Pakistan-UAE relations fray as Abu Dhabi demands loan repayment, deports workers

The Kathmandu Post reports on a significant and concerning shift in Pakistan-UAE relations, marked by the abrupt deportation of Pakistani Shiite workers and the termination of jobs for Pakistani employees by Etihad Airways. This development, occurring amidst the ongoing West Asia conflict, signals a deepening divide and raises critical questions about Pakistan's regional alliances, particularly its relationship with Saudi Arabia.

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This incident signals a growing divide in Pakistan’s relations with the UAE, especially amid the ongoing conflict in the region and Pakistan’s ties with Saudi Arabia, bringing a question to the forefront: Will Pakistan change its position in the Saudi-UAE rivalry?

The UAE's actions, including the demand for the repayment of a $3.5 billion loan—a substantial portion of Pakistan's foreign exchange reserves—and its less-than-favorable response to Pakistan's request for interest rate reduction, are having immediate economic and political repercussions. The article suggests these moves may be a reaction to Pakistan's nuanced position on the West Asia war, where Islamabad has urged Iran not to attack Saudi Arabia but has not explicitly condemned Iran's past missile strikes on the UAE.

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The UAE’s demand to return $3.5 billion, which is roughly 21 percent of Pakistan’s foreign exchange reserves, was described by the government as a ‘routine financial transaction’, as the rollover period of two months expired.

This unfolding situation has led to a realignment of regional dynamics. While the UAE's actions have strained Pakistan's finances, Saudi Arabia has stepped in with crucial financial support, extending a $5 billion rollover arrangement. This intervention is vital for Pakistan's economic stability, especially considering the International Monetary Fund's (IMF) reliance on 'Gulf deposits' for its bailout plan.

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Many people attribute the UAE’s demand to pay off its debt as a reaction to Pakistan’s stance on the war in West Asia.

The Kathmandu Post notes that the UAE's departure from OPEC further underscores the shifting geopolitical landscape. Pakistan's historical security ties with the UAE, dating back to its formation, now appear to be under considerable strain. The article implies that Pakistan's foreign policy must navigate these complex interdependencies carefully, as economic vulnerability leaves it susceptible to external pressures. The implications for regional stability and Pakistan's economic future are profound.

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Riyadh has already extended a $ 5 billion rollover arrangement to Pakistan for a longer period.