The visit by Saudi Arabia’s Energy Minister Khalid A Al-Falih on Saturday to Gwadar to inspect the site allocated for a multibillion oil refinery in the port city suggest that Riyadh and Islamabad are giving the final touch to reaching agreement for a Saudi Aramco Oil Refinery in Pakistan. Reports say that Saudi Arabia will be investing $10 billion in the proposed project.
(Saudi Arabia’s Minister of Energy Khalid A Al-Falih arriving at Gwadar Port, January 12, 2019)
Without doubt, this is a major development in the region. The Saudi-Pakistan relationship, which has been traditionally close and fraternal, is moving on to a new level of dynamism. The Saudi investment decision can be taken as signifying a vote of confidence in the Pakistani economy as well as in Prime Minister Imran Khan’s leadership. It comes on top of the $6 billion package that Saudi Arabia had pledged last year (which included help to finance crude imports) to help Pakistan tide over the current economic difficulties.
The visiting Saudi minister Khalid al-Falih told reporters in Gwadar, “Saudi Arabia wants to make Pakistan’s economic development stable through establishing an oil refinery and partnership with Pakistan in the China Pakistan Economic Corridor.” This remark highlights that Saudi Arabia is openly linking up with the China-Pakistan Economic Corridor (CPEC). China has welcomed this development, but countries that oppose the CPEC such as the US and India will feel disappointed.
From the Indian perspective, the Saudi investment in Gwadar becomes a game changer for the port city, which was struggling to gain habitation and a name. Inevitably, comparisons will be drawn with Chabahar. India has an added reason to feel worried that its Ratnagiri Refinery project, which has been described as the “world’s largest refinery-cum-petrochemical project” is spluttering due to the agitation by farmers against land acquisition. The Saudi Aramco was considering an investment in the project on the same scale as in Gwadar. Will Gwadar get precedence over Ratnagiri in the Saudi priorities? That should be the question worrying India.
The Saudi energy minister disclosed that Crown Prince Mohammed bin Salman will be visiting Pakistan in February and the agreement on the Gwadar project is expected to be signed at that time. Of course, it signifies that Saudi Arabia is prioritizing the relations with Pakistan. The fact remains that Saudi Arabia has come under immense pressure of isolation following the killing of Jamal Khashoggi.
There is much uncertainty about the dependability of the US as an ally and security provider. Riyadh is diversifying its external relations and a pivot to Asia is under way. Suffice to say, under the circumstances, a China-Pakistan-Saudi axis should not look too far-fetched. There is also some history behind it.
To be sure, Iran will be watching the surge in Saudi-Pakistani alliance with growing trepidation. The Saudi presence in Pakistan’s border region with Iran (such as Gwadar) has security implications for Tehran. Iran has been facing cross-border terrorism.
(Pakistan Prime Minister Imran Khan met Abu Dhabi’s Crown Prince Sheikh Mohamed bin Zayed Al-Nahyan at the Air Force base in Islambad on January 6, 2019)
Tehran cannot but take note that Imran Khan has not shown any interest in reciprocating the overtures it made when he came to power. He is yet to visit Iran. The expectation in Tehran was that Imran Khan who often voiced the political idiom of justice and resistance as an opposition leader would have empathy with Iran. But, as it happened, Imran Khan appears to be far more comfortable as prime minister with the crown princes of Saudi Arabia and the UAE.
Simply put, Tehran misjudged Imran Khan. But Imran Khan’s priorities today are quite understandable. He wants the Gulf Sheikhs to make big investments in the Pakistani economy. He senses that left-wing slogans have served their purpose when he was seeking power but they become liabilities today. Why should he put Pakistan as a torchbearer of resistance politics? In his interview with WaPo, he didn’t mince words in implying that he intended to follow neo-liberal economic policies.
Besides, in strategic terms, on important fallout of the Saudi bailout of Pakistani economy is that there may be no more need for Islamabad to approach the International Monetary Fund for a rescue package. The earlier indication was that Pakistan might seek a $8 billion bailout package. From present indications, the help from Saudi Arabia, China and the UAE will enable Pakistan to avoid seeking IMF assistance. (The UAE and Pakistan formalized a $6.2 billion bailout package last week in Islamabad.)
The US had openly threatened that any IMF bailout would be conditional on a close scrutiny of the CPEC projects. Ironically, it proved counterproductive. As a result, in geopolitical terms, Washington’s capacity to leverage Pakistani policies is significantly diminishing. The impact will be most keenly felt in Afghanistan.