Saudi Arabia and China jockey for influence in Pakistan

Saudi Arabia and China jockey for influence in Pakistan
Comment: After falling from favour in the West, MbS turns his attention to investment in Pakistan, challenging China's economic stronghold in the region, writes Giorgio Cafiero.
7 min read
19 Feb, 2019
Pakistani Prime Minister Khan welcomes MbS to Islamabad with a lavish reception [Getty]
Saudi Arabia's Crown Prince Mohammed bin Salman (MbS) met with Pakistan's Prime Minister Imran Khan and President Arif Alvi in Islamabad this week, and signed US$20 billion worth of deals with the country. 

In return, he received the Nishan-e-Pakistan award; the highest civilian honour in Pakistan.

MbS' visit on February 17 and 18, marked the first leg of the crown prince's Asia tour that also includes stops in India and China, highlighting the value that Islamabad and Riyadh place on investing in ever-deeper bilateral relations, particularly through greater strategic cooperation.

From Pakistan's perspective, luring more Saudi investment is key to dealing with the country's faltering economy that faces a looming balance of payments crisis, against the backdrop of slowed growth and dried up domestic investment.

Read more: India 'prevents MbS flying direct from Pakistan', forces him home to Riyadh first

Unquestionably, Pakistan welcomes the Saudi investment in no small part because it will afford the country the means to negotiate more favourable terms with the International Monetary Fund later this year.

That Pakistan's prime minister made his 
first foreign trip in office to the kingdom in September 2018 underscores his administration's focus on securing closer relations with Riyadh, for reasons pertaining not only to Saudi investment in Pakistan, but also the Islamic Military Counter-Terrorism Coalition, led by retired Pakistani General Raheel Sharif.

Saudi influence in Gwadar port

As Riyadh's chief diplomat Adel al-Jubeir explained, this investment from the kingdom demonstrated Saudi Arabia's high level of confidence in Pakistan's long-term economic potential.

stated: "This is not charity, this is an investment… There is benefit for both sides. If we did not believe in Pakistan, we would not be making this investment."

MbS himself commented that
"Pakistan is going to be a very, very important country in the future and we want to be sure that we are part of that... We believe in our region that's why we are investing in it, and we believe that we are going to have one day a great Middle East surrounded by Pakistan from the east side."

Islamabad seeks to capitalise on investment from both Riyadh and Beijing

Doubtless, from a geopolitical standpoint Riyadh has high stakes in Pakistan's future, particularly with respect to the kingdom's effort to counter its rival Iran.

Such factors heavily influence Riyadh's investment plans in Pakistan, and the deep-sea Port of Gwadar is central to Saudi investment strategies in the country.

The investment deals just signed by MbS may lead to the construction of an oil refinery in the port on top of projects in the alternative energy and mining sectors, and Saudi corporations' purchase of two state-owned power plants.

Strategically, Saudi Arabia's footprint in Gwadar would provide the kingdom with a foothold near the Strait of Hormuz, and vital shipping lanes across the Gulf while also possibly securing Pakistani demand for Saudi crude oil.

Conflicting interests: China, Qatar and Iran enter the equation

Although the ways in which Pakistan stands to gain from Saudi investment are countless, there are geopolitical risks that Islamabad must accept with permitting the Kingdom to expand its geo-economic presence in Gwadar and other parts of Pakistan.

Clearly, Islamabad seeks to capitalise on investment from both Riyadh and Beijing, enabling Pakistan to avoid becoming excessively dependent on any single strategic partner.

The Pakistani capital was decked out with billboards boasting of Saudi-Pakistani
cooperation prior to MbS' visit  [Getty]

Previously, officials in Islamabad claimed that Riyadh had received an invitation to join the China-Pakistan Economic Corridor (CEPC) as a "strategic partner" although they later denied this. One reason why Pakistan's leadership has been perhaps strategically unclear about its vision for a Saudi role in CPEC pertains to Islamabad's relationship with Beijing that could suffer from China's negative view of Riyadh's investments in Gwadar.

With China having already invested billions in Gwadar to develop the CEPC, which begins in Kashgar (located in China's Xinjiang Province), the appropriate role for Saudi Arabia to play in the network of highways, railways, and pipelines linking China and Pakistan seems to be a source of friction between Beijing and Islamabad.

