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India-Pakistan Relations:

Does Modi Matter?

Frederic Grare

s the new Indian government has settled in, what will happen to its relations with Pakistan?
While some take comfort in the idea that the strong nationalist credentials of the new Prime
Minister could facilitate a peace agreement with Pakistan, others argue that the risk of
communal violence created by the Hindutva ideology of the new government could be a
potential impediment to better IndiaPakistan relations. But the evolution of the bilateral relationship
is unlikely to depend on either of these considerations; it is also unlikely to depend primarily on New
Delhi.
Narendra Modis decision to invite his Pakistani counterpart, Nawaz Sharif, to his May 26,
2014, swearing-in ceremony, along with all the other heads of state or government from the South
Asian Association for Regional Cooperation (SAARC), was considered a positive gesture on both
sides of the border. The meeting between the two Prime Ministers was cordial and frank butto no
ones surprisenot groundbreaking. However, the two countries have already interpreted this early
meeting differently.
The Indian side viewed it as a signal that New Delhi was open to resetting relations, but on
its own terms, most of which have to do with preventing terrorist attacks from originating in Pakistan
or with Pakistani support. By inviting the leaders of all South Asian countries to his swearing-in
ceremony, Modi undoubtedly seized the initiative. There is, however, little he can or is probably
willing to do unless Pakistan clarifies its own position on the terrorism issue. Substantive progress
will thus demand much more than friendly political statements.
The Pakistani side welcomed the invitation, but both Islamabads initial hesitation and the
comments on the visit from personalities close to the security establishment soon demonstrated that,
although Pakistan officially and sincerely favors better relations with India, its security establishment
and parts of the political establishment remain divided on the issue of normalizing relations with its
neighbor. Islamabad can no longer hide its inaction behind the electoral campaign in India or the
alleged inability of Indian decision makers to deliver on their own potential commitments. Although it
cannot coerce India toward any specific outcome, the actual decision to normalize relations will
primarily be Pakistans.
Even among Sharifs own constituency, there is no consensus on if, when, or how to move
forward with normalization. A large part of the problem lies in the difficult civilian-military relationship
within Pakistan. Pakistan has known four military coups and been under military leadership for most
of its existence. Even when civilians have held power, the military has pulled the strings from behind
the scene in order to retain control over domains they considered to be theirs, like foreign policy. It is
doubtful that the Pakistani military entertains the idea of better relations with India for reasons
beyond the narrowly tactical. The Pakistani military is currently busy on its Western front, fighting
insurgent groups and terrorism, and is unwilling and incapable to confront India. It therefore needs
the civilian government to appease India.
The Pakistani prime minister therefore has a diplomatic opportunity, but it remains to be
seen whether he will have the capacity to translate it into a substantial rapprochement with India.
Nawaz Sharif and the Pakistani military are caught in a zero-sum game of sorts: Sharif is trying to
turn a tactical rapprochement with India into a more permanent arrangement (the nature of which still

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needs to be defined), but the military is trying desperately to prevent any reset with India from
affecting any of Pakistans territorial claims, i.e. Kashmir.
Because of Pakistans dysfunctional civil-military relations, and therefore uncertain political
future, India is left in an essentially reactive role. The election of a new government may have
elevated Indias resolve to punish Pakistan in case of terrorist attackNarendra Modi made several
statements during the electoral campaign to indicate he would not remain passive in the case of a
Pakistan-supported terrorist attack and could not afford politically to look weak should that occur.
However, this has not increased Indias capacity to coerce its neighbor into any specific outcome.
India, recognizing that the ball is squarely in Pakistans court, is therefore likely to adopt a wait and
see attitude. But New Delhi will have to walk a fine line between ignoring Pakistan (which it cannot
really afford to do) and keeping the door to better relations open wide enough to provide a real
incentive for Islamabad to adopt meaningful new policiesall without making unilateral concessions
to Pakistan.
Three main issues will prove particularly meaningful for the trajectory of bilateral relations in
the coming years: Pakistans potential extension of Most Favored Nation (MFN) status to India, the
Kashmir dispute, and Afghanistan. All of these issues are important in their own respect; none will be
decisive. But each provides a barometer for Pakistans domestic political scene and for India
Pakistan relations in general. What is at stake is not only regional stability and prosperity, but the
consolidation of democracy in Pakistan.

