Pakistan risks Chinese anger by courting Saudi Arabia, wth CPEC.

With CPEC, Pakistan risks Chinese anger by courting Saudi Arabia

BY gowidenews 6 Oct 2018

Report reaching us says,
The Khan administration is making political hay with the China Pakistan Economic Corridor – including efforts to reduce potential IMF loans and avoid becoming the focus of a confrontation between the US and China.

Since 2015, Beijing has insisted that the China Pakistan Economic Corridor (CPEC), the showcase project of President Xi Jinping’s “Belt and Road Initiative”, is purely an economic programme – as its name suggests.

Apparently, the new Pakistani administration of Prime Minister Imran Khan did not receive the memo. In the space of a couple of weeks, it has taken two decisions which have cast the CPEC as a bargaining chip in Pakistan’s complicated, ill-managed relationships with other key partners.

First, it has suddenly reduced the potential value of the CPEC programme to US$50 billion by 2030, down from US$62 billion. In one fell swoop, it decided to starve the western overland route from Xinjiang to the Chinese-operated Arabian Sea port of Gwadar of funding.
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Pakistan is also considering slashing its planned spending on a CPEC project to rehabilitate its horribly outdated national railways network. Priced at about US$8 billion, it would constitute the single largest project of the enormous programme.

These drastic measures are part of Khan’s urgent response to an unsustainable current account deficit, which is currently at a record level, and severely depleted foreign exchange reserves. Viewed from his perspective, these issues were brought about, in part, by the greedy enthusiasm of his ousted predecessor, Nawaz Sharif, for the CPEC. Sharif failed to foresee the impact of massive inflows of Chinese machinery on Pakistan’s external finances, which have been kept afloat – barely – by a series of emergency Chinese loans and central bank deposits this year.

 Economists are convinced Pakistan has little choice but to apply to the International Monetary Fund (IMF) for a balance of payments bailout. Already, it is clear that any prospective bailout would come at a steep political price. US secretary of state Mike Pompeo has vowed to ensure that any American taxpayer money lent to Pakistan by the Bretton Woods institution would not be used to settle its Chinese debts. Accordingly, the IMF mission to Islamabad pushed for greater disclosure about CPEC project contracts.

This raises a poignant question: was the Khan administration’s decision to dump the western CPEC route an attempt to persuade the US to soften its line on multilateral financial assistance?

The answer may lie across the border in Iran, the target of the sanctions-driven Middle East agenda of US President Donald Trump. CPEC’s western route offered China an opportunity to develop an overland belt and road extension into Iran – a natural destination, given the considerable investments it made after the 2015 multilateral deal on Tehran’s nuclear programme.

Pakistan’s second decision, to invite Saudi Arabia to develop a massive refinery complex at Gwadar, certainly suggests the CPEC is being manipulated to serve ends other than China’s. The reformist Saudi administration of Crown Prince Mohammad bin Salman has courted the Trump administration to counter Iran’s growing role across the Middle East, and was delighted when Washington abandoned the nuclear deal struck by former president Barack Obama. Riyadh must be salivating at the prospect of setting up a strategic oil reserve 120km from Pakistan’s border with Iran. Tehran, on the other hand, would be foaming at the mouth at this brazen attempt to undermine its flailing economy.

China was not informed about Saudi Arabia’s prospective investment at the port of Gwadar. Photo: Reuters
China was not informed about Saudi Arabia’s prospective investment at the port of Gwadar. Photo: Reuters

Asad Umar, the Pakistani finance minister, has admitted China was not informed about the prospective Saudi investment at Gwadar, the CPEC’s crowning glory. It was merely told that Pakistan planned to involve unspecified third-party investors, an idea China has always been open to because of the broader objectives of the belt and road plan.

Beijing had no idea the Khan administration was seeking to leverage Gwadar to persuade the Saudis to provide Pakistan with oil on a deferred-payment basis, so as to ease the pressure on its forex reserves and reduce the amount it would need to borrow from the IMF.

It must have been alarmed to learn the identity of the mystery investor, and then to hear Pakistan’s information minister, Fawad Chaudhry, describe the Saudi project as part of the CPEC. He hastily backtracked the next day, but not before strengthening the impression that the Khan administration was not being entirely honest or sincere with its “iron brother”.

The reasons for its duplicity are clear enough. Pakistan is uncomfortable with the prospect of becoming the focal point of an economic confrontation between the US and China that threatens to escalate into a 21st-century cold war. It has also noted that talks are under way to bring India into the fold of the counter-belt-and-road fund recently launched by the US and Japan, and that the European Union has unveiled similar plans to resist China’s economic expansionism.

