Saudi Arabia will build an oil refinery in Pakistan near the Iran border, officials said on Thursday amid warnings that the move may trigger a conflict between the Persian Gulf rivals.
The oil facility will be located near Gwadar sea port in the South-Western province of Balochistan, Petroleum Minister, Sarwar Khan, said.
Pakistan’s cabinet approved the plan after a delegation from the Saudi Energy Ministry visited Gwadar on October 2, Khan said.
The capacity and the cost of the refinery were still to be determined, the minister added, but local media reports suggested the investment might be around eight billion dollars.
Since taking over in August, Pakistan’s new government has been looking to Saudi Arabia to invest in the country and seeking financial assistance to avoid a looming economic crisis.
Analysts warned that Saudi investment in a region bordering Iran could trigger a new conflict between Riyadh and Tehran.
“It is natural that Iranians will not be comfortable to see Saudis in their backyard,” Security Analyst, Fida Khan, said.
China could also be upset by the move, according to analysts.
The Chinese have built a port in Gwadar as part of 62-billion dollar project to establish an overland and sea trade route through Pakistan to reach Middle Eastern, European and African markets.
Political and defence analysts warned the investment by a U.S. ally in a project initiated by Beijing might anger the Chinese.
“This is a risky move,” said Irfan Shehzad from the Institute of Policy Studies think tank. “The Chinese may not be pleased.”
Pakistan’s new government said the investment plan with China that was signed by the previous administration might push the country into a “vicious debt trap.”