Moeen Afzal and Hafeez
Pasha betrayed the Saudis
Who Leaked $2 Billion Saudi Oil Secret and Got Away
July 29: Saudi Arabia, the Islamic brother of Pakistan has withdrawn
a $2 billion annual oil grant, Prime Minister-in-waiting Shaukat
Aziz is deeply worried how he will fill that huge gap but the
men who betrayed the country and leaked the two billion dollar
secret are enjoying life in Pakistan and in US and both are loved
by the Army rulers.
grim story is not just of betrayal and selling out the national
interest for petty personal gains but also of poor leadership
by the institution which claims day in and day out that it is
the custodian of the country’s interests and ideological
frontiers, the Pakistan Army.
story is also about lessons Pakistan should have learnt from giving
top national positions to experts and technocrats from international
financial institutions because it proves that these “imported
leaders” are always loyal to their real employers and never
care for the interests of "their client" states.
December 1998, Pakistan has been receiving from the Saudis crude
oil worth $2 billion annually, free of cost. That was the reward
Pakistan received for making the Islamic world feel a sense of
strength and confidence by becoming a nuclear power.
nuclear test brought sanctions on Islamabad from the Western world
but Muslim brothers supported a weakening Pakistan economy and
the $2 billion free Saudi oil was one way of saying ‘Thank
You’ and keeping Pakistan afloat.
there was a condition put by the Saudis. The oil would be free
of cost for Pakistan but for the rest of the world, it would be
a “sale on deferred payments” to keep away the intrusive
IMF and World Bank from interfering and the US and the others,
who had imposed sanctions on Pakistan, from pressurizing the Saudis.
Every thing looked fine.
to their utter shock Nawaz Sharif and his financial managers soon
found that their big secret had been leaked to the IMF. Who had
done it was the big question.
seven top men of the Nawaz Government knew the deal. Besides Sharif
they were Sartaj Aziz, Ishaq Dar, Shahbaz Sharif, Hafeez Pasha,
Secretary Finance Moeen Afzal and Governor of State Bank Dr. Mohammad
body was duty bound to keep that secret keeping in view the national
interest involved particularly after the economic sanctions imposed
on Pakistan after the nuclear blasts.
Dar was in London with Nawaz Sharif on his return from the UN
General Assembly session in September 1998 when Governor of the
State Bank sent an urgent but explosive message informing him
that some Finance Ministry guys had already told the IMF about
the $2 billion free oil plan. IMF had also been told about the
devaluation of the Pakistani currency, at least by four to five
rupees against dollar.
created panic in the Nawaz camp. They were really in a fix how
to explain the deal to the IMF as delicate negotiations for an
IMF package were going on and disclosure of such a huge financial
facility would disturb all the calculations. The Pakistanis were
also worried about saving their Saudi friends who were facing
the wrath of US for bailing out Pakistan.
asked Dar to rush to Washington to join the Pakistani team busy
in the negotiations with IMF. Imported technocrat Hafeez Pasha
was heading the Pakistan team. The purpose was to control the
damage done by the disclosure.
meeting the IMF guys, Dar went straight to meet one of his friends
in the IMF and asked him how much they knew about Saudi oil facility?
Islamabad had already given the agreed explanation to the IMF
that Saudis were supplying oil on deferred payment basis.
IMF Director told Dar: “Yes Dear Minister your guys have
already told us all in Islamabad while you were away with Nawaz
in New York.”
Once this was confirmed, Nawaz Sharif was so enraged he decided
to sack the two top financial managers -- Secretary Finance Moeen
Afzal and PM’s Advisor Hafeez Pasha as they had leaked the
classified information. Afzal was retired and sent home disgraced
and Pasha returned to US humiliated and embarrassed.
deal with Saudi Arabia was somehow restructured on papers, written
down for the IMF and others and properly signed but in effect
it remained a free oil facility. The Saudis stood by their word
and kept on sending hundreds of thousands of barrels to keep the
Pakistani economy running.
a year, however, Nawaz Sharif was toppled and the Army took over
and the first thing General Musharraf did was to reinstate the
disgraced Moeen Afzal to a post higher than he first enjoyed. He
was made the Secretary General of the Ministry of Finance. He
was awarded the Hilal-I-Imtiaz, a high civil award, in 2002, when
he became Chairman of a private bank. Hafeez Pasha was soon appointed
at a top UN post for the services he had rendered. The betrayal
to the country was forgotten and forgiven.
those turbulent times, no one was ready to talk on this troubling
issue because the culprits had become powerful decision makers
once again and the Opposition was on the run. However former Finance
Minister Ishaq Dar recently shared this information with this
scribe in detail and confirmed everything including how Pakistan
said the Crown Prince Abdullah had great regard and respect for
Nawaz Sharif and even used to call him his brother. So, when Nawaz
Sharif requested for help in those crucial times, Crown Prince
Abdullah offered every help to bail out Pakistan. Two billion
dollars a year was no small favor.
also disclosed how Hafeez Pasha had negotiated a $1.5 billion
foreign loan at highly negative terms and conditions for Pakistan.
Conditionalities attached with the loan were horrible but Pasha
accepted these terms. He agreed to take the loan on 5 per cent
above LIBOR against normal rate of 1.5 per cent.
said Pakistan was also required to pledge three key strategic
assets, including an oil refinery, a fertilizer unit and power
plants to lenders. But the startling fact was that Pakistan would
actually receive only $300 million out of $1.5 billion. The remainder
of $1.2 billion was to be repaid to the same lenders. Even out
of the $300 million, Pakistan would be repaying $240 million as
increased interest. So in real terms Pakistan was to receive only
$60 million out of a $1.5 billion loan negotiated by Hafeez Pasha.
Dar said after becoming Finance Minister he simply scrapped that
expensive deal. Soon foreign exchange reserves situation started
to improve simply because of an unprecedented tradition set by
Ishaq Dar to buy dollars from open market particularly from the
money changers of Dubai.
billion dollars were purchased by Ishaq Dar. This practice got
so popular with his successor Shaukat Aziz that he purchased $12
billion from the local market against cash payment of Rs 9 trillion
without caring much about the inflation unleashed in Pakistan.
total foreign exchange reserves now stand at $12 billion thanks
to money changers who were given Rs 2-3 more for each dollar against
prevailing market price. Thus, taxpayers suffered a loss of Rs
25 billion to create the $12 billion reserve.
this artificially created reserve has been cited by the Saudis
to stop the free oil that Pakistan had been getting. The Saudis
now want us to pay upfront as we have a huge dollar reserve.
immediate worry for Shaukat Aziz after he becomes a full time
Prime Minister in August, would be how to convince the defiant
Aziz’s foreign links are his biggest weakness as far as
the Saudis are concerned. It were “imported technocrats”
like him who betrayed the trust of the Saudi Royal family by leaking
their secrets to IMF. Will they trust another imported leader?
writer is a senior investigative journalist based in Islamabad