The Middle East war has Pakistan facing a familiar headache – short on cash and long on problems. With the Iran war threatening prolonged closure of the Strait of Hormuz, through which Pakistan receives significant oil supply, the Shehbaz Sharif government has decided to turn to austerity tricks to save fuel. For this, Pakistan has turned to Covid-era measures like work from home and online classes to ensure fewer vehicles are on the road.
The irony is hard to miss. Just a day earlier, the same cash-strapped Pakistan talked tough on Iran. Its foreign minister signalled that it might be drawn into the Iran war, citing its “attack on one = attack on both” defence pact with Saudi Arabia. Ishaq Dar also tom-tommed how Pakistan warned Iran.
In reality, it is a conflict Pakistan can hardly afford, considering its fragile economy. Not to forget its overwhelming dependence on foreign loans. Moreover, it is already engaged in a border conflict with Afghanistan.
Crucially, the war not only threatens oil supplies but remittance flows as well. Over 4.7 million Pakistani citizens reside in the Gulf. The immediate concern for Pakistan, however, is the closure of the Strait of Hormuz by Iran. Almost a fifth of global oil supply and most of Pakistan’s fuel imports pass through Hormuz.
PAK STARTS SAVING OIL ON WAR FOOTING
Against this backdrop, Pakistan has begun preparations to conserve energy. According to a report in Dawn, Pakistan is mulling work from home for employees and mandating schools and colleges to shift to online sessions — similar to those implemented during the Covid-19 pandemic.
According to the report, authorities are considering ensuring that only essential staff remain present in offices during March. Telecom and IT companies have also been asked to consider allowing employees to work online at least twice a week.
Proposals are also under consideration to promote ride-sharing among office employees. All these just to reduce fuel consumption.
Currently, Pakistan has petrol and diesel stocks for about 25 days, around 10 days of crude oil reserves, and 15 days of LPG supplies, according to its Finance Minister Muhammad Aurangzeb.
WEEKLY REVISION OF FUEL PRICES
The Sharif government is also looking at other immediate fuel-saving measures, including a weekly revision of petroleum prices and compensation for oil companies. Weekly petroleum price revision will prevent hoarding by fuel dealers.
The government is also working on contingency plans. Pakistan has already asked Saudi Arabia to route oil supplies through the Red Sea port of Yanbu after the closure of the Strait of Hormuz, Reuters reported.
The war has come as a nightmare for oil companies. Not only have shipping costs surged, but insurance costs for oil cargoes have also spiked. Thus, compensation for these additional costs is a must to prevent a more serious disruption.
The panic in Pakistan and the conservation measures highlight how vulnerable a cash-strapped Islamabad remains to global energy shocks.
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