(Image source from: x.com/WhiteHouse)
After revealing a 25 percent 'reciprocal tariff' on his 'friend' India and a fine for purchasing Russian weapons and oil, Donald Trump stated on Thursday that the US has made a trade agreement with Pakistan. He claimed this agreement involves developing Pakistan's "massive" oil reserves on Truth Social. An unhappy Trump also remarked about India, suggesting, "... maybe they (Pak) will sell oil to India," criticizing India's ongoing Russian oil purchases despite sanctions due to its conflict with Ukraine. In a recent Truth Social update, Trump seemed to hold India (and China) responsible for supporting the war effort by buying Russian oil, a conflict he once claimed he could resolve within a day of taking office. The upset American President also criticized India's economy, which is the fourth largest globally, calling it "dead" after failing to convince Delhi to open its dairy and agriculture markets. Meanwhile, Pakistan announced this morning that its agreement would "lead to a decrease in reciprocal tariffs, especially on exports to the US," but did not specify what the new lower rates might be.
The neighboring nation had faced a 29 percent tariff according to rates declared in April. That tariff was later paused for 90 days to allow both parties to negotiate a new agreement.
The US will assist in developing Pakistan's "massive" oil reserves, though the specifics remain unclear. Likely, as suggested by Trump's post on Truth Social, this will mean an American company will receive the rights to drill for Pakistan's crude oil. India's oil reserves are significantly larger—an estimated 4.8 billion barrels proven as of 2016—and it has the capability to extract and refine oil from deep-sea sites, which Pakistan cannot do. Moreover, India independently produces more crude oil each day than Pakistan; for instance, in February 2025, India generated over 600,000 barrels per day, while Pakistan only produced 68,000.
However, both nations heavily rely on imports, with India depending on them even more due to its larger demand. According to some estimates, in fiscal year 2024/2025, India imported almost five million barrels per day. In contrast, Pakistan imported only 140,000 barrels in 2024—slightly below its historical average of 163,000 barrels per day.
While India has greater reserves and produces more oil daily than Pakistan, it also requires significantly more. The International Energy Agency forecasts an increase of 330,000 barrels per day for India this year. For Pakistan, that number is expected to surpass 300,000 barrels per day this calendar year. The disparity highlights that the US helping Pakistan drill for uncertain oil reserves is unlikely to impact India significantly, particularly since India has larger confirmed supplies and established import routes. The US's involvement in developing Pakistan's oil reserves will enhance its supply and potentially save money. However, the motivation for the US seems to extend beyond just financial concerns. From Washington’s perspective, making a deal with Pakistan is primarily about pressuring India to a) purchase from the United States instead.
Earlier this year, when Prime Minister Narendra Modi spoke with Trump in the US, India agreed to purchase more oil and gas from the US. This might have been a strategy to encourage a decrease in tariffs. The agreement was beneficial for India as it helped them reduce dependence on oil from Russia or Iran, both of which are under sanctions and have payment issues. It also demonstrated to the US that India is open to discussions. However, Russia remains one of the top three suppliers of oil to India, which has frustrated Trump. The US support for Pakistan sends a message to India that they should comply or risk making their rival stronger, making a significant ally like Washington uneasy while trying to agree on a trade deal. Trump's comment regarding Pakistan selling oil to India is not quite accurate. Firstly, Pakistan does not have enough proven oil reserves to attract India's interest. Secondly, even if they did, the tense political and military situation between India and Pakistan completely prevents any oil purchases. However, if Pakistan's energy trade with the US grows, it could lower India's opportunities to buy oil from America at reasonable prices, complicating India's efforts to diversify its oil sources.
In 2016, Pakistan had proven reserves of 353.5 million barrels, which was less than 10 percent of what India possessed that same year. Recently, there have been new discoveries of oil and gas. In June, the state-run Oil & Gas Development Company Limited announced it found resources in the Sindh province, and in September last year, more reserves were claimed to be found offshore. The specifics were not shared publicly, but early tests from some locations showed production of between 20 and 74 barrels of oil each day, indicating that the reserves are not very extensive. Nevertheless, this suggests that Pakistan has unused reserves. A significant amount of these reserves might be located in its waters. In April, Turkey, which is seen as building a new partnership with Pakistan and Azerbaijan, signed an agreement to bid for and explore 40 offshore blocks from what is known as the world's fourth largest oil and gas reserve.
The fact that no significant oil-producing nation or company has rushed to take advantage of this opportunity is viewed as a warning sign. Analysts believe that the geopolitical instability, specifically the balance of risk and reward, is a key reason for this, especially after five Chinese engineers lost their lives in a rebel suicide attack in March 2024. Nevertheless, the US's willingness to assist in developing Pakistan's oil reserves, particularly since Pakistan lacks the technology for deep-sea mining, marks a significant advancement for Pakistan, especially during tough economic times.
