The US has many levers against Pakistan’s perfidy
It wasn’t the best start to the new year for the Pakistani establishment as US President Donald Trump chose to target their country via Twitter on the first day of 2018. Trump expressed his extreme annoyance with Pakistan’s “lies and deceit”, even though it had received more than $33 billion in aid over the last 15 years. After his tweet, other spokesmen and officials of the US government, including Nikki Haley, the US ambassador to the UN, have indicated that the $255 million of foreign military financing (FMF) that has been withheld for a few months may not actually be disbursed at all. Other elements of security aid and coalition support funds (CSF) may also be rolled back partially or entirely.
A significant section of American academia argues that the US has minimal coercive leverage over Pakistan. Those who pursue this line do so on the basis of two main arguments: a) The US continues to rely on Pakistan for the ground and air supply routes to Afghanistan, and b) any financial harm that the US inflicts on Pakistan will be cushioned by China and the China Pakistan Economic Corridor (Cpec). Then there are other, more fantastic, arguments against America’s rollback of support for Pakistan. Some of them amount to plain scaremongering, like “the Pakistani state will collapse”, “the terrorists will get hold of nuclear weapons”, “Pakistan will resume its illicit trade in nuclear technology”, etc. One particular Washington-based security expert has even suggested, ludicrously, that Pakistan can shoot down American drones without worrying about consequences.
Barring the first two, which deserve to be engaged with, the rest of the arguments are exaggerated and sometimes just panicky. It is true that in the light of bad US-Russia relations, and perhaps worse US-Iran relations, Pakistan is the only supply route available for American troops in Afghanistan. But security aid is not the only leverage the US has to preserve its interests in Pakistan. One of the greatest advantages the US has is its influential role in international financial institutions like the International Monetary Fund (IMF) and the World Bank. The Pakistani army is prone to seeking bailout packages from the IMF. The last such instance was in 2013. And the widening trade deficit, high public debt and low foreign exchange reserves mean that Pakistan may have to go back to the IMF yet again after the national election later this year.
The US has several tools to crack down on Pakistan’s terrorist sponsorship. Even a simple visa denial and freezing of assets of senior officers in the Pakistan army and the Inter-Services Intelligence (ISI) involved with terrorist outfits will go a long way in conveying the seriousness of American intentions. We have already seen some—although far less than required—progress. The fear of debilitating sanctions by the inter-governmental Financial Action Task Force (FATF) on combating money laundering and terrorist financing has forced Pakistan to ban fund-raising by organizations proscribed by the UN. The ban includes Jamaat-ud-Dawa, the outfit headed by 26/11 mastermind Hafiz Saeed. In addition, the European Union (EU) has warned that Pakistan may lose economic concessions under the Generalised Scheme of Preference Plus (GSP+) programme over concerns of increasing human rights violations inside the country. Under the GSP+ programme, Pakistani exports enjoy a full tariff exemption over 66% of EU tariff lines. A nudge from the US may accelerate the abrogation of such privileges.
In September 2017, the New York department of financial services (DFS) had shut down the New York branch of—and imposed a fine of $225 million on—Habib Bank Ltd, Pakistan’s largest private bank. The state regulator found the bank had been engaged in financing terrorist activities. But these are isolated and sporadic actions. A concerted set of moves under a tighter, overarching sanctions regime might asphyxiate Pakistan’s nefarious activities. American control over international finance grants it coercive instruments even against nations like China that might want to help Pakistan. For instance, the US excluded China’s Bank of Dandong from its financial system after the bank was found to be helping the North Korean regime evade UN-imposed sanctions. A tough sanctions regime from the US doesn’t even spare friendly countries: India was forced to significantly reduce oil imports from Iran in the period leading up to the 2015 nuclear deal.
As far as Cpec is concerned, it is yet to be seen whether it will kick-start the virtuous cycle of high investment and greater productivity or push Pakistan into a debt trap. Some sensible analysts inside Pakistan are already warning against seeing Cpec as a short-cut to the modernization of the country’s economy, without realizing higher domestic savings and undertaking institutional reforms to channel these for building infrastructure.
In the first address to his officers as Pakistan’s army chief in 1998, Pervez Musharraf had said: “You may love America, you may hate America; but you cannot ignore America. Such is the reality of our times and we must live with it.” Having practised the art of accumulating favours from both the US and China since the days of the Bandung Conference in 1955, Pakistani leaders know well—and, in fact, better than American academics and even some Indian commentators—the limitations that could arise from having just one patron. The US has a lot of options, and we haven’t yet spoken of military ones.
Will Donald Trump be able to effect a change in Pakistan’s policies? Tell us at email@example.com
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