M Omar Dogar
For decades, Pakistan’s agricultural sector has been defined by two constants: its role as the backbone of the national economy, and its peculiar vulnerability to forces beyond its borders. Today, that vulnerability is being tested with a severity not seen since the oil crises of the 1970s. The ongoing conflict involving Iran, a critical node in global energy and trade corridors, has ruptured supply chains that our farmers, agribusinesses, and food systems rely upon with almost fatalistic dependence.
As someone who has spent years navigating the financial architecture of Pakistan’s rural economy, I see a perfect storm gathering. This is not merely about higher prices at the utility store or a slight dip in export earnings. It is about the structural integrity of a sector that employs nearly 40% of our labor force and feeds 240 million people. If we fail to read the signals emanating from West Asia, we risk turning a geopolitical fire into a domestic food crisis.
The Anatomy of a Supply Shock
The Iran crisis disrupts Pakistan’s agriculture through three distinct but interwoven channels: energy and input costs, trade and transit routes, and fiscal pressures on the national exchequer. Each channel, on its own, would be manageable. Together, they form a cascade.
1. The Cost of Cultivation
Pakistani agriculture is an energy-intensive industry. From the diesel that powers tube wells in the parched plains of southern Punjab and Sindh, to the natural gas that serves as feedstock for urea manufacturing, the entire production matrix is tethered to fossil fuels. When conflict flares in West Asia, particularly when the Strait of Hormuz, through which one-fifth of global oil passes, is perceived as threatened, global energy markets react with immediate price spikes.
For the Pakistani farmer, this translates into a brutal arithmetic. Urea prices, already strained by volatile international ammonia markets, become hostage to shipping insurance premiums and rerouted cargo. DAP (Diammonium Phosphate), for which we rely heavily on imports from the region, sees its landed cost climb before a single bag reaches a farmer’s field. Meanwhile, the cost of running a tube well for a single acre of wheat can increase by 30-40% within a matter of weeks.
These are not abstract statistics. When input costs outpace the official support price for wheat or sugarcane, the farmer’s margin is compressed to nothing. In a country where small landholdings predominate, such compression does not lead to efficiency gains; it leads to distress sales, a retreat from cash crops, and a dangerous cycle of over-indebtedness.
2. Fertilizer and Feedstock Vulnerability
Pakistan’s fertilizer sector is a case study in cascading vulnerability. Urea manufacturing, though largely domestic, depends on gas supply which is frequently curtailed in winter due to competing demands from the power and domestic sectors. Any disruption in global LNG markets, exacerbated by Middle East tensions, tightens gas availability further, forcing plant closures or reduced production.
Phosphate fertilizers tell an even starker story. Pakistan imports a significant portion of its phosphate rock and phosphoric acid from Jordan, Morocco, and, prior to sanctions and conflict, via routes that pass close to volatile zones. The Iran crisis has led to increased maritime insurance premiums in the Gulf of Aden and the Strait of Hormuz, directly raising the cost of these critical inputs. The result is that by the time kharif sowing begins, farmers face either scarcity or exorbitant prices, forcing them to under-fertilize, a decision that directly diminishes yields and national output.
3. Water and Energy Interdependence
Perhaps the most under-discussed aspect of the energy-agriculture nexus is water. Pakistan is one of the most water-scarce countries in the world, yet it uses more water for agriculture than almost any other nation. A large portion of this water comes from groundwater extracted via tube wells, the majority of which are diesel-powered.
When diesel prices surge due to geopolitical risk, the cost of pumping water rises in lockstep. In regions where the water table is falling, such as large swathes of the Rechna Doab, farmers must pump from greater depths, consuming even more fuel. This creates a vicious cycle: higher global energy prices lead to higher pumping costs, which lead to reduced irrigation, lower yields, and ultimately higher food prices. The conflict in Iran, by keeping a risk premium embedded in oil prices, effectively taxes Pakistani agriculture every day.
Trade Routes and Regional Connectivity
Iran is not merely a source of instability; it is also Pakistan’s gateway to West Asia, Central Asia, and beyond. The conflict has direct implications for the trade corridors on which our agricultural exports and imports depend.
The Gwadar–Chabahar Dynamic
The proximity of Gwadar to Iran’s Chabahar port has long been seen as an opportunity for complementarity. However, conflict in the region introduces a security premium for cargo destined for or originating from these ports. Agricultural exports, particularly rice, kinnow, mangoes, and vegetables, that rely on timely shipping schedules face delays, higher freight costs, and in some cases, outright cancellation of orders by risk-averse international buyers.
Moreover, the land route to Turkey and Europe via Iran has become increasingly precarious. While official trade may continue, informal and transit trade, which has historically played a role in moving agricultural goods, suffers disruptions. For Pakistani traders, rerouting cargo around the conflict zone adds weeks to transit times and erodes the freshness and quality of perishable exports.
Import Dependency: Wheat and Edible Oil
Pakistan’s perennial structural weakness is its reliance on imported edible oil and occasional wheat imports. The edible oil import bill stands at over $3.5 billion annually, making it one of the largest drains on foreign exchange. Most of this oil, palm oil, comes from Southeast Asia, but the shipping routes pass through choke points affected by the West Asian conflict. Any escalation that affects the Strait of Hormuz or the Arabian Sea shipping lanes directly impacts the cost and availability of this essential commodity.
Wheat presents a different but equally acute challenge. Although Pakistan often produces a surplus, the margin between surplus and deficit is thin. In years of climatic stress, and we have seen unprecedented floods and heatwaves in recent years, the country must turn to international markets. When global markets are roiled by geopolitical tension, as they are now, the cost of procuring wheat for public reserves becomes prohibitive. This forces the government into a dilemma: either subsidize wheat imports at the expense of other development spending, or allow domestic prices to rise, stoking urban food inflation.
To Be Continued
