Impact of Russia Ukraine War on Pakistan:
In February 2022, Russia launched a full-scale military assault on Ukraine, delivering a strong statement to the world about Russia’s opposition to continued NATO expansion toward Russia and Ukraine’s future plans to join NATO. The battle is claiming a large number of lives and is likely to have long-term consequences for global trade, notably in the energy markets. This is bad news for Pakistan, which is already dealing with high inflation, slow economic development, and political unrest, including a looming vote of no confidence in the Former Prime Minister.
Russia-Ukraine relations with Pakistan:
Pakistan has maintained bilateral commercial connections with Russia and Ukraine in the past. Pakistan’s exports to Russia have grown at a 13.6 percent annualized rate from USD 13.1 million in 1996 to USD 279 million in 2020, while Russia’s exports to Pakistan have grown at a 10.2 percent annualized rate from USD 67.6 million in 1996 to USD 699 million in 2020.
Pakistan’s exports to Ukraine climbed by 15.5 percent annually from USD 18.1 million in 1996 to USD 573 million in 2020, while Ukraine’s exports to Pakistan increased by 14.8 percent annually from USD 2.98 million to USD 82.1 million in 2020. Pakistan’s trade with Russia was worth USD 711 million in 2021, including USD 537 million in Russian imports.
The trade value with Ukraine reached USD 800 million, including USD 739 million in imports. Pakistan has amicable, albeit small, trading relations with Ukraine, with agriculture, notably wheat, playing a significant role. Pakistan and Russia have committed to expanding bilateral cooperation in all areas, including trade, defense, economy, and energy, in recent years.
However, the conflict has the potential to destabilize Pakistan’s new geo-economics strategic pivot.
The U.S Sanctions on Russia:
Sanctions against individuals of the Russian regime have been imposed or expanded by the United States, the European Union, and other countries. The United States has banned Russian oil and natural gas imports, while the United Kingdom plans to phase out Russian oil by the end of this year.
Furthermore, the European Union, which imports 25% of its oil and 45% of its gas from Russia, plans to transition to other energy sources by the end of this decade, making it energy independent of Russia.
The Nord Stream 2 gas pipeline from Russia has been halted by Germany. Russia has retaliated against the restrictions by prohibiting the export of a number of products and has threatened to cut off the gas supply in reaction to the oil penalties.
Disruption of supplies:
This disruption of energy supplies from the world’s largest supplier Russia is resulting in a hike in energy prices throughout the world. This is a significant setback for an oil-importing country like Pakistan, particularly considering the fact that oil accounts for a sizable share of its imports. This has the potential to drain our national reserves, further reducing the purchasing power of the country.
Pakistan’s wheat imports from Ukraine, which accounted for 39% of total imported wheat in the previous fiscal year, will be directly impacted by the conflict. This issue has the potential to have a major snowball effect, with increased electricity rates, central bank interest rate hikes, wage-increase demand to meet greater living costs, company price hikes to compensate for higher salaries, and workforce cuts leading to unemployment.
Regardless of the situation in Afghanistan, the Russia-Ukraine issue may increase Pakistan’s geopolitical prominence in the eyes of both Russia and China, notably in terms of trade. In light of the current war and the resulting sanctions, Russia needs to broaden its customer base and find new markets for its energy goods.
Pakistan has established itself as a viable energy consumer despite severe gas constraints. In fact, despite Western sanctions, Pakistan just struck a trade agreement with Russia, under which Pakistan will import two million tons of wheat and natural gas from Russia.
Apart from improving regional connections, Pakistan can pursue internal policies and steps to reduce inflation and lessen the economic impact of the crisis on the country and its inhabitants. These include promoting work from home, digitalizing education, reducing operational timings of commercial shops, malls, parks, and other non-essential travel, encouraging the use of public transportation, imposing a temporary ban on luxury and higher duty items, exploring alternative energy sources (both foreign and domestic), and arranging for an inventory of goods imported from both countries, particularly agricultural goods from Ukraine.
With ongoing geopolitical tensions arising as a result of the Russia-Ukraine situation, Pakistan’s economy will undoubtedly be impacted. With Pakistan’s economy already vulnerable to the pandemic, the country’s current account and fiscal balances could worsen, resulting in stagnation in economic development.
As a result, the country must carefully examine its strategic position in the global and regional contexts and make timely, informed decisions that are critical to its survival.
Currently, the building industry is quite important in Pakistan’s economy. This battle will not only raise raw material prices but will also result in a lack of exported goods, which will most certainly hurt the average person. Steel is imported from Ukraine, which is high in quality and low in price. Pakistan is the most steel-hungry country in the world.
In these circumstances, though, the tension is increasing. Pakistan also purchases defense equipment from Ukraine, but the continuing conflict between Ukraine and Russia has thrown the country into instability, and if the conflict continues, Pakistan’s military imports will be cut off. That, of course, isn’t the case for us.
Pakistan’s biggest importing country is Ukraine, which imports food, as well as carpets, machinery, paper, and other goods. Other commodities’ supply and demand diverged after the crisis, causing anxiety among Pakistani businesses. Oil, wheat, and steel were among the raw material markets that closed higher. Many industries will be impacted directly.
This article is written by Shahid Nazeer, who is a student of International Relations at the National University of Modern Languages, Islamabad. The views expressed in this article reflect the opinion of the author, this does not reflect the opinion or policy of the Youth Diplomacy Forum.