A 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.

At 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.

This is an idea that looks crazy at first glance — Pakistan, struggling with its own food shortages and rising prices, rents out its farmland to grow grains for the rich Gulf states instead. 

But the idea appears to be gaining momentum. Saudi Arabia is holding talks with officials in Pakistan, among other countries, to set up projects to grow wheat and other grains to protect itself from crises in world food supplies. Dubai-based private equity firm Abraaj Capital has already said it is looking at investing in agriculture in Pakistan  and other Gulf countries are also showing an interest.

So is this good or bad news for Pakistan?

U.S. News & World Report says there may be ”potential for large and enduring benefits on both sides. The reported sellers of under-developed farmland, Pakistan and Sudan, for example, are poor and lack the resources to make their own land productive,” it says. “Foreign investment is meant to help the investor, but in these cases it might also help the host countries by improving roads and irrigation and, of course, providing cash.”

The Financial Times last month quoted a senior Pakistani official  as saying of the talks to sell farmland to the United Arab Emirates: “Our aim is not to do away with precious farmland but in fact to raise the productivity of our farms and turn barren land in to fertile farmland.”

On the positive side is the potential for big investments in Pakistan from wealthy Gulf economies looking to use windfall oil profits to diversify away from oil.  According to one expert, the cumulative sovereign wealth fund wealth in the Middle East is now about 1.5 trillion dollars, mostly in the United Arab Emirates; and their assets could triple or quadruple in five to 10 years time.

Pakistan also has an interest in keeping relations sweet with Saudi Arabia as it seeks a deal on deferred oil payments  to ease its own financial crisis. Is this the beginning of a new version of oil for food deals?

On the negative side are all the issues about sovereignty and economic control. And of course the perennial question in emerging markets. What will it mean for the poor man who is already struggling to feed his family.

It would be hard to think of a more complex web of problems.  Pakistan and Afghanistan face, in very different ways, severe domestic political crises which are being exacerbated by soaring prices and food shortages. Both blame each other for failing to crack down on the Taliban and al Qaeda. And now tensions are rising over attempts by Pakistan, the traditional supplier of food to Afghanistan, to curb its wheat exports to make sure it can feed its own hungry population.

For an idea of how significant this is in Afghanistan, it’s worth reading this piece in the Chicago Tribune. “Western officials - including officers with the NATO-led International Security Assistance Force - say the food crisis is potentially more destabilizing to the U.S.-backed government of President Hamid Karzai than the insurgency itself,” it says.

The website Registan.net followed this up by saying that the food crisis will drive more people into the arms of the Taliban. “Hungry, disenfranchised people are angry people,” it says. ”… every time someone can’t afford to buy bread for his family, he’ll have one more reason to … blow up some Humvees.

The World Food Programme says that emergency food aid meant to help 2.55 million Afghans affected by soaring food prices has reached only about 38 percent of the targeted population, according to IRIN, largely due to curbs on Pakistani food exports.

“One of the main reasons why food aid has not yet reached even half the targeted communities is procurement and logistical hurdles,” IRIN reports. “Initially it was decided that wheat and other food items would be procured from markets in neighbouring countries, especially Pakistan, which traditionally supplies Afghan food markets. However, rising prices have prompted Pakistani authorities to impose a strict ban on food exports, hitting WFP’s operation in Afghanistan.” 

Yet look at it from Pakistan’s point of view. It has a shaky coalition government which will become all the more vulnerable if it doesn’t make sure its people have enough food to eat. For all its interference in Afghanistan, it has also felt the burden of supporting three million Afghan refugees. 

“The priority must be on feeding the people of Pakistan, not excluding the three million Afghan refugees who still enjoy our hospitality, Hamid Karzai and company’s ingratitude notwithstanding,” wrote Ikram Seghal in The News last month. “Find me another nation in the world having so many refugees.”

Can someone see a way out of this morass? Or are Pakistan and Afghanistan condemned to stumble from crisis to crisis until historians write, with 20/20 hindsight, that whatever happens next was inevitable?