The first-ever official overseas trip of Pakistan’s new Prime Minister is to Saudi Arabia, where the South Asian leader plans to reinforce the important message of Islamic solidarity while shrewdly positioning his country to potentially get a better series of financial deals from China.
The Significance Of Saudi Arabia
Prime Minister Khan is in Saudi Arabia during his first-ever official overseas trip, and the media is speculating about the reason why he chose that country over all others to visit first. For starters, these two countries have a long legacy of historical ties with one another, and Pakistan still provides military training to the Arab Kingdom’s military. In fact, its former Chief Of Army Staff Raheel Sharif is the Command-In-Chief of the Saudis’ “Islamic Military Alliance”, a geographically far-reaching platform that’s theoretically supposed to bring together a multitude of countries under Saudi leadership but has in practice failed to fulfil this ambitious goal for a variety of reasons outside of the scope of this analysis. Even so, the point in bringing this up is to draw attention to the influence that Pakistan has within the Kingdom, which also aided by the fact that Saudi Arabia is the largest destination for Overseas Pakistanis (roughly 1,5 million) who are mostly there as guest workers.
There are also other symbolic reasons why Prime Minister Khan travelled to Saudi Arabia, and those have to do with the more obvious ones of religious solidarity when considering that the King is officially regarded as the Custodian of the Two Holy Mosques. Pakistan’s leader has become very pious at this stage of his life and wants to project the image that he, his new administration, and his country at large follow Islamic principles (ergo why Pakistan is officially an Islamic Republic), so it’s important to reinforce Islamabad’s historic friendship with Riyadh to draw attention to this within the larger international Islamic community (Ummah). Moreover, Pakistan under Prime Minister Khan perceives of itself as one of the Ummah’s current military and future economic leaders. The first-mentioned role is by virtue of its status as the only nuclear-armed Muslim country and global distinction in having the only military that ever defeated Daesh-like terrorism on its own without outside help, while the latter relates to CPEC.
The flagship project of China’s One Belt One Road (OBOR) global vision of New Silk Road connectivity is expected to make Pakistan the Zipper of Eurasia and the Convergence of Civilizations, which could in turn transform it into the center of 21st-century geopolitics and the primary engine for realizing the Golden Ring of multipolar Great Powers. So promising are these prospects that Saudi Arabia recently decided to participate in this initiative by making its terminal port of Gwadar an “oil city”, which accordingly makes the Kingdom a stakeholder in the South Asian state’s overall success as well. This is very important in the current context because Pakistan is facing a looming financial crisis with its balance of payments and is in need of international support to avert a possible crisis. Saudi Arabia’s CPEC-related investments in Gwadar and elsewhere, as well as any loan that the Jeddah-based Islamic Development Bank could provide, would be especially helpful at this moment in time.
CPEC Won’t Be Reconsidered, But It Could Be Reviewed
With this backdrop in mind, it’s actually quite prudent for Prime Minister Khan to visit Saudi Arabia before any other country because he could ideally obtain financial support or promises thereof which could consequently make his presumable future negotiations with Pakistan’s Chinese strategic partners all the easier. To explain, China will predictably also chip in to help its ally because it has obvious interests in retaining financial stability in its irreplaceable Silk Road partner, but Pakistan would understandably want to ensure that it gets the best deal possible, which is why shoring up support from other sources beforehand is crucial before going to Beijing to negotiate the terms of any forthcoming assistance. Relatedly, Prime Minister Khan’s government might also seek to renegotiate the terms (e.g. repayment period, interest rates) of existing Silk Road deals if a possible review uncovers that his predecessor’s administration agreed to unfavorable ones for corrupt reasons.
To be clear, nothing of the sort has been discovered thus far and Abdul Razzak Dawood, Prime Minister Khan’s advisor on commerce, clarified earlier remarks that were attributed to him by the Financial Times which reported that he wanted to halt the implementation of CPEC projects for one year prior to reviewing and possibly renegotiating them. He said that his statements were taken out of context but didn’t exactly refute the essence of what he supposedly conveyed, which is that a review and renegotiation process could possibly commence but that it wouldn’t involve halting the implementation of CPEC projects or outright scrapping them like the newly (re-)elected government of Malaysia’s Mahathir has already done. What this means in practice is that Pakistan could try to get better terms for the deals that it already signed in order to advance it and China’s collective interests.
