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Choices for Pakistan

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Lot of developments are taking place in the world and in our region. Latest is the President Donald Trump quitting the nuclear deal with Iran and leaving the future of Tehran’s nuclear ambitions in question. Along with this Saudi Arabia reforms are putting Saudi Arabia close to USA and western allies including Israel.

After emergence of terrorism in recent years Financial Action Task Force (FATF) was established in 1989 by the Ministers of its Member jurisdictions. The objectives of the FATF are to set standards and promote effective implementation of legal, regulatory and operational measures for combating money laundering, terrorist financing and other related threats to the integrity of the international financial system.

The FATF monitors the progress of its members in implementing necessary measures, reviews money laundering and terrorist financing techniques and counter-measures, and promotes the adoption and implementation of appropriate measures globally. In collaboration with other international stakeholders, the FATF works to identify national-level vulnerabilities with the aim of protecting the international financial system from misuse. The FATF’s decision making body, the FATF Plenary, meets three times per year.

Hence like IMF and World Bank FATF is mostly used by the USA to pressurize those countries where USA wants its own policies.

In this background no doubt Pakistan has survived from persistent internal and external crises only due to the extraordinary resilience of Pakistan’s people. However unlike its people, Pakistan’s rulers, drawn from privileged elite, are vulnerable to the slightest pressure that affects their bulging pocket books. It is this weakness which makes Pakistan a “soft state”.

This sensitivity to economic pressure was on full display in the recent FATF debacle in Feb 2018. After the event, Miftah Ismail, the Finance Minister till end of this month has assured the country, that being on the FATF’s “grey list” does not imply major or immediate consequences for a country’s banking and financial operations, apart from a stronger “due diligence” by external entities.

Pakistan was on the list from 2012 to 2015 without major consequence. After sitting on its hands for over two years, the Government suddenly mobilized to pass legislation in Feb 2018 to enable it to close down the (LeT) Lashkar-e-Taiba / (JuD) Jamaat-ud-Dawa entities. Pakistan confiscated assets (properties) worth Rs96 millions of JuD and FIF (Falah-e-Insaniat Foundation). The key leaders of the JuD and FIF were declared proscribed pursuant to section 11-EE of Anti-Terrorism Act 1997. This should have been done long ago to fulfill the requirements of UNSC resolution 1267. Unfortunately, Pakistan’s ham-handed diplomacy has made a bad situation worse.

After blocking a decision in the informal meeting in Feb 2018 with the help of China, Turkey and the GCC Pakistan’s FM prematurely tweeted his triumph, inviting US to reopen the issue in formal session, neutralize Pakistan’s slim support and secure a decision to place it on the grey list in June. Combining ingratitude with incompetence, some Pakistani officials have sought to deflect blame onto China and the GCC for “abandoning” Pakistan in the final hours. It is Islamabad which should convey its apologies for embarrassing them by the FM’s premature tweet.

Pakistani Ministers have indicated that they will take the necessary measures to secure Pakistan’s removal from the grey list. But, as evident, the US move is political; part of the pressure is designed to obtain Pakistan’s compliance with its new Afghan and South Asia policy. Reportedly, the actions now being asked from Pakistan are more extensive than those Pakistan has to fulfill in the run up to the Paris meeting.

Whatever the status of Pakistan’s adherence to the new FATF requirements, the US, with its allies and India, having put Pakistan on the grey list, could force a decision in June, or soon after, to place it directly on the FATF’s “black list”. Although this would not terminate international transactions, it would have a negative impact on Pakistan’s financial sector.

Moreover, it would set the stage for the US to impose unilateral restrictions on Pakistan’s dollar transactions (which are all cleared through the US banking system) if it chooses to further escalate economic pressure on Pakistan. The FATF diplomatic disaster is emblematic of Pakistan’s anemic and discordant response to US President Trump’s Afghanistan and South Asia policy since it was announced last August.

In this context Bajwa Doctrine (of General Bajwaa COAS) is working well against American blackmail. According to this gone are the days of timidity and scurrying to please the Americans and “- – the time for American threats and directives.

