The economics of Trump’s threats

President Donald Trump has threatened to stop all aid to Pakistan if Islamabad, according to him, does not forthwith stop providing safe havens to Afghan Taliban, especially the Haqqanis. The US aid to Pakistan has already dwindled to an insignificant level in recent years to make any difference to Islamabad if it is stopped altogether. Lately Washington has also started blocking disbursement of resources that the US is under contractual obligation to disburse from what is called Coalition Support Fund (CSF) to make good the expenditure that Pakistan incurs on terror campaigns.

So, in effect the threat to stop US aid altogether is hardly likely to force policymakers in Pakistan to do what the US wants them to do unless of course they believe doing so would be in Pakistan’s own national interest. One vividly recalls that in the decade of the 1990s Pakistan had withstood and survived the worst kind of economic isolation when it became during that decade the most sanctioned country in the world after Libya.

The first set of sanctions in the decade was imposed on Pakistan as the Pressler Amendment was invoked when in Washington’s view we had finally succeeded in fabricating a nuclear device. The next set of sanctions was imposed when in 1998 we brought our nuclear bombs out of the basement and tested them in response to India’s tests. The third and the fourth sets were imposed in quick succession, first for the Kargil misadventure in June 1999 and for the military take-over in October the same year.

The World Bank tap was virtually turned off on Pakistan during the 1990s on the plea that the demand on the Bank’s resources had increased manifold from the recently liberated Eastern European countries. And the IMF’s help was denied because the most influential members of its Board-the US and the UK – were obliged under their respective laws to reject applications from countries under military rule.

It was during this sanctioned period that the US not only refused to deliver a squadron of F-16s for which we had already paid $600 million but even the cash was virtually forfeited. And finally, when the ban on the release of money was lifted in early 2000 instead of reimbursing the $600 million in cash soybean and wheat worth the amount were supplied.

The only country that came to our economic rescue during the decade was Japan which provided us $500 million annually. In those days China was not in a position to extend help to any significant extent. But of course Saudi Arabia and the GCC countries had extended adequate assistance in cash. And the Saudis were also supplying us oil on deferred payment.

And despite being one of the two world’s most sanctioned countries Pakistan, a seemingly economically destitute nation, was also obliged by circumstances to fight two low-intensity wars during the decade, one on the side of Taliban government in Kabul against the Northern Alliance which was being backed by Iran, India and Russia and the other on the side of Kashmiri freedom fighters inside the Indian occupied Kashmir (IOK).

However, the world could not keep Pakistan in economic isolation for long because of five highly persuasive reasons: 1. The region had become the hub of extremism; 2. It had also become one of world’s major drug exporters; 3. Pakistan-India tensions had turned the region into a nuclear flash-point; 4. China, the country the US saw emerging as a challenger to its global hegemony was not only located on the borders of Pakistan but had also come too close to Islamabad for US did comfort and; 5. Iran, the country with which Mr. Trump appears to be too unhappy is also located in the same region.

Worried at the way India and Pakistan were hurtling towards a nuclear conflagration as the violence inside the IOK had assumed a crisis proportion forcing India to deploy as many as 700,000 troops in the occupied territory to put down the peaceful but highly effective intifada the US came back to Pakistan offering IMF assistance if it were to cool off the heat in the IOK.

This intervention led to the IMF agreeing to arrange a small Standby loan to bailout Pakistan in June 2000 (as representatives of both the US and UK abstained from the Board meeting that took the decision) followed by unilateral ceasefire by Hizbul Mujahideen which was reciprocated by India by publicly announcing a ceasefire followed by Pakistan too reciprocating but not publicly. All this led to the Agra Summit of 2001.

The Summit had remained inconclusive but before it could be resumed 9/11 happened and the US administration of the day came back to Pakistan offering dollars in return for the use of its territory to supply international troops in a landlocked Afghanistan, its airspace to fly drones and as many as three airbases.

There are two routes from Pakistan to Afghanistan. Both start in Karachi. From there, one route crosses the Khyber Pass, enters Afghanistan at Torkham, and terminates at Kabul, supplying northern Afghanistan. The other passes through Balochistan province, crosses the border at Chaman, and ends at Kandahar, in the south of Afghanistan. Nato uses these routes to transport fuel and other supplies.

As the second Afghan war began immediately following 9/11 Pakistan became once again the most allied ally of the US and then graduated to the status of the Non-Nato ally. Unencumbered dollars started pouring in as Pakistan caught hold of fleeing Al-Qaida operatives from US occupied Afghanistan and handed them over to the CIA while we allowed the fleeing Taliban to settle down in our tribal areas as well as in the settled areas of Balochistan. We were saving these Taliban for the rainy day because once the US walked away from the region once again as they did after winning the first Afghan war Pakistan thought it will have to deal with a Talibanized Afghanistan once again.

If Trump stopped all aid to Pakistan the country in the first place would not be as financially troubled as it was in the 1990s when it was world’s second most sanctioned country after Libya thanks to the over $50 billion Chinese investment that is anticipated from the China Pakistan Economic Corridor (CPEC).

Secondly and more importantly, the major problem with Trump’s latest threat is that it has no route other than through Pakistan to transport essential supplies to its troops in Afghanistan where it has decided to stay indefinitely/or until the last Taliban is killed which is not going to happen in a decade or two.

One recalls that the United States was in a diplomatic scramble to reopen the two key supply routes when Pakistan stopped all traffic from crossing into Afghanistan in November 2011 in reaction to a Nato airstrike that killed 26 Pakistani soldiers. Nato forces had been transporting between 70 and 80 percent of its non-lethal supplies to northeastern and southern Afghanistan through the two crossings. An Average of 200 to 250 containers used to pour into Afghanistan daily through these routes. The routes were reopened after eight months