Traditional US “allies” + China Stand up for Pakistan

The United States has been forced down from its attempt to persuade the Financial Action Task Force (FATF) to label Pakistan a state which finances terrorism. As a country that has suffered more at the hands of multiple terrorist groups than almost any other in the region and the world as a whole, Pakistan has repeatedly expressed its supreme dissatisfaction with the Trump administration’s anti-Pakistani policies which include the withdrawal of “aid”, withdrawal of security cooperation, repeated infringements on Pakistan’s sovereignty and insulting rhetoric regarding Islamabad’s alleged cooperation with terrorists.

The FATF was initially formed to police international money laundering schemes, but in 2001, the FATF also began policing the financing of terrorism. During the attempted US move to censure Pakistan via the FATF, a unique triumvirate of nations coalesced to support Pakistan’s position. The fact that China, Turkey and Saudi Arabia banded together to force the US down on this issue, says as much about the shifts in geopolitical alliances/partners as it does about each country’s relationship with Pakistan.

China is clearly Pakistan’s closest and most meaningful partner in the 21st century. The China-Pakistan Economic Corridor (CPEC) has the aggregate effect of linking China’s Pacific coast with the Indian Ocean via a land route from China through to Pakistan’s Gwadar Port. But far beyond merely protecting its assets in Pakistan, China has diplomatically spoken up for Pakistan throughout the series of sustained attacks on Pakistani dignity which continue to spew forth ever since Trump came to power. For China, Pakistan is more than a vital economic partner in One Belt–One Road, it is a friendly neighbour with whom Beijing seeks to further intensify cooperation in a variety of areas ranging from security, trade and development, to jointly working to bring about genuine peace in Afghanistan. Thus, China’s support of Pakistan at the FATF is consistent in respect of China’s track record of rebutting US insults towards Pakistan.

While Turkey and Saudi Arabia have been long time economic partners of Pakistan, Ankara and Riyadh have also historically been incredibly close to the United States. For Turkey, the last two years have been a watershed in a relationship with Washington that is rapidly declining. With Turkey pivoting towards both new and revitalised eastern partnerships, Ankara clearly feels that its friendship with Pakistan is both more genuine and more important to its future than its frosty relations with the US. When it came to revitalising ties with the US or strengthening ties with Pakistan, the choice for Turkey was abundantly clear.

While Saudi Arabia remains the closest US partner in the Arab world, behind the scenes, under the de-facto leadership of the young Muhammad bin Salman, even in Riyadh, many are becoming aware that the future of international petro-politics, as well as the future of international investment will soon revolve not around the US but China.

As I recently wrote, 

“While China has also traditionally been on the ‘other side’ of old Cold War alignments in the Middle East, Beijing and Riyadh enjoy a quietly happy relationship. MBS will be fully aware that if there is one country able to provide monetary and beyond to logistical/physical investment in Vision 2030, this country is China.

With China and Russia both investing heavily in Saudi Arabia, the stage is being set for a gradual Saudi shift from the Petrodollar to the Petroyuan. Even without Chinese and Russian investment, the Petroyuan is fast becoming a new reality that soon all energy producers and buyers will have to adopt. As China is the world’s largest oil consumer and will soon be the world’s largest overall economy, history dictates that such a country will be able to set the standard for the international trading/reserve currency as economic leaders always have throughout history.

As I wrote at the time when China announced the date of sale for its first oil futures contracts in Petroyuan, 

‘For China and China’s partners this means that they will be able to set the terms of major international trade deals. For OPEC, it means intensifying discussions with China and China’s long term partners, as opposed to the US and its long term partners. This means that even traditional US allies like Saudi Arabia will begin looking to open new doors with China in preparation for an oil export market that will see banknotes featuring images of Mao Zedong supplant those with images of George Washington.

This will have a knock-on effect in geopolitics, making the richest countries in the Arab world, particularly those in the Gulf Cooperation Council, less attached to US foreign policy making. If China becomes their biggest trading partner and if the trade is conducted in the Petroyuan, it will be China whose geostrategic goals will be able to hold sway in the court of Gulfi Arab monarchies rather than the whims of Washington. Already, Saudi Arabia has begun courting China, likely in order to attract investment for its new megaproject, the creation of a massive new city on the Gulf of Aqaba’.

If Russia and China had ignored Saudi Arabia and likewise, if Saudi Arabia had failed to engage in productive discussions with Moscow and Beijing, the Petrodollar would have arrived at Saudi’s door in an atmosphere of mistrust and caution. Instead, by mutually working on joint investment projects before the grand arrival of the Petroyuan, China and Russia are using soft power incentives to ween Saudi Arabia away from the United States and lure it into a system of economic cooperation that appeals to a country whose economic diversification programme is tailor made for a Sino-Russian multipolar partnership”.

Thus, even in Saudi Arabia, Muhammad bin Salman’s political allies and even some of his opponents are keen to follow the money which no longer automatically leads ‘west’. For a country looking to both retain its position as a leading energy exporter while also attempting to diversify its domestic economy, the prospects of courting China are becoming increasingly attractive and in many ways are already vital for the oil rich Kingdom. In this sense, while Pakistan is less dependent on Riyadh for investment than it was as recently as 10 years ago, Riyadh is inversely more dependant on retaining good will among Pakistani elites as a means of forming a trusting relationship with Beijing. Hence, the pragmatic reasons for Saudi Arabia’s decision to stand up for Pakistan at the FATF actually trump any emotional connections, which in any case have generally been exaggerated by pundits on both sides.

A seemingly ‘unlikely’ phenomenon of Turkey and Saudi Arabia joining China to put a kibosh on a US scheme to isolate and insult Pakistan, is actually a natural alliance that will only become stronger as the Petroyuan beings to supplant the Petrodollar as the world’s de-facto means of exchange in the energy market while the Yuan taken in totality slowly but surely becomes the world’s de-facto reserve currency.

READ MORE: 

D-Day For The US Dollar: China’s Petroyuan Oil Futures Contracts To Be Issued From 26 March

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