- Supply on deferred payments set to start from July and is worth at least $1.5 billion
Saudi Arabia has agreed to “restart oil assistance for Pakistan worth at least $1.5 billion from July”, reported Financial Times on Monday, citing officials in Islamabad.
Last month, Information Minister Fawad Chaudhry said that Saudi Arabia had agreed, in principle, to revive the oil supply to Pakistan on deferred payments.
In 2018, Saudi Arabia had agreed to a $6-billion financial package for Pakistan’s ailing economy. The package included $3bn for the balance of payments and another $3bn in deferred payments on oil imports.
However, Pakistan has not received oil on deferred payments from Saudi Arabia since May 2020.
Relations between the two countries suffered a strain last year when Foreign Minister Shah Mehmood Qureshi asked Saudi Arabia-led Organization of Islamic Cooperation (OIC) to convene a meeting of its Council of Foreign Ministers (CFM) on Kashmir.
“I am once again respectfully telling OIC that a meeting of the Council of Foreign Ministers is our expectation. If you cannot convene it, then I’ll be compelled to ask Prime Minister Imran Khan to call a meeting of the Islamic countries that are ready to stand with us on the issue of Kashmir and support the oppressed Kashmiris,” Qureshi had said.
In December 2020, Pakistan returned $1 billion to Saudi Arabia as the second installment of a $3 billion soft loan, in an indication that the Kingdom was not happy about Pakistan’s criticism.
The current Saudi offer is less than half of the previous oil facility of $3.4bn, which was put on hold when ties frayed. But, through a tweet, Fahad Rauf, head of equity research at Ismail Iqbal Securities in Karachi, said "any amount of dollars helps because of time and again we face a current account crisis. And with these prices north of $70 a barrel anything helps.”.
The timing of the Saudi gesture is interesting given that Iran is preparing to step up its own oil exports with the US considering easing sanctions.
"The acrimony between the two longtime allies has eased [now] after Imran Khan, the prime minister, met Saudi Crown Prince Mohammad bin Salman in May,” says the FT report.
“News of the oil deal with Pakistan comes as Saudi Arabia embarks on a diplomatic push with the US and Qatar to build a front against Iran."