Mar 21, '14
By Syed Fazl-e-Haider
KARACHI - A US$1.5 billion donation to Pakistan from Saudi Arabia is hotly being debated in the country's parliament, political circles and among the analysts. The main question being under what deal Riyadh disbursed the crucial amount to help the cash-strapped country make short-term economic gains? What has Pakistan guaranteed or promised to do in return? Many believe Saudi Arabia killed many birds with one stone.
Saudi Arabia did what the US could not do to keep Pakistan away from a $7.5-billion gas pipeline project with Iran. In a tit-for-tat deal, Saudi Arabia might have persuaded Islamabad to cancel the Iran-Pakistan (IP) pipeline project, which is vital to end energy shortages that are crippling Pakistan's economy.
Pakistan's oil minister Shahid Khaqan Abbasi, after receiving funds from Saudi Arabia last month, reportedly said work on the pipeline was not possible because of sanctions imposed by the United States and the European Union on Iran over its nuclear program. Iran has warned that Islamabad is contractually obliged to complete the project which would allow Tehran to export gas to its southeastern neighbor.
"Iran has carried out its commitments ... and expects the Pakistani side to honor its own," Iran's deputy oil minister Ali Majedi was reported to have said. "They should even pick up the pace of work and make up for falling behind schedule in constructing Pakistan's [780-kilometer] side of the pipeline."
Iran has already laid the pipeline its side up to its border with Pakistan. Financing has been the key issue for Islamabad. Islamabad has so far failed to secure the required funding for the IP pipeline due to the threat of sanctions from the US. Pakistan had been asking Iran, China and Russia to fill the finance gap.
Ironically, Saudi Arabia's $1.5 billion donation was the amount Pakistan needed complete the portion of pipeline on its territory. But this donation, or "gift" as called by Ishaq Dar, Pakistan's finance minister, could not be used to finance the construction of the IP pipeline.
The Saudi grant has, however, helped Pakistan to shore up its foreign exchange reserves. It improved the health of the Pakistani rupee, which appreciated 6% to a nine-month high against the US dollar within a week.