The history of the Gulf is marked by immense wealth, strategic rivalry and recurring conflict. Yet wars in this vital region have never remained confined to its shores. Whenever conflict threatens oil production or the security of shipping routes, its consequences spread across the world. Prices rise, supplies become uncertain and economies far from the battlefield are forced to absorb the shock.

Pakistan has repeatedly experienced these consequences. Although geographically distant from the Gulf, the country remains deeply dependent upon imported oil and gas. At the same time, millions of Pakistanis working in Gulf countries send home remittances that provide an important source of foreign exchange. Every major crisis in the region therefore presents Pakistan with two interconnected challenges: rising energy costs and possible disruption of remittance flows.

The Iran-Iraq war, which began in 1980, provided an early demonstration of this vulnerability. Both countries were major oil producers, but fighting damaged their production and export facilities, reducing supplies and pushing international prices upward. Pakistan, under General Zia-ul-Haq, responded with pragmatic diplomacy, maintaining working relations with both Iran and the Arab Gulf states while strengthening its strategic relationship with Saudi Arabia.

Higher oil prices placed considerable pressure on Pakistan’s import bill, particularly because domestic refining capacity was limited. Yet the rapid growth of remittances from Pakistani workers in the Gulf provided an important economic cushion. By the early 1980s, remittances had become a major source of foreign exchange, helping finance the trade deficit and support domestic demand.........

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