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Saudi officials are due to visit Pakistan for talks on Monday on a multi-billion dollar oil refinery and other investments, Pakistani officials said, while Islamabad looks for new sources external liquidity to avoid further debt distress on Chinese debt.
Saudi Arabian Oil Co., the state oil giant known as Aramco, is currently negotiating investments in the refinery, a person close to the Saudi side of the negotiations. The Pakistani port refinery at Gwadar, near the strategic oil control point in the Strait of Hormuz, would produce 200,000 barrels a day, he added. Aramco spokespersons did not respond to requests for comment.
The Saudis will also discuss investments in other projects, Pakistani officials said, including the giant copper mine Reko Diq, also located in the western province of Baluchistan.
Any agreement would strengthen relations between Pakistan and Riyadh and place a Saudi outpost close to its main regional rival, Iran. The refinery would also strengthen Gwadar's facilities as a competitor to the nearby Iranian port of Chabahar. Gwadar is only 70 miles from the Iranian border.
The Saudi refinery would undermine any Iranian attempt to circumvent US sanctions to sell oil to Pakistan. Tehran, which faces US sanctions in November, has often focused on sales to neighbors when it has been subject to international restrictions.
Pakistan is the flagship of Beijing's global belt and road infrastructure program, known here as the China-Pakistan Economic Corridor, which has projects in the region. billions of dollars. Gwadar, handed over to the Chinese to manage, is supposed to be the centerpiece, but the development has been slow, to the frustration of Beijing.
Pakistan had already turned to China for the refinery, with talks taking place last month, according to the Pakistani Ministry of Energy. However, this would involve getting into more debt to China. Saudi Arabia should invest the money for the refinery. Washington has warned of a "debt trap" of Chinese infrastructure loans to countries that can not afford to repay them, a claim rejected by China.
In Pakistan, China and the United States are opposed to China's "One Belt, One Road" initiative. To understand the issues, it is helpful to understand why China is in Pakistan initially.
Saudi investment would be a boost to the CPEC, which stalled due to debt fears and a reassessment by the new Pakistani government of Imran Khan, elected in July. Under the leadership of Mr. Khan, Pakistan has invited other countries to participate in the program, and visiting Chinese Foreign Minister Wang Yi said recently that Beijing is open to that.
A Pakistani minister said that Saudi Arabia would become "the third country of the CPEC". Riyadh is a close ally of the United States, which Beijing accuses of seeking to undermine its global infrastructure initiative.
Pakistan, faced with a balance-of-payments crisis, is also looking into getting Saudi Arabia to supply oil at reduced prices or with deferred payment, according to Pakistani officials.
The Saudi visit is a preparatory work for the visit of Crown Prince Mohammed bin Salman, who is due to visit Pakistan in a few weeks, Pakistani officials said.
The first foreign visitor after the formation of Mr. Khan's government was the Iranian Minister of Foreign Affairs, Javad Zarif, who came at the end of August. This would have triggered alarms in Riyadh, said Rifaat Hussain, a professor at the National University of Science and Technology of Islamabad.
Mr. Khan was then invited to Saudi Arabia, where he recently met with King Salman and the Crown Prince. Riyadh said at the time that ways to strengthen bilateral cooperation had been discussed.
Pakistan supplies several thousand soldiers to Saudi Arabia for deployment and training missions in the kingdom, but refuses to join the war in Yemen, where a Saudi-led coalition fights Houthi rebels . Hussain said Pakistan was seeking to balance its relations with Iran and Saudi Arabia.
"Pakistan is considering Saudi Arabia as a way to attract more foreign investment into the CPEC," Hussain said. "Pakistan hopes to bring in Saudi Arabia and Iran."
In the past, Tehran has accused Saudi Arabia of using Baluchistan province in Pakistan to support jihadist groups attacking Iran, a charge denied by Riyadh.
The Saudi Minister of Energy, Industry and Mineral Resources, Khalid Al-Falih, who also chairs Aramco, is also expected to attend the conference. He is scheduled to meet with Pakistani Oil Minister Ghulam Sarwar Khan, officials said.
Petroleum products from all Gwadar refineries could be exported, sold inside Pakistan or trucked to China on new roads built across Pakistan to the northwestern region of China. Xinjiang, said experts.
The Saudi side is expected to visit Gwadar and Reko Diq's copper mine, Pakistani officials said. Reko Diq was developed by a joint venture between the Chilean copper mine Antofagasta PLC and the Toronto-based Barrick Gold Corp. This contract was frozen for years after the Pakistani authorities refused to grant him a mining permit in 2011. Seeking billions of dollars in damages.
Write to Saeed Shah at [email protected] and Benoit Faucon at [email protected]
