The United Arab Emirates (UAE) has drawn attention after demanding immediate repayment of $3.5 billion (about 5 trillion won) from its ally Pakistan, which is struggling with an economic crisis.
According to the Financial Times (FT) of the U.K. on the 27th (local time), the UAE abruptly demanded repayment of a $3.5 billion loan from Pakistan earlier this month, while Pakistan was mediating between the United States and Israel on one side and Iran on the other. The UAE had been rolling over the loan since 2018 but refused to extend it this year.
$3.5 billion is about 20% of the State Bank of Pakistan's foreign exchange reserves (about $16 billion) as of early April. In particular, when Pakistan received a $7 billion bailout from the International Monetary Fund (IMF) in 2024, the UAE had promised not to demand repayment until 2027.
The two countries have maintained close ties since the UAE gained independence from the U.K. in 1971. All five inaugural chiefs of staff of the UAE Air Force were Pakistanis, and Pakistan International Airlines provided aircraft and training to Emirates. In return, the UAE has provided Pakistan with financial support worth billions of dollars.
Relations began to fray as the UAE and Saudi Arabia competed for regional dominance in the Middle East. When the civil war in Sudan broke out in 2023, Saudi Arabia and the UAE backed different factions, and a similar pattern emerged in Yemen. In December last year, tensions peaked as Saudi Arabia bombed vehicles transporting UAE-made weapons in Yemen and denounced the UAE as a "national security threat."
Amid the tensions between the UAE and Saudi Arabia, Pakistan appeared to move closer to Saudi Arabia. In September last year, the two countries signed the Strategic Mutual Defense Accord (SMDA). And on the 11th, ahead of U.S.-Iran end-of-war talks, Pakistan's air power was deployed to King Abdulaziz Air Base in Dammam in eastern Saudi Arabia to prepare for contingencies.
Meanwhile, since late last year, Pakistan sought to extend at least $2 billion (about 3 trillion won) of UAE loans for two years, but starting in January the UAE applied pressure by granting only month-to-month rollovers and ultimately refused any extension. Pakistan weathered the crisis by securing $3 billion in emergency financial support from Saudi Arabia, and Saudi Arabia also agreed to extend the maturity of existing $5 billion (about 7 trillion won) deposits placed with the Central Bank.
In addition, Pakistan's role as mediator in the U.S.-Iran war reportedly displeased the UAE. In particular, after the war, among Gulf countries the UAE suffered the greatest damage from Iran's retaliatory attacks, and Pakistan's mediation efforts were seen by the UAE as, to some extent, a friendly posture toward Iran.
Neil Quilliam, a researcher at the U.K. think tank Chatham House, said, "The UAE currently views the issue in very black-and-white terms," and noted, "Neutrality does not exist, and engaging in mediation itself is already choosing the middle ground." He also analyzed, "The rift between Saudi Arabia and the UAE still exists, and Pakistan is one stage where that conflict is playing out."
Abdulkhaleq Abdulla, a UAE-born scholar and commentator, said, "There is a clear grievance in Abu Dhabi," adding, "Pakistan's attempt to play mediator was received negatively." However, he added, "Grievances and a fundamental reassessment of bilateral relations are separate issues."
Some also voice concern that Pakistan is relying too heavily on Saudi Arabia instead of the UAE. Saudi support now amounts to about half of Pakistan's foreign exchange reserves, prompting warnings that excessive dependence on such funding could backfire. Bernard Haykel, a Middle East expert at Princeton University, said, "Saudi Arabia does not have the capacity to keep bailing out Pakistan."