Middle East tension

Middle East tension

The Drone strike on the Aramco’s crude oil processing complex in Saudi Arabia has further escalated the level of tension between Iran and Saudi Arabia and its allied Arab States. The responsibility of this attack was claimed by Houthi rebels of Yemen but the United States blamed it on Iran. The rising temperature of hostilities will generate risks for Pakistan both on foreign policy and economic fronts. This time the incumbent government can neither take side nor stay neutral because of political polarization. In the previous government, there was a harmonious working relationship between the government and opposition and the parliament provided a safe passage by adopting a resolution, advising for taking a neutral stance in rivalry between Iran and Saudi Arabia. It does not seem likely that opposition political parties give parliamentary support to PTI government.

The Prime Minister may visit Saudi Arabia during his journey to the United States for his address to the United Nations General Assembly later this month. Saudi Arab is supplying oil to Pakistan on deferred payments and has also provided billions of dollars short term soft loans. Likewise, the UAE has given economic assistance. The economic compulsions will necessitate tight rope walk in the domain of foreign policy.

The Aramco attack has caused reduction in crude oil supplies to the world market. It has pushed up prices from 15 to 20 percent in the global market. The price of crude oil has shot up from $58 to 72.  The current tension carries the risk of disruption in oil and LNG supplies to Pakistan. It merits mention here that consumers had paid $45 million as idle capacity charges for the floating LNG terminal in 2018. The successive governments did not build the facility of strategic reserves and the available storage capacity hardly suffices for 12 to 15 days. If disruption in supplies of petroleum products and LNG occurs then it will impact a wide range of economic activities and reduction in thermal power generation which is about 70 percent in the total energy mix. There is dire need of long term planning for expanding oil production and its storage facilities.

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