Imran Khan CPEC Diplomacy: Remodelling Trade Politics - II
by James M Dorsey on 03 Nov 2018 0 Comment

The Saudi Factor


Khan’s insistence on a refocus of CPEC takes on added significance given that Pakistan is turning to the International Monetary Fund (IMF) to help it avert a financial crisis with a loan of up to US$ 12 billion and its agreements with Saudi Arabia involving US$ 6 billion in financial support and could produce some US$ 10 billion in investments that would be separate but associated with CPEC. China worries that Saudi investments would reduce Pakistani dependence on the People’s Republic and is believed to have persuaded Pakistan to backtrack on its initial announcement that Saudi Arabia would become a partner in CPEC rather than invest separately from the People’s Republic.


Lijian Zhao, China’s deputy chief of mission in Islamabad sought to smoothen potentially ruffled feathers by insisting that his country welcomed Saudi investments as part of any effort to develop Pakistani infrastructure, raise living standards and create jobs. In an interview as well as a series of tweets Zhao insisted that China welcomed Saudi investment and “always supported & stood behind @ Pakistan, helping #develop it’s #infrastructure & raise #living standards while creating #job.” Zhao’s comments followed a statement in September by Chinese foreign minister Wang Ji after talks with Khan in Islamabad that appeared to indicate that China, while acknowledging Pakistani demands, would not address them immediately. Wang suggested that CPEC would only “gradually shift to industrial cooperation”.


In a further implicit recognition that at least some of its Belt and Road-related projects risk trapping target countries in debt or fail to meet their needs, China has conceded that adjustments may be necessary. “It’s normal and understandable that development focus can change at different stages in different countries, especially with changes in government. So China can also make some strategic adjustments when cooperating with these countries, but it’s definitely not a reconsideration of the B&R (Belt and Road) initiative,” Wang Jun, deputy director of the  Department of Information at the China Center for International Economic Exchanges told the Chinese Communist Party’s Global Times newspaper.


Said Financial Times columnist Jamil Anderlini: “China is at risk of inadvertently embarking on its own colonial adventure in Pakistan - the biggest recipient of BRI investment and once the East India Company’s old stamping ground… Pakistan is now virtually a client state of China. Many within the country worry openly that its reliance on Beijing is already turning it into a colony of its huge neighbour. The risks that the relationship could turn problematic are greatly increased by Beijing’s ignorance of how China is perceived abroad and its reluctance to study history through a non-ideological lens... It is easy to envisage a scenario in which militant attacks on Chinese projects overwhelm the Pakistani military and China decides to openly deploy the People’s Liberation Army to protect its people and assets. That is how ‘win-win’ investment projects can quickly become the foundations of empire.”


A Linchpin of Chinese Policy


China, moreover, frets that in a worst-case scenario, Saudi investment rather than boosting economic activity and helping Gwadar get out of starting blocks, could ensnare it in one of the Middle East’s most debilitating conflicts. China is further concerned that there would be a set of third-party eyes monitoring activity if and when it decides to use Gwadar not only for military purposes but also as a naval facility. Saudi investment would also thwart potential Chinese plans to link the ports of Gwadar and Chabahar, a prospect that Pakistani and Iranian officials have not excluded.


Indeed, Khan’s involvement of Saudi Arabia could complicate tensions in Balochistan where China is already a target for nationalist and/or religious militants by potentially drawing Pakistan into the escalating rivalry between Saudi Arabia and Iran and putting Saudi investments in the firing line. A Balochistan Liberation Army (BLA) suicide bomber driving an Iranian manufactured Zamyad oil transporter killed three Chinese engineers and two Pakistani frontier guards in August when he attacked a bus carrying them to the Saindak copper and gold mine that is operated by the Metallurgical Corporation of China.


A Rand Corp study asserted in 2014 that Pakistan is “the linchpin of China’s South Asia policy.” “Islamabad is considered a key capital to help Beijing deal with the challenge both in terms of cracking down on radical Islamic groups supporting and training Uighurs in Pakistan as well as helping to cast China as friend of the Muslim world… Pakistan is also important to China because it is considered critical to stabilizing neighbouring Afghanistan - a country that has become of growing concern to China as a source of terrorism and heroin… From China’s perspective Pakistan has a key role to play…in actively advancing China’s economic relations with the region and the world. Beijing seeks a government in Islamabad that can maintain order inside Pakistan and also help stabilize Afghanistan,” the study said.


