Pakistan and U.S. reach a trade agreement to develop oil reserves and reduce tariffs

A Pakistani flag flies on a lookout in Islamabad, Pakistan, on July 27, 2022. (AP Photo/Rahmat Gul)

ISLAMABAD — The United States and Pakistan reached a trade agreement expected to allow Washington to help develop Pakistan’s largely untapped oil reserves and lower tariffs for the South Asian country, officials from both nations said Thursday.

Officials did not specify where the exploration would take place, but most of Pakistan’s reserves are believed to be in the insurgency-hit southwestern province of Balochistan, where separatists say the province’s natural resources are being exploited by the central government in Islamabad.

“We have just concluded a deal with the country of Pakistan, whereby Pakistan and the United States will work together on developing their massive oil reserves,” U.S. President Donald Trump wrote on his Truth Social platform.

“We are in the process of choosing the oil company that will lead this partnership,” Trump added. “Who knows, maybe they’ll be selling oil to India someday!”

Total U.S. trade with Pakistan was an estimated $7.3 billion in 2024, according to the Office of the United States Representative, which said on its website that U.S. exports to Pakistan in 2024 were $2.1 billion, up 4.4% ($90.9 million) from 2023. U.S. imports from Pakistan totaled $5.1 billion in 2024, up 4.9% ($238.7 million) from 2023, it said.

There was no immediate comment from the Baloch nationalists and separatist groups. Balochistan has long been the center of violence mostly blamed on groups including the outlawed Balochistan Liberation Army, or BLA, which the U.S. designated a terrorist organization in 2019.

Separatists in Balochistan have opposed the extraction of resources by Pakistani and foreign firms and have targeted Pakistani security forces and Chinese nationals working on multibillion-dollar projects related to the China-Pakistan Economic Corridor.

Oil reserves are also thought to exist in the southern Sindh, eastern Punjab and northwestern Khyber Pakhtunkhwa provinces.

Pakistan’s Prime Minister Shehbaz Sharif welcomed the “long-awaited” deal and thanked Trump for playing a key role in finalizing it.

Pakistan had been pursuing a trade agreement since May, when Trump mediated a ceasefire between Pakistan and India following an escalation triggered by Indian airstrikes on Pakistani territory in response to the killing of 26 tourists in Indian-controlled Kashmir.

Pakistan’s Finance Ministry said in a statement early Thursday the agreement aims to boost bilateral trade, expand market access, attract investment and foster cooperation in areas of mutual interest.

The breakthrough came during a meeting in Washington between Pakistani Finance Minister Muhammad Aurangzeb and senior U.S. officials, including Commerce Secretary Howard Lutnick and Trade Representative Ambassador Jamieson Greer.

The deal includes a reduction in reciprocal tariffs, particularly on Pakistani exports to the U.S., the statement from the ministry said.

“The agreement enhances Pakistan’s access to the U.S. market and vice versa,” it said. The agreement is also expected to spur increased U.S. investment in Pakistan’s infrastructure and development projects, it added. The ministry said the deal reflects both nations’ commitment to deepening bilateral ties and strengthening trade and investment cooperation.

Munir Ahmed, The Associated Press