Another bailout package from Saudi Arabia

Prime Minister Imran Khan recently undertook a visit to Saudi Arabia to attend “Middle East Green Initiative (MGI) Summit” at the invitation of Saudi Crown Prince Muhammad bin Salman. But to the surprise of many, the Prime Minister returned from Riyadh with yet another financial bailout package. Saudi Arabia immediately deposited $3 billion in the State Bank of Pakistan to shore up Pakistan’s foreign reserves against the backdrop of rising international commodity prices. Riyadh would also provide $1.2 billion oil on deferred payment for a year.

This new support was unexpected given that the relationship between Pakistan and Saudi Arabia in recent years has been marred by differences on certain issues. Earlier this year, Pakistan had rather returned $3 billion to Saudi Arabia even though in the past, such lending had either rolled over or converted into a grant. But such was the nature of the hiccup in ties that Pakistan had to do the unthinkable. The reason for apparent friction stemmed from differences on certain issues including Pakistan’s move to seek closer ties with countries such as Iran, Turkey and Malaysia, something that did not go down well with the Saudi rulers. Pakistan was also upset with Saudi Arabia not supporting it on the Kashmir dispute with India. Then there was also thought to be pressure on Pakistan to rethink its stance towards Israel. Against this backdrop it is natural to ask what has prompted Saudi Arabia to extend a helping hand at this juncture and if Pakistan has offered anything in return.

When Prime Minister Imran Khan took charge in August 2018, the US and Saudi Arabia had close ties while tensions were running high between Iran and Saudi Arabia. But since President Joe Biden has taken over, the relationship between Saudi Arabia and the US has gone sour. Biden decided not to speak to MBS while he also withdrew support for the Yemen war. This left Saudi Arabia in a serious situation as it looked for other options. While the Biden administration sought to revive the nuclear deal with Iran, Riyadh also began talks with Tehran to seek rapprochement. The Saudi Foreign minister confirmed that the two countries had been talking to each other. Their officials had a fourth meeting on September 21 and both sides reported progress in them. The improved Saudi-Iran ties means that Pakistan won’t be facing the similar pressure to pick sides as it faced in the past. MBS is now seeking to strengthen ties with China, the main US rival. On October 17, the Chinese and Saudi Foreign Ministers spoke to each other on the phone. The statement issued by the Chinese foreign minister was quite telling. It said that the Chinese foreign minister told his Saudi counterpart that China has “always given priority” to its relations with Saudi Arabia in its diplomacy in the Middle East. The Saudi foreign minister responded by suggesting that Saudi Arabia regards “China as a truly credible strategic partner.”

Similarly, the Saudi-Russia ties have also seen improvement signaling another shift. It is also important to note that while Saudi Arabia announced the financial bailout package, Prime Minister Imran Khan and the Chinese President had a rare telephonic conversation. It is believed that the Prime Minister took the Chinese leader into confidence about the Saudi assistance. In the past, Saudi assistance was thought to be aimed at persuading Pakistan to stay away from China at the behest of the US. But this time it seems that is not the case. Therefore, it appears that Saudi Arabia has extended the assistance to Pakistan out of its own strategic compulsions.

 

Published in The Express Tribune, November 1^st, 2021.

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