The South Asia Channel

Playing Hardball with Aid to Pakistan

The United States is putting tougher conditions on its aid money to Pakistan. And Pakistan might just tell the United States to take a walk.

An employee counts USD notes at a money change outlet in Jakarta on June 14, 2013. Indonesia's central bank unexpectedly hiked interest rates for the first time in more than two years as it seeks to boost confidence in the rupiah after the currency fell to a four-year low. AFP PHOTO / Bay ISMOYO        (Photo credit should read BAY ISMOYO/AFP/Getty Images)
An employee counts USD notes at a money change outlet in Jakarta on June 14, 2013. Indonesia's central bank unexpectedly hiked interest rates for the first time in more than two years as it seeks to boost confidence in the rupiah after the currency fell to a four-year low. AFP PHOTO / Bay ISMOYO (Photo credit should read BAY ISMOYO/AFP/Getty Images)

Earlier this month, an envoy from the Pentagon informed Pakistani officials in Islamabad that they are planning to hold back nearly a third of $1 billion due this year because Pakistan has failed to disrupt militant safe havens on the border with Afghanistan.

These payments, called Coalition Support Funds (CSF), have formed the largest category of U.S. funding for Pakistan, amounting to $13 billion — as much as one-fifth of Pakistan’s military expenditures — since 9/11. CSF pays for the meals and ammunition of Pakistani troops deployed on the Afghan border and wear and tear of Pakistani ports and roads that carry U.S. military supplies.

The news that part of the payments can be cancelled comes at a time when U.S. funding and interest in the region are dwindling.

The Pentagon has been mulling over the decision to slash $300 million based on Pakistan’s insufficient cooperation for the past year. The Pakistanis have been equally concerned. According to a U.S. official I spoke with, “the Pakistanis have been raising it consistently in meetings.”

The threat to hold back assistance at this time underscores the transactional nature of a relationship that has been losing its dollar value. Security-related assistance from the United States, not including CSF, has gone down from $1.2 billion per year in 2010 and 2011 to around $300 million for the past few years.

Instead, Pakistan has been cultivating alternative allies and sources of economic and military support, especially China and Russia. China’s promise of $46 billion in development aid earlier this year was seen as a counterweight to the anticipated loss of U.S. support.

“Pakistan is certainly hedging its bets on continuing U.S. interest,” said a U.S. official who asked not to be named. “They’ve also obviously made a calculation that it’s worth it to do what they want and to deal with the consequences later.”

At issue is a long-standing irritant in the relationship: the Haqqani Network, a militant group named for a family that is closely tied to the Taliban. The United States holds the Haqqani Network responsible for some of the most deadly attacks on U.S. soldiers in Afghanistan.

“The threat to cut off part of CSF is a forcing function to prod the Pakistanis to take the fight to the Haqqanis,” continued the U.S. official.

Senior American officials have long alleged that the Haqqani Network enjoys the protection of the Pakistani military and intelligence services. Pakistan denies the claim.

Last year, former Senator Carl Levin, then-chairman of the Senate Armed Services Committee conditioned part of CSF to Pakistan’s progress against the Haqqani safe havens in North Waziristan. Levin had been a vocal and powerful critic of Pakistan’s alleged relationship with the Haqqani Network for many years.

Levin told the Council on Foreign Relations in an interview in 2011, “Pakistan military intelligence — the [Inter-Services Intelligence] — maintains ties with the Haqqani Network and provides support to this group, even as these extremists engage in cross-border attacks against our forces.” He said that the U.S. would choose to lose Pakistan as an ally rather than to lose its troops in Afghanistan.

Of the multitude of congressional conditions on funding to Pakistan, Levin’s was the first one since 9/11 that could not be waived.

“Some in Congress expressed frustration with Pakistan’s alleged ‘double game’ and with the [Obama] administration for persistently waiving away what they considered to be thoughtful and important conditions,” said Alan Kronstadt, a specialist at the Congressional Research Service.

