The recent Saudi confirmation that Riyadh will be investing $10 billion to set up an oil refinery in Pakistan’s deepwater port of Gwadar, which is part of the marquee China-Pakistan Economic Corridor (CPEC), is a big strategic development. Not only does it shore up the CPEC which aims to build a massive network of roads, railways and power plants across the breadth of Pakistan, but also showcases a new strategic axis comprising Saudi Arabia, Pakistan and China.
The Chinese-funded CPEC to which Beijing has committed more than $60 billion, is part of the larger One Belt, One Road (OBOR) initiative of transnational connectivity that Chinese President Xi Jinping has championed. However, in recent times, concerns have been raised that Chinese OBOR projects leave recipient countries debt-ridden. In fact, Malaysia cancelled two big OBOR projects last year fearing they would bankrupt the country. And this narrative of China piling debt on recipient countries has been growing.
Against this backdrop, the Saudi decision to establish an oil refinery in Gwadar comes as a booster shot for CPEC and OBOR. It increases the trust perception regarding Chinese projects and makes them appear viable. For, as things stand, China does have the determination and the resources to actualise OBOR projects. But it still needs to convince countries that these projects are mutually beneficial. And with the US currently engaged in a trade and strategic power tussle with China, Beijing is having to work extra hard at convincing. Plus, cases like that of Hambantota in Sri Lanka do not help Beijing’s cause. Thus, the Saudi investment in Gwadar – which will be formally inked during Saudi Crown Prince Mohammed bin Salman’s visit to Pakistan in February – will come as a boon for Chinese plans.
But what’s really interesting here is Riyadh’s motivation for getting into CPEC. I believe this is directly related to straining of ties between Saudi Arabia and the US last year. Although the two countries continue to reassert their bilateral partnership, a couple of American moves appear to have rubbed Riyadh the wrong way. First, US President Donald Trump last year publicly stated that the Saudi King wouldn’t last two weeks without US support. This was at a time when the US was pressuring the Saudis to curb rising oil prices and pay more for American military presence in the region. Needless to say the public insult did not go down well with Riyadh.
Then in December the US senate passed a resolution against Crown Prince Mohammed blaming him for the murder of journalist Jamal Khashoggi in the Saudi consulate in Istanbul, Turkey. At the same time, the senate passed a separate resolution calling for US aid to the Saudi-led war in Yemen to be stopped. These cuts were quite close to the Saudi bone and it is then that I believe Riyadh decided to diversify its strategic engagements. And what better way to give the Americans something to think about than investing in a Chinese project in Pakistan. Given that the US-Pakistan relationship has also turned rocky over the last few years – over terrorism and Afghanistan – it is easy to see the forces that are bringing Riyadh, Islamabad and Beijing closer.
This would also replace an older US-Pakistan-Saudi Arabia triangle. Overall, China seems to be replacing the US in Asia. It still hasn’t completed this process and no one knows if it ever will. But Trump with his mercurial ways and cavalier approach to allies is making it easier for Beijing.