ISLAMABAD – The potential for a Russia-Ukraine war is already buffeting Pakistan as local prices of energy, food supplements, pharmaceutical exports, commodities, steel and semiconductor chips soar.The conflict may also delay the repair and modernization of T-80UD tanks under a US$86 million contract Islamabad made with Ukrainian state arms conglomerate Ukroboronprom last year. Pakistan purchased 320 Ukrainian T-80UD tanks in a deal worth $650 million in 1996. Pakistan also imports the bulk of its wheat from Ukraine, with 39% of its total imports coming from Kiev last year. The country also imports barley, buckwheat, canary seed, oats, grain and corn from Ukraine. The crisis in a faraway region may also help distort the country’s current account balance, which is already in a bad way, according to a report by Ismail Iqbal Securities (IIS) released on February 14.Given the looming war-like situation, the IIS report titled Russia-Ukraine looming war threat: Implications for Pakistan said the wider indirect implications include a likely inflationary spiral in Pakistan.The report foresees a transient surge in crude oil, liquefied natural gas (LNG) and coal prices and predicts a serious threat to the country’s steel sector, which may see the prices of raw material and finished goods escalating, with the country’s current account balance going further downhill.The report also foresees a “major risk” to the automobile sector in the wake of chip shortages. The IIS expects the raw materials and finished goods in the steel industry to see a high spike in prices.“In the short run, the price rally in finished steel products such as cold-rolled coil, rebars and tabular steel might result in inventory gains. However, demand destruction is likely to occur in the medium term due to already higher prices,” it added. In addition to wheat imports, Pakistan also buys 37% of its foreign corn starch from Ukraine. As for exports, Ukraine has a share of 28% in the foreign sales of Pakistani polyester staple fibers and pharma industry.