Most Favored Nation Status


In 2013, then-candidate Nawaz Sharif made normalizing relations with India a central
argument of his campaign. For instance, in a television interview before the election, he professed
his goodwill toward India, indicating his willingness to resolve all pending issues peacefully, including
Kashmir; to not let Pakistani soil be used by extremist organizations to attack India; to forbid all antiIndia speeches; and to launch investigations into the Kargil war and the 2008 Mumbai terrorist
attacks. Hopes were high therefore that Pakistan would finally extend India MFN status, removing
tariff and other trade barriers. Sharif did not articulate any conditions on which awarding the status
would depend. But after months of procrastination, the issue remains unsettled. In early 2014,
Islamabad announced that it had decided to move forward with the MFN determination, but it soon
reversed its decision.
This remains a sore point with India. In February 2014, Indian Commerce and Industry
Minister Anand Sharma cancelled a trip to Lahore, accusing Pakistan of having failed to enact trade
boosting measures that had been agreed upon, including the start of the round-the-clock truck
passageand the opening up to trade of hundreds of currently restricted items. Pakistan is now
stipulating that MFN will be attributed to India only if New Delhi reopens the composite dialogue, a
stalled executive-level negotiation process involving all pending issues between the two countries
including Jammu and Kashmir, water sharing, economic and commercial cooperation, etc.
Indeed, Pakistans debate on extending MFN status is partially a trade issue. A substantial
part of the business community, in particular small- and medium- size enterprises, seem to fear a
massive arrival of cheaper Indian products on the Pakistani market which would overwhelm them.
Opponents to MFN status also invoke non-tariff barriers, such as the refusal of some Indian
distributor networks to sell Pakistani product, as a justification for Pakistans hesitations. Yet, the
Pakistani government maintains its principled position on the need to facilitate bilateral trade
between the two countries. It blames several Indian lobbies (automobile, textile, pharmaceutical as
well as agricultural) for obstructing the negotiations, but still maintains that awarding India MFN
status would benefit Pakistan. With annual growth rates barely at 3 percent (although the World Bank
prediction for 2014 is 4 percent), accelerating inflation, and high deficits (the trade deficit alone
increased from $8.322 billion in 200506 to $16.53 billion in 201314), Pakistan has every interest in
normalizing trade relations with India.
While the business angle in Pakistan is a significant part of the debate in granting MFN
status to India, the issue is primarily a domestic political problem. The main political parties support
Sharifs policy to grant MFN status. Meanwhile, jihadi organizations continue to object to any trade
deals with New Delhi so long as Kashmir remains under Indian control. Sharif seems to have
underestimated the opposition of the military, convinced that the retirement of Ashfaq Pairvez Kayani
as Chief of Army Staff (COAS) would usher in a more receptive posture in Rawalpindi, the seat of the
military. But the nomination of Raheel Sharif (who has no family ties with the Prime Minister) as
Kayanis replacement did not lead to any change in the position of the military. The dispute with the
civilian government over the trade issue is ongoing. It was the military that insisted that the
government take the small- and medium-sized enterprises objections to heart. It also lent its explicit
support to their cause, warning Sharif against making rapid concessions, particularly in the run-up to
the Indian elections. In a February 2014 interview, the Prime Ministers brother, Shabaz Sharif,

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obliquely accused the military of obstructing trade normalization, asserting that distrustful `security
agencies in both India and Pakistan were one of the main two blockages.
Awarding the MFN status to India would thus serve the interests of the civilian government
in that the economy would benefit from free trade with India, but this would only partly satisfy the
military. Rawalpindis motivation for better interactions with India is real, but limited and essentially
tactical. This opens some diplomatic and political space that the government could exploit and
possibly enlarge, providing it could keep its relations with the military under control. But a spectacular
advance in trade relations between India and Pakistan is unlikely. It would depend primarily on
improving civil-military relations within Pakistan, since the Pakistani military remains the most
influential objector to trade normalization.
In the process, Pakistan, whose economy is in shambles, has much more to lose than India.
New Delhi can afford patience here. Its economic future does not lie in any specific trade relation
with its South Asian neighbors, but in its integration in the global economy.

