China-Pakistan Economic Corridor and Its Impacts on Pakistan-Saudi Arabia Relations

The Critical Evaluation of The Pak-India Relations In The Context of Water Dispute Between Both by Captain Imran Khan

CPEC and Pakistan-Saudi Arabia Relations | Daily Writeup | Opinions

The article is written by Captain Imran Khan, a student of Sir Syed Kazim Ali.

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Outline

1-Introduction

China-Pakistan Economic Corridor (CPEC), a corridor of opportunities, is a framework of regional connectivity to boost the economies of China and Pakistan and to strengthen relations with other countries of Asia. Through Gwadar, the corridor’s core, China imports energy resources from the Middle East, specifically from Saudi Arabia, to meet its energy requirements. In addition, it is likely to give realization to the “Vision 2030” that Saudi Arabia has adopted to diversify its economy. As a result, CPEC is to act as a mainstay in consolidating relations between Pakistan and Saudi Arabia.

2-What is China Pakistan Economic Corridor (CPEC)?

3-Objectives of CPEC

  • In reference to China
  • In reference to Pakistan
  • In reference to South Asia

4-Historical background of Pak-Saudi Arabia’s relations

5-Strategic foundations of Pak-Saudi Arabia’s relations

  • On economic fronts
  • On military fronts
  • On political fronts

6-Contemporary phase of Pak-Saudi Arabia’s relations

7-Impacts of CPEC on Pak-Saudi Arabia’s relations

8-Critical analysis

9-Conclusion

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Answer to the Question

1-Introduction

The Pakistan Economic Corridor is a framework of regional connectivity benefiting not only China and Pakistan but is likely to change the fate of the entire continent of Asia. Although a bilateral development programme between China and Pakistan has invited investors from around the world to participate in its different projects, Saudi Arabia’s involvement has remained noteworthy with an agreement to build an oil refinery in Pakistan. Pak-Saudi Arabia relations- initially premised on an ideological and religious basis and strengthened with time on the basis of economic, developmental, defence and strategic grounds- are to be more pragmatic and muscular through CPEC. Late King Abdullah greatly desired greater unity among the Muslim World. He also advocated for establishing strong bondage between Pakistan and the Kingdom. He envisioned the Pak-Saudi relationship as:

“More than strategic partners and even more than brothers.”

Through CPEC, China has planned to use Gwadar port to reach the hot waters of the Indian Ocean and extend its trade to the entire world; moreover, a fifty years agreement has been signed between Saudi Arabia’s Aramco and China through which the company has prioritized China for oil supply for the next fifty years. Aramco is to build an oil refinery in Pakistan through which crude oil supplied from Saudi Arabia to Pakistan, after refinement, is to head towards China. Hence, undeniably, CPEC, along with enhancing the economic and infrastructural development of Pakistan, is to ensure strong, exclusive and cordial ties with Saudi Arabia.

2-What is China Pakistan Economic Corridor (CPEC)?

The China-Pakistan Economic Corridor is one of the flagship projects of the world’s largest project of One Belt One Road (OBOR), through which China aims to extend its trade throughout the world. CPEC is a trade route from China’s Kashgar region to the Gwadar port in Pakistan through Khunjerab Pass. It is a road network of about 3000 kilometres and is likely to cut a distance of around 12000 kilometres. Divided into three phases: Early Harvest Phase (2015-20), including energy, infrastructure/ connectivity projects, like railways and the development of Gwadar; Medium Term Phase (2020-2025), which focuses on the energy sector, transport sector, trade, international parks and international cooperation; Long-Term Phase (2025-2030) that includes Connection to the ports, agricultural development, poverty alleviation, and tourism, CPEC, certainly, is to not only boost the economies of China and Pakistan but also to empower the entire region of South Asia through establishing strong diplomatic ties among the countries as well as ensuring regional stability and security.

3-Objectives of CPEC

3.1-In reference to China

  • To export the surplus amount of goods to Europe, Central Asia, and other states, like Iran and North Africa, to the UK.
  • Two important imports:
  • Oil from oil-rich states, such as Iran, Saudi Arabia, and Iraq.
  • Minerals and raw materials from Africa are rich in resources and raw materials.
  • To decrease the time of exports or imports.
  • To avoid the passage of Melaka and the South China Sea for transport.
  • The development of Xinjiang province of China.
  • Making China the first world country.

3.2-In reference to Pakistan

  • To strengthen Pakistan’s economy through various infrastructural and development projects and create employment opportunities.
  • To resolve the security concerns of the country and to cope with terrorism.
  • To stabilize the economy of the country in case of economic sanctions by the USA.

