Business Recorder
EDITORIAL: Qatar Energy has declared force majeure on some of its long-term liquefied natural gas (LNG) supply contracts, including for customers in Italy, Belgium, South Korea and China - a clause that allows one party in a binding contract to be excused from its obligation due to unforeseeable circumstances. This prompted Shell to declare force majeure to its LNG customers on 10 March. Industrial and trading entities including Norsk Hydro, Aluminium Bahrain, and Oman’s OQ have been compelled to reduce output due to curtailed gas supply and supply chain breakdowns. Petroleum companies in Kuwait (Equate and Petroleum Corporation) declared force majeure on 7 March and by Bapco Energies (Bahrain) on 9 March due to Iranian attacks against US interests in the Gulf states as well as Israel. Saudi Arabia’s petrochemical giant SABIC, 70 percent owned by the world’s largest exporter of crude Saudi Aramco, producing over 5 million tons of methanol and 7 million tons of EG products such as monoethylene glycol, declared force majeure on 26 March as its sales continue to be impeded due to the closure of the Strait of Hormuz. Supply disruptions have impacted on economies around the world including in the US with minimal reliance on purchase of oil from the Middle East as petrol (gas) prices rise at the pump. The question is whether the experience during the pandemic (Covid-19), an extraordinary event, is a good illustration of what the world is being subjected to at present with the ongoing US/Israel war on Iran and the latter’s retaliations that spans the six Gulf countries, housing US bases and considerable US economic interests, as well as Israel. There is mounting evidence that the impact on different economies is uneven with developing countries suffering considerably more than the developed countries even though their citizens are now struggling with surging fuel and energy prices. Pakistan as a case in point was extended major relief in terms of a suspension of the severely contractionary monetary and fiscal policies that were being implemented under the International Monetary Fund (IMF) programme – a suspension that began early 2020 and continued till end 2021. By 2022, the Fund insisted that the government begins implementation of the previously agreed polices, which led to a staff-level agreement by the middle of that year though by October the then administration violated two of the agreed conditions (extending electricity subsidies to industry at a time when more than 30 million were living under the open sky due to the floods, and artificially controlling the rupee-dollar parity that led to multiple rates resulting in a 4 billion dollar contraction in remittance inflows), prompting the Fund to suspend the programme. Pakistan has secured two more Fund programmes since that suspension and currently it is facing serious issues relating to the fuel supply disruptions as a consequence of the ongoing Middle East conflict. The government first raised prices, as well as petroleum levy to perhaps minimise the revenue shortfall that had been evident even prior to the start of hostilities, but had to back down due to massive public outcry. Today, there is little clarity as to exactly how much would subsidies cost the taxpayers and how much would the austerity package generate. The IMF, surely, is aware of the fact that the poverty levels in this country are a high of 42.4 percent, as determined by the World Bank, and that claims of stabilisation were on the back of securing foreign debt that enabled the country to import essentials and at the same time to provide support to the external value of the rupee. With the Middle East conflict in full swing Pakistan is not only grappling with supply disruptions of essentials but also in ensuring the smooth outflow of exports and the inflow of remittances. IMF’s Managing Director Georgieva has stated that “in an uncertain world more countries are needing more support. We are there for them.” It is hoped that her statement is applied to Pakistan and the harsh upfront conditions are deferred till an end to global supply disruptions. Copyright Business Recorder, 2026
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