By James M. Dorsey 16 May 2019

Pakistan risks falling off the tightrope it walks as it attempts to balance its relations with rivals Saudi Arabia and Iran.

Developments in recent days, including this weekend’s Baloch nationalist attack on a luxury hotel in the strategic port city of Gwadar and a legal dispute over completion of a gas pipeline against the backdrop of Saudi-Iranian-Qatari competition for the Pakistani gas market, suggest that Pakistan is caught between a rock and a hard place.

The South Asian nation’s seemingly unsustainable tightrope walk is likely to have consequences for the security of China’s massive US$45 billion investment in the China Pakistan Economic Corridor (CPEC), a crown jewel of Beijing’s Belt and Road initiative; an approximately US$10 billion planned Saudi investment in a refinery and a copper mine in the troubled Pakistani province of Balochistan; and Pakistani hopes of getting a grip on  political violence in a bid to attract further badly needed foreign investment and avoid sanctioning for inadequate counterterrorism measures.

The assault on the highly secured hilltop Zaver Pearl Continental Hotel Gwadar, part of Pakistan’s largest luxury hotel chain, in which four people, including three gunmen were killed, was the second incident since Pakistani prime minister Imran Khan and Iranian president Hassan Rouhani last month agreed to step up security cooperation along their 959-kilometre long border.

Many Baloch, members of an ethnic minority on both sides of the border, feel economically disadvantaged and marginalized with a minority harbouring nationalist aspirations. Security-led repressive policies by both Iran and Pakistan have fuelled militancy and offer ample opportunity for manipulation by regional powers.

In an emailed statement claiming responsibility for the hotel attack, Baloch Liberation Army (BL) spokesman Jihand Baloch said this weekend’s attack targeted “Chinese and other investors who were staying at the PC hotel.” The hotel was believed to have few guests because of Ramadan.

In an earlier statement issued last week after an attack on a coal mine in which five people were killed, Mr. Baloch asserted that “Balochistan is a war-torn region and we will not allow any investments until the independence of Balochistan.”

BLA operatives have in the past seven months hit various Chinese targets beyond the boundaries of Balochistan, including a convoy transporting Chinese engineers in Karachi and the People’s Republic’s consulate in the city.

Baloch nationalist militancy is not the only problem confronting Pakistani security forces in the strategic southwest of the country. The Islamic State claimed responsibility for an attack last month on a market in the Baloch capital of Quetta frequented by Hazaras, a beleaguered Shiite minority, in which 19 people were killed and dozens injured.

Iran blamed allegedly Saudi and US-backed Balochistan-based Sunni Muslim militants for an assault in February on the Iranian side of the border that killed 27 Revolutionary Guards.

In an apparent bid to build confidence, Mr. Khan admitted during his visit to Tehran that militants operating from Pakistan had attacked targets in Iran but vowed to put an end to that.

Complicating Mr. Khan’s efforts to walk a fine line between Saudi Arabia and Iran and safeguard crucial Chinese and future Saudi investment is the fact that the Trump administration’s stepped up maximum pressure campaign against the Islamic republic is restricting the South Asian nation’s ability to live up to prior commitments to Iran and fuelling Iranian concern that Saudi Arabia is able to influence Pakistani policy.

Jeddah-based Arab News quoted Mobin Saulat, the managing director of Pakistan’s state-owned Inter State Gas Systems, as advising his Iranian counterparts that US sanctions were preventing it from completing the Pakistani leg of an agreed gas pipeline despite statements by Messrs. Khan and Rouhani that they were seeking to enhance connectivity between their two countries.

Iranian suspicion of Saudi covert activity in Balochistan as well as the kingdom’s ability to influence Pakistani policy stems from multiple factors that Tehran sees as indicators.

These include massive Saudi financial assistance to help Pakistan avert a financial crisis, question marks among international oil executives of the economic rationale for the kingdom’s  plan to build a refinery in Gwadar, a plan published by a Riyadh think tank calling for the fostering of an insurgency among Iran’s Baloch minority, reports by Pakistani militants of Saudi funding for anti-Shiite and anti-Iranian Sunni Muslim militants in Balochistan, and evidence of broader segments of the Pakistani population buying into Saudi-inspired ultraconservative interpretations of Islam as a result of the kingdom’s decades-long support of religious and cultural institutions as well as media.

Iran’s province of Sistan and Balochistan hosts the Indian-backed port of Chabahar, a mere 70 kilometres up the Arabian Sea coast from Gwadar. A shadowy militant Sunni Muslim group claimed responsibility for a rare suicide bombing in Chabahar in December.

Pakistan scholar Madiha Afzal noted in a just released Brookings report that “Saudi Arabia has succeeded in changing the character of Pakistan’s religiosity in a bid to expand its influence in the Muslim world, and in its mission to counter Iran.”

While US sanctions may have, at least for now, given the death knell to the Iran-Pakistan pipeline, Saudi influence appears to have failed in stopping Pakistan from entertaining a gas deal with Qatar, another of the kingdom’s nemeses, despite an almost two-year old Saudi-United Arab Emirates-led diplomatic and economic boycott of the Gulf state.

Qatar recently lowered the price in a bid for a major Pakistani liquified natural gas (LNG) contract in an effort to outcompete Saudi Arabia, that last month sent a delegation to Islamabad to discuss the South Asian nation’s gas needs.

The competition is about more than commercial advantage. While Qatar sees its gas exports as part of its soft power strategy, Saudi Arabia views the Pakistani contract as part of an effort to establish the kingdom as a major trader and marketeer as it strives to position itself as a significant gas exporter over the next decade.

Pakistan’s ability to maintain its tightrope walk could be further endangered if it fails to convince the Financial Action Task Force (FATF), an international anti-money laundering and terrorism finance watch dog, that it is doing sufficient to meet the group’s standards.

Pakistan was last year grey listed by the group and risks being blacklisted if it fails to convince FATF in talks later this month that it has substantially improved its controls. Blacklisting listing would significantly curtail its access to international finance at a time that it is seeking a bailout by the International Monetary Fund. (IMF).

Juggling multiple balls is proving to be an increasingly difficult act in which Pakistan may be the country out on a limb but many of its partners have a stake in ensuring that it maintains its tightrope walk.