Trump Bets Big on Pakistan’s Oil Dream
“We have just concluded a deal with Pakistan… to develop their massive oil reserves,” declared Donald Trump on July 31, 2025, in a single line that could redraw South Asia’s energy map.
The U.S. president’s announcement, made on Truth Social, marks the first time Washington has moved to directly invest in Pakistan’s untapped oil potential. While details remain scarce, the lead oil company has yet to be named, and tariff terms are still under negotiation, the symbolism is unmistakable.
For decades, the country has dreamed of finding enough oil to power its economy and escape its import trap. Now, with both Washington and Beijing eyeing its energy sector, Pakistan finds itself at the centre of a new great game, one that could bring riches, debt, or deeper geopolitical entanglements.
A Resource Long on Promise, Short on Proof
Pakistan currently imports around 80% of its crude oil, costing more than $17 billion annually and accounting for over a fifth of its total import bill (State Bank of Pakistan, 2024).
Exploration surveys, including offshore drilling in the Arabian Sea, have hinted at promising reserves along Pakistan’s 1,046-km coastline. But no commercially viable discoveries have been made. This U.S. deal represents the first high-level attempt to change that.
Finance Minister Mohammad Aurangzeb, in Washington for trade talks, has been pushing for tariffs in the 15–20% range, comparable to U.S. trade terms with Japan and Indonesia, as part of the broader deal (Dawn, 2025). In return, Pakistan has offered to boost imports of U.S. goods, including oil and energy technology, to narrow its $3 billion trade deficit with Washington.
China’s Grip on Gwadar
While the U.S. move is new, China’s investment in Pakistan’s energy future runs deep. Through the China–Pakistan Economic Corridor (CPEC), Beijing has committed over $60 billion in loans and projects since 2015, much of it in energy and transport infrastructure.
At the heart of this strategy is Gwadar Port, just 400 km from the Strait of Hormuz, the world’s busiest oil chokepoint. Plans for a $10–12 billion Chinese-backed refinery, with capacity for 250,000–400,000 barrels per day, could turn Gwadar into a hub for refining Gulf crude and re-exporting it to China’s western provinces.
For Beijing, it’s an insurance policy against the U.S. Navy’s dominance of the Malacca Strait. For Islamabad, it’s a shot at industrial growth in Balochistan, Pakistan’s poorest province, though locals worry about displacement and whether promised jobs will materialise.
Caught Between Superpowers
Pakistan’s oil gamble comes as U.S.–China rivalry reaches its sharpest point in decades.
Washington has grown increasingly wary of China’s control over strategic ports and supply chains, from Djibouti in Africa to Hambantota in Sri Lanka. By entering Pakistan’s oil sector, the U.S. signals it won’t leave South Asia’s energy future entirely in Beijing’s hands.
Yet Islamabad has long depended on Chinese financing for infrastructure, and on U.S. security, trade, and financial support. Aligning too closely with either risks alienating the other. As one Islamabad-based analyst put it:
“It’s like standing on two ships moving in opposite directions. You can’t keep your balance forever.”
Geopolitical Ripples
The deal’s implications go far beyond Pakistan’s borders:
India: Already hit with a 25% U.S. tariff plus penalties for buying Russian oil, New Delhi may deepen its energy ties with Moscow, widening regional divides.
Iran: Tehran, which has pushed overland oil export routes through Pakistan, could see U.S. involvement as a threat to its regional ambitions.
Gulf States: Saudi Arabia and the UAE, both long-time investors in Pakistan, may either compete for refinery stakes or partner with U.S. or Chinese ventures to secure influence.
Billions at Stake, but Big Risks Ahead
The rewards are tempting:
Reduced reliance on imported crude.
Potential oil exports for the first time in Pakistan’s history.
Billions in refining and transit fees if infrastructure plans succeed.
But the risks are real:
Commercial uncertainty, past exploration failures mean reserves might not be viable.
Debt strain, large-scale projects financed through loans could deepen Pakistan’s already fragile debt position.
Political instability, frequent government changes, and regional unrest could scare off long-term investors.
The Road Ahead
Negotiations in Washington are expected to conclude within weeks. If successful, the deal could open a new chapter in U.S.–Pakistan relations, one where Islamabad is no longer just a strategic ally in security matters, but also a partner in energy production.
Pakistan’s leaders face a high-stakes choice: leverage its location and new interest from Washington to diversify away from overreliance on Beijing, or risk getting caught in a tug-of-war between two superpowers.
If Pakistan’s oil reserves prove real, the country could transform its energy profile, reduce its trade deficit, and gain new geopolitical leverage. If not, it may be left with more debt, half-finished projects, and a sharper squeeze between competing global powers.
As one senior Pakistani economist warned:
“The world is shifting from a unipolar to a multipolar energy order. Pakistan has the location to win big, but also the politics to lose it all.”