China’s Self-Interests In Restructuring The Silk Road
To explain, China isn’t the “greedy neo-colonial land-grabber” that it’s maliciously framed to be through weaponized infowar narratives but instead wants to build a sustainable economic ecosystem along the New Silk Roads in order to function as reliable markets for its overproduced goods, which in turn can allow the People’s Republic to indefinitely continue growing without having to risk the political consequences that might come from an economic slowdown. That’s why China is working to improve the capacity of its partners through infrastructure and commercial investments, free trade deals, and general loans in order to improve their development prospects and correspondingly make them the sort of partner that the country needs. The cumulative effect of these dynamics is supposed to be mutually beneficial for both parties, but in the unexpected event that the Silk Road host and loan recipient has difficulty repaying the assistance that it’s received, then China has every interest in modifying the terms.
China understands that many of its Silk Road projects have very long-term “return on investments” (ROI) that make them the easy target of domestic demagogues (notwithstanding any possible corruption that the host government, whether current or previous, might have been engaged in when agreeing to their terms), so it’s wisest for Beijing to agree to extend their (already sometimes lengthy) loan repayment periods upon request in order to make them easier to service and assist the authorities with deflecting unwarranted criticism. This is especially the case with physical connectivity projects whose benefit consists in qualitatively enhancing the effects of the economy but can’t be immediately seen solely in the context of any single initiative. China already expects that it will take a while for it to recoup the original principal of its loans, so pushing it further back a comfortable period of time like what it’s in the process of doingin Ethiopia isn’t going to radically upset its grand strategy.
In addition, and referring back to the invisible qualitative enhancements that many Silk Road projects have, China invested in many of them not to “make a quick buck” but to lay the basis for an entirely new international economic order that would eventually lead to political changes in the global system by facilitating the transition from unipolarity to multipolarity, so while the profit that could be reaped from interest payments is obviously significant, it’s not a be-all and end-all in itself to stand in the way of China’s grand strategy. If a country has difficulty repaying its loans, it’s better for China to consider providing debt relief in the form of lowering interest rates in order to ensure that its partner retains its macroeconomic stability and pays back at least the principal of what was lent. It could also consider decreasing it beyond that level in exceptional cases in order to retroactively make part of the original loan a grant if circumstances necessitate doing so.
Concluding Thoughts
To return back to Prime Minister Khan choosing Saudi Arabia as his first-ever official overseas trip, the grand Silk Road significance is that it could potentially provide Pakistan with leverage to negotiate more advantageous terms for a forthcoming Chinese loan that would aim to avert its impending balance of payments crisis. Furthermore, the successful clinching of such an agreement through these means could lead to Pakistan possibly renegotiating the terms of existing CPEC deals – but importantly, not halting their implementation or pulling out of them – in order to reach a better win-win arrangement with China in light of the country’s newfound financial circumstances that could make servicing its debts much more difficult than before. China has self-interested reasons pertaining to Pakistan’s irreplaceable geostrategic connectivity role in the New Silk Road that compel it to be flexible in the face of positively responding to Islamabad’s reasonable requests to reconsider some of the terms of its CPEC deals in order to ensure that their repayment isn’t painful.
China didn’t initiate OBOR in order to “conquer territory” and turn its partners into “neo-colonial vassals”, but to simply ensure its own viability as a rising Great Power given the particularity of its export-dependent macroeconomic structure that necessitates securing reliable access to international markets, hence its interest in loaning billions upon billions of dollars in building them up in the first place. Bearing this in mind, the country has every interest in making sure that this end is reached, even if the original means in attempting to do so end up being modified in response to the changed financial conditions in certain Silk Road host countries, which could foreseeably see some of Pakistan’s and other states’ loans restructured as a result. So long as the reasons for doing so are verifiable, as they are in Pakistan’s case (even without any speculative review uncovering evidence of the previous government’s possibly corrupt motives when clinching earlier deals), then there are no rational grounds for China to reject this request.
By Adam Garrie
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