Another Rand Corp research paper noted that Pakistan is China’s largest military hardware export market. Pakistan accounted for 42 per cent of China’s total arms sales in the years between 2000 and 2014. In a move designed as much to strengthen Pakistani counter-terrorism capabilities as a gesture towards the armed forces, China made Pakistan the second country after Saudi Arabia to receive killer drones and the associated technology. The US has refused to sell its more advanced killer drones to either Saudi Arabia or Pakistan.


Pakistan’s powerful military and intelligence service, Inter-Services Intelligence (ISI) is determined to play an important role in Khan’s manoeuvring of the Chinese and Saudi minefields. Handpicked by Chief of Army Staff General Qamar Javed Bajwa, ISI’s new head, Lieutenant General Asim Munir garnered experience in dealing with both China and the kingdom while he served in the province of Gilgit-Baltistan that borders on the People’s Republic and when he was seconded to Saudi Arabia.


Saudi Arabia is considering investing in a refinery in the Baloch Arabian Sea, Chinese-operated port of Gwadar that is a key node in China’s strategy to fuel economic development in its troubled north-western province of Xinjiang. Saudi Arabia is also looking at putting money into the Reko Diq copper and gold mine, that like Gwadar is close to Iranian border and a mere 70 kilometres from Iran’s Indian-backed port of Chabahar.


Ironically, the death of Saudi journalist Jamal Khashoggi has turn out to be a blessing in disguise for Khan. After two visits to Riyadh in the first two months of his prime ministership that did not persuade the Saudis to give him the cash relief he needs, Khan earned brownie points by attending a high-profile meeting in October in Riyadh that was boycotted by Western CEO’s and government officials. Khan was received in private audience by King Salman and his embattled son, Crown Prince Mohammed bin Salman. He received US$ 6 billion in deferred oil payments and a deposit in the central bank to alleviate Pakistan’s cash crunch.




Armed with the Saudi aid, Khan arrives in Beijing more confident that he can secure similar Chinese support. His talks are likely to be clouded by the question whether and, if so, what geopolitical price he may have paid for the Saudi aid. Ensuring that Pakistan, home to the world’s largest Shiite minority, does not snuggle up too much to Iran has become even more crucial for Saudi Arabia as it seeks in the wake of Khashoggi’s death to enhance its indispensability to US President Donald J. Trump’s effort to isolate and cripple Iran economically, if not to engineer a change of regime in Tehran. Trump sees Saudi Arabia as central to his strategy aimed at forcing the Islamic republic to halt its support for proxies in Yemen and Lebanon, withdraw its forces from Syria, and permanently dismantle its nuclear and ballistic missiles programs.


Saudi financial support means that Khan may find it more difficult to shield Pakistan from being sucked into the US-Saudi effort with potentially far-reaching consequences for Chinese investment, particularly in Balochistan. “There will be at a minimum Saudi expectations and perhaps even demands, when it comes to Pakistan’s support for issues that are of interest to the Saudi monarchy. When he was an opposition figure, Mr Khan seemed to understand that and hence decried the secret deal that the previous PML-N (Pakistan Muslim League-Nawaz) rulers had struck with the Saudis in return for a loan,” Dawn, Pakistan’s leading English-language daily, said in an editorial.


Pakistani finance minister Asad Umar denied that the Saudi support came with political strings. “The Saudis did not make any demands that we refused to meet. They made no demands. And this is the Pak-Saudi relation; it’s a people-to-people connection. They will stand by Pakistan’s side during our time of need,” Umar said. Khan is moreover likely to argue in Beijing that Saudi and Chinese aid would reduce his need to turn for help to the IMF that would demand insight into the financial terms of CPEC-related projects.


Insurgents kidnapped a week before Khan’s visit to Saudi Arabia 14 Iranian security personnel, reportedly including Revolutionary Guards on the Iranian side of the border with Pakistan. Pakistan pledged to help liberate the abductees who are believed to have been taken across the border into Balochistan, long a militant and Baloch nationalist hotbed. “Members of terrorist groups that are guided and supported by foreign forces carried this out through deceiving and bribing infiltrators,” the Guards said in a statement that appeared to blame Saudi Arabia and the United States without mentioning them by name.





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