Imran Khan secures $6 bn loan from Saudi Arabia: Cash-strapped Pakistan has little choice but to kowtow to Riyadh
The Saudis have been trying to pressure Pakistan to come fully on board the Saudi-led coalition of Arab states with a military contingent.
At some level, one can't but feel a little sorry for Prime Minister Imran Khan. He’s inherited an economic mess from the previous government’s kowtowing to Chinese loans and plunging the country into debt. Oil prices show no signs of easing, and there is every indication that the country may go into a blacklist next year as the Financial Action Task Force remains dissatisfied over Islamabad’s ‘reforms’.
With a UN-designated terrorist Hafeez Saeed now publicly declared as being under no restraints whatsoever, that blacklisting has become even more likely. Small wonder then that the prime minister has had to seek a Saudi bail out at a time of real crisis. Just before he left for his second visit to Riyadh in just a month, Khan was quoted as saying that Pakistan was "desperate" for a loan. Further, he was quoted as saying “The reason I feel I have to avail myself of this opportunity is because … right now we have the worst debt crisis in our history.” That’s a lot for a leader of a country to say out loud in the media.
Remember that during his earlier visit to the Saudi capital, there was no reference to a possible bailout. The Saudi king is understood to have given “assurances” of Saudi investment in the China Pakistan Economic Corridor. However, bankers in Pakistan or anywhere else don’t do business on mere verbal pledges, which Riyadh and Islamabad are well aware of. The actual bailout of an estimated $6 billion in total — broken into a deferred oil facility and balance of payments support — was announced only after Pakistan ‘marked attendance’ at the Future Investment Initiative, a high stakes summit usually known as the Davos of the Desert. At a time when the brutal murder of US resident and Washington Post correspondent Jamal Khashoggi is making headlines, the Saudis need all the friends they can pay for.
However, $6 billion can buy a lot, and the unfortunate fact is that nothing in life is free. True, Foreign Minister Shah Mehmood Qureshi did say that Saudi aid came "without strings" but then leaders of countries do not always put down what is expected of each other on paper. The question then arises as to what Islamabad will be expected to do to reciprocate Saudi generosity. First off the bat is what Imran has already announced. Pakistan is to get into the sticky business of mediating between Saudi Arabia and Iran to end the war in Yemen. True, this is a proposal that Imran has made earlier when he was on the campaign trail, but that was when he was still unversed in the art of keeping Pakistan afloat. The Yemen conflict started in 2014, when the Houthis, a Shia militia alleged to be backed by Iran, overran large parts of the country and the capital unseating a Saudi backed government. Offering mediation between two sworn enemies is like trying to tame two tigers at once. So far the new government has managed to toe a very fine line between the two warring governments. It was hardly an accident that the first foreign dignitary to call on the new prime minister was Iranian Foreign Minister Javad Zarif. Tehran clearly values Pakistan's support or at least even-handedness. With Saudi’s footing the bill, however, that is going to be the first casualty.
Second, and arising from the above, it is unlikely that Riyadh can be fobbed off with offers of mediation. The Saudis have been trying to pressure Pakistan to come fully on board the Saudi-led coalition of Arab states with a military contingent. Islamabad instead sent its former army chief General Raheel Sharif and a few naval vessels to apparent interdict smuggling in of weapons from Iran. Imran and his party have also been staunchly against sending of Pakistani troops into the war (though they are stationed in Saudi Arabia). That will probably have to change, and change soon.
Third, there is the ticklish issue of Iranian support to various Taliban segments. Islamabad has so far turned a Nelson’s eye to such support, though it chafes at anything that erodes its own tight control over the group. Recently announced sanctions by the US Treasury targeted eight individuals in an effort to highlight the role of the Iranian Revolutionary Guards in assisting the Taliban. That list also includes two Pakistanis. One of them is Abdul Aziz, narcotics kingpin who was allowed to operate his processing units in Helmand, even while he provided for travel of the Taliban leadership in Quetta. He’s an enterprising person, and also had plans to set up a company in China. Though Aziz is clearly someone who operates with the full knowledge of Pakistan’s Inter-Services Intelligence, the military establishment will have to close him down or at least eliminate his ties to Iran. It will also need to pressure Taliban shadow governors of Iran and Helmand to cease sourcing weapons and money from Tehran. While this may not immediately translate into Saudis emerging as an alternative supplier, it will mean a greater Saudi influence in Afghanistan at the cost of the Iranians. Tehran won’t take that lying down. Expect an uptick in activities of groups like the Jundullah, and other Shia groups operating in Pakistan.
Then there is the most ticklish question of all, which relates to Iran’s nuclear programme and Saudi Arabia ‘s ambitions for one. Iran’s own programme has its roots in the assistance from Pakistan’s celebrity Abdul Qadir Khan, the "father" of the Pakistani nuclear programme. Apart from that, Iran is also grateful for Islamabad (or rather its foreign minister’s) recent support on the issue of reinvigorated the US sanctions and the dumping of the Obama era nuclear deal. That support is likely to be limited to words and nothing much else, as the country bows down to the US and Saudi pressure. That casualty could include plans to link Chabahar with Gwadar.
With regard to the Saudis, now more than ever, Riyadh is likely to re-start a search for its own deterrent, deferred after the Abdul Qadir Khan nuclear proliferation network was closed down. Though nothing was ever proved, there were enough indications at the time that a blueprint for a nuclear weapon for Saudi CSS-2 missiles was provided by that enterprising Pakistani scientist. There’s a second aspect to all of this. Fairly reliable reports have long linked Pakistan’s own nuclear programme to Saudi Arabia’s belief that its own weapons were “on order” from Pakistan.
Riyadh has long funded the Pakistani nuclear programme, and the fact that then defence minister Prince Sultan bin Abdul Aziz was the only foreigner ever permitted to visit Pakistani nuclear facilities — even as prime minister Benazir Bhutto was shut out — speaks much of Saudi proximity to the Pakistani programme. As the riyals flow in, that sense of ownership is only going to increase.
Even as the Pakistani prime minister sets forth in search of other friends who can help reduce its credit request from the International Monetary Fund, he may well find that the IMF conditions are less troublesome in the long run. Creditors have an unhappy knack of turning loans into ownership. China has a long track record in this area. So could Saudi Arabia. That ownership could extend well beyond allowing a Saudi royalty permits to shoot a few hundred endangered Houbara bustards in the arid lands of Punjab. With a rather more than adventurous leadership at the helm, Riyadh like Oliver Twist, may well ask for more.
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