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Saudi Arabia to provide $3 billion to Pakistan

Context:

Saudi Arabia has agreed to provide $3 billion to cash-strapped Pakistan in safe deposits and $1.2 billion and $1.5 billion worth of oil supplies on deferred payments.

Relevance:

GS-II: International Relations (India’s Neighbors, Foreign Policies affecting India’s Interests)

Dimensions of the Article:

  1. Economic and Strategic Aspects of Saudi-Pakistan Relationship
  2. Saudi-Pakistan ties affecting India in the past
  3. Saudi Alignment over Kashmir
  4. 2015 Strains in the Relationship
  5. India-Saudi Relations
  6. Implications for India

Economic and Strategic Aspects of Saudi-Pakistan Relationship

  • Pakistan has benefited enormously from Saudi Arabia – the Muslim world’s wealthiest nation – through generous financial aid, the supply of oil on a deferred payment basis and aid during crises.
  • For instance, the Saudis provided a grant of US$10 million during the 2005 earthquake, $170 million during the 2010/11 floods, and a $1.5 billion grant when Pakistan faced an economic crisis in 2014.
  • Besides, there are around two million Pakistani expatriates in Saudi Arabia, and they send back remittances worth over $5 billion every year.
  • Not only has Saudi Arabia helped Pakistan avoid major economic crises, it has also supported Pakistan’s defence by providing logistic support and financial assistance. For instance, the Kingdom assured Islamabad that it would supply 50,000 barrels of crude oil per day on a deferred payment basis in case Pakistan’s nuclear tests resulted in US and other European sanctions in 1998.
  • Pakistan has been importing mainly oil from Saudi Arabia and exports rice, meat, meat products, spices and fruits, footwear and leather goods, and chemicals.

Saudi-Pakistan ties affecting India in the past

  • The relationship between Saudi Arabia and Pakistan was most prominent during the 1971 war between India and Pakistan.
  • Saudi Arabia had denounced the Indian action as “treacherous and contrary to all international covenants and human values” and found no justification for the Indian aggression except “India’s desire to dismember Pakistan and tarnish its Islamic creed”.
  • Saudi Arabia is also reported to have transferred arms and equipment including the loan of some 75 aircraft to Pakistan during the 1971 war.
  • After the war, Saudi Arabia consistently supported the call for the return of Pakistan’s prisoners of war and for dropping the Dacca (Dhaka) Trial against 195 of them.
  • After the war, Saudi Arabia gave loans to Pakistan enabling it to buy arms worth about $1 million by 1977, including F-16s and Harpoon missiles from the US.
  • Saudi oil and dollars have kept Pakistan’s economy on its feet after sanctions following the nuclear tests.
  • Over the last two decades, Saudi Arabia has provided oil on deferred payments to Pakistan whenever it ran into economic difficulty.
  • Saudi funding of madrasas have also led to their mushrooming, later giving rise to religious extremism.
  • In 1990, Pakistan sent its ground forces to defend Saudi Arabia against Iraq’s invasion of Kuwait.

Saudi Alignment over Kashmir

  • The alignment over Kashmir at the Organisation of Islamic Conference (OIC) crystallised since 1990, when insurgency in Jammu and Kashmir began. While the OIC has issued statements over the last three decades, it became a ritual of little significance to India.
  • In 2019, after India revoked Article 370 in Kashmir, Pakistan lobbied with the OIC for its condemnation of India’s move. To Pakistan’s surprise, Saudi Arabia and the UAE issued statements that were nuanced rather than harshly critical of New Delhi.
  • After that, from 2019-20 Pakistan has tried to rouse the sentiments among the Islamic countries, but only a handful of them — Turkey and Malaysia — publicly criticised India.

2015 Strains in the Relationship

  • When, in 2015, Saudi Arabia asked Pakistan to join the coalition it was leading to undertake the ground offensive in Yemen against the Iran-backed Houthis, Islamabad refused and let it be known that it would prefer to stand “neutral” in the Iran-Saudi rivalry.
  • The decision was taken keeping in mind the possible implications of joining the coalition on domestic politics and on bilateral relations with Iran.
  • The Saudi-Iran conflict in West Asia has serious ramifications for Pakistan’s relationship with Saudi Arabia. Saudi Arabia sees Iranian involvement and growing salience in regional politics as a threat to its security.
  • Pakistan, for its part, is worried about India’s improving relations with West Asian countries in general and Saudi Arabia in particular. While Pakistan wants to maintain a delicate balance between Saudi Arabia and Iran, the Saudis are not happy with this balancing game and want Pakistan to support them.

India-Saudi Relations

  • The geostrategic position of Saudi Arabia makes it an important country for India, with trade and cultural links dating back thousands of years.
  • There is a rational calculation regarding Saudi interest in expanding trade and investment in India and collaboration in the energy sector.
  • Saudi Aramco is interested in partnering with the Abu Dhabi National Oil Company in developing an integrated refinery and petrochemicals complex at Ratnagiri in Maharashtra, a $44 billion joint venture with Indian public sector involvement. Saudi Arabia is already one of the three largest suppliers of oil to India.
  • That the two countries are moving beyond the traditional buyer-seller relationship is best exemplified by the joint venture for the $44 billion worth Ratnagiri refinery and petrochemical project.
  • The assumption that Saudi Arabia is tilted towards India is nothing more than an unrealistic hope.
  • The Saudi Foreign Minister’s statement in Islamabad during MBS’s visit that Riyadh is committed to “de-escalating” tensions between India and Pakistan over Kashmir must not be read as an endorsement of the Indian stand but as an attempt to intervene in the dispute rather than accept its bilateral nature.
  • Good relations with Riyadh and other West Asian capitals is essential for the welfare of the expatriate Indian community and their emergency evacuation should there be such a need. West Asia is also an important partner in the domains of counterterrorism and maritime security in the western Indian Ocean.
  • Indians in Saudi Arabia are the second-largest providers of remittances to their home country. They are also an important aspect of our soft-power diplomacy in the region.

Recent changes in political viewpoints

  • As Saudi Arabia seeks to diversify from its heavily oil-dependent economy, it sees India as a valuable partner in the region.
  • Saudi Arabia’s Crown Prince MBS, who is looking to invest in India, has taken a realistic view, along with UAE’s crown prince – Saudi Arabia is India’s fourth largest trade partner (after China, US and Japan) and a major source of energy: India imports around 18% of its crude oil requirement from the Kingdom. Saudi Arabia is also a major source of LPG for India.
  • New Delhi, for its part, has wooed the Arab world over the last six years 2014-20, and worked the diplomatic levers through high-level visits and dangled opportunities for investment and business.

Implications for India

  • India, which is closely watching the developments between Pakistan and Saudi Arabia, has not said anything publicly, but Saudi’s silence on J&K as well as CAA-NRC has emboldened the Indian government.
  • What is key to India’s calculus is that the Pakistan-China and the Pakistan-Saudi axes are not fused together at the moment: It is not a Saudi-Pakistan-China triangle.
  • Both New Delhi and Riyadh see value in their relationship. At a time when India and China are locked in a border standoff, India would be wary of Pakistan and China teaming up. However, having Saudi Arabia in India’s corner may provide a leverage over Pakistan as Riyadh would not want a conflict and regional instability.

-Source: The Hindu

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October 2022
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