July 31, 2025 — Former U.S. President Donald Trump has unveiled a major development deal with Pakistan, centered around the joint exploration and development of the South Asian country’s untapped oil reserves. The announcement, made via Trump’s Truth Social account, marks a pivotal moment in U.S.-Pakistan relations, signaling a strategic move from purely geopolitical ties to deep economic cooperation.
Trump Touts Oil Deal as Gateway to Long-Term Energy Alliance
On Wednesday, Trump declared, “We’ve just finalized an agreement with Pakistan to collaborate on developing their massive oil reserves.” While specific reserves were not named, the message underscored a new direction in bilateral relations.
Though Pakistan primarily imports oil, with around 20% of its import bill attributed to petroleum products—mainly from the Middle East—Trump referred to the agreement as a “significant beginning” in fostering a long-term U.S.-Pakistan energy alliance.
New Trade Framework Emerges
Shortly after the oil partnership was publicized, the White House revealed a broader trade agreement with Pakistan. Central to this development is the reduction of tariffs on Pakistani imports to the U.S. from 29% to 19%, signaling a shift towards economic collaboration.
Pakistan’s Prime Minister Shehbaz Sharif hailed the deal as a “landmark”, emphasizing its potential to boost cooperation in sectors like:
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Energy
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Mining and minerals
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IT
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Cryptocurrency
Pakistan’s Finance Ministry echoed this enthusiasm, describing the agreement as a “forward-looking, balanced approach” from Washington.
Strategic Positioning in South Asia
Trade experts, such as Azeem Khalid, see the evolving alliance as a shift from military-centered ties to economic diplomacy, adding that Pakistan is now emerging as a strategic commercial partner in the region.
This development also has geopolitical undertones. The new U.S. tariff on India’s imports stands at 25%, slightly higher than Pakistan’s, prompting Trump to jest, “Maybe one day, Pakistan will be selling oil to India!”
Pakistan’s Oil Industry: Untapped but Promising
Despite being oil-reliant, Pakistan has long struggled to develop its own domestic reserves. Offshore exploration attempts, particularly in the Indus Basin, have so far yielded limited success. According to official estimates, the nation holds 234 to 353 million barrels of proven recoverable crude oil reserves—ranking it around 50th globally.
The most promising deposits are believed to lie in:
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Balochistan
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Sindh
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Punjab
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Khyber Pakhtunkhwa
However, efforts to extract oil—especially in Balochistan—face significant security challenges due to ongoing insurgencies.
Oil Flow Reverses: Pakistan to Import US Crude
While the deal opens doors for Pakistan’s potential exports in the future, for now, the oil flow is heading inward. On Friday, Reuters reported that Cnergyico, Pakistan’s largest oil refiner, will import 1 million barrels of U.S. crude oil in October, facilitated by Dutch trading company Vitol.
“If economically feasible, we plan to bring in at least one shipment monthly,” said Cnergyico Vice Chairman Usama Qureshi.
Balochistan: Security Hurdle in the Heart of Oil Potential
Balochistan, believed to hold significant underground oil reserves, is also a center of resistance. Armed insurgent groups, opposing federal control over resources, often target exploration and extraction projects.
Legal expert Osama Malik warns that any extraction activities without addressing local grievances could further alienate the Baloch population, already resentful of Chinese-backed projects.
American Presence May Shift Regional Balance
Security analyst Qamar Cheema suggests that the introduction of American oil firms into Balochistan could eventually diminish support for insurgents, assuming local development projects are managed with transparency and fairness.
“Once U.S. businesses set up shop, the insurgency will likely weaken,” he noted. “This could also reshape the region’s strategic balance.”
Geopolitical Stakes and U.S. Interests
The United States sees Balochistan not just as an energy hub but as a strategic corridor, given its proximity to Iran and Afghanistan. Analysts say Washington views it as a watchpoint for monitoring Iranian activities, especially amid ongoing nuclear tensions.
There’s also the dimension of countering China’s growing influence in Pakistan. The $65 billion China-Pakistan Economic Corridor (CPEC) includes the Gwadar Port, a key node for Beijing’s trade ambitions.
China, U.S., and the Diplomatic Balancing Act
While Chinese companies currently dominate Pakistan’s energy and mineral sectors, U.S. entry into this space could present new competitive dynamics.
“Islamabad must now balance its relationships,” Malik observed. “While Chinese support is extensive, new investment from the U.S. could diversify Pakistan’s options.”
Azeem Khalid believes this situation may not provoke conflict but rather form a diplomatic bridge between competing global powers.
✅ At a Glance: Key Details of the US-Pakistan Oil Deal
| Aspect | Details |
|---|---|
| Deal Announcement | July 2025 by Donald Trump |
| Oil Partnership | Joint U.S.-Pakistan oil exploration and development |
| Tariff Reduction | Pakistani imports to U.S. now taxed at 19% (down from 29%) |
| Resource Focus | Untapped reserves in Balochistan, Sindh, Punjab, Khyber Pakhtunkhwa |
| Current Oil Flow | Cnergyico importing 1M barrels of U.S. crude oil |
| Security Challenges | Baloch insurgencies target extraction projects |
| Strategic Implications | Competes with China’s CPEC investments; challenges India’s regional position |
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✅ Final Word
The latest U.S.-Pakistan oil agreement is more than just a trade deal—it’s a strategic pivot. It signals Washington’s intent to engage Pakistan not just as a security ally, but as a regional economic partner. If managed wisely, this partnership could unlock long-awaited energy opportunities, reshape local dynamics in resource-rich provinces, and recalibrate the global balance of power in South Asia.
