Brewing Gulf conflict

The killing of Iranian’s Quds Force commander Qasem Suleimani in a US drone attack at the Baghdad airport has raised the specter of a new and wider conflict in the Gulf and the Middle East.

Any conflict in Pakistan’s neighborhood would have grave security, political and economic risks for Pakistan which has still been reeling from the disastrous consequences of four decades of war in the bordering Afghanistan. The country also faces prospect of another conflict with its main rival India.

Hours after the news of Suleimani’s killing flashed on the world media, US Secretary of State Mike Pompeo phoned army chief General Qamar Bajwa and discussed “US defensive action to kill Qasem Soleimani”.

“The #Iran regime’s actions in the region are destabilising and our resolve in protecting American interests, personnel, facilities, and partners will not waver,” the US official said in a tweet.

The army spokesman Major-General Asif Ghafoor confirmed the telephonic conversation in which the two discussed “regional situation including possible implications of recent escalation in the Middle East”.

According to ISPR statement, General Bajwa emphasised the need for maximum restraint and constructive engagement by all concerned to de-escalate the situation in the broader interest of peace and stability. (The) COAS also reiterated need for maintaining focus on success of the Afghan peace process.

Suleimani’s killing marked not just a major escalation in tensions between the United States and Iran but also has the potential to spark a dangerous conflict in a region which straddles on one of the major oil route for the world, and Pakistan could not stay unaffected from the consequences of such a conflict in its immediate neighbourhood.

Oil prices rose sharply in the international market following the killing with analysts warning that any conflict could affect global oil production.

The price of Brent crude spiked over three percent and at one point hit $69.50 a barrel, the highest since September.

It also pushed oil stocks on the London Stock Exchange higher, with BP up 2.7 percent and Royal Dutch Shell nearly 1.9 percent higher.

After its main regional rival Saudi Arabia, Iran is the second biggest oil producer in the world though its oil income has dropped sharply after US imposed crippling sanctions to curb Iranian oil exports after Tehran refused to open dialogue to re-negotiate the nuclear deal sealed by Trump’s predecessor Barak Obama along with major world powers.

Trump unilaterally pulled out of the deal to force Iran to discuss a new deal that should also include Tehran’s growing role in the regional issues.

Previously, Iran has threatened to block strategic Strait of Hormuz for oil trade in case of any conflict with the United States. About one-fifth of the world oil supplies pass through the strait which lies between Iran and Oman. It links the Persian Gulf with the Gulf of Oman to the south and the Arabian Sea beyond.

So any armed conflict involving Strait of Hormuz could have serious and direct consequences for Pakistan. Apart from oil, the Strait of Hormuz is also a major route for other energy supplies.

Qatar, the world’s biggest liquefied natural gas (LNG) exporter also sends almost all of its LNG through this route. Qatar is presently the only LNG supplier to Pakistan and all these supplies take place through this route.

Energy experts believe that Pakistan being a totally oil importing country could have a highly inflated oil import bill in case the conflict persists in the Gulf region.

“The dollar rate has been stabilised after a great effort and if there is a conflict in the region then the oil prices would go sky high which would inflate our import bill,” energy expert Moosa Khan Durrani said.

He said the Arabian Sea and the Strait of Hormuz was the only route for energy supplies for Pakistan and in case of an armed conflict, Pakistan’s energy supplies could also be affected. “The conflict could have very dire consequences. It even runs risk of choking oil supplies,” he added.

Apart from energy supplies, Pakistan’s other trade to the Gulf countries also passes through this strategic lane which could turn into a battlefield between Iran and the United States. Though Iran had threatened to close Strait of Hurmuz and there have been sporadic attacks on oil tankers by Iran there in recent months, Tehran has never tried to choke it altogether, knowing well that the major powers would never let it to do so.

Shahid Hasan Siddiqui, a senior economist, said Pakistan’s economy was still in a vulnerable position and could not afford any external or internal shock. He said extraordinary hike in oil prices could push fiscal deficit to 15 percent of the GDP and also spike inflation which would complicate economic problems for the government and would also increase hardship for the common people.

However, he played down the prospect of any bigger conflict in the region or choking of the Strait of Hormuz. “It can’t be closed more than a couple of days. America would not allow this,” he said.

“In case of Pakistan, remittances would keep coming from the Gulf countries but there investment from this region to Pakistan could be a bit affected but overall it seems situation would not aggravate.”

Moreover, international oil market observers say the spike in global prices was not as high as feared amidst hopes that the conflict would be contained.

However, if the conflict persisted and widened than the situation might go out of control.

But still it would affect countries like Pakistan more than big powers like the United States which produces enough of its own oil to meet its requirements. Still, the US would not like its energy supplies to be affected through any conflict and that was why it has already stationed its warships and troops in the region and plans to send in more soldiers and equipment to face any eventuality.

At a time when Pakistan’s relations are very tense with India over the situation in Kashmir as well as Modi government’s actions to discriminate against Muslims in India, the situation is very alarming for Pakistan, which lies in the proximity of the highly volatile region.

One hopes that better sense prevails on all sides of the brewing Gulf conflict and the situation is defused as quickly as possible.

The writer is a senior journalist based in Islamabad

from The News International - Money Matters https://ift.tt/2ZS3skO