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Tim Daiss

Tim Daiss

I'm an oil markets analyst, journalist and author that has been working out of the Asia-Pacific region for 12 years. I’ve covered oil, energy markets…

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Saudi Arabia Boosts Pakistan Energy Relations With $20 Billion Pledge

Amid increasing tensions between longtime regional antagonists India and Pakistan, Saudi Arabia’s Crown Prince Mohammed bin Salman (MbS) pledged $20 billion to Pakistan on his trip to Islamabad on Sunday. The amount is reportedly higher than originally estimated, while more will be forthcoming.

“It’s big for phase 1, and definitely it will grow every month and every year, and it will be beneficial to both countries,” MbS said.“We have been a brotherly country, a friendly country to Pakistan. We’ve walked together in tough and good times, and we (will) continue.”

Saudi Arabia’s investment pledge comes a month after the kingdom said that it would invest $10 billion in a new oil refinery in Pakistan’s deepwater port of Gwadar. “Saudi Arabia wants to make Pakistan’s economic development stable through establishing an oil refinery and partnership with Pakistan in the China Pakistan Economic Corridor,” Saudi Energy Khalid al-Falih told reporters in Gwadar at the time.

The crown prince’s high profile visit to Pakistan also comes just days after a suicide bomber killed 44  Indian paramilitary police by ramming his car into a bus carrying the officers. The incident took place in the disputed Kashmir region. The Pakistan-based Islamist militant group Jaish-e-Mohammad (JeM) claimed responsibility for the attack, while the Indian government accused Pakistan of letting militant groups operate from its soil and called on it to take action. The Kashmir region has been contested between India and Pakistan, having started just after the partition of India by the British in 1947. Both countries rule parts of the region while claiming the entire territory as theirs. Related: OPEC’s Next Big Crisis

Saudi Arabia’s investment pledge will also help Pakistan as it struggles with a mounting debt problem, and dwindling foreign reserves. Consequently, Pakistan has been talking to the International Monetary Fund (IMF) about a possible financial bailout and has also recently stepped up efforts to sector funds from several Arab states and China.

Strengthening decades-old bilateral ties

Saudi Arabia’s investment pledge is not only larger than anticipated, but it also furthers the decades-old strategic partnership between the countries that dates back to helping the House of Saud in a volatile region. It has been said that Saudi Arabia at times helps Pakistan financially, while Pakistan helps secure the kingdom's security by being able to assist it with Pakistani military might.

Case in point, Pakistani military engagement started in Saudi Arabia when Pakistani special forces participated in the operation to eliminate fundamentalist elements that seized the Grand Mosque in Makkah in 1979. Afterward, tens of thousands of Pakistani troops remained in Saudi Arabia during the Iran-Iraq war. Most were recalled after the war ended in 1988 – but a smaller contingent remained. Last year, Pakistan was reportedly preparing to send troops to Saudi Arabia in an advisory and training role.

Ali Awadh Asseri, a former Saudi ambassador to Islamabad, said after the crown prince's visit that greater interaction between business and the private sectors in both countries will take the historical bond “to a new level.”

“We know that Saudi Arabia and Pakistan have always enjoyed an incomparable level of understanding and friendship based on religion, culture and values. There is a historical bond between the two countries,” he added. “I have no doubt that Crown Prince Mohammed bin Salman is taking a cohesive approach to strengthen the relationship and take it to another level.”

Asseri said Saudi Arabia has deferred payments on oil worth billions of U.S. dollars from time to time in order to ease pressure on the Pakistan economy. The kingdom is also making billion-dollar direct investments in the country in line with the China-Pakistan economic corridor.

By Tim Daiss for Oilprice.com

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