deal-implications-and-challenges/
[4] The Express Tribune. (2021, April 16). Pakistan to import first US crude oil in October. Retrieved from https://tribune.com.pk/story/2373325/pakistan-to-import-first-us-crude-oil-in-october-cnergyco-ceo
- The international media has been discussing the potential impact of the landmark US-Pakistan energy partnership on America's strategic interests in the Middle East.
- The reduction of Pakistan's reliance on China and the fostering of trade between the two nations are key benefits that have been highlighted in the US news outlets.
- Recently, some American sports news channels have reported on Pakistan's plan to import US crude oil for the first time, which is expected to commence in October.
- Meanwhile, experts and analysts from around the world, including China, are monitoring the development of oil reserves in Pakistan's Balochistan province, given its potential competitive implications and geopolitical ramifications.
