In the first week of August, Pakistan and Saudi Arabia experienced an unusual spat despite the two countries usual warm relationship.
As tensions between India and Pakistan rose in the Kashmir region, Pakistan’s Foreign Minister, Shah Mahmood Qureshi criticized the Saudis for not supporting Pakistan on the Kashmir issue through the platform of the Organization of Islamic Countries (OIC), which works as a collective voice for the Muslim world.
The Pakistani minister hinted that if Saudi Arabia did not convene a meeting of the Foreign Ministers of the OIC countries on the Kashmir issue, Pakistan would then join the newly emerging bloc in the Muslim world led by Turkey and comprising of Iran, Qatar, and Malaysia among others.
This change of policy by Islamabad triggered a quick reaction by Saudis who asked Pakistan to repay a $3 billion loan which they extended to Pakistan in 2018. Riyadh also suspended a $3.2 billion oil credit program for Pakistan which started in 2018 with the purpose of easing Pakistan’s balance-of-payment crisis.
This means that almost $20 billion in pledged investments by Saudi Arabia in Pakistan will also not materialize. This move would have put Pakistan in financial trouble, but China came to the rescue once again. China lent Pakistan $1 billion, which was used to repay the first installment of loans owed to Saudi Arabia.
The spat between Pakistan and Saudi Arabia, and China’s role in bailing out Pakistan has four major implications that need to be discussed. Firstly, the significance of China in the region will further increase if Pakistan loses Saudi Arabia as one of its benefactors. Now, Pakistan will likely rely more on China both financially as well as strategically.
This would increase China’s role and power in the geopolitical chess game of South Asia. Pakistan would also lose leverage to China, and push Islamabad to tow Beijing’s line. This will likely result in Beijing reshaping the China-Pakistan Economic Corridor (CPEC) according to its own designs, which might not be in the interests of Pakistan.
Moreover, understanding the gravity of the situation, Pakistan’s Army Chief visited Saudi Arabia on the 17th of August. Despite constant attempts, he failed to get an audience with Crown Prince Muhammad Bin Salman, the de facto ruler of the oil-rich kingdom.
This was an expression of displeasure by the Saudi leadership, and they signaled that Pakistan will not be able to mend fences with them so easily. This again left Pakistan with the only option of China for financial support as well as military support in its rivalry with India. China will happily provide this support to Pakistan, but in turn will amass unimaginable influence in Pakistan and the wider South Asian region.
Secondly, in the aftermath of this development, China will increase its support to Iran against the wishes of Saudi Arabia. Since the inception of CPEC in 2015, India has tried to use the Iranian port of Chabahar to counter the rise of the Chinese operated Gwadar Port. However, China has recently co-opted Iran’s favor and they are on the verge of signing a $400 billion mega-deal.
Under this proposed deal, China will spend $280 billion in Iran’s energy sector and $120 billion in its infrastructure sector in the next 25 years. In return, China will get a long-term supply of cheap oil and will also be able to use the ports of Iran in the strategically significant Persian Gulf.
Consequently, Iran could become a part of China’s Belt & Road Initiative, as opposed to being a competitor with the support of India. Now, China will help bring Pakistan and Iran closer so both can cooperate under the Belt & Road Framework. This would have been very difficult when Saudi Arabia was a key ally for Pakistan. The latest fallout between Islamabad and Riyadh has made this possible.
Once this arrangement materializes, then China will get a direct land route for oil supply from Iran via Pakistan. This will completely end the reliance on sea routes for oil supply and will play a huge part in the energy security of Beijing. Moreover, this arrangement with Iran will also reduce the security threats to Belt & Road in Pakistan from Baloch insurgents, who were on Iranian soil to stage attacks on Chinese interests.
The third implication of this development will be China’s successful establishment of an anti-U.S. bloc in the region. China, Pakistan, and Iran versus the U.S., India, and Saudi Arabia will likely compete for influence in South Asia and the adjoining Gulf region. This will be a win-win situation for Beijing because it will not only be able to contain the rise of India but will also settle the score with the U.S. in its global rivalry.
The U.S. government has been critical of Belt & Road Projects in Pakistan and pushed Islamabad to reconsider its relationship with Beijing. Under the current circumstances, the U.S.’s interests will become harder to accomplish, which may push Pakistan even closer to China. Ultimately, this latest geopolitical change does not serve Washington’s interests.
The fourth implication of this development will be that China will aid Pakistan to replace Saudi Arabia as a new leader of the Muslim world. Currently, Saudi Arabia is the leader of the Muslim world due to the religious sanctity attached to it as the home of Islam’s holiest sites. However, Saudi Arabia is a strong U.S. ally and therefore can use its influence in the Muslim world against China if the need arises.
An example can be the ongoing issue involving Uighur Muslims in Xinjiang province under the name of “vocational training.” The Saudis have the ability to use their influence to push for an anti-China narrative in the Muslim world using the Uighur issue. At the very least, this would reduce Chinese exports to the region, but Saudi influence also has the potential to sabotage the Belt & Road.
In order to prevent this threat, China could help Pakistan secure the leadership support of other countries in the Muslim world.
China is unlikely to fall out of favor with Saudi Arabia as it is the largest importer of Saudi oil, buying around $40 billion worth of oil from Saudi Arabia, which makes up 17 percent of China’s total oil imports. Due to its dependence on Saudi oil, China will want to use Pakistan as a counterbalance against the Islamic Kingdom rather than taking direct confrontational action.
Even if Pakistan is able to secure the support of half of the Muslim Countries with the help of China, then those can be used to help Beijing at a time of conflict in the future. This support within the Islamic world will also be used to protect and expand the Belt & Road. Hence, this move will be immensely beneficial to China.
In conclusion, the opportunities arising from the recent Pakistan-Saudi spat will be extremely helpful for Chinese interests; however, Pakistan can face certain negative repercussions. Foreign remittances by expatriate Pakistanis remain a major source of foreign exchange reserves of Pakistan.
A quarter of those remittances come from Saudi Arabia. If relations further deteriorate then Saudis can send back Pakistani expatriates, cutting down foreign exchange inflow to Pakistan and also creating domestic problems in the form of protests by the now unemployed Pakistani expatriates.
Therefore, Pakistan will still want to salvage the situation with the Saudis, but it cannot resist China’s pressure to follow a path that protects Beijing’s interests at the cost of Pakistan’s interests.