What does Pakistan have to lose in case Iran ceasefire doesn't pan out

Mere hours before the 2-week old ceasefire came to an end, US President Donald Trump announced on Wednesday that the he had extended the fragile truce 'indefinitely' in order to give a 'fractured' Iran time to come up with a unified 'peace proposal.

Trump claimed he had done so on the request of Pakistan's Field Marshall Asim Munir and Prime Minister Shehbaz Sharif. However, he remained defiant on the continuation of the blockade in the Strait of Hormuz.

With peace talks reaching a stalemate, Pakistan one again finds itself stuck in a limbo, trying to initiate a dialogue between the two.

Hormuz- main point of contention

Barring Iran's nuclear prowess, the main point of contention between both camps has been the Strait of Hormuz— a chokepoint which control nearly 20 per cent of world's maritime trade.

After US and Israel's initial attack, Iran had closed the Strait of Hormuz sending oil prices skyrocketing across the world. The first round of peace negotiations, held in Islamabad, unfortunately bore no fruit and neither could they come to a decision regarding the State of Hormuz.

After a little back and forth from Iran's side the Strait was effectively closes. However, what escalated matters was US' naval blockade of Iranian vessels in the Strait.

The little progress made between the two also collapsed and Pakistan had to once again rise to role of the mediator.

Pakistan's relations with other countries

Up until last year, Pakistan's standing in the realm of geopolitics wasn't the best. But an invitation from Donald Trump—where he called Munir his "favourite Field Marshal'—was just the beginning of a good diplomatic relationship between the two.

Though Trump's predecessor Joe Biden has called Pakistan as "one of the most dangerous” countries in the world. The new administration has allotted the South Asian a space in of its good books.

On the other hand, Pakistan shares not only a 900-km border with Iran, it also has deep cultural ties with West Asian country, Iran is Shia majority country and Pakistan though is largely Sunni, it does have one of the largest Shia populations in the world. This connection acts as a bridge between the two nation.

Moreover, Pakistan also has connections with other countries impacted in the war including Saudi Arabia. Last year, Pakistan signed a defence deal with the country, strengthening their already robust bond.

How is the war impacting Pakistan?

With Strait of Hormuz closed, Pakistan which is heavily dependent on imports of oil and gas is now facing major fuel crisis. This has prompted implementation of work-from-home policies in many offices and schools.

But what really puts Pakistan in tough spot, is its loan from International Monetary Fund (IMF). The agreement demands Pakistan to maintain foreign currency reserves at a certain level. But with the strait closed , Pakistan has to spend more of this currency on oil, which is causing a huge dent in its reserves.

According to a recent report by the Pakistan Institute of Development Economics (PIDE), “Rising oil prices increase the import bill, intensify inflationary pressures, and place downward pressure on the exchange rate, thereby slowing economic activity."

"The existing closure of the Strait of Hormuz, if prolonged, can elevate industrial input costs and weaken overall business confidence. Furthermore, higher energy prices may also widen the trade deficit and strain external financing needs,' it added

There is another issue which is looming over Pakistan's head: defence deal with Saudi Arabia. After US and Israel's initial attack, Iran retaliated by attacking US bases in West Asian region including Saudi Arabia. The country incurred huge demands on its oil fields.

Though, for the moment, Saudi hasn't retaliated with an attack of it own but if it decides to do so then Pakistan will have no choice but to join the war and pick sides—something it has evaded until now.

How the mediator role benefits Pakistan

Pakistan's role as the diplomat has raised its stature among its geopolitical peers so much so that even European Union and Gulf Council clauded the country's efforts in trying to bring the war to an end.

This also cements Asim Munir's role as the de facto head of the state while simultaneously giving the Pakistani government an achievement they can flaunt in front of their electorate.

And if the war does indeed end, then Pakistan will be elevated in others' eye and will be able to loans and foreign investments—a funding the economy desperately needs.

But Pakistan is walking very tightrope at the moment. If the talks fail, the country will be blamed for failing to acquire peace. There have already been claims that Pakistan is furthering US interests more than acting as a neutral mediator.