Kashmir
Six months after Narendra Modis accession to the post of Prime Minister, Kashmir,
traditionally the main point of contention between India and Pakistan, again commanded all attention
in October 2014 as it experienced the most intense exchange of artillery fire across the Line of
Control and the international border in a decade.
The Pakistani army is in no position to challenge India along the Line of Control, since the
bulk of its forces are on its western front. Skirmishes in Jammu and Kashmir resumed in August
2013, shortly after a meeting between Sharif and Kayani during which the Chief of Army Staff
reportedly told the newly-elected Prime Minister that rapprochement with India was acceptable, but
should not be too fast. Shortly afterward, occasional troubles resumed along the LoC. The Pakistan
military seemed intent to prevent any temptation by the government to ignore its instructions for
patience. It therefore provoked India to impede any rapprochement with the Pakistani government.
The incidents remained limited in scope to avoid any escalation.
Just as on the MFN issue, the appointment of a new COAS did not alter the militarys
position on Kashmir. In an April 2014 speech, the Chief Of Army Staff Raheel Sharif declared that
Kashmir was the jugular vein of Pakistan, calling for a settlement of the conflict in accordance with
UN resolutions and the aspirations of the Kashmiri people. The insistence on the UN resolutions, in
particular, indicated a lack of interest among the military leadership in exploring non-territorial
solutions to the Jammu and Kashmir issue, as had been done during the Musharraf era. (For
example, in 2006 General Pervez Musharraf proposed a four-point formula that did not include any
change of the existing boundaries, but rather proposed self-governance of the Kashmiris,
demilitarization of the state, free movement of people and trade between the two parts of Kashmir,
and joint management of a number of select issues such as water, tourism, trade.)
The militarys hardening of its position on Kashmir did not prevent Nawaz Sharif from
attending Modis swearing-in, but the military and its allies used the predictable absence of tangible
results afterward to attack the Prime Minister on his return to Pakistan. Maleeha Lodhi, a former
Pakistani ambassador to the United States and the United Kingdom, was representative of such
complaints in an opinion piece lamenting that Kashmir was not mentioned in the Prime Ministerial
Statement. Nor was it raised in the delegation level talks, and that in an unfortunate break with
tradition, there was no meeting between Kashmiri leaders of the All Parties Hurriyat Conference
(APHC) and the Prime Minister or any member of his delegation.
Rawalpindis most recent signals, including the recent exchanges of artillery fire, are unlikely
to lead to any kind of escalation in the military buildup on either side of the LoC. They indicate,
however, that the significance of the Kashmir issue is changing. Kashmir has become as much an
indicator of the evolution of civil-military relations in Pakistan as of the India Pakistan relationship
itself. Pakistan-generated troubles in Kashmir do not give Islamabad an additional inch of Kashmir
territory, nor do they improve Pakistans bargaining position; instead they temporarily stop any
possibility for the civilian government to conduct negotiations on other aspects of the bilateral
relationship with India. It therefore helps the Pakistani military in reasserting its control over the
countrys foreign policy. But this evolution does not make a settlement of the issue any less complex
or uncertain than it was in the past.

Prospects for Violence


For India, the question raised by uncertainty over Pakistans actual positions on issues such
as MFN or Kashmir is much more immediate: what level of violence should India expect in the
months and years to come? Some Indian experts anticipate a renewal of violence in Kashmir, a

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prediction sometimes echoed by Pakistani former officials in private. These expectations raise the
question of Indias options vis--vis Pakistan.
New Delhi cares far less about Islamabads irredentist claims on its territory than it does
about the uncertainty of Pakistans political future. For many Indian officials across the political
spectrum, the lack of a unified Pakistani center of power with a single policy makes meaningful
negotiation and settlements impossible. Stuck in its own contradictions, Pakistan is not amenable to
any policy initiated from the outside, be it favorable or hostile.
This therefore condemns India to remaining essentially reactive until Pakistan can resolve
the tensions in its foreign policy. On past rare occasions when India has made the first move toward
advancing relations, different segments of the Pakistani establishment interpreted them in divergent
and often conflicting and counterproductive ways, no matter what the proposal contained. For
instance, Manmohan Singhs proposal to make the border between the two countries irrelevant in
Kashmirand Pervez Musharrafs relatively positively answergenerated strong dissent within the
Pakistani military. True, New Delhi can favor or close any possibility of dialogue. It can also raise the
cost of potential aggression. But the decision to normalize the relationship belongs ultimately to
Pakistan.
In this context, widespread speculation about the positive or negative influence of Prime
Minister Modis ascension or the nationalism of his Bharatiya Janata Party (BJP) is in many ways
irrelevant to the IndiaPakistan conflict. These factors in India could facilitate or complicate the
acceptance of a political settlement between the two countries, but they cannot drive the relationship.
Similarly, a flare-up of communal tensions could slow the pace of an eventual normalization but
would not derail it completely.
Modis first several months in office illustrate this dynamic well. His invitation to the SAARC
leaders signaled a model of management for the relationship with Pakistan, although its intention and
impact are not limited to Indias relationship with Pakistan alone. With this move, Modi made it clear
to his Pakistani counterpart that Pakistan is not his sole foreign policy concern, but he also ironically
half-opened a door to improving that relationship which many thought was closed for the foreseeable
future. In short, Modi has made Sharif aware of Indias conditions, mostly related to terrorism, for a
significant improvement of the relationship; it is now for Pakistan to demonstrate its willingness to
take action.
The tough Indian response to Pakistani October 2014 provocations in Kashmir may have
calmed down the latters temptation to further test the resolve of the Indian government, but the risk
of a major crisis persists. Modi has a reputation for decisive leadership, which creates an additional
political constraint in that he cannot politically afford to look weak. Indeed, India has limited options
for responding to a major attack. In a recent article, journalist Praveen Swami enumerated five
possible Indian responses to an attack originating from Pakistan: doing nothing; coercion through an
Indian army mobilization along the LoC/international border; actually using artillery and infantry along
the LoC; striking jihadist training camps; and using covert means. None of these options, however, is
totally satisfactory as none is likely to push Pakistan toward normalization.
Calculated inaction, for example, characterized New Delhis response to the November 2008
Lashkar-e-Taiba (LeT) attacks in Mumbai. This approach earned India goodwill with major powers,
including the United States, and increased pressure against Pakistan. No major LeT attack on Indian
territory has taken place since. But even though a restrained strategy paid dividends in 2008, it is
highly dependent on third-party pressures on Islamabad. Thanks to the demands of its withdrawal
from Afghanistan, the United States is temporarily too dependent on Pakistan to risk a crisis with
Islamabad unless a major terrorist attack obligates it to do so. This does not mean that Washington
would not intervene in case of a major crisis, but rather that its threshold for intervention is probably
higher than in 2008.
Similarly, coercion modeled on Indias 20012002 response to the Pakistani- sponsored
attack against the Indian parliament has its drawbacks. By deploying its vastly superior army along
the international border, India coerced Pakistan into mobilizing its forces after the Pakistani attack
against the Indian parliament. The financial cost of the mobilization as well as the opportunity costs
due to the temporary stoppage of all direct investments weakened Pakistans economy, but also, for
the same reasons, New Delhis. Limited strikes on Pakistani jihadist training camps or shelling
targets across the LoC are also possible options, but it is uncertain whether they would produce
meaningful resultsand they carry a high risk of escalation, up to and including the use of nuclear
weapons. Finally, according to Swami, Indias intelligence agencies seem to lack the capacity to
mount covert operations in response to a crisis.
Domestic political factors must also factor in to any political options. Narendra Modi, who
capitalized on his hardline image during his campaign, will likely find it difficult not to react in case of