Put simply, Chinese officials worry about the Saudi kingdom's multibillion-dollar investment in the Arabian Sea port city enabling Saudi Arabia to undermine China's economic stronghold in Gwadar.

Islamabad's relationship with Beijing could suffer from China's negative view of Riyadh's investments in Gwadar

Beijing has invested billions into the CPEC framework as a signature project of China's Belt and Road Initiative (BRI) and sees Saudi Arabia as encroaching in Pakistan, especially in the oil sector where China fears that Saudi Arabia may block out Chinese energy firms.

Additionally, as Iran plays a major role in China's BRI, it is easy to imagine Beijing having a vision of folding Gwadar and its main competitor - Iran's Chabahar - into one single economic belt. Yet if Saudi Arabia makes major inroads into Gwadar, the idea of Beijing successfully integrating Iranian and Pakistani energy projects would become less realistic.

Not lost in the equation is the fact that Pakistan's prime minister may also travel to Doha later this month with the aim of securing Qatari investment. Doubtless, achieving this goal would further diversify Pakistan's sources of investment and financial help. Yet major deals with Qatar would also complicate Islamabad's relationship with Riyadh and Abu Dhabi nearly 21 months into the Saudi-led blockade of Qatar.

China's Belt and Road Initiative is investing massively in infrastructure, energy and industry [Click to enlarge]

Several important geopolitical factors and domestic political dynamics may also increase Pakistan's incentive to knock on Qatar's door, given the perceived costs of betting Gwadar's future too much on Saudi Arabia.

Doubtless, Riyadh's expanding role in Gwadar unsettles Iran which fears that Riyadh intends to use the Pakistani port to support militant Sunni-Baloch separatist factions that have been carrying out attacks on Iranian territory near the Pakistani border for years. The recent February 13 attack targeted Iran's Islamic Revolutionary Guards Corps near the village of Chanali, resulting in at least 
27 deaths, is just the most recent example.

Any Qatari investment in Gwadar however, would likely be uncomplicated vis-a-vis Islamabad-Tehran relations, while the expansion of Saudi Arabia's geo-economic footprint in a part of Pakistan located just miles from the Iranian border would surely be a point of contention.

Pakistan's government may also face a domestic backlash as a result of greater Saudi investment and activity in Gwadar. Last month, Pakistani parliamentarians from Balochistan such as Aslam Bhootani voiced their opposition to MbS' visit to Islamabad and Saudi Arabia's geo-economic footprint in the Arabian Sea port city.

A delicate balancing act

With China and Saudi Arabia jockeying for influence in Pakistan in the port of Gwadar, officials in Islamabad must assess the geopolitical risks that come with investments from both Beijing and the oil-rich Gulf Kingdom.

Looking ahead, Pakistani officials are fully aware that aid and investment from Riyadh will inevitably come with political strings. Islamabad understands that MbS will seek to leverage support for countering the states that Riyadh deems to be its greatest threat: Iran, Qatar and Turkey.

Pakistani officials are fully aware that aid and investment from Riyadh will inevitably come with political strings attached

How Pakistan decides to balance Beijing and Riyadh's geo-economic influence in Gwadar remains to be seen, yet the government in Islamabad will certainly consider all options for increasingly diversifying Pakistan's sources of aid and investment. 

In order to avoid becoming increasingly dependent on China, Pakistan has the option of building on MbS' visit to Islamabad in order to lure more Saudi investment.

But this will require the Pakistani leadership deciding how much of a price Islamabad would pay for this stepped-up assistance from the kingdom.

It appears evident that Pakistan's careful calculations when it comes to foreign investment will inevitably be most influenced by complicated geopolitical tensions felt on the international and regional levels, and unfortunately not necessarily the economic interests of Pakistan's citizens.

Giorgio Cafiero is the CEO of Gulf State Analytics a Washington, DC-based geopolitical risk consultancy.

Follow him on Twitter: @GiorgioCafiero

Opinions expressed in this article remain those of the author and do not necessarily represent those of The New Arab, its editorial board or staff.