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Posts tagged as Saudis

The bittersweet smell of money

Saudi Crown Prince Mohammad Bin Salman (MBS) has come and gone. He arrived amid great fanfare and departed on a high note, leaving behind a government grateful for a seemingly significant package of promised investments worth billions of dollars.
But what does the visit really amount to in both political and economic terms? The promise of $21 billion is nothing to trifle about.But seen in a broader historic context, the promises come in the shape of memoranda of understanding (MoU), not actual investments. A report in this newspaper last week revealed that Pakistan had signed over 10,000 MoUs in the last two decades but only two percent materialised into on-the-ground investments.The political context matters. The latest Saudi promises translating into MoUs have been underwritten by MBS himself on his first-ever visit to Pakistan, and come on the heels of hectic deliberations over the last four months, including two meetings between him and IK in Riyadh and another three with Pakistan’s military leadership.
They also follow two separate sets of $3 billion assistance for balance of payment support and oil on deferred payments, which led to similar arrangements with the UAE and China, thus preventing potential bankruptcy.This total of $12 billion worth of investments in oil and mineral sectorare already materialising and go beyond MoUs, so that is something.
The other significant aspect is that the MoUs are for investments that specify several projects and acquisitions such as a major refinery in Balochistan and power plants in Punjab — in a staggered manner over the course of five years. That the promised money has a high probability of materialising into Pakistan’s fraught economy is hinted at by the establishment of an Implementation Coordination Council to be co-chaired annually by MBS and IK, with its maiden meeting held in Islamabad and co-chaired by the two leaders even before the ink on the MoUs had dried.A three-year priority list and action plan were promptly drawn up, bilateral working groups created, and tasks assigned. This is super-fast by Pakistan standards and smell of real money!While the fate of the investments is in the hands of the working groups, what cannot escape scrutiny is the fact that these promises-leading-to-investments really constitute an economic bailout for Pakistan, which require payback.
Pakistan must start paying back $12 billion to Saudi Arabia, UAE and China starting from the new fiscal year in equal annual installments. This is on top of the current annual $9 billion debt servicing obligations.
The $21 billion Saudi investments will come at an average of $5 billion a year, if all of it will flow in, and that too will depend on Pakistan creating and utilising capacity for delivery.In addition to Pakistan having to deliver on these tough financial terms and economic performance, the real cost of this Saudi bailout over several years may be political and tougher to deliver.
The deep involvement of the Pakistani military in bringing fractured bilateral ties between Islamabad and Riyadh cannot come without expectations on the issue of security.The Saudi refinery at Gwadar will kill any remaining chances of a long-gestating Iran-Pakistan-India gas pipeline as it allows the Saudis to export oil supplies to China and Central Asia right through Iran’s backyard.
A former Pakistan Army chief is already head of the security alliance against terrorism based in Saudi Arabia. He shuttled between Islamabad and Riyadh, meeting both IK and the COAS, ahead of the MBS visit.The previous government led by Nawaz Sharif, otherwise considered historically close to the Saudis, balked at providing outright support of the military to the Saudi security alliance which is seen as one that aligns Sunni states. It was IK who protested on the streets against Pakistan aligning itself with the military alliance currently fighting Iran-backed rebels in Yemen.
Ironically, IK seems to have reversed his stance on the issue now that he is in power and is ready to go the extra mile with Saudi Arabia.While there has been no formal mention of Pakistan’s security partnership during the MBS visit, everyone found themselves focusing on it when the Saudi foreign minister, accompanying MBS, said in a press conference jointly with his Pakistani counterpart that Iran was a sponsor of terrorism.This brought into open the elephant in the room – Pakistan’s ties with Iran – even though the engagement was a bilateral one between Pakistan and Saudi Arabia. This embarrassed Pakistan and its foreign minister had to call his Iranian counterpart within a couple of hours of his press conference with the Saudi foreign minister to assuage concerns that Pakistan was neutral with Iran and that its ties with Saudi Arabia were not going to influence its relationship with Iran.
This ‘X’ factor in Pakistan’s strengthening ties with Saudi Arabia – Iran –will test Pakistan’s diplomatic and political skills at packaging a neutrality-in-policy that is not neutrality-in-practice. The Saudi refinery at Gwadar will kill any remaining chances of a long-gestating Iran-Pakistan-India gas pipeline as it allows the Saudis to export oil supplies to China and Central Asia right through Iran’s geographic backyard.Iran will not let go this strategic slight by Pakistan. This will make a long-term de facto or de jure security pact between Pakistan and Saudi Arabia all but inevitable to counter Iranian anger.
The MBS visit to Pakistan definitely carves out a more strategic engagement with Pakistan by moving the course from hitherto an assistance relationship to an economic relationship. But that is really a thin cover for a broader, long-term security relationship that will pitch Pakistan into a larger strategic regional game but, considering how security interests in Pakistan impact national polity, will end up changing Pakistan’s political landscape.And, from the perspective of the people, this will not necessarily be for the better. COAScrown prince Mohammad bin Salman Gwadar Imran Khan MBS Pakistan and Saudi relations Saudi Arabia Saudi Arabia and Pakistan Adnan Rehmat 2019-02-24 TNS Editor tweet The author is a political analyst and media development specialist.