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a major Pakistani aggression. Many of his supporters claim that restraint similar to Manmohan
Singhs in November 2008 would be politically suicidal.
The real problem, however, is the definition of what would constitute a major Pakistani
terrorist attack that would also demand a response. There is no obvious answer to this question,
including among people who favor a muscular intervention. Much would depend on the prevailing
political circumstances. The need to show evidence of the links between the Pakistani state and the
terrorist groups further complicates the question. Since 2008, far fewer reports have surfaced of
direct attacks by Pakistani groups on Indian soil, but many more allegations of cooperation between
Pakistani intelligence agencies and indigenous Indian terrorist organizations have.
The best guarantee against the use of any of these five options, with all of their attendant
risks, lies therefore in Pakistan exercising restraint due to its domestic security situation. The
intensification of terrorist attacks on Pakistani soil compels Islamabad to reduce its force levels along
the LoC and the international border, heightening its disadvantage vis--vis the Indian military. This
forces Pakistan to exercise greater caution, lest it be drawn into a shooting war it is not fully
equipped to fight along the border. The recent October 2014 tensions in Jammu and Kashmir
illustrate the point. India responded forcefully to what it saw as Pakistani provocations along the LoC
and the international border without triggering a massive mobilization on the Pakistani side. Pakistan
expected a calibrated response, but was taken by surprise and had no real good option to get out of
the crisis.
Islamabad understands it is trapped: it needs to dedicate sufficient forces to combat
domestic terrorism and insurgencies, but it also has a perceived need to keep issues like Kashmir
alive without developing a military capacity that could face and/or escalate the potential
consequences of its provocations. Since 2004, it also accuses India of supporting Baloch insurgents
and, more recently, of supporting Islamic terrorism on Pakistans soil. However, due to Pakistans
relative weakness, the indigenous roots of internal terrorism, and the Baloch insurgency, these
accusations are unlikely to increase the tensions between India and Pakistan. On the contrary, they
have created the conditions for a negotiation on renouncing terrorism that would no longer appear as
surrender by Pakistan.
This can only comfort those in the new Indian government who advocate a wait-and-see
attitude. The real difficulty for the Modi government will come in defining a level of engagement with
Pakistan that is sufficient to prevent the temptation of sponsoring terrorism, but limited enough to
force Islamabad to make real concessions in anti-terrorism to secure greater gains. Should New
Delhi make significant concessions early in the process, the incentive to renounce terrorism as a way
of achieving foreign policy objectives will be nil or limited. The continuation of the back-channel
negotiations initiated by then-President of Pakistan Pervez Musharraf and then-Indian Prime
Minister Manmohan Singh in 2005 to define the contours of a paradigm shift in the relations between
the two countriescould offer, once more, the most effective instrument in advancing the
relationship.

The Future Rivalry in Afghanistan


But even backchannel negotiations are unlikely to prevent the rivalry from playing out once
again in Afghanistan. Since 2001, the Western presence in the country has partly limited Indo
Pakistani maneuvering and provided both New Delhi and Islamabad a guarantee against the
predominant influence of the other. With the departure of U.S. forces slated for the end of 2016 at the
latest, chances are that Afghanistan will again become the backdrop for an Indo- Pakistani proxy
conflict.
Both sides deny this possibility, professing the purity of their intentions. Over the past four
years, Pakistani officials have claimed that Islamabads policy in Afghanistan has changed and that
the era of interfering in its northern neighbors internal affairs is over. As evidence of such ostensibly
responsible behavior, Islamabad has reached out to its erstwhile foes from the former Northern
Alliance; facilitated a reconciliation process between the Taliban and the Afghan government; and
cooperated in the Afghan elections, assuring everyone that it did not support any particular group.
The evolutions of the Afghan conflict, the domestic security situation in Pakistan, and Pakistans
relative diplomatic isolation all convinced Pakistani decision makers to adjust their strategy over the
past four years. With the realization that a Taliban victory was neither realistic nor, perhaps, desirable
in the short term came the need to reach out to other ethnic groups.
Interestingly, most Pakistani officials would dismiss the notion of a power sharing
agreement with the Taliban at the central government level, which would be a negation of the
electoral process, but some of them would support the idea at local levels. Such a dynamic would
inevitably produce a Taliban takeover of the Afghan provinces adjacent to the border with Pakistan
and of a number of Pashtun enclaves in the North. The Taliban presence in and potential dominance

