In Pakistan’s time of need, Saudi Arabia has been a friend indeed
It would not be wrong to say that since the formation of Prime Minister Imran Khan’s government, Pakistan has been jostling with an endemic economic crisis that has forced the administration to depreciate the value of the Pakistani rupee, even as the stock exchange lost more than 1,328 points in a single day.
As things stand, Pakistan’s current-account deficit remains at $18 billion, and the country needs financial assistance amounting to $12 billion to avoid defaulting on its international debt obligations.
As a result, the government was compelled to formally start negotiations with the International Monetary Fund for a mega bailout plan, even while Pakistan continues to gather support from its allies. Saudi Arabia, meanwhile, has been trying to reorient its relationship with its close allies and develop them along more structural lines.
Against this backdrop, Khan this week embarked on his second trip to the Kingdom within a month. Under his leadership, the government has been trying to broaden its engagement with states that have long maintained friendly ties with Pakistan and stood by it in every hour of need.
Saudi Arabia is one such important ally. In addition to sharing a common regional outlook, the longstanding security cooperation between the two states has further strengthened bilateral ties. It was because of this that Khan’s first official trip after becoming the prime minister was to Saudi Arabia, on the invitation of King Salman and Crown Prince Mohammad bin Salman.
That visit was instrumental in advancing the traditional spheres of bilateral engagement, widening them further into a comprehensive economic partnership. It was only after the trip that the two sides started to look into areas of investment and trade that have remained unexplored until now. For the first time, Saudi Arabia has taken an extensive interest in investing in a variety of ventures and projects in Pakistan, with the aim of developing strategic economic ties.
The decision by Riyadh to invite the Pakistani premier to the FII conference in Riyadh and Imran Khan's participation and complete trust in the Saudi leadership makes it evident that the strategic considerations of Saudi Arabia and Pakistan remain closely aligned, now more than ever.
Umar Karim
Most notably, the Kingdom has agreed to set up an oil refinery in the southern port city of Gwadar. The port is of enormous geopolitical significance, as it sits at the mouth of the Arabian Gulf and is connected to the Strait of Hormuz through the Gulf of Oman. Moreover, with Gwadar becoming a major trade hub and a fulcrum point in the China-Pakistan Economic Corridor (CPEC) project, its strategic significance has quadrupled.
A Saudi presence in Gwadar will not only benefit the Kingdom’s investments in Pakistan’s energy sector but will also link it with CPEC and its subsidiary projects.
The proposed oil refinery is expected to have a capacity of 500,000 barrels per day, and will attract $8 billion to $9 billion of Saudi investment. This is crucial for Pakistan, as once the refinery is operational it will help to finally reduce the country’s oil-import bills; instead of importing refined oil, Pakistan would be able to obtain crude shipments directly, which could then be refined locally.
Based on recent statements from the prime minister — when he said that Pakistan might yet try to avoid seeking the IMF’s help — it seemed as though there had been positive signals of help from its allies. This proved to be correct this week when it was announced that Saudi Arabia will deposit $3 billion in Pakistan’s state bank as a balance-of-payment grant.
Pakistan had also been in discussion with the Kingdom regarding assistance with the import of petroleum products, reasoning that such imports — bearing in mind rising oil prices — were a huge burden on country’s economy. Saudi Arabia’s subsequent approval of the Pakistani request by deferring payment on up to $3 billion of oil shipments will have a major effect in reducing one of the major economic woes faced by the country, as it will decrease Pakistan’s import bill.
The decision by Riyadh to invite the Pakistani premier to the FII conference in Riyadh and Imran Khan's participation and complete trust in the Saudi leadership makes it evident that the strategic considerations of Saudi Arabia and Pakistan remain closely aligned, now more than ever.
— Umar Karim is a doctoral researcher at the University of Birmingham in the United Kingdom. His research focuses on the evolution of Saudi Arabia’s strategic outlook, the Saudi-Iran tussle, the conflict in Syria, and the geopolitics of Turkey, Iran and Pakistan.
@UmarKarim89