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Saudi crown prince meets Chinese president, bags oil deal

BEIJING (AFP) – Saudi Crown Prince Mohammed bin Salman met China’s President Xi Jinping on Friday and bagged a $10-billion oil deal, pressing on with his diplomatic charm offensive in Asia following a global outcry over the Khashoggi killing.
Mohammed arrived in Beijing on Thursday following visits to Pakistan and India, showing the world that his country still has allies after the grisly murder of Saudi journalist Jamal Khashoggi at the kingdom’s Istanbul consulate.
China is a good friend and partner to Saudi Arabia, Xi told Mohammed in a meeting in the Great Hall of the People.Saudi Arabia’s relations with China can be traced back a very long time in the past, the crown prince said.
Over such a long period of exchanges with China, we have never experienced any problems with China.He met with Chinese Vice Premier Han Zheng earlier on Friday.Is the crown prince’s tour symbolic of Saudi Arabia’s pivot to the East? Yes, Najah al-Otaibi, a senior analyst at the pro-Saudi think-tank Arabia Foundation, told AFP.Riyadh wants to strengthen alliances in Asia — especially now with the continuing fallout with the United States over Khashoggi’s murder and other issues, and attempts by the EU to put Riyadh on a blacklist over money laundering allegations.
Khashoggi, a fierce critic of the prince, was killed at the Saudi consulate in Istanbul in October, a murder that tarnished the image of the kingdom and of the crown prince in particular.Riyadh initially denied the murder, then gave several conflicting accounts of Khashoggi’s death, and now claims he was killed in an unauthorised operation that did not involve Mohammed.
The murder sparked global indignation, with US lawmakers pushing for Washington to distance itself from the crown prince, but the White House has maintained close relations with Riyadh, a major ally in the Middle East.Separately, the European Commission wants to add Saudi Arabia to a money-laundering blacklist of governments that do too little to thwart the financing of terrorism and organised crime.
But China is looking to strengthen its economic ties with the kingdom, as Beijing pursues its ambitious Belt and Road trade infrastructure initiative, while Riyadh rolls out Saudi Vision 2030 — the crown prince’s major programme to diversify the national economy away from oil.Mohammed told the Chinese President they could join the two projects to realise more progress and jointly confront challenges.
Vice Premier Han suggested during his meeting with the crown prince that the two countries deepen partnerships in energy, infrastructure construction, finance, and high-tech.Trade and securityRiyadh’s national oil giant Saudi Aramco said it had signed an agreement to form a Saudi-Chinese joint venture — worth more than $10 billion — to develop a refining and petrochemical complex in northeastern Liaoning province.
The Saudi Arabian General Investment Authority also announced the signing of 35 non-binding memorandums of understanding, including deals related to energy, mining, transportation and e-commerce.China is Saudi Arabia’s largest trading partner.
As the kingdom diversifies its non-oil economy, it needs a variety of other investors with technical expertise, including the Chinese, Otaibi said.China steadfastly supports Saudi Arabia pushing a diversification of its economy and societal reforms, Xi told Mohammed, according to state broadcaster CCTV, adding he supported the hard work the kingdom has undertaken to promote stability and safety at home.National security is a potential area of cooperation between the Gulf state and China.The two countries should boost partnerships in counterterrorism and law enforcement, and exchange experience on combating extremism, Han said in his meeting with Mohammed, according to a report by the official Chinese news agency Xinhua.
The Saudis said they firmly supported Beijing’s efforts to keep the country secure, and opposed interference by external forces in China’s internal affairs, Xinhua added, paraphrasing remarks by the crown prince.Riyadh has remained silent over China’s treatment of Uighurs and other mostly Muslim minorities in the far-western region of Xinjiang.Up to one million Uighurs and other minorities are being held in internment camps in Xinjiang as part of a draconian anti-terror and anti-separatist campaign, according to estimates cited by a UN panel.China has the right to take anti-terrorism and de-extremization measures to safeguard national security, Mohammed told Xi, according to CCTV.