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of these areascombined with the concomitant fragmentation of the anti-Taliban factionswould


make any opposition to the Taliban more difficult, leaving the door open for a future Taliban offensive.
At the same time, Islamabad is increasing its own control over the Taliban by preventing all attempts
at direct negotiations between the Islamist militia and the Afghan government, unless authorized by
Islamabad. In this context, the reconciliation process Islamabad says it is supporting appears
essentially to be a means of conferring legitimacy upon the Taliban as political actors, preparing their
future participation in an Afghan government sufficiently weak and divided to be more amenable to
Islamabads demands.
Yet there are few reasons to believe that Pakistan is no longer trying to eliminate Indian
influence in Afghanistan. Naturally, it is still trying to promote the emergence of a friendly Afghan
government (or at least a government it can control) and expedite the return of Afghan refugees to
prevent their potentially violent involvement in Pakistani politics. Thus, what Pakistan has presented
for the past four years as a wholesale reversal of its old strategy is in fact a tactical readjustment
designed to meet changing realities on the ground. Interference is still a reality despite some genuine
rethinking in some government circles.
The participation of the Taliban in the Afghan government (or at least its control of some
provinces) is antithetical to New Delhis primary goals of preventing the return of the Taliban to power
and, if it cannot achieve this objective, mitigating its potential impact on the regional Islamist
movement, while also weakening the connection between the Taliban and the Pakistani security
establishment. For that purpose, New Delhi has established a quasi- containment policy around
Afghanistan with all of Kabuls neighbors except Pakistan, and unfailingly supports the Afghan
government. India has also supported the international presence in Afghanistan.
But the announced U.S. withdrawal will inevitably weaken Indias position within Afghanistan
and diminish its own margin for initiative. New Delhi cannot ignore the fact that the new Afghan
government will face severe economic and security constraints. It knows that its support to Kabul will
at best slow down the erosion of the government authority, but cannot hope to arrest it altogether.
More importantly, its position is highly dependent on the durability of the arrangement worked out by
the U.S. administration to resolve the political deadlock that followed the accusation of fraud during
the second round of the 2014 presidential election. The capacity of the elected President Ashraf
Ghani and of his main opponent and now CEO of the government, Abdullah Abdullah, to maintain
government cohesion will prove essential for the future of Indias standing in Afghanistan.
So far, Pakistans preoccupation with the security of its own territory against anti-Islamabad
militants, in particular along the AfghanPakistani border, offers India the best protection against
excessive interference in its Afghanistans affairsbut it makes New Delhi dependent on a situation it
does not control. There is little doubt, however, that should IndiaPakistan relations deteriorate,
Afghanistan, not Kashmir, would soon become their battlefield of choice once more. The
geographical location and the proxy nature of the conflict would diminish the risk of a nuclear
escalation because few core interests on either side would be at risk.

The Civil-Military Key Forward


Although India and Pakistan officially profess their goodwill toward one another, none of the
conditions for a real rapprochement are met. Despite Pakistans assurances that it is ready to seek
an agreement with Modi, as it did under the last BJP government, this consensus seems quite
superficial and linked to the security situation, which forces the military to dedicate a substantial part
of its resources to domestic tasks rather than to antagonizing New Delhi.
It would, however, be a mistake to assume that the military is resolutely opposed to all kinds
of rapprochement with India. The military still needs the civilian government to break the vicious
circle of economic regression and international isolation in which successive incompetent Pakistani
governments (including under military regimes) and adventurist policies of the security establishment
have locked the country into. It therefore wants the Prime Minister to improve relations with New
Delhi in service of that goal, but to do so without creating the kind of organic links that would emerge
from the development of a strong economic relationship.
There are also powerful incentives, however, for the military to stall an eventual
rapprochement for as long as possible. Peace with India would challenge the narrative that the
militarys outsized role in Pakistani government and society is essential to the countrys security, and
would therefore seriously challenge its influence on Pakistani politics.
Several other factors could further derail the already tense civilian-military dynamic, which is
the key to the bilateral relationships future. Pakistans generals feel threatened by the recent trial of
former dictator Pervez Musharraf, which they perceive as a challenge to the traditional impunity of
the army from prosecution. Civil society and media actors also have increasing antagonism toward

