On Wednesday, July 30, 2025, Donald Trump took to Truth Social to declare that the US and Pakistan had “concluded a deal … we will work together on developing their massive oil reserves”, adding that the US was “choosing the oil company” for the project.
On the same day, he issued a blunt threat to India, announcing a 25 per cent tariff on Indian imports beginning August 1, along with an unspecified “penalty” tied to New Delhi’s defence and energy purchases from Russia. Though he referred to India as “our friend”, he harshly criticised its high average tariff levels and burdensome non-monetary trade barriers, accusing it of being “Russia’s largest buyer of ENERGY … at a time when everyone wants Russia to STOP THE KILLING IN UKRAINE”.
A Bloomberg columnist says that India’s refusal to fall in line irritated Trump, who emphasised that, while “he received fulsome praise from Pakistan’s leaders after he announced a ceasefire; the Indians pointedly ignored him”.
Combined, these messages signal a coordinated diplomatic design: the oil deal with Islamabad is not merely economic but geopolitical, while the tariff on India serves as both pressure and provocation. It should be highlighted that after the recent tariff agreement, Pakistan now faces reciprocal tariffs broadly aligned with those imposed on key regional competitors like Bangladesh, Cambodia, Vietnam, Indonesia, and Sri Lanka. India is currently the only major competitor in the region facing higher tariff rates. In a broader international perspective, 42 countries have been granted lower tariffs than Pakistan’s 19 per cent. Trump’s treatment of Pakistan has been friendly but not exceptional.
Pakistan’s proven oil reserves – around 353.5 million barrels as estimated by the US Energy Information Administration in 2016 – are modest and unlikely to shift global energy equations. Pakistan may have potential. But that’s very different from proven reserves. No one doubts the country is underexplored. But ‘untapped riches’ is a phrase that’s been used too often without results.
It is claimed that seismic surveys suggest large potential in the Offshore Indus Basin. However, this is not new: a similar narrative surfaced in November 2015, when the then Minister of Petroleum claimed that Pakistan had recoverable reserves of around 200 trillion cubic feet (TCF) of natural gas and around 58 billion barrels of oil in its shale structure. ExxonMobil’s much-hyped offshore Kekra-1 well near Karachi, drilled in 2019 with ENI, OGDC and PPL, was abandoned after a $100 million effort failed to find commercially viable reserves.
Export-grade infrastructure is limited, and exploratory data remains sparse. But as ‘Foreign Affairs’ argued in July 2025, the value of the agreement lies in geographic strategy: Pakistan borders the Arabian Sea, Iran and Afghanistan and lies along China’s Belt and Road routes. It presents Washington with a lever in a region where strategic influence matters more than oil volumes. ‘The Washington Post’ further noted that US–China competition, strained Gulf supply chains, and rising energy insecurity have made geography a proxy for influence in South Asia.
Diplomatic posture toward Pakistan has shifted rapidly since Trump assumed office in January 2025. In June, General Michael Erik Kurilla praised Pakistan during testimony before the US House Armed Services Committee, calling it a “phenomenal partner in the counter-terrorism world” for its operations against ISIS-K, collaboration in capturing militants like Mohammad Sharifullah and sharing intelligence. Importantly, he asserted that US engagement with Pakistan “does not have to come at India’s expense”, marking a departure from earlier zero-sum frameworks. Soon after, Pakistan was excluded from a broader $397 million US aid cut affecting other regional partners. As recognition of the deepening partnership – and despite Kurilla’s pending retirement – Pakistan awarded him the Nishan-e-Imtiaz (Military). These developments suggest the shift is structural rather than personal.
The parallel imposition of a tariff threat on India does more than open a trade row; it deliberately disrupts India’s strategic alignment. At the same time that Pakistan is courted via an energy deal, New Delhi is publicly scolded for protectionism and its procurement from Moscow. The trade standoff comes amid ongoing bilateral negotiations aimed at doubling US–India trade by 2030. India’s resistance to opening its agricultural markets, combined with high domestic tariff levels on key exports, has drawn sharp US rebuke.
Trump’s framing seeks to penalise these policies while signalling that alignment with Russia carries real costs. International media noted India’s economic markets immediately reacted: stock futures fell sharply, the rupee weakened and foreign institutional investors sold off, reflecting destabilising uncertainty in bilateral commerce.
While Washington applies pressure on both Pakistan and India, Islamabad has not neglected its ties with China. On July 24–25, Army Chief Field Marshal Syed Asim Munir made an unplanned high-level visit to Beijing – skipping scheduled stops in Sri Lanka and Indonesia – to meet Foreign Minister Wang Yi, PLA leaders including Zhang Youxia and Vice President Han Zheng.
The focus: reinforcing the ‘iron-clad’ partnership, reviewing CPEC security and ensuring protection for Chinese nationals amid rising attacks. Chinese state media emphasised mutual support, joint counterterrorism and deepening defence and infrastructure ties. Wang pressed for tighter security; Munir reaffirmed Pakistan’s commitment in return for long-term Chinese investment.
The visit reflects Pakistan’s strategic bind. Billions in CPEC financing remain vital, but delays, mounting debt and insecurity have strained relations. Beijing has reportedly asked for expanded counterterrorism cooperation and discreet Chinese security deployments – demands Islamabad has so far resisted. The US-Pakistan thaw further complicates the picture: as Trump wields economic carrots and sticks, Islamabad must juggle China’s expectations without provoking US backlash over Gwadar or CPEC transparency.
Viewed together, the US-Pakistan oil agreement, India tariff threats, and Munir’s China diplomacy sketch triangular geopolitics. Washington is extending strategic latitude to Islamabad, asserting its right to shift alignments and leverage geography; concurrently, China is tightening its hand via economic and military partnership. Pakistan has placed itself at the centre of two great power vectors, but the vectors pull in different directions.
Risks to this configuration abound. Pakistan’s economy is fragile: high debt to China, currency instability, IMF conditionality and lack of investor confidence threaten the oil deal’s viability. Chinese investments are under increasing scrutiny for debt sustainability and security liabilities in Balochistan. US and multilateral financial leverage might constrain Pakistan’s ability to continue unconditional alignment with Beijing. If Pakistan fails to maintain sufficient neutrality, it risks alienating either Goliath. If Washington overplays pressure on India, it could damage its broader Indo-Pacific architecture.
If this framework endures, it could mark the most deliberate US-Pakistan strategic reorientation since the post-9/11 era. But it would be too much to expect much in official US aid, unlike in the past when Pakistan received $12 billion in economic assistance from 2002 to 2015. However, if Pakistan cannot sustain its balancing act, it could become a structural mistake rather than a pivot.
For now, the engagement is audacious, consequential, but risky. Trump is unpredictable and tends to get angry rather quickly. The pivot’s legacy will depend on whether Washington and Islamabad translate transactional openings into enduring strategic currency – and whether Islamabad can navigate the Sino-American tug without fracturing its own strategic identity.
The writer is former head of Citigroup’s emerging markets investments and author of ‘The Gathering Storm’.