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Pakistan eyes $12b deals with Saudi Arabia

ISLAMABAD: After decades of dependence on Saudi grants, Pakistan is poised to sign billions of dollars of investment deals with the kingdom during an upcoming visit of Crown Prince Mohammad Bin Salman, including a multibillion dollar oil refinery in .

“Pakistan and Saudi Arabia will sign three memoranda of understanding for investment in oil, renewable energy and mineral sectors during the royal visit,” Prime Minister’s Adviser on Commerce and Investment Razak Dawood told a select group of journalists on Monday.
“It is very likely that an agreement for $3 billion oil facility on deferred payments will also be signed during the visit,” said Dawood, who was very upbeat about keen interest being shown by Saudi investors in Pakistan.Pakistan will also ask Saudi Arabia to take part in the privatisation of over $2 billion worth of LNG-fired two power plants, although the kingdom had earlier showed interest in buying those units only under a government-to-government deal.

Dawood did not put an exact investment figure by Saudi Arabia, as the precise size of the investment will be determined once a feasibility study of the oil refinery is ready.The adviser estimated minimum $10 billion to $12 billion Saudi investment in Pakistan in the medium term.“It will take about 15 months to 18 months to complete the feasibility study,” said Dawood.He said the cost of the oil refinery will be in the range of $5 billion to $6 billion but if the Saudis decide to build a petrochemical complex the cost would increase close to $10 billion.

A strong Saudi delegation comprising 600 to 700 delegates including 40 private investors would visit Pakistan, at the weekend, said Board of Investment Chairman Haroon Sharif.Prince Mohammed is expected to arrive in Pakistan this week, although an exact date of his arrival has not yet been officially disclosed. It is expected the crown prince would arrive on Saturday or Sunday.His security team, comprising 170 personnel, has already arrived in Pakistan and is visiting various places in Islamabad.
Two five-star hotels and couple of three-star hotels have been booked for the delegates. In addition, media reports suggested that the PM’s House that had earlier been converted into a university will be used to host the royal guests.
The investment deals with Saudi Arabia will mark a partial departure from Pakistan’s decades-old policy of begging from Saudi Arabia in difficult economic times.In 1998, after the nuclear explosions, Saudi Arabia had given free oil facility to Pakistan that continued for many years.In 2014, the then PML-N government had secured $1.5 billion “gift” from Saudi Arabia.

However, the government did not issue official statement regarding the purpose of the grant.This time also, Saudi Arabia has agreed to give $3 billion annual oil facility on deferred payments, which can be rolled over for three years period.
In addition, Pakistan has also obtained $3 billion Saudi loan at 3.18% interest rate to shore up official foreign currency reserves.At the heart of the investment is the multibillion dollar 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.But Razak Dawood said Saudi Arabia never discussed with Pakistan whether the oil refinery will be part of CPEC. He, nonetheless, said that Saudis “will export refined oil to other destinations to which Pakistan has no objection”.The facility will have 250,000 to 300,000 barrel per day refining facility.
“We want that the refinery should be internationally competitive and is viable without the government support,” said Dawood.To a question, the adviser said that Pakistan will also extend tax incentive package, similar to one given for the UAE oil refinery project.
Former prime minister Shahid Khaqan Abbasi had approved $1.6 billion worth of incentives for the UAE-based Abu Dhabi Petroleum Investment Company to encourage it to establish an oil refinery along the coast in Hub.The incentives were given on a planned investment of $5 billion in the refinery a project of the Pak Arab Refinery Company (Parco).Dawood said that the UAE has given front-end engineering design contract for the construction of the refinery.
The BOI chairman said that during the crown prince visit a government-to-government deal for $2 billion investment in renewable energy projects will also be signed.“The third memorandum of understanding will be for minerals developments,” said the BOI chairman.He said the BOI has already taken the consent of the four provinces for signing the umbrella deal in the minerals sector

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