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the military, which ballooned after the Inter-Services Intelligence (ISI), Pakistans premier intelligence
agency, allegedly tried to assassinate star journalist Hamid Mir in April 2014.
This further shows that the military is no longer politically omnipotent. The relative unity of
the mainstream Pakistani political parties not to cooperate with the military limits the latters capacity
to manipulate politics. Couple this with the Armys need for its eastern front with India to remain
quiet while it fights anti-Pakistani insurgent groups along the Afghan-Pakistan border, and some
space opens up for the government to maneuver, including in relations with India. Nawaz Sharif can
now initiate a rapprochement with India, providing that it does not lead to the abandonment of any of
Pakistans traditional claims such as Kashmir or the Sir Creek water dispute.
On the Indian side, Modi does not seem to consider Pakistan a priority, both because of the
destabilizing political uncertainties between Islamabad and Rawalpindi and because the weakened
Pakistani economy is not a very attractive market for Modis growth-centric agenda. India would
benefit from better relations with Pakistan, but its economic future does not depend on it. Yet, the
new Indian Prime Minister cannot totally ignore Pakistan. All previous attempts to do so resulted in
the resumption of terrorist attacks, a situation that India wants to avoidnot least because a possible
escalation into even a conventional conflict with Pakistan could impede the new governments
program of economic reform. In its confrontation with Pakistan, India is not without assets: it could
certainly exact a heavy toll from Pakistan in retaliation to any aggression. Yet, New Delhi is not
capable of dictating the terms of an agreement to Islamabad, who, although the weaker of the two
actors, controls the evolution of the relationship.
The choice facing Islamabad has implications beyond just its bilateral relationship with India.
Pakistan must decide between joining the development bandwagon or becoming increasingly
marginalized in the international community. Making this decision will require Pakistan to speak with
a single voice, including both the government and the security establishment. Given the configuration
of Pakistans polity, only a consolidation of democracy in the country will therefore allow for
substantial improvements in the relationship with India. But consolidation of democracy will be, at
best, an incremental process. In the current situation, the willingness of the Pakistani government to
normalize relations with India is real, but it still clashes with the more or less open opposition of the
military which can sabotage any negotiation process at any time.
Bilateral relations in the coming months and years are therefore
likely to fluctuate between periods of appeasement and occasional crisis.
There is little chance of a major conflict, but any deterioration of the security
situation, especially in Kashmir or Afghanistan, could revive the risk of
terrorism. In the meantime, no matter what Modi or any Indian leader does
for the foreseeable future, the key to any long-term rapprochement between
India and Pakistan rests on an improvement in civilian control over the
military in Pakistan itself.

Peace with Neighbours:


Theory and Practice
Dr. Muhammad Hafeez

Introduction

o far, Pakistan has survived a serious strategic-insurgency (war on terror) within and outside
its geographical boundaries. This should be a confidence booster for the state of Pakistan.
Although the insurgency continues and the country may face harder times, but the nation
needs to appreciate the strengths of Pakistan. The country sustains a great professional
army; Pakistan has been known as a security state as it has provided more than 50 per cent troops
for UN peace missions around the world since the 1950s. Due to the long experience of
wars/insurgencies around the world (Asia, Africa, Europe, and elsewhere), Pakistan can reposition
itself as a benevolent security-provider, and build its image as a saviour of mankind.
Pakistanis should learn to see its security apparatus in a positive frame. A slanderous
campaign was started to malign Pakistan army, particularly its intelligence agencies. Pakistan needs
to create an image as a useful state for the good of mankind. This country has all the potential to
claim a respectable status in the comity of nations. Pakistan is the sixth largest country populationwise. It has the sixth largest professional army supported by one of the best intelligence agencies

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(the most relevant strength in the age of war on terror). Equipped with nuclear technology and home
manufactured armaments, Pakistan remains a uniquely powerful Muslim country in the world; the
whole Islamic world (nearly 1.6 Billion people) looks up to it for strength and leadership. It is blessed
with the highest mountain peaks, glaciers, rivers and dams, vast agriculture, minerals, and very
important geostrategic location.
During the last one decade, Turkey has become the 17th largest economy, and has attained
a respectable status in the region and the world. It just repositioned itself and turned its negative
image into a positive one. Professor Ahmet Davutolu lead the transition through a new international
Professor Ahmet Davutolu lead the transition through a new international policy whereby the
Turkish worked towards creating zero problems with neighbours and going beyond their region to
establish friendly relations. They pursued multidimensional but integrated foreign policy to harness
diplomatic and economic benefits. Their soft power (culture and civilization) was used to develop
fruitful links with neighbours and beyond. They addressed their disputes with neighbouring countries
including Iran, Syria, Iraq, Greece and Cyprus. Turkey had all the necessary ingredients and just had
to learn to appreciate its potential and make use of it. Actually, peace with neighbours provides
peace of mind to work on other issues, including social and economic development. It may however
be noted that Turkey addressed disputes with neighbours with mutual equality supported by its
national power. Pakistan can learn from such experiences from around the world and formulate its
own foreign policy to improve relations with its neighbours (China, India, Iran, and Afghanistan). It
probably will happen, but will take some time.
It may be reiterated that internal strength of any country has become critically important in
present day international relations. In the past, international wars were fought with military hardware
(guns, munitions, aircrafts, and ships), but the wars of today are fought within nations (insurgencies
and propaganda). In other words, ordinary people and their participation in national and international
affairs has become very important. A score of television channels and burgeoning social media has
become an important factor of present day wars. They form public opinion and create pressures for
the government and the security forces. Human rights laws, including access to information, are
used/abused to serve certain interests. In the past, mass media was controlled by the states and was
considered as the fourth pillar of state; but not anymore.
In addition, the Media Houses have become private businesses and they generally work for
money coming from anywhere, even from sources that are against national aspirations. While
pursuing monetary gains, some Media Houses compromised the security and economic interests of
Pakistan. The recent issues related to the largest Media House in Pakistan clearly show the
importance of media in todays warfare. In diplomatic language, public diplomacy has become more
important in present times as compared to the past, and Pakistan should learn the new tricks of the
trade.

