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Cablegate: Saudi Oil Assistance to Pakistan Proceeding Slowly

VZCZCXRO9493
PP RUEHDE RUEHDIR
DE RUEHRH #1175/01 2121424
ZNY SSSSS ZZH
P 301424Z JUL 08
FM AMEMBASSY RIYADH
TO RUEHC/SECSTATE WASHDC PRIORITY 8893
RHEBAAA/DEPT OF ENERGY WASHINGTON DC PRIORITY
INFO RUEHZM/GULF COOPERATION COUNCIL COLLECTIVE PRIORITY
RUEHHH/OPEC COLLECTIVE PRIORITY
RUEHIL/AMEMBASSY ISLAMABAD PRIORITY 4708
RUEAHLC/HOMELAND SECURITY CENTER WASHINGTON DC PRIORITY 0233
RUEATRS/DEPT OF TREASURY WASHDC PRIORITY
RHMFISS/HQ USCENTCOM MACDILL AFB FL PRIORITY
RUEKDIA/DIA WASHINGTON DC PRIORITY
RUCPDOC/DEPT OF COMMERCE WASHDC PRIORITY
RUEAIIA/CIA WASHDC PRIORITY
RHEHNSC/NSC WASHDC PRIORITY
RUEKJCS/SECDEF WASHDC PRIORITY

S E C R E T SECTION 01 OF 02 RIYADH 001175

SIPDIS
STATE FOR D JNEGROPONTE
DEPT OF ENERGY PASS TO MWILLIAMSON, GPERSON, AND JHART
TREASURY PASS TO A/S CLOWERY

EO 12958 DECL: 07/30/2018
TAGS EPET, PREL, PK, SA
SUBJECT: SAUDI OIL ASSISTANCE TO PAKISTAN PROCEEDING SLOWLY

Classified By: CDA Michael Gfoeller for reasons 1.4 (b) (c) and (d).

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Summary
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1. (S) Recent conversations with the Assistant Minister of Petroleum, the Ministries of Foreign Affairs and Finance, and the Pakistani Embassy point to one conclusion: the Saudi offer to assist Pakistan by deferring crude oil payments is proceeding slowly. With King Abdullah, Petroleum Minister Naimi, Foreign Minister Saud al Faisal, and Assistant Minister of Petroleum Prince Abdulaziz all out of the country on vacation, absent USG intervention, the proposal is unlikely to advance substantially until September.

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MinPet Unaware of Any Progress
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2. (S) In a July 30 phone call from London, Assistant Minister of Petroleum Prince Abdulaziz bin Salman bin Abdulaziz Al-Saud was surprised to hear we were interested in discussing the Saudi proposal to defer payments for crude sales for Pakistan. He stated he had heard nothing about the proposal since the June 22 oil summit in Jeddah. Abdulaziz, who led the Jeddah summit and holds the international portfolio for the Ministry of Petroleum (MinPet), promised nonetheless to look into progress on the negotiations, and call us again tomorrow.

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Deal At Least a Month Away? Saudis Reluctant with Crude Prices so High
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3. (S) In a July 30 meeting with Pakistan Embassy Commercial Counselor Zia Shams, Shams told us, “The deal is not finalized, it is in negotiations.” He clarified that Pakistan did not expect to alter its regular schedule of crude oil deliveries from Saudi Arabia, but had requested a deferred payment scheme. He explained Pakistan could have turned to the IMF for assistance, but had hoped terms would be easier working with Saudi Arabia. Shams told us Pakistan had requested the assistance when oil was about $147/barrel, but negotiations still had not concluded. Shams fretted that, “Muslim brotherhood is not what it used to be, these deals have become very commercialized.” The Saudi government had explained they could not do a deal with oil prices so high, Shams noted. Saudi Arabia is concerned that if Pakistan were awarded payment concessions, other major developing nations such as India would make similar demands. Shams believes a deal might be concluded if crude prices continue to slide. At the conclusion of the meeting, Shams whispered that he thought a “deal was likely a month away.”

4. (S) Shams indicated any encouragement the USG might offer for the proposal would go a long way to see that it was implemented in time to avoid further chaos in Pakistan. Shams told us that the new Pakistani government had been forced to raise gasoline prices by 60 percent and diesel prices (key to the transport sector) by 100 percent since March. The price increases were pushing the population to the limit and fueling extremism, he said.

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MFA Has No Knowledge of Deal
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5. (S) On July 30, the Charge D’Affaires met with Ambassador Khalid Al Jindan, the third ranking diplomat at the MFA, and the Director of Western Affairs. Ambassador Al Jindan had no knowledge of the deal. Nonetheless, he said there was wide agreement within the Saudi government on the need to do everything possible to support Pakistan’s internal stability.
RIYADH 00001175 002 OF 002

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Ministry of Finance: Deal Still with MinPet
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6. (S) Hamad Najashi from the International Relations Office at the Ministry of Finance shed some light on the process for negotiating such oil relief packages. He verified MinPet was the lead negotiator for such programs. Once a relief package was agreed upon, it would be forwarded to the Ministry of Finance (MOF) for financial processing. After researching the issue with counterparts in the international assistance area, he told us the MOF has not seen the Pakistan proposal, because the agreement was not yet concluded.

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Comment
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7. (S) Prince Abdulaziz’s apparent ignorance of any recent developments on the Saudi offer to assist Pakistan suggests there has been no movement since the June 22 Jeddah summit. Prince Abdulaziz would be aware of, if not leading, any negotiations with Pakistan. Taken together with the comments from the MFA’s Ambassador Al Jindan, the Pakistani Counselor, and the MOF, it appears the Saudi offer has been shelved until a decline in oil prices make it more palatable for MinPet to implement. The Saudi royal family and senior officials are on vacation now, to be followed by the September Ramadan season. If we see rapid implementation of the offer as critically important to the Pakistan government’s stability, it will likely take USG intervention at the highest levels with senior Saudi officials now in Morocco to secure its rapid implementation.
GFOELLER

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