The Pakistan-Saudi Arabia-China Partnership

Saudi Arabia has recently announced its decision to fund the creation of a $10 billion oil refinery in Pakistan, a strategic step in association with the China- Pakistan Economic Corridor (CPEC). China and Pakistan have established an ongoing relationship as a part of China’s Belt and Road Initiative led by Chinese president Xi Jinping. This initiative focuses on infrastructure development for Pakistan, specifically focusing on their transportation network, power plants, and industrial zones. Saudi Arabia’s decision to fund the oil refinery in the Gwadar port establishes the country’s commitment to the CPEC. “Saudi Arabia is the first country that we have invited to become a third partner in CPEC. They will be our third strategic economic partner in CPEC, and Saudi Arabia is expected to bring massive direct investments to the project,” Minister Fawad Chaudhry explained.


The China- Pakistan Economic Corridor has led to a significant level of Chinese investment in Pakistan, averaging at about $19 billion in the past five years. This investment has contributed to the creation of about 70,000 more local jobs in Pakistan. China is expected to invest about $62 billion into Pakistan the next fifteen years. The CPEC will provide China with greater access to international markets, especially with the establishment of the Gwadar port. The development of a China- Saudi Arabia- Pakistan partnership has important strategic connotations, especially as China increases its hold over the Asian continent. Saudi Arabia will also benefit from the loans, as now they have an influence over Pakistan’s development in upcoming years.


The investment from China and Saudi Arabia comes at a time when Pakistan is suffering from extreme foreign debt. There is heavy criticism regarding the China- Pakistan Economic Corridor, and the effects that this initiative may have on Pakistan. The country is already dealing with a foreign debt crisis, and the billions of dollars given from China and Saudi Arabia might exacerbate this issue. Countries such as Malaysia and Sri Lanka have received investment funds from China in the past and have experienced a ‘debt trap’ due to these loans. Malaysia has cancelled numerous China- backed projects in fear of increasing their debt to China itself. Sri Lanka also got caught in a debt trap after receiving loans from China to build the Hambantota port, and had to give China a long-term lease of the port.


Saudi Arabia’s decision to fund the oil refinery development comes at an important time for the CPEC, as it increases the initiative’s legitimacy after the negative attention it has been receiving recently. As explained in Times of India, “…the Saudi decision to establish an oil refinery in Gwadar comes as a booster shot for CPEC and OBOR. It increases the trust perception regarding Chinese projects and makes them appear viable.” Saudi Arabia’s willingness to partner with China and Pakistan in the CPEC gives the initiative more credibility in the international arena.


The billions of dollars in investment may not be enough to save Pakistan from another IMF bailout, which Prime Minister Imran Khan was hoping to avoid. While Pakistan’s finance minister Asad Umar stated on January 12th that Pakistan will not be receiving a bailout package from the IMF, the country is still in communication with the organization. IMF spokesperson Gerry Rice stated on January 17th, “IMF staff are continuing discussions with the Pakistani authorities, with our counterparts, toward reaching an understanding on policy priorities, on reforms to stabilize the economy and lay the foundations for sustainable and inclusive growth.” If Pakistan does end up receiving financial assistance from the IMF, the country will have to take many drastic steps to secure the aid. This includes welfare spending cuts and higher taxes, which will not help the Pakistani government’s standing.

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