Theory and Practice


Theory of international relations duly suggests peace with neighbours; however practice in
several parts of the world has been otherwise. It is easy to understand that most of the developed
countries have peace with their neighbours because they practice the theory truthfully. They dont
exhaust their energies on wars and conflicts. Those countries are developed as they understand this
reality very well. On the other hand, the developing countries dont understand the importance of
peace with neighbours and keep on fighting with them. Another dimension of this sad episode is the
influence of the world system: divide and rule is now quite clear to most nations around the world,
and Pakistan probably has learnt this lesson the hardest way (fighting several wars with India and
another war with Russia through Afghanistan). These wars did not bring any long term benefits for
the warring nations; actually these were injurious to their growth and prosperity. However, these wars
created strategic benefits for the world system, led by the US and West. Turkey realized this situation
and fixed its policy and actions by developing peace with its neighbours.

Background
More than 200 wars were fought approximately during the last 200 years worldwide, and
most of these had been imposed by powerful countries for a variety of economic and strategic
benefits. Apparently, war is the traditional strategy for continuing domination of small nations by the
powerful states. These wars were fought by different nations for the greater benefit of the global
system controlled by the big powers.
Since its creation in 1947, Pakistan has fought several wars with neighbouring India and
also with Soviet Union through Afghanistan; all these wars created loss for warring nations; however,
the world system remained the primary beneficiary through the sale of war machinery, thereby
retaining political domination. The warring countries suffered economically, psychologically and
diplomatically. Russia collapsed and Pakistan got punishment in the shape of sanctions from the US/
world system. However, sometimes war can become a necessity for the survival of a nation.
The accelerated process of globalization has created new realities around nation states.
Apparently, states have been weakening and multinational corporations have been becoming
stronger. Regionalization in the shape of multilateral agreements like NAFTA, SAFTA, SCO, and
ASEAN has emerged to deal with the burgeoning forces of globalization.