To formulate and execute an effective response to US pressure and threats, Pakistan needs complete clarity on the context and substance of the US demands. Notwithstanding Trump’s tweeted tantrums, US security and foreign policy is now formulated and managed by the US marines: Generals Kelly, Mattis and McMasters. The US ‘establishment” is determined to utilize the Trump Presidency and the Republican control of all branches of Government to reassert American “power” (which Obama is accused of dissipating) across the world.

China and Russia are seen as the main challengers to US global preeminence, as indicated in the recent US strategy and security reviews. The US has offered India a major role in the Indo-Pacific and Eurasia to contain China’s rapidly rising power. India has accepted this role (even as it denies this to China and Russia). As part of the bargain, the US is prepared to arm India regardless of the security implications for Pakistan.

Indeed, US positions indicate that it expects Pakistan to accept India’s regional domination, terminate support for the Kashmiris and give up the attempt to counter India’s nuclear and conventional military buildup. This would be Washington’s preferred way to avoid an India-Pakistan war and enhance India’s capacity to compete and confront China. The US also expects Pakistan to support its latest decision to stay on in Afghanistan and to help in “bludgeoning” the Afghan Taliban into accepting peace on America’s terms.

If Pakistan rejects US demands, Washington could: terminate Pakistan’s non-Nato ally status; escalate drone attacks; halt IMF/World bank financing; impose targeted sanctions on Pakistani intelligence personnel; impose banking restrictions; declare Pakistan a “state sponsor of terrorism”; resort to Abbottabad type interventions and encourage Indian “surgical strikes” and/or a limited war” against Pakistan.

Pakistan, in turn, could: block coalition supply lines; halt intelligence cooperation; expel all US/allied intelligence personnel from Pakistan; align with Iran on regional issues; shoot down US drones; attack TTP “safe havens” in Afghanistan; extend support to the Afghan Taliban and unleash the pro-Kashmiri groups to participate in the on-going indigenous Kashmiri revolt. Obviously, such a Pakistan-US confrontation would create a major threat to regional and global security.

In this scenario one way for Pakistan is to accommodate legitimate US concerns while avoiding strategic costs. Thus, on Afghanistan, Pakistan appears to have already persuaded the Taliban to offer talks with US, twice in the past. Such talks could be pursued in the Quadrilateral (Afghanistan, China, Pakistan, US) Coordination Mechanism. But the US response is unclear. It is still talking about eliminating the alleged “safe havens”. It may continue to press Pakistan to expel the Taliban/Haqqani leaders to Afghanistan.

If so, Pakistan will need to push back and mobilize international and regional support for the political dialogue. Moreover, in exchange for its assistance in promoting a negotiated settlement, Pakistan should demand elimination of the TTP’s “safe havens” in Afghanistan and a halt in Indian-sponsored subversion in Baluchistan and FATA. With regard to the Kashmiri groups, having accepted the UN terrorism listing of the LeT and JeM in the past, Pakistan will have to impose the restraints on these groups and their affiliates as required under UNSC resolution 1267.

There are many reasons why Pakistan would be well advised to adopt a policy of strategic patience in the face of present pressure from the US and India. First, in the emerging great power rivalry, the US and its allies are likely to come behind China as economic, political and ideological power.

Under Xi Jinping’s leadership, China will enjoy policy consistency, whereas a divided America will need to heal its domestic wounds after the Trump era. By 2040, China will account for 20% of global GDP; the US for 13%; India for 7%. When integrated with the 65 countries covered by the Belt and Road Initiative, including Russia, Europe, Turkey, Iran, Pakistan, the GCC and ASEAN, China’s influence and impact on the global economy will significantly surpass that of the US.

Hence now in coming days with interim government and new government after July 2018 elections it has become utmost clear that Pakistan should have to go along with China and its allies with very clear vision to get away from US and Indians blackmailing.

Chairman Centre of Advisory Services for Islamic Banking and Finance (CAIF), former Head of FSCD SBP, former Head of Research Arif Habib Investments and Member IFSB Task Force for development of Islamic Money Market, former Member of Access to Justice Fund Supreme Court of Pakistan