[Rambo]

CBS) Written by CBS News' Farhan Bokhari, reporting from Islamabad.

Saudi Arabia has stepped in with a major gesture of support for Pakistan, with its offer to defer payments on oil shipments to Islamabad worth almost US$6 billion.

The Saudi move highlights the desert kingdom’s longstanding ties to Pakistan which it considers a close ally on key security issues including the fight against terror.

For Muslim-majority Pakistan, the Saudi support comes as Islamabad grapples with fast-mounting difficulties driven largely by high global oil prices. Pakistan imports about one-third of its daily petroleum needs from Saudi Arabia.

In the past, too, the Saudis have helped Pakistan in this way when they deferred payments on oil shipments to the south Asian country from 1998 (after Pakistan carried out its first nuclear tests) until 2001.

Those tests in May 1998 were followed by punitive international economic sanctions imposed by countries, including the United States. Eventually, the Saudis wrote off the dues owed by Pakistan on account of the deferred payments on oil.

“There is an agreement in principle to defer oil payments. The modalities are being worked out,” said Naveed Qamar, Pakistan’s finance minister, in comments reported on Saturday.

Western diplomats and long-term observers of Pak-Saudi ties said, the Saudi gesture is meant to ensure Pakistan’s internal stability at a difficult time for the country, and to cushion the effect of spiraling oil prices for a close ally.

“For the Saudis, instability in Pakistan is highly undesirable,” said a Western ambassador in Islamabad who previously served in the Middle East. Speaking to CBS News on condition of anonymity, the ambassador said, "Turmoil in Pakistan would seriously jeopardize Pakistan and its surrounding region, and I think it is an outcome that the Saudis do not want to see."

News of the Saudi gesture coincides with reports of U.S. and Afghan troop concentrations growing in numbers near Pakistan’s border with Afghanistan. On Saturday, a senior Pakistani security official said the growing troop concentrations had further raised concerns among policymakers in Islamabad.

In the past six months, U.S. officials have repeatedly called for increased Pakistani determination to take action against Islamic militants loyal to the Taliban and al Qaeda, operating from Pakistan’s semi-autonomous region next to the Afghan border.

But for Washington, dealing with Pakistan presents one of its trickiest foreign policy challenges, as U.S. officials are also keen to retain the support of Pakistan’s government and the influential military in fighting terrorism. “The U.S. has seldom before faced such a complicated policy challenge. Exactly how to retain the support of Pakistan while also taking actions against areas which have become havens for militants?” asked the Western ambassador in Islamabad who spoke to CBS News.

Saudis Defer $6B In Pakistani Oil Payments, Riyadh Hopes To Bolster Key Alley In Region - CBS News

[Rambo]

Saudi Pakistani Friendship forever!

[Rambo]

Sunday, July 13, 2008

By our correspondent

ISLAMABAD: Saudi Arabia has agreed to rescue Pakistan from its present oil crisis by indicating that it may renew its special oil facility (SOF) of almost $5 billion that would provide substantial fiscal space to the country facing multiple economic challenges.

“This act of the brotherly country would enable the government to come out of the present economic morass of huge current account deficit and poor state of balance of payments,” a senior government official told The News on Saturday.

Saudi Arabia’s gesture has come in response to a request that Prime Minister Syed Yousuf Raza Gilani submitted during his visit to the country last month.

Pakistan is at present getting 110,000 barrels of crude oil per day from Saudi Arabia under a 60-day “Defer Payment Mechanism”.

After Pakistan went nuclear in 1998, it was Saudi Arabia that extended oil facility on “deferred payments” at a time when the country was being subjected to severe world economic sanctions by the US and Europe.

Under the expected deal with Saudi Arabia, Pakistan may get the oil facility for three to four years on deferred payment mechanism. “If it is assumed Islamabad gets the oil facility of four million barrels a year at a cost of $125 per barrel, the facility in that case would spiral to an amount of $5 billion.”

To a question, the official said Pakistan was getting the oil facility on 60-day deferred-payment mechanism at the price of $121 per barrel. “Right now both the countries are working out the modalities for implementation of the new special oil facility.”

Online adds: The agreement would provide a significant boost to Pakistan’s economy during its present July-June financial year.

The measure would also enable the country to cope with the fast-mounting political and economic difficulties, the Financial Times (FT) reported.

“There is an agreement in principle to defer oil payments. The modalities are being worked out,” FT quoted Finance Minister Naveed Qamar as saying.

A Western diplomat familiar with Saudi ties to Pakistan said the Saudis in 1998 began supplying crude oil under a deferred payment plan after Pakistan carried out its maiden nuclear tests and came under international sanctions.

“In that previous case, after three years of deferred payments, the Saudis practically wrote off the payments. It would be interesting to see if there is going to be a write-off in future of the deferred payments now under discussion,” he said.

[jinnzaman]

May Allah (subhana wa ta'ala) reward the Saudis for their act of kindness. Ameen.

[dreamdeferred]

Very interesting.