Record Saudi investment to help cash-strapped Pak

Dubai, February 10

A record investment package being prepared by Saudi Arabia for Pakistan will likely provide welcome relief for its cash-strapped Muslim ally, while also addressing regional geopolitical challenges, analysts say.

At the heart of the investment is a reported $10 billion refinery and oil complex in the strategic Gwadar Port on the Arabian Sea, the ultimate destination for the massive multi-billion dollar China Pakistan Economic Corridor, which lies not far from the Indo-Iranian port of Chabahar. Two Saudi sources confirmed that heir apparent to the Gulf kingdom’s throne, Crown Prince Mohammed bin Salman, will visit Islamabad shortly, without giving a date. Riyadh and Islamabad, decades-old allies, have been involved for months in talks to hammer out details of the deals in time for the high-profile visit.

The Wall Street Journal reported last month that both Saudi Arabia and the United Arab Emirates, Islamabad’s biggest trading partner in the Middle East, have offered Pakistani Prime Minister Imran Khan some $30 billion in investment and loans.

Riyadh investments are expected to provide a lifeline for Pakistan’s slumping economy, which was downgraded in early February by S&P ratings agency from a B to a B-, Saudi economist Fadhl al-Bouenain said.

The OPEC heavyweight also aims to achieve strategic and commercial goals with investments in infrastructure and refinery projects, he said.

Saudi Arabia and its Gulf partner, the UAE, have already deposited $3 billion each in Pakistan’s central bank to help resolve a balance of payments crisis and shore up its declining rupee.

They have also reportedly deferred some $6 billion in oil imports payments as Islamabad has so far failed to secure fresh loans from the International Monetary Fund. Khan has already visited Riyadh twice since taking office in July and in October attended a prestigious investment conference widely boycotted by other political and economic figures after the murder of journalist Jamal Khashoggi.

Khan also visited Saudi rivals Qatar and Turkey, as well as China seeking investments. “One of the goals for Saudi expanding investments in refining worldwide is to secure market share and sustainable exports in the face of international competition,” Bouenain said. 

Saudi Energy Minister Khalid al-Falih visited Gwadar in January and inspected the site for the proposed oil refinery at the deep sea port, just 70 km away from its Iranian competitor, Chabahar. He was quoted by media as saying the kingdom was studying plans to construct a $10 billion refinery and petrochemicals complex in Gwadar. — AFP

Gwadar vs Chabahar

• Saudi Arabia, the world’s top crude exporter, has been investing heavily in refinery and petrochemicals projects across the globe to secure long-term buyers of its oil
• A pipeline from Gwadar to China would cut the supply time from the current 40 days to just seven
• Developed as part of China’s Belt and Road Initiative with investments worth some $60 billion, Gwadar is being billed as a regional industrial hub of the future, easily accessible for Central Asia, Afghanistan, the Middle East and Africa
• But so far China has rejected other partners for the corridor that seeks to connect its western province Xinjiang with Gwadar, including Saudi Arabia and UAE
• Iran late last year inaugurated Chabahar, which provides a key supply route to landlocked Afghanistan and allows India to bypass its historic enemy Pakistan
• India has seen Chabahar as a key way both to send supplies to Afghanistan and to step up trade with Central Asia as well as Africa
• Riyadh is not expected to get involved in any Indo-Pakistani rivalry and the kingdom also has major strategic energy deals with New Delhi