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.


US-China trade deal hopes grow as oil prices decline

Updated 19 June 2019
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US-China trade deal hopes grow as oil prices decline

  • Data suggested a smaller-than-expected fall in American crude inventories
  • Preparations underway for Donald Trump to meet Xi Jinping next week at the G20 summit in Osaka

LONDON: Oil prices declined on Wednesday as data suggested a smaller-than-expected fall in American crude inventories, as hopes for a US-China trade deal continue to grow.
Brent crude futures were down 51 cents at $61.72 a barrel.
US West Texas Intermediate crude fell 25 cents to $53.65 a barrel. On Tuesday, it had recorded its biggest daily rise since early January.
After weeks of swelling, US crude stocks fell by 812,000 barrels last week to 482 million, the American Petroleum Institute said on Tuesday, a smaller fall than the 1.1-million-barrel drop analysts had expected.
Official estimates on US crude stockpiles from the US government’s Energy Information Administration are due during afternoon trading.
US President Donald Trump offered some support, saying preparations were underway for him to meet Chinese President Xi Jinping next week at the G20 summit in Osaka, Japan, amid hopes a trade deal could be thrashed out between the two powers. Trump has repeatedly threatened China with tariffs since winning office in 2016.
European Central Bank President Mario Draghi also offered a boost, saying on Tuesday that he would ease policy again if inflation failed to accelerate.
Tensions remain high in the Middle East after last week’s tanker attacks. Fears of a confrontation between Iran and the US have mounted, with Washington blaming Tehran, which has denied any role.
Trump said he was prepared to take military action to stop Iran having a nuclear bomb but left open whether he would approve the use of force to protect Gulf oil supplies.
On Wednesday, oil markets shrugged off a rocket attack on a site in southern Iraq used by foreign oil companies.
“It is interesting to note that the crude oil futures market could not rally on hawks planting bombs in the Strait of Hormuz but could rally on doves planting quantitative easing,” Petromatrix’s Olivier Jakob said in a note.
“This is an oil market that doesn’t know how to react when an oil tanker blows up but knows how to react when the head of a central bank makes some noise.”
Members of the Organization of the Petroleum Exporting Countries have agreed to meet on July 1, followed by a meeting with non-OPEC allies on July 2, after weeks of wrangling over dates.
OPEC and its allies will discuss whether to extend a deal on cutting 1.2 million barrels per day of production that runs out this month.