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Portraits of Saudi leaders along a highway outside Islambad, Pakistan. Portraits of Saudi King Salman, Crown Prince Mohammed bin Salman and Pakistani Prime Minister Imran Khan line a highway outside Islamabad ahead of the crown prince's visit to tout Saudi investment in Pakistan, Feb. 17, 2019 (AP photo by Anjum Naveed).

Saudi Investment in Pakistan Could Further Destabilize Its Border With Iran

Friday, March 1, 2019

QUETTA, Pakistan—Crown Prince Mohammed bin Salman visited Pakistan last week and promptly pledged twice the amount of Saudi investment in infrastructure that observers had expected: $20 billion. Though it may not all be delivered, the promised money signaled the growing Saudi role in major infrastructure development in Pakistan.

Until last year, such projects were being funded prominently, and almost exclusively, by China. But last fall, soon after Prime Minister Imran Khan took office, Pakistan unexpectedly invited Saudi Arabia to join the China-Pakistan Economic Corridor, or CPEC—the big-ticket Pakistan component of China’s huge Belt and Road Initiative, which was previously only a bilateral arrangement between Islamabad and Beijing. Riyadh was happy to accept the invitation, as it wants to expand its economic influence in Pakistan by helping fund a slate of ambitious infrastructure projects, including a major oil refinery on the Arabian Sea.

CPEC, with a collection of infrastructure projects totaling $62 billion, aims to connect Xinjiang province in western China with the new Gwadar port in southern Pakistan. Cash-strapped Pakistan opened CPEC up to Saudi Arabia because it desperately wants a bailout package from Riyadh. China, for its part, has welcomed the Saudi investment.

But the Saudi entry is having effects that extend beyond the realm of economics. Specifically, it is causing ties between Pakistan and neighboring Iran to deteriorate. The influx of Saudi money and influence in Pakistan has fomented a long-running, low-level insurgency in Iran’s Sistan-Baluchistan province from militants belonging to the Sunni Baloch ethnic minority, and it could continue to make the security situation there worse.

The kingdom’s oil giant, Saudi Aramco, agreed to a memorandum of understanding with the Pakistani government last year to establish an oil refinery in Gwadar city, a central CPEC project; the memorandum was signed by the crown prince during his visit. The proposed refinery will be built just some 45 miles from the Iranian border, an area affected by the Sunni Baloch insurgency. Tehran has blamed Saudi Arabia for supporting these militants in the past.

Insecurity has already spiked recently on both sides of the border. In December, a car bomb at a police headquarters killed four policemen and injured 42 people in Chabahar, just over the border in southeastern Iran, where another ambitious port project is underway on the Arabian Sea to compete with the Gwadar port 100 miles up the coast. Sunni Baloch militants claimed responsibility for the attack, and Iran blamed an unnamed foreign power, which was widely considered a reference to Saudi Arabia.

Iran will make every possible effort to prevent the success of Saudi investment in Pakistan.

Just a week later, a Pakistani paramilitary convoy was ambushed in Wakai, near the Iranian border in the Pakistani province of Balochistan. Six Pakistani soldiers died in the attack, which was claimed by the Baloch Liberation Front, an ethnic Baloch separatist group operating in Balochistan and allegedly aided by Iran.

Then, in mid-February, a suicide bombing in southeastern Iran killed at least 27 members of Iran’s elite Revolutionary Guard Corps, in one of the deadliest attacks in Iran in years. An extremist Sunni Baloch separatist group, Jaish al-Adl, or the Army of Justice, claimed responsibility for the attack. It operates on both sides of the Iran-Pakistan border. A senior Revolutionary Guard commander later claimed the bomber was Pakistani.

The apparent tit-for-tat between Iran and Pakistan seems to be fueled by Saudi Arabia. As the work on Aramco’s oil refinery in Gwadar gets underway, such attacks are likely to continue. Iran will make every possible effort to prevent the success of Saudi investment projects in southern Pakistan, especially the refinery, which would solidify a Saudi economic presence near the Iranian border—a situation that Tehran might consider untenable. The Saudi footprint could lead to an intensification of attacks in Iran’s Sistan-Balochistan province, too, which could stoke a backlash in Pakistan, with sabotage attacks by Baloch separatists aided by Iran.

Saudi involvement in CPEC could also have consequences for Pakistan’s eastern neighbor and longtime nemesis, India, just as tensions have ratcheted up around Kashmir. Iran has already expanded its ties with India in order to counter Pakistan’s Saudi outreach, mainly by courting Indian investment in Chabahar. Both ports will provide quick access to Central Asia from the Arabian Sea, so the development of Chabahar will reduce the strategic leverage Pakistan could gain from Gwadar.

The Trump administration’s imposition of sanctions on Iran could have thwarted India’s ambitions to help Tehran develop the Chabahar port. But India got a waiver from U.S sanctions last November on its projects in Chabahar and other parts of Iran. The Trump administration agreed to the waiver partly because the Chabahar port could provide the U.S., and other countries, with an alternative route for “reconstruction assistance and economic development” to Afghanistan that bypasses Pakistan, an unreliable U.S. partner in Afghanistan and one of Trump’s many foreign policy targets.

Pakistan was unable to get its own U.S. waiver on sanctions, so a major gas pipeline project in Iran has been scrapped. More than a decade in the works, the pipeline, known as IP Gas, was supposed to help fulfill Pakistan’s growing energy needs. Last year, Iran asked Pakistan to pay back $1.2 billion as a penalty for not starting work on its end. Iran has even threatened to take Pakistan to the International Court of Arbitration, underscoring the poor state of their relations.

Billions in Saudi investment was supposed to help Pakistan overcome its economic woes, at least to some extent. But given the complicated nature of Pakistan’s relations with Iran, it’s unclear whether that is going to happen. Rather than helping the fragile Pakistani economy, Saudi involvement in CPEC could result in more conflict along the Pakistan-Iran border and tensions beyond it, threatening the Saudi-backed oil refinery in Gwadar and the stability of other CPEC projects. Pakistan is getting more than it bargained for.

Adnan Aamir is a journalist based in Quetta, Pakistan. He has written for the Financial Times, Nikkei Asian Review, South China Morning Post, Asia Times and other publications. Follow him on Twitter @iAdnanAamir.

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