With the Russian war on Ukraine intensifying, most countries are beginning to feel the heat of the conflict in the shape of commodity shortages and surging prices. Currently, the war is confined within Ukraine, but it is feared to spill over the Ukrainian boundaries and last longer than anticipated. If so, most countries, including Pakistan, will be faced with grave challenges.
Historically, Pakistan has maintained moderate economic relations with both Russia and Ukraine. In 2020, mismanagement as well as exports in hopes of a bumper crop led to acute wheat shortages in Pakistan. This compelled the government to allow private companies to import wheat to stabilise prices and accumulate stocks. Between July and November 2020, Ukraine was the main supplier of wheat exporting 1.2 megatonne (MT) to Pakistan. During the same period, Russia supplied 0.92 MT to Pakistan. Wheat imports from the two countries exceeded 2.1 MT over 2020-2021.
Russia and Ukraine – both of which are important agricultural suppliers in the global food chain – are off the market due the ongoing war between them. Russia’s blockade of Ukrainian ports has further prevented Ukrainian wheat and other essential exports from reaching several countries. Resultantly, many countries have already reported food shortages; and Pakistan has also been compelled to find an alternative wheat supplier. The government may have to cover any shortages with expensive wheat imports.
Russia’s invasion of Ukraine has also resulted in a record surge in LNG rates as the global supply chain is threatened with disruptions. This has caused immediate issues for Pakistan, as LNG companies have backed out of their contracts with Pakistan to exploit lucrative European markets. Pakistan is now compelled to purchase expensive LNG. Also, Pakistan’s imports of fossil fuel – oil, LNG and coal – from Ukraine have come to a halt. So, in the coming months, Pakistanis will be faced with frequent and prolonged power outages, extortionate utility bills and impediments to other services. Global oil prices have exceeded $100 per barrel since the start of the war, and supply and development have slowed down. Future fuel price hikes would be detrimental to Pakistan as its forex reserves would deplete further. The construction industry has also taken a hit because Pakistan was importing steel from Ukraine. Also, Pakistani exports to Ukraine have ceased, which will harm local industries and the economy.
Last year, several European and North American countries pledged to welcome Afghan refugees fleeing the Taliban regime. However, the same countries are now taking in Ukrainian refugees. Afghan refugees in different countries are facing evictions. In such circumstances, Pakistan is experiencing a fresh influx of Afghan refugees. Also the Afghan refugees within Pakistan awaiting visa acceptance from different countries may never get approvals and stay on in Pakistan. This will increase the likelihood of illegal refugee settlements in urban areas, which can cause social unrest and further exhaust the country’s resources.
Diplomatically, Pakistan is caught in a complex situation as it wishes to maintain ties with both Russia and the West, including the US and EU. Given Pakistan’s poor experiences with camp politics, Islamabad abstained from voting against Russia at UNGA to stay neutral. As Russia intensifies its aggression and prolong the war, the West may ask Pakistan to review its stance.
Pakistan is also required to maintain diplomatic ties with Russia and China for geopolitical reasons. It may soon be faced with a repeat of the Cold War situation by having to pick sides. Alienation from either side can affect bilateral relations with the other. The government must tread carefully as the conflict unfolds.
In a globalised world order, it is inevitable for countries to remain unaffected by modern-day wars. The Russia-Ukraine conflict has exemplified that people around the world are being directly affected by the war.
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