Saudi Arabia has agreed to restart oil aid to Pakistan to 'clear the air', according to a report by Financial Times today. The deal, worth at least $1.5 billion annually, is set to commence next month and comes amid Riyadh's determination to steer Islamabad away from Iranian influence.
"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," the report said.
Last year, Riyadh demanded that Pakistan repay a $3 billion loan after the Saudi-led Organisation for Islamic Cooperation (OIC) was asked to exert pressure on India after the controversial amendment to Kashmir's special status.
Additionally, Saudi's close ally the UAE issued a ban on Pakistani labourers being issued work visas; a vital source of revenue for Islamabad.
However, Pakistani Prime Minister Imran Khan visited Saudi Arabia last month in an attempt to reset strained relations, although officially the visit was to establish the Saudi-Pakistan Supreme Coordination Council.
Gaining Pakistani support to contain Iran is part of Saudi's growing concerns in Islamabad's recent shift towards an alternative bloc to the OIC, one headed by Turkey, Iran and Malaysia.
The timing of the Saudi oil agreement also comes amid reports that Iran's own oil exports are set to rise rapidly, should the Joint Comprehensive Plan of Action (JCPOA) be revived under new President Ebrahim Raisi. Prime Minister Khan congratulated Raisi on Saturday over his "landmark" victory and that he looked forward to working with him for" further strengthening of our fraternal ties and for regional peace, progress and prosperity".
In 2018 cash-strapped Pakistan secured a $6 billion financial package from the Saudis which included $3 billion for the balance of payments and another $3 billion in deferred payments on oil imports, although Pakistan had not received oil on deferred payments from the kingdom since May last year. Late last year, China bailed Pakistan out by providing it with a $1 billion loan to help repay part of the $3 billion to the Saudis.