Pakistan’s economic and strategic circumstances simply do not accord it the luxury of taking sides in a stand-off between behemoths, all of which it is beholden to. This promises to invigorate the conversations to be held during Khan’s forthcoming visit to China.

Officially, China will persist with the position that it is working to develop the CPEC in accordance with Pakistan’s wishes. It may seek to placate Khan by agreeing to improve the terms of existing and future CPEC project agreements, reschedule some of the bilateral debt, and relax tariff barriers for Pakistani exports. But Xi must be wondering whether the calculated gamble of showcasing his signature initiative in Pakistan is going to pay off or backfire. ■

canberra has been thorough in examining its position on a rising China. London’s response is one of complacency verging on indifference.

It is a common question: what does China want for itself and its future? The issue following on from this, often in the same breath, is what the country thinks of the outside world and the role it might play in achieving what it wants. Non-Chinese get particularly perplexed by the latter because it relates directly to them. Lord Macartney wrote in his memoirs that when he led the first British Mission to China in 1793, he was deeply puzzled as to what the Chinese he met thought of the outside world, and what they really wanted from him and his mission. More than two centuries later, while everything else has changed, the same bewilderment remains.

It is strange in the modern era, especially since China opened up to the outside world in 1978, how little the second question is turned around and asked back: what do we, as outsiders, want from China?

Early on, of course, in the heady days of initial engagement from the 1980s, the answer may have been “for the People’s Republic to become more like us”. But things have turned out more complex than that.
 China under President Xi Jinping is clearly not on an easy path to becoming a multi-party democracy – at least not any time soon. At most, it wants “democracy with Chinese characteristics”. And like the “socialist market economy with Chinese characteristics”, that is going to be a hybrid, novel product – not the one any American or European who was keen on promoting engagement to see political reform happen in the 1980s might recognise as a successful fulfilment of their original aims.

Underpinning this question of what we want from China – and closely linked to it – are more profound, structural queries. What do we feel, what are our sentiments towards this vast, complex country? Even if it did become politically more like us, would we embrace and accept it? Deep down, do we want to know anything about it at all, beyond what we absolutely have to?

When we compare two cases on this attitude towards sentiment for China – Australia and Britain – we get widely divergent responses. At the very least, one can say that Australia does actually want to know what it thinks and feels about its largest investor and trade partner.

Every year, the Lowy Institute in Sydney produces a poll that records the levels of trust, attitudes towards Chinese investment and influence in Australia, and other impressions of China among the Australian public. Surveys like this give some broad idea of national sentiment on topical aspects of China-Australia relations – in essence, how Australia sees China.
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For Britain, however, things are very different. British attitudes towards China appear in very general Pew surveys, but these surveys span multiple countries, and are largely devoid of detail. But what do the British actually feel about this partner which, post-Brexit, is likely to figure more in their lives?

Anyone asking this question will be confronted with an enigma. There is no easy way of answering this. There is simply no real data. One can gather some impressions of what the British feel about Americans, Europeans, and others by the amount of films, journeys, and engagements they make with these places. However, China’s cultural and political differences, and its distance, make this a much harder one to call.

A simple explanation in both of these cases is that while Australia has been compelled to ask itself more what it thinks and feels about its massive regional neighbour, due to its greater economic and geopolitical immediacy to China, Britain is not yet in that position. But anyone looking at the almost laconic and sometimes preternatural calmness of the British response to China’s greater impact in the world might describe it as complacency verging on indifference.

This is particularly so compared with the more anxious and frenetic debate about China in the United States, Australia and elsewhere.

It is not so much that the British haven’t been forced to ask themselves what they feel about the new global power – it is more that the British haven’t really regarded it as a question worth addressing in any great detail in the first place.

That posture might be fine at the moment, but post-Brexit, as Britain’s engagement with China is expected to grow, things will quickly become different. At the moment one can argue that the Australian public is well prepared, almost to the point of saturation, to address the various challenges and issues with regard to China.

Australia knows how complex its relations with and its own sentiments towards China are. Britain simply doesn’t.
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Things might go swimmingly in the future and Britain might have the most blessed of links with China. However, this is hardly likely. Even with its closest partners (from Europe to the US), Britain has encountered enough shocks and tribulations in these relations.

What could well happen is that Britain’s real attitude towards China, with all its ambiguity and layers, won’t come forth till a serious problem happens – for instance, a crisis involving Chinese investment or technology used in Britain on nuclear or high-speed projects.

It is likely then that the real sentiments of the British towards their new major partner will come to the fore with force. As Sun Tzu said many hundreds of years ago in The Art of War, the first thing in any engagement with a competitor is to know yourself. On China, the British haven’t even made a start.