by Muhammad Mohsin Iqbal
The history of the Gulf is marked by immense wealth, strategic rivalry and recurring conflict. Yet wars in this vital region have never remained confined to its shores. Whenever conflict threatens oil production or the security of shipping routes, its consequences spread across the world. Prices rise, supplies become uncertain and economies far from the battlefield are forced to absorb the shock.
Pakistan has repeatedly experienced these consequences. Although geographically distant from the Gulf, the country remains deeply dependent upon imported oil and gas. At the same time, millions of Pakistanis working in Gulf countries send home remittances that provide an important source of foreign exchange. Every major crisis in the region therefore presents Pakistan with two interconnected challenges: rising energy costs and possible disruption of remittance flows.
The Iran-Iraq war, which began in 1980, provided an early demonstration of this vulnerability. Both countries were major oil producers, but fighting damaged their production and export facilities, reducing supplies and pushing international prices upward. Pakistan, under General Zia-ul-Haq, responded with pragmatic diplomacy, maintaining working relations with both Iran and the Arab Gulf states while strengthening its strategic relationship with Saudi Arabia.
Higher oil prices placed considerable pressure on Pakistan’s import bill, particularly because domestic refining capacity was limited. Yet the rapid growth of remittances from Pakistani workers in the Gulf provided an important economic cushion. By the early 1980s, remittances had become a major source of foreign exchange, helping finance the trade deficit and support domestic demand. Pakistan also provided strategic cooperation to Saudi Arabia while maintaining economic links with Iran.
The crisis demonstrated the importance of diplomatic flexibility and overseas remittances, but it also exposed a structural weakness: Pakistan remained heavily dependent on imported energy.
A decade later, Iraq’s invasion of Kuwait in August 1990 created an even more serious challenge. The disappearance of Iraqi and Kuwaiti oil exports from international markets caused crude prices to rise sharply. Pakistan was particularly vulnerable because Kuwait had been an important supplier of petroleum products.
Islamabad was forced to seek alternative supplies from Saudi Arabia, Iran, Malaysia and other countries. The oil import bill increased substantially, foreign exchange reserves came under severe pressure, and remittances from Kuwait were disrupted. Although other Gulf states eventually helped compensate for much of the loss, the crisis revealed how quickly events in the Gulf could become an economic emergency in Pakistan.
The government initially tried to shield domestic consumers from the full impact of international price increases, but this placed an increasing burden on the national treasury. Emergency procurement, short-term financing, diplomatic appeals and deferred-payment arrangements became necessary. The eventual end of the conflict and decline in oil prices brought relief, but the fundamental lesson remained: Pakistan’s economy was extremely sensitive to instability in the Gulf and to disruption of maritime energy routes.
The 2003 invasion of Iraq produced a comparatively smaller shock. Iraqi exports had already been restricted by sanctions, so the immediate loss of supplies was less dramatic than in 1990. Oil prices nevertheless rose temporarily, increasing Pakistan’s import costs.
Pakistan was better prepared than it had been in the early 1990s. Foreign exchange reserves had improved, while its strategic relationship with the United States after September 11 provided additional financial and diplomatic support. The government also adjusted petroleum prices more promptly. Although the economy faced higher energy costs, it avoided the severe reserve crisis associated with the earlier Gulf conflict.
Today, however, the same vulnerability remains. Any serious confrontation involving Iran, the United States or other regional powers could threaten the Strait of Hormuz, one of the world’s most important energy corridors. Pakistan depends heavily on this route for its crude oil and LNG supplies. A prolonged disruption could therefore affect almost every sector of the national economy.
The consequences would extend far beyond the petrol pump. Agriculture depends on diesel for machinery, irrigation and transportation. Industry requires affordable energy to maintain production. Transport costs influence the prices of food and essential commodities, while electricity generation can also be affected by rising fuel costs or supply disruptions. Ultimately, ordinary citizens bear much of the burden through higher transport fares, food prices and household expenses.
Pakistan’s vulnerability is further increased by domestic taxes, levies, margins and other charges incorporated into petroleum prices. Thus, an international increase in oil prices can quickly become a broader inflationary burden at home.
History shows that Pakistan has repeatedly responded through emergency procurement, diplomatic balancing, assistance from friendly countries and domestic price adjustments. Such measures can provide temporary relief, but they cannot replace long-term planning.
Pakistan therefore needs a comprehensive energy-security strategy. Import sources should be diversified, strategic petroleum reserves strengthened, and domestic refining capacity modernised and expanded. Long-term supply agreements with reliable producers should be pursued. At the same time, investment in indigenous energy, particularly solar and hydropower, must accelerate. Every unit of domestically produced energy reduces dependence on volatile international markets.
Diplomacy must remain equally important. Pakistan should maintain constructive relations with Iran, Saudi Arabia, the United States and other regional partners while avoiding unnecessary involvement in their rivalries. Its foreign policy should protect national economic interests, energy supplies and the welfare of millions of Pakistanis working abroad.
The Gulf will remain strategically important, and instability may continue to emerge there. Pakistan cannot prevent conflicts beyond its borders or control international oil prices. It can, however, reduce the extent to which those events determine its economic destiny.
The lesson of the past four decades is clear: energy security is national security. Diversified supplies, adequate reserves, modern refineries, renewable energy, prudent economic management and balanced diplomacy can make Pakistan more resilient.
The storms of the Gulf may continue to gather. Pakistan cannot stop those storms—but it can strengthen its foundations so that every distant crisis does not become an economic crisis at home.
