Washington DC, July 29, 2004 | ISSN: 1684-2057 | www.satribune.com

The First Book based on Articles and Forum Discussions of South Asia Tribune has been published in Pakistan. It is a compilation of articles written for the SAT by Dr. Zafar Altaf, former Federal Secretary and Ex-Chairman of Pakistan Cricket Board. It includes most of the Messages and Comments posted on these articles on SAT Forums. The Book will soon be available through the Internet Book outlets. It is already on sale in Pakistan.

 

Moeen Afzal and Hafeez Pasha betrayed the Saudis

The Men Who Leaked $2 Billion Saudi Oil Secret and Got Away

By Rauf Klasra

ISLAMABAD, July 29: Saudi Arabia, the Islamic brother of Pakistan has withdrawn a $2 billion annual oil grant, Prime Minister-in-waiting Shaukat Aziz is deeply worried how he will fill that huge gap but the men who betrayed the country and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.

This 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.

This 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.

Since 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.

The 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.

But 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.

But 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.

Only 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 Yaqub.

Every 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.

Ishaq 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.

This 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.

Nawaz 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.

Before 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.

The 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.

The 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.

Within 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.

In 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 was betrayed.

Dar 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.

Dar 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.

Dar 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.

Ishaq 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.

Three 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.

Pakistan’s 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.

Now 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.

The immediate worry for Shaukat Aziz after he becomes a full time Prime Minister in August, would be how to convince the defiant Saudis.

But 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?

The writer is a senior investigative journalist based in Islamabad

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