Saudi investments to aid cash-strapped Pakistan

A Pakistani vendor arranges his stall near vehicles covered with snow during a snowfall in Murree, some 65 km north of Islamabad, on January 5, 2019. (File/AFP)
Updated 17 February 2019
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Saudi investments to aid cash-strapped Pakistan

  • At the heart of the investment is a reported $10 billion refinery and oil complex in the strategic Gwadar Port on the Arabian Sea
  • Riyadh and Islamabad, decades-old allies, have been involved for months in talks to hammer out details of the deals in time for the high-profile visit

DUBAI: A record investment package being prepared by Saudi Arabia for Pakistan will likely provide welcome relief for its cash-strapped Muslim ally, while also addressing regional geopolitical challenges, analysts say.
At the heart of the investment is a reported $10 billion 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, which lies not far from the Indo-Iranian port of Chabahar.
Two Saudi sources have confirmed to AFP that heir apparent to the Gulf kingdom’s throne, Crown Prince Mohammed bin Salman, will visit Islamabad shortly, without giving a date.
And a number of major investment deals are expected to be signed during a visit, officials from both countries have told AFP.
Riyadh and Islamabad, decades-old allies, have been involved for months in talks to hammer out details of the deals in time for the high-profile visit.
“The outcome of the talks so far has been very positive and this is going to be one of the biggest-ever Saudi investments in Pakistan,” a Pakistani senior finance ministry official told AFP.
“We hope that an agreement to this effect will be signed during the upcoming visit of the Saudi crown prince to Pakistan,” said the official, requesting anonymity.
The Wall Street Journal reported last month that both Saudi Arabia and the United Arab Emirates, Islamabad’s biggest trading partner in the Middle East, have offered Pakistani Prime Minister Imran Khan some $30 billion in investment and loans.

Riyadh investments

Riyadh investments are expected to provide a lifeline for Pakistan’s slumping economy which was downgraded in early February by S&P ratings agency from a B to a B-, Saudi economist Fadhl Al-Bouenain said.
“Saudi investment to Pakistan comes within an economic aid package aimed at relieving the stress of external debt and a shortage of foreign currency, besides boosting the sluggish economy,” Bouenain told AFP.
The OPEC heavyweight also aims to achieve strategic and commercial goals with investments in infrastructure and refinery projects, he said.
Saudi Arabia and its Gulf partner, the UAE, have already deposited $3 billion each in Pakistan’s central bank to help resolve a balance of payments crisis and shore up its declining rupee.
They have also reportedly deferred some $6 billion in oil imports payments as Islamabad has so far failed to secure fresh loans from the International Monetary Fund.
Khan has already visited Riyadh twice since taking office in July and in October attended a prestigious investment conference widely boycotted by other political and economic figures after the murder of journalist Jamal Khashoggi.
Khan also visited Saudi rivals Qatar and Turkey, as well as China seeking investments.
“One of the goals for Saudi Arabia expanding investments in refining worldwide is to secure market share and sustainable exports in the face of international competition,” Bouenain said.
Saudi Energy Minister Khalid Al-Falih visited Gwadar in January and inspected the site for the proposed oil refinery at the deep sea port, just 70 kilometers (45 miles) away from its Iranian competitor, Chabahar.
He was quoted by local media as saying the kingdom was studying plans to construct a $10 billion refinery and petrochemicals complex in Gwadar.

Petrochemicals projects

Like most oil suppliers, the world’s top crude exporter has been investing heavily in refinery and petrochemicals projects across the globe to secure long-term buyers of its oil.
A pipeline from Gwadar to China would cut the supply time from the current 40 days to just seven, experts say.
Developed as part of China’s Belt and Road Initiative with investments worth some $60 billion, Gwadar is being billed as a regional industrial hub of the future, easily accessible for Central Asia, Afghanistan, the Middle East and Africa.
“Pakistan needs a rich partner to enter as a third party besides China, capable of injecting needed cash,” Bouenain said.
But so far China has rejected other partners for the corridor that seeks to connect its western province Xinjiang with Gwadar, including Saudi Arabia and UAE, said James M. Dorsey, a senior fellow at Singapore’s S. Rajaratnam School of International Studies.
This is despite calls by Khan “for the Chinese investments to be restructured to include agriculture and job-creation sectors and not only in infrastructure,” Dorsey told AFP.
Any Saudi investment in Gwadar will also have geopolitical dimensions, Dorsey said.
Iran late last year inaugurated Chabahar which provides a key supply route to landlocked Afghanistan and allows India to bypass its historic enemy Pakistan.
India has seen Chabahar as a key way both to send supplies to Afghanistan and to step up trade with Central Asia as well as Africa.
But Riyadh is not expected to get involved in any Indo-Pakistani rivalry and the kingdom also has major strategic energy deals with New Delhi, where demand for oil is growing fast.
Indeed in April, the Saudis signed a $44 billion deal to build a huge refinery and petrochemicals complex in western India.


Turkey set to begin oil and gas drilling off Cyprus

Updated 21 February 2019
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Turkey set to begin oil and gas drilling off Cyprus

  • “In the coming days we will start drilling with two ships around Cyprus,” Turkish foreign minister said
  • Turkey and the Cypriot government have overlapping claims of jurisdiction in the eastern Mediterranean

ISTANBUL: Turkey will begin drilling for oil and gas near Cyprus in coming days, state-owned news agency Anadolu reported Foreign Minister Mevlut Cavusoglu saying on Thursday, a move that could stoke tensions with neighboring Cyprus and Greece.
Turkey and the internationally recognized Greek Cypriot government have overlapping claims of jurisdiction for offshore oil and gas research in the eastern Mediterranean, a region thought to be rich in natural gas.
“In the coming days we will start drilling with two ships around Cyprus,” Cavusoglu was quoted as saying in a speech to a business conference in western Turkey’s Aydin province.
“Let those who come to the region from far away, and their companies, see that nothing can be done in that region without us. Nothing at all can be done in the Mediterranean without Turkey, we will not allow that,” Cavusoglu said.
Turkey launched its first drillship “Fatih” in October to drill off the coast of Turkey’s southern Antalya province. It said a second ship that it purchased would operate in the Black Sea, but was diverted to the Cyprus area.
Breakaway north Cyprus, which is supported by Turkey, says any offshore wealth also belongs to them, as partners in the establishment of the Republic of Cyprus in 1960.
The island was divided in 1974 after a Turkish invasion triggered by a brief Greek-inspired coup. Countless peacemaking endeavours have failed, and offshore wealth has increasingly complicated peace negotiations, with Greek Cypriots saying the matter is not up for discussion.