3.3-In reference to the South Asian region

  • To build strong diplomatic relations with the countries in the region so that stability can be assured.
  • To make it prosperous by benefiting from the vast majority of natural resources available in the region.
  • To make it economically stable so that the interference and hegemony of America can be confronted here.

4-Historical background of Pak-Saudi Arabia’s relations

Bilateral cooperation between both countries was initiated, with Pakistan gaining independence in 1947. Initially established on the basis of religious sentiments of Muslims towards the holy mosques of Makkah and Madina, the relations have become more cordial, exclusive, and pragmatic with the passage of time. To ensure mutual cooperation and bilateral understanding, a Treaty of Friendship was signed between the two countries in 1951, which marks the formal start of relations. With the emergence of new nation-states in the Arab world, Pakistan has extended its cooperation to Saudi Arabia for the development of newly created states and regional stability and security. On the economic front, a large number of people from Pakistan are employed in different fields, including engineering, medicine, education, technology, etc., and render their services to the Kingdom’s development. Moreover, Pakistan has extended its military support to the country at times of worst domestic upheavals or any kind of foreign aggression. The former Saudi intelligence chief, Prince Turki bin Faisal, famously once said about the relationship between the two countries:

“Probably one of the closest relationships in the world between any two countries without any official treaty.”

5-Strategic foundations of Pak-Saudi Arabia relations

The basis of Pak-Saudi relations is sentimental and religious, as the Kingdom is the guardian of holy mosques (Hijaz e Muqaddas). However, the relationship is further fortified on strategic grounds because of the common geopolitical interests of both countries. Over the decades, Pakistan has made an exclusive contribution to the strategic calculus of the Kingdom, which speaks about their mutual cooperation and consistent relationship.

On military fronts, Pakistan, after establishing its military in accordance with the international standards of military professionalism, has extended its tremendous support to build a defensive mechanism for the country. Many military students of Saudi Arabia get their training from the military institutions of Pakistan; in addition to that, many army professionals of Pakistan are sent to the Kingdom to impart military training to Saudi Royal Forces and to protect the holy assets of Islam. Since the 1960s, Pakistan’s armed forces have continuously assisted the country in its defence against any sort of foreign invasion. During “Operation Desert Storm”, a division-sized military force of Pakistan was deployed in Saudi Arabia to protect the country.

On economic fronts, Saudi Arabia has been a significant ally in assisting Pakistan in its economic pitfalls. Anwar Ali, a Pakistani economist, remained a Governor of the Saudi Arabian Monetary Agency (Saudi Central Bank) from 1958 to 1974. The Saudi economy has been boosted under the able leadership of Anwar Ali, who gave it a new vision and future orientation. Many Pakistani migrants are employed in the Kingdom; they play two important roles: first, they serve the host country; second, they contribute to Pakistan’s economy through remittances. Since the 1960s, Pakistan’s human resources have started pouring into Saudi Arabia; recently, in 2018, the number of Pakistani expatriates in Saudi Arabia was around 2.7 million working in almost all fields, including education, medicine, engineering, and information technology. Pak-Saudi bilateral trade in the first half of the twenty-first century (2002-2013) has been over thirty billion US dollars, and the trade exchange from 2013-2013 has remained at five billion US dollars. In 2018, Saudi Arabia gave a $3 billion bailout package to Pakistan along with $3 billion in deferred payments on oil imports. In October 2018, from the platform of the Future Investment Initiative (FII), both countries signed several agreements for future economic cooperation.

On political grounds, Pakistan and Saudi Arabia have been cordial partners from the beginning because of the common geopolitical interests of both countries. High-level official visits have been paid by the heads of successive governments of both nations. Pakistan has always supported Saudi Arabia in its domestic as well as foreign policies. As a member of OIC, Pakistan has supported Arab wars against the illegal occupation of Palestine (the Holy Land) by Israel; moreover, Pakistan has  Saudi authorities to mediate to resolve the conflict with Yemen. Pakistan’s foreign policy clearly states that it will prioritize friendly relations with the Muslim world.

6-Contemporary phase of Pakistan-Saudi Arabia relationships

The two-day official visit of Crown Prince Muhammad Bin Salman in February 2019 has been viewed as the start of a new phase of bilateral cooperation between Pakistan and Saudi Arabia; seven memorandums of association (MoUs) in the amount of $21 billion have been signed between the two countries for the development of various sectors of the economy. Under the changing geopolitical situations and geo-economic developments, both countries have realized their responsibilities to cooperate and work together for the good of the entire Muslim world. There are tremendous potentials and opportunities in both countries, including the vast majority of natural resources and a competent workforce in Pakistan that can be utilized to change the fate of both countries. Saudi Arabia, in its “Vision 2030”, has decided to not only rely on petroleum products but also to diversify its economy through industrial manufacturing and other techniques in the modern world.

