Saudi Arabia cancels investment in Pakistan's Gwadar port, souring Chinese dreams

Saudi Arabia has inflicted a $10 billion dent on Chinas Belt and Road Initiative (BRI) in Pakistan. As reported by Nikkei Asia Riyadh has decided to shift a proposed $10 billion oil refinery to Karachi from Gwadar, the centre stage of the China-Pakistan Economic Corridor (CPEC).

An elated Pakistan and China had invited Arabs to join in the CPEC nearly three years ago, following which, Saudi Arabia decided to pour in $10 billion in the refinery project. During the visit of Saudi Crown Prince, Mohammad Bin Salman to Pakistan in February 2019, Riyadh had announced it would invest $10 billion in a refinery and petrochemical complex at Gwadar.

The announcement was considered to be Saudi's endorsement of China's BRI only. Chinese media called it "A trilateral alliance of China-Pakistan-Saudi Arabia, driven by geo-economic interests, is emerging, with the Pakistani port of Gwadar on the Arabian Sea as its hub."

It followed Chinese President Xi Jinping's personally driven outreach in 2016 to West Asia and North Africa , which included expenditure of quality time in Saudi Arabia, Iran and Egypt. The refinery angle was prominent even at that point in time.


"With King Salman (of Saudi Arabia), Mr. Xi visited the Yasref oil refinery, China's largest investment project in Saudi Arabia, a joint effort between Sinopec, the Chinese state-owned energy giant, and Saudi Aramco," wrote the New York Times in its report of that visit.

President Xi Jinping of China Is All Business in Middle East Visit

But Prince Salman has now dealt a massive blow to Chinese president Xi's ambitions to develop Gwadar as a mega-investment hub in the Arabian Sea.


Pakistan's Gwadar loses luster as Saudis shift $10bn deal to Karachi

Pakistan was apparently apprehensive of the move by the House of Saud. On June 2, Tabish Gauhar, the special assistant to Pakistan's prime minister on power and petroleum had told Pakistani media that Kingdom of Saudi Arabia will not install a refinery at Gwadar but had indicated to set up a refinery along with a petrochemical chemical complex somewhere in Balochistan or near Karachi.

"However, there is no mentionable progress from Aramco as to when and where the deep conversion refinery with the capacity to refine 250,000 barrels per day of crude oil will be set up," the minister said.


According to the minister, the Saudi energy giant, Aramco, had conducted a feasibility report, following which it concluded that establishing the refinery at Gwadar would not be feasible. However, as plan-b, it can be set up in Balochistan, or near Karachi. He added that in the next five years, another refinery with capacity to refine over 250,000 barrels per day was imminent.

Citing the Pakistani officials, Nikkei Asia reports that a mega oil refinery in Gwadar was never feasible. "Gwadar can only be a feasible location for an oil refinery if a 600-km oil pipeline is built connecting it with Karachi, the center of oil supply of the country," the official said. There is currently an oil pipeline from Karachi to the north of Pakistan, but not to the east.

Arif Rafiq, president of Vizier Consulting, a New York-based political risk firm, told Nikkei that a Saudi-commissioned feasibility study on a refinery and petrochemicals complex in Gwadar advised against it. "Saudi interest has shifted closer to Karachi, which makes sense, given its proximity to areas of high demand and existing logistics networks," he added.


It is apparent that Imran Khan's government is not happy with the decision and plans, and has requested Prince Salman to "re-think " the decision. After Imran Khan's visit to Saudi Arabia last month, Pakistan was expecting to kick-start work on the $20 billion Saudi development projects in Pakistan, especially the Aramco oil refinery and petrochemical complex in Gwadar.

The Saudi decision is clearly a setback to Pakistan's plans to develop Gwadar as an energy and industrial hub. Pakistan has been struggling to find a viable economic growth strategy for Gwadar and has asked investors to drive stakes in the project by selling the master plan details Of Gwadar as the "Singapore" of Pakistan--an economic hub of not only Pakistan but the entire South Asian region.

Ironically, Pakistanis put faith in Gwadar not because of their own government but because Gwadar is a made-in-China product.


Experts link Saudi's backtrack on Gwadar with the G7's Build Back Better World (B3W) plan to counter president Xi's BRI, which has been criticised for creating massive debt and exposing countries to undue influence by Beijing.

(This content is being carried under an arrangement with indianarrative.com)-IANS