“Levin’s effort came without waiver authority and has been seen as an explicit message to both the government of Pakistan and the administration that patience was wearing thin,” continued Kronstadt.

Conditioning just $300 million of the $1 billion authorized for CSF was the result of a compromise between the Obama administration and Congress.

“Our primary concern was not the impact on military operations in the Federally Administrated Tribal Areas but on monetary stability,” says an official familiar with the negotiations. “Monetary stability in Pakistan depended on CSF so we couldn’t in good conscience cut it off completely.”

According to Business Recorder, the dollars that come in exchange for Pakistan’s support to U.S. military operations count as a government service export — as much as 25 percent of all Pakistani service exports, or 5 percent of total exports.

Pakistani officials interviewed for this piece suggested that, at the moment, CSF payments are not as important as they used to be. Pakistan’s budget deficit is narrowing thanks to falling oil prices and high remittances.

Instead, they expressed excitement about the promised China-Pakistan Economic Corridor, referring to it as a “game-changer” that will strengthen ties and trade with China and help the country’s balance of payments in a more sustainable way.

But until the corridor is a reality, Pakistan will have to find a way to boost trade in actual goods and private sector services if it wants to decrease dependence on foreign aid payments like CSF and move away from a transactional foreign policy.

A bigger question for the United States is how long CSF should be extended past 2014, the official end of U.S. combat operations in Afghanistan.

“There was always a horizon in view for CSF. We won’t be fighting the Taliban forever,” said the official cited earlier who asked not to be named. “Something could replace it but we’re probably not talking the same dollar amounts.”

For now, it looks like CSF will continue in 2016 but its future past that is not clear.

The Defense Authorization Act for 2016 — which is in the final stages of passages — authorizes up to $900 million for CSF.

And the 2016 bill again requires the Department of Defense to withhold $300 million if Pakistan does not demonstrate meaningful action against the Haqqani Network.

It also adds a new requirement that cannot be waived: Pakistan must promote stability in Afghanistan and encourage reconciliation talks between the Taliban and the government of Afghanistan.

“The U.S. does not want to lose Pakistan, as unhelpful as its policies have been for the U.S. in recent years,” said Michael Kugelman, a senior program associate at the Woodrow Wilson Institute in Washington, D.C.

“But one factor in this decision is that the U.S. troops aren’t fighting in Afghanistan anymore. This makes the U.S. more willing to play hardball with the Pakistanis,” he continued.

Stephen Tankel, assistant professor at American University, reinforces the point in a piece just published by War on the Rocks: “The [Pakistani] military only needed to undertake operations in North Waziristan that ‘significantly disrupted the safe haven and freedom of movement of the Haqqani network in Pakistan.’ The fact that U.S. policymakers took a hard line suggests a willingness to begin holding Pakistan more accountable for its behavior.”

But Pakistan is scarred by its experience with congressional certifications. Failure to meet the threshold for a congressional certification — the infamous Pressler Amendment — triggered sanctions against Pakistan in 1990s; sanctions that were preceded by a decade in which Pakistan was one of the largest recipients of U.S. aid.

Levin’s language is actually the first condition on aid to Pakistan since the Pressler Amendment that cannot be waived.

“There’s a recognition that the relationship with America is never going to be reliable. America works on a different canvas, different assumptions,” said Ashraf Jehangir Qazi, who served as Pakistan’s ambassador to the United States between 2002 and 2004, in an interview.

“Tough messages to Pakistan don’t seem to work,” he continued. “Pakistan has lost $100 billion in the war on terror, which pales in comparison to what America has given. If the U.S. Congress doesn’t care about that then it will be popular here to say take a walk.”


Nadia is a former Pakistan Desk Officer at USAID and a national security aide in the U.S. Senate. She served as USIP’s Country Representative in Pakistan. She runs The Local Lead. Twitter: @NadiaNavi

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