The Pulse | Diplomacy | South Asia

Can China Replace Saudi Arabia for Pakistan?

Islamabad needs both Riyadh and Beijing for its domestic as well as foreign imperatives.

By Ameena Tanvir for
Can China Replace Saudi Arabia for Pakistan?

Pakistan’s Prime Minister Imran Khan

Credit: U.S. Institute of Peace/Flickr

Just before leaving for China last week on a two day official visit to attend the second round of the China-Pakistan Foreign Ministers’ Strategic Dialogue, Foreign Minister Shah Mahmood Qureshi termed his visit “important“and that he had a discussion with Prime Minister Imran Khan before leaving. The visit came just days after Chief of Army Staff (COAS) General Qamar Javed Bajwa and the ISI head General Faiz Hameed were denied an audience with Saudi Crown Prince Muhammad Bin Salman during their visit to the Kingdom. The COAS and ISI chief’s Saudi Arabia visit was a damage-control effort after Qureshi criticized the Saudi government and threatened to circumvent the Kingdom by calling an Organization of Islamic Cooperation (OIC) meeting separately. During this whole episode, Qureshi has remained the key player, claiming his Beijing visit strengthened the “All-Weather Strategic Cooperative Partnership” between China and Pakistan.

Pakistan, already tangled with tough domestic problems ranging from unbridled inflation to hours-long power outages and threatening economic indicators, might not have afforded to offend the Saudis. But Qureshi’s surprising criticism puts the country in an awkward situation. Islamabad doesn’t have enough support from the international community and angering the Saudis at this point may have serious repercussions. Qureshi’s China visit, although having taken place for previously scheduled foreign minister level talks, aims to get Chinese support on two levels immediately: financial and diplomatic. The big question is whether China can once again rescue Pakistan given the latter’s excessive reliance on Saudi Arabia.

Over the years, Pakistan has received an abundance of Saudi financial aid and oil payment deferments. Riyadh bailed out Islamabad on a number of occasions — it provided 50,000 barrels of free oil per day to Pakistan for a year when the country came under sanctions after the 1998 nuclear tests. The Kingdom also lent a hand to Pakistan when Pakistan’s foreign currency reserves were dwindling steeply by giving $1.5 billion in 2014. Likewise in 2018, Saudi Arabia provided $3 billion to Pakistan in foreign currency support for a year to address its balance-of-payments crisis, and a one-year deferred payment facility for import of oil worth up to $3 billion. Last year, the Saudi Crown Prince visited Pakistan and signed a number of agreements including one to set up an $8 billion refinery and petrochemicals complex in the coastal city of Gwadar. Furthermore, more than 2.7 million Pakistani expatriates live in Saudi Arabia who send back billions in remittances — $2.7 billion alone in fiscal year 2019-20 — contributing to capital inflow to the cash-strapped country.

On the other hand, China is termed  an all-weather friend of Pakistan that has maintained cordial and working relationship with Islamabad through thick and thin. Like the Saudis, China has also extended financial support to Pakistan more than once, and lent support during tough times.

In 2018, China agreed to provide Pakistan $6 billion in aid to minimize Pakistan’s dependence on the IMF bailout package. In July 2020, Pakistan received $1.3 billion in commercial loan from China, helping Islamabad achieve the foreign exchange reserve target of around $12 billion by the end of fiscal year 2019-20. During the ongoing COVID-19 pandemic, China has so far provided aid worth $4 million to Pakistan along with a large quantity of medical equipment. To avoid defaulting on international debt obligations, Pakistan recently once again turned toward China. Reportedly, a few weeks ago Pakistan took a $1 billion loan from China to repay the same amount to Saudi Arabia.

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Saudi Arabia has often supported Pakistan on foreign policy issues including generous support during the 1971 Indo-Pakistani War when it pushed India to return Pakistan’s prisoners of war. The two Muslim states furthered their engagements during the Cold War years with the Saudis providing funds to thousands of madrassas and supporting Pakistan’s Kashmir stance.

Pakistan, on its part, also stood by the Saudis on foreign policy issues on multiple occasions. Last fall, Pakistan dropped the plan to attend Kuala Lumpur Summit. Ostensibly due to pressure from Riyadh, Pakistan didn’t attend the summit to which Saudi rivals Iran, Turkey, and Qatar were invited to attend but not the Saudis. There were, however, elements of rifts between the two sides when in 2015 the Pakistani parliament rebuffed the Kingdom’s call for military involvement in the Saudi-led coalition fighting Houthi rebels in Yemen. Quite recently, Saudi Arabia’s shying away from calling a special OIC meeting on Kashmir irked Pakistan. Deepening Saudi Arabia-India relations have also annoyed Islamabad.

Given the numbers involved, we can safely assume China can help Pakistan financially even if the Saudis don’t for various reasons. However, there have been numerous calls warning Pakistan to avoid being caught in Chinese “debt traps.” Besides, Pakistan cannot get oil from China nor can China accommodate millions of Pakistani workers in its country. Both factors leave policymakers in Islamabad in limbo on ways to keep foreign money coming in form of both remittances and aid.

Recently, Pakistan’s diplomacy has relied more on China than on Saudi Arabia given the latter’s foreign-policy preferences and geographical detachment from South Asia. On the other hand, China — because of its extended regional interest — sees Pakistan as a connecting link to the  warm waters of the Indian Ocean and a balancer against Indian hegemonic designs. This is a win-win situation for both Pakistan and China. China’s continuous support to Pakistan on Financial Action Task Force (FATF) steps, unlike the Saudis, provides breathing space to Islamabad. Beijing has fully supported Pakistan on the country’s call against India’s decision to effectively abrogate Article 370 of the Indian Constitution (pertaining to Kashmir’s autonomous status). Since August 5 last year when New Delhi announced this decision, China has repeatedly supported Pakistan’s Kashmir stance. China has also urged India to show restraint along the India-Pakistan Line of Control.

Pakistan’s bold move to shout at the Saudis, so to speak, seemingly hasn’t worked and the Saudi cold shoulder indicates the Kingdom cannot be the brother Pakistan wants it to be, at least on the Kashmir issue. And then again, the whole situation puts Beijing in the limelight by having supplanted Riyadh as Islamabad’s main backer, at least for now. Pakistan cherishes Chinese financial support, socio-economic ventures, and diplomatic backing. Yet parting ways with Saudi Arabia cannot serve Islamabad well at this point when it needs not only to avoid FATF blacklisting but diplomatic isolation too.

Ameena Tanvir is a PhD scholar at the South Asian Center in Punjab University Lahore. She tweets at @AmeenaTanvir.