C Raja Mohan writes: Why India may not be averse to UAE rescuing Pakistan’s economy

Source– The post is based on the article “C Raja Mohan writes: Why India may not be averse to UAE rescuing Pakistan’s economy” published in “The Indian Express” on 26th July 2023.

Syllabus: GS2- International relations

Relevance:  triangular dynamics between Middle east, India and Pakistan

News- According to media reports, the United Arab Emirates has offered to bring significant new investments that could help pull Pakistan out of its unending cycle of economic crises and bailout packages.

How has the relationship between Pakistan and the Gulf evolved over time?

The Arab Gulf enjoyed closer partnership with Pakistan. It was based on religious solidarity, regular economic assistance, concessional oil facilities, as well as cooperation on regional security.

Due to being a major Islamic nation, Pakistan enjoyed much goodwill in the Gulf. The Gulf rulers enjoyed exclusive privileges in sovereign Pakistan.

The balance between Pakistan and the Gulf has altered in the 21st century. The Gulf has become richer and Pakistan is becoming poorer by the day.

Pakistan’s per capita GDP today is less than that of Bangladesh.

Pakistan’s continuing relative economic decline has expanded the Gulf’s leverage over Islamabad and Rawalpindi.

Why is there scepticism that the current round of reforms advocated by the IMF will not be implemented by Pakistan?

Pakistan has a lack of political will for structural transformation of its economy. The Pakistani elite is not interested in economic reform. This is because of their confidence in extracting geopolitical rent from the US, China, and the Gulf.

The rental value of Pakistan is coming down. Pakistan is less important for Washington after the US withdrawal from Afghanistan.

China remains deeply invested in Pakistan. But, Islamabad is no longer in a strong position to keep a check on India. It has never been as generous as Washington.

The Gulf is not interested in giving freebies to Pakistan. It wants substantive return.

Why is it not possible for Pakistan to continue with its business as usual approach?

The US, in the past, persuaded international financial institutions to have a soft approach towards Pakistan. But, this time it wants the IMF to apply maximum pressure.

The Gulf states and China want Pakistan to get support from the IMF before they can provide financial assistance. Pakistan had no option but to submit to the IMF conditions.

The IMF wanted to ensure it had solid reform commitments from Islamabad.

How is the Gulf capital becoming important?

UAE, Qatar, and Saudi Arabia have emerged as powerful financial actors in the region due to oil wealth.

It has increased the political and strategic influence of the gulf across the Greater Middle East, Africa, the Indian Ocean and beyond.

South Asia is no exception. Emirati and Saudi capital is flowing into India. UAE and Saudi Arabia at the top of India’s most valued strategic partners.

What is the current status of the triangular relationship between India, Pakistan and the Gulf?

There has been significant change in the triangular dynamic involving India, Pakistan, and the Gulf countries.

In the past, Pakistan held stronger ties with the Gulf nations compared to India. However, the current scenario shows a shift in favour of India. India’s engagement with the UAE and Saudi Arabia has gained prominence. It has overshadowed Pakistan’s influence.

Despite Pakistan’s objections, the UAE invited India’s Foreign Minister Sushma Swaraj to address a meeting of the Organization of Islamic Cooperation (OIC) in March 2019.

Moreover, the UAE has refrained from criticising India’s decision to change the constitutional status of Kashmir in August 2019.

The UAE seems to have played a role in facilitating back-channel dialogues between India and Pakistan. It led to a ceasefire agreement in February 2021.