What price Saudi oil bill deferrals for Pakistan?

July 14, 2008

Khurais oilfield in Saudi ArabiaA report in the Financial Times that Saudi Arabia has agreed in principle to defer payments for crude oil sales to Pakistan worth $5.9 billion has raised speculation about what it is looking for in return.

The Daily Times suggests that the Saudis are buying political stability in Pakistan, which may include throwing a lifeline to President Pervez Musharraf.  “Apparently, the immediate impact will be on PML-N chief Nawaz Sharif’s politics of confrontation with Musharraf, which will have to be diluted significantly in line with ground realities,” it says. “The Saudis, like the Americans, want a stable transition to civilian rule and no confrontation between the politicians and the military, including Musharraf.”

The Saudis have no interest in seeing Pakistan descend into chaos, not least because this would further strengthen al Qaeda which has set its own sights on the kingdom’s rulers. It may also see Sunni-dominated Pakistan as a potential counterweight to Shi’ite Iran. So it would make sense for it to buy stability in Pakistan.

Woman works in cotton field near the city of MultanAt the same time, Saudi Arabia is looking to use Pakistani farmland to grow grains  to protect itself from food shortages and rising prices, as indeed are other Gulf states.  So there may be an element of oil-for-food as well as oil-for-stability in the deal.

The  Daily Times adds a note of warning however in a subsequent editorial. It says Islamabad must also look to alternative sources of energy so that the Saudi bailout does not become “politically suspect”.

One to watch, with no doubt far more to come before this deal is fully played out.

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Cooperation between regional powers for purposes of expanded agricultural production is a positive thing. It would also help to funnel increasing percentages of oil revenues into developing infrastructure for manufacturing, and industries not tied to petrol extraction and refinement.

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