Saudi Arabia is no longer magnanimous to Pakistan as in the past. Gone are the days when the Royal Kingdom was quick to come in aid of the needy Islamic brother. But Pakistan’s erratic and unreliable behavior towards the kingdom in the Islamic world has forced a rethink on the part of the rulers. Now the days of blank cheque relationship is over.
There has been a strategic shift in Riyadh’s policies and is increasingly attaching conditions to such aid, insisting on economic overhauls like cutting subsidies and privatizing state-owned companies. Even if Pakistan wins Saudi Arabian support for the resumption of its IMF programme, it will be a temporary respite. The truth is that Pakistan will not be able to secure any major package of economic support from Saudi Arabia today or in the foreseeable future because the model for such blanket support simply does not exist anymore.
Saudi Arabia, whilst maintaining very strong ties with Pakistan, simply does not have the patience with Pakistan’s elites (military and civilian) to convert those fraternal ties into unconditional bailouts. Pakistan’s military and civilian leaders continue to visit Riyadh and repeat their request for a bailout, but the absence of the traditional blank cheque should have forewarned Pakistan that the new Saudi Arabia thinks and acts differently under Crown Prince Mohammed Bin Salman (MBS) who makes decisions. But more importantly, it is the inability of the Pakistan state to capitalise on the roots of the fraternal ties and this is costing them dear. By viewing Saudi Arabia through a lens of the past, Pakistan finds it difficult to grasp the idea and vision of the new Kingdom that is taking shape under MBS.
The MBS Vision 2030 aims to transform Saudi Arabia and works on the principle that one needs to dispense with tradition that doesn’t work. That is what has led to MBS taking a series of bold decisions. These ranged from economic disinvestment of state- owned enterprises to lifting the ban on women driving motor vehicles. In 2019, Saudi Aramco went public, raising US$29.4 billion in a single day for a mere two per cent of the company’s ownership stock. In 2022, another four per cent was transferred, then worth US$80 billion to the PIF. The rapid changes have produced eye-popping results. Saudi Aramco posted a profit of US$161 billion last year, with nearly US$20 billion in cash dividends being awarded to the shareholders (two per cent) and Public Investment Fund (four per cent). Vision 2030 is about diversifying Saudi Arabia’s economy away from oil and advancing Saudi interests by leveraging its cultural and religious centrality to the Arab and Muslim world. This also involves using the power of its financial wherewithal to diversify and expand its economic capability, and strategic location as a hub for connectivity between Europe, Africa and Asia.
The world’s largest crude oil exporter, Saudi Arabia ended the year 2022 with a US$28 billion budget surplus after Russia’s invasion of Ukraine pushed up oil prices, sending profits flooding to producers. Despite that windfall, Saudi officials say they are tired of doling out endless aid to poorer states like Egypt, Pakistan, and Lebanon only to watch
it evaporates. As the New York Times aptly states, the Saudi government has adopted the IMF model of aid and assistance, which gives it even greater sway than before over regional politics, with larger nations like Pakistan. The message was given out loud and clear at Davos in January this year, by the Saudi Finance Minister Mohammed al-Jadaan, when he said, “We used to give direct grants and deposits without strings attached. And we are changing that. We are working with multilateral institutions to actually say, ‘We need to see reform’.’”
In February 2019, MBS visited Pakistan. Pakistan announced US$10 billion of Saudi Arabian money as possible investment. That figure has since been repeated on numerous occasions and yet none of it seems to have materialized. Pakistan should know the reasons for this. While it is clear that Saudi Arabia has changed the way it provides aid to its friends, the real reason for lack of progress is that Pakistan has repeatedly failed to provide even the very basic paperwork and due diligence required to close divestments of some of the state-owned assets under discussion. Green field investments like an oil refinery are much more complex. There also remain basic challenges like protection under the law, land acquisition, and political stability, lack of which stymie any real progress. Pakistan has neither the bureaucratic capability, nor the decisive national leadership to allow for investments from Saudi Arabia (or for that matter from the UAE or Qatar) to materialize.
Meanwhile, Saudi support for Pakistan continues to be available, but today with strings attached. Saudi Arabia is a much more ambitious and globally competitive nation than before. Pakistan may manage to get its bailout once in a while, but in the long run, this will actually erode the quality of fraternal relations between the two countries. Recent developments in the Middle East, focused on thawing of Iran-Saudi ties should be seen as a function of the new Saudi Arabia that is preparing to launch itself in regional and global affairs much more stridently than before. Pakistan is today in dire straits and they are unable to think straight. Their establishment and bureaucracy still think and act like a medieval-era government and is unable to grasp the rapid changes taking place globally, more particularly, in Saudi Arabia. The new Saudi Arabia will soon be a power to reckon with in a new avatar as a lender and this is worth watching.