However, there was a major setback in the relations towards the end of 2019 when the special status of Kashmir was abrogated by the Indian authorities, and the Muslims of the valley were put under an indefinite curfew. Saudi Arabia and other Gulf countries, although expected to support Muslim plea and stand with Pakistan on the Kashmir issue, are silent on the issue. Moreover, Saudi Aramco and Abu Dhabi National Oil Company have struck a deal of $70 billion to establish an oil refinery in Maharashtra, India. With a pessimistic and prejudiced response from OIC, Arab League, and GCC, India has taken its illegal acts against Kashmiris justified. Furthermore, on economic fronts, Saudi Arabia has demanded Pakistan repay part of the $3 billion loan and has frozen the $3.2 billion oil credit facility because of the Kashmir dispute. Recently, in February 2022, Pakistan was asked to return another amount of $3 billion within a year, granted by the Crown Prince, to the government of Pakistan with an interest rate of 4% in October 2021 to improve its dwindling foreign exchange reserves. Last but not least,  a major knockback was seen by the Saudi government in the establishment of the Aramco oil refinery at Gwadar, which is now planned to be set in Karachi, according to the Prime Minister’s Special Assistant on Power and Petroleum. Hence, it is evident that the relationship between Pakistan and Saudi Arabia has taken a dip in the recent past over the Kashmir issue.

7-Impacts of CPEC on Pak-Saudi relations

With the official visits of Pakistan’s current PM in May 2021 and the Saudi foreign minister in July 2021, Riyadh and Islamabad are determined to regain what they lost in the years of 2019 and 2020. CPEC is a game-changer project not only for Pakistan and China but also for all the countries of Asia that are going to be part of the project. Through its “Vision 2030”, Saudi Arabia is aimed at the diversification of its economy, and Pakistan can provide a prospective route and staging place. China, the world’s largest growing economy, is dependent on Gulf states to meet its energy requirements, and Pakistan, due to its unique geo-strategic location, can provide a secure and shortest route for energy transportation through CPEC. Gwadar is to act as an energy hub between oil-rich and oil-deficient countries. Therefore, the establishment of an oil refinery at Gwadar with Saudi investment is likely to boost economic integration and interdependence between the two countries. It is to give Saudi Arabia relevance in the regional geo-economics. With the prospective participation of Saudi Arabia in CPEC, another dimension adds to the geopolitical significance of the long-standing relationship between Pakistan and Saudi Arabia. Hence, without any doubt, CPEC is likely to promote the economic diversification of Saudi Arabia, and as the trade route of CPEC is through Pakistan, it is to fill the gap in relations that was created by Indian hostilities. As a result, the long-established relationships between both countries are to reach new heights.

8-Critical analysis

The relations between Pakistan and Saudi Arabia are fundamentally based on the ideological foundations and religious doctrines of Islam. Pakistani people have profound respect and dignity towards the Holy Lands in the Kingdom. However, with the passage of time and changing global situations and priorities, these relations have witnessed pragmatism and an upward trajectory in all the diplomatic fields, including political, economic, defence, social and strategic cooperation. Both countries need to work through the platform of the Organization of Islamic Cooperation (OIC) to solve the problems of the Muslim world. Both are rich in natural resources; Pakistan has one of the world’s armed forces, and Saudi Arabia, rich in oil reserves, is economically strong enough; hence, these two can work in bilateral cooperation and coordination to further strengthen the Muslim Umma and also enhance their economic strength. CPEC can prove to be a cornerstone in the economic development of both countries as it provides secure and shortest trade routes between oil deficient, especially China and oil-rich countries_ among which Saudi Arabia is number three after the USA and Russia.

9-Conclusion

To sum it up, Pakistan_being the only nuclear power in the Muslim world_ and Saudi Arabia_ the leading oil producer among the Muslim countries_ with bilateral cooperation, exclusivity, and mutuality in their ties, can take the Muslim world to the heights of glory. CPEC can provide numerous opportunities and breakthroughs in the economic diversification of both countries. Gwadar_ the core of the corridor_ is the energy hub between oil-rich and oil-deficient countries through which China buys petroleum products from the Middle East, especially Saudi Arabia, that is to promote the economic development of the country. Pakistan is the junction between both parties for trade and economic activities; consequently, CPEC is to ameliorate the relations between both countries. As a result, Pakistan and Saudi Arabia are to be able to work together on all fronts, including political, economic, social, religious, etc., to ensure the development of the Muslim world along with the region’s prosperity.

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