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After the collapse of Russia in the late 1980s, the world faced three global events: (i) US became the
sole super power (a lack of politico- military balance), (ii) emergence of penetrating information
technology (satellite TV and social media), and (iii) a complex of 9/11 events. Their combined effect
created an overall environment which was conducive for rapid change through designed
interventions in all parts of the world. Wars and issues related to Libya, Iraq, Syria, Egypt, Ukraine,
Afghanistan, and Pakistan are examples. In other words, the world experienced different sorts of
shocks to maintain the existing world order. To rebut this onslaught, China and Russia came closer
through SCO (Shanghai Cooperation Organization) and recently signed a US$400 Billion gas deal
(Wright 2014) which will be operated in their local currencies (not the US dollar). BRICS and several
other countries have been trading either in Yuan or their locally swapped currencies during the last
several years. Apparently, the world is moving towards a multipolar system of governance and
regional blocs are emerging to create new environment.
Moreover, new (parallel) banking systems are coming up. In the Western perspective, China
only has US$4 Trillion worth of shadow banking and has grown by 42 per cent in year 2013 only
(Wen 2014). The US has faced powerful resistance in Syria, Ukraine, and other parts of the world in
recent times. Moreover, the US has just decided to close 21 military facilities in Europe (Wong 2014).
The above few lines were written to note that the world system is undergoing structural
changes and Pakistan needs to understand these qualitative and quantitative transformations in
order to formulate its foreign policy.
Howard E. Koch (a celebrated American writer) once said: You can be a good neighbour
only if you have good neighbours. In the context of this saying, Pakistan can either wait for
neighbouring countries to become good neighbours, or Pakistan can become proactive and make its
neighbours good. The wisdom from Turkey suggests that Pakistan should follow the proactive policy
of fixing its issues with neighbours bilaterally but in a regional/multilateral context. The aimed net
result should be total peace in the region for all the countries. It may sound difficult due to bilateral
issues between other countries of the region, but Pakistan could play a role to minimize conflicts in
the region.
It may also be noted that durable peace is in the interest of all nations of the region. This is a
new reality for mature understanding that peace is good for all the states including India and
Pakistan. During the last several years, Pakistan and India came very close to launching a fullfledged war, but both the countries avoided it. This clearly indicates the mutual need for peace.
Pakistan should gain confidence from its great strategic assets, coupled with natural
resources, to assert its positive role for the good of the region. When any country wishes to share
good, every neighbour wants to participate. Pakistan should pursue the policy of sharing its
expertise for the good of all nations in the region. It should be easy to understand that if the region is
good, the life in individual countries will be prosperous.
Thus, given the fast changing global environment, Pakistans foreign policy should be multidimensional, dynamic and flexible. As the forces of change come along, the nations policy should be
alive and duly flexible to address the upcoming challenge. Rapid changes in the global environment
demand frequent reviews and adjustments in the foreign policy. It is worth noting that American
policy has become more pragmatic in recent times. Obama has tended to subordinate principle to
the national interest (Michael Crowley, Time, January 27, 2014). Philip Hamburger (2014) has just
authored a book Is Administrative Law Unlawful? The thesis of the book suggests that when pen
and phone alone are used to make a law, it can be unlawful. In such a global environment, Pakistan
should be proactive to address foreign policy issues to promote its national interests.
The opinions, attitudes, and actions of groups of people can be transformed in minutes and
hours, unlike the past. Email, Facebook, Twitter, SMS, and other social media have been used in
Pakistan to influence public action in the past. Our national policy should be abreast with these new
realities, and the use of soft power must be an integral tool for our internal and external policy.
The internal and external policies must be carefully planned in an integrated fashion, and
always could be modified in response to instantaneous changes/shocks. Innovative solutions to
policy issues are the need by the hour. For example, recently, the Turkish Prime Minister, Tayyip
Erdogan, addressed the issue of street protests by organizing a huge public rally in Istanbul. He
actually understood the root cause of street protests; besides using police, he spoke to a huge
gathering of the public to send a message to the foreign hands which were instigating the protesters.
In my view, public diplomacy has become increasingly important than the traditional forms of
international relations. Pakistan has faced a war on terror for a long time, and it should understand
the importance of public opinion and public diplomacy now.

Perceptions and Assumptions


Before this paper embarks upon the details about understanding and improving relations
with neighbours, let us identify current threats and supports prevailing in our region and those
expected in the immediate future. These are some of the assumptions which can make us
understand the regional scenario in a pragmatic sense, and help us find ways to improve the
neighbourhood for the good of Pakistan and other nations.

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1.

Neighbours are permanent, and promoting good relations with them is an intrinsic and constant
desire for all the relevant nations.
2. Strategic interests of nations vary over a period of time due to changes in global, regional, and
state policies/actions.
3. Individual states pursue their interests within the frame of short, medium, and long term.
Sometimes, short term interests are sacrificed for long term gains and vice versa.
4. Bilateral relations are identified in five dimensions: (a) Geostrategic, (b) Economic/Trade, (c)
Military/Security, (d) Public sentiment/opinion, (e) Culture/religion.
5. Pakistan is facing a new global and regional environment whereby the war on terror (war of
hearts and minds or moulding public opinion through a complex form of propaganda) remains a
major tool of international relations (for advantage or disadvantage).
6. In the overly complex global and regional milieu, bilateral relations with neighbours have
experienced qualitative changes since 9/11. Complexity must be understood duly.
7. On account of the highly penetrative information technology (e.g. expansive spying) and war
technology (e.g. drones, IEDs, and bio warfare), modern warfare involves common individuals
and households as well.
8. Impacting economic outcomes of countries/companies is a significant intervention in present day
warfare. Just to explain, through a complex of international financial systems, certain individual
companies received funds for financing politico-military activities. Pakistan remains a major
victim of such sneaky forms of operations.
9. The world has increasingly been globalized and individual countries/companies are influenced
(one way or the other) instantaneously; so the speed of response from the relevant quarters is
important.
10. We live in a highly deceptive and complex world virtually nothing is straight and honest. Psywars and cultural wars have taken new significance, and have acquired powerful dimensions
due to satellite TV and social media.
11. On account of the rising power, China (US$9 Trillion economy), and resurging politico-military
power of Russia, global and regional environment have been changing significantly. This is a
reality and has created new operating conditions for individual states; Pakistan seems to be at
the forefront of the global dynamism particularly after the events of 9/11.
12. During the last several years, the US strategy about war on terror vis-a-vis Pakistan has
changed from occupying Afghanistan to AfPak to PakAf and then to Asia-centric (Markey 2009,
2014). While the US strategy has been changing, the goals of the scheme remain the same (that
is, taming Pakistan).
13. The US will withdraw its topics from Afghanistan in the second half of year 2014. It will create
new threats and opportunities. America plans to leave India as its proxy in Afghanistan.
Keeping the above assumptions/realities in view, Pakistan needs to design an appropriate
foreign policy that is duly integrated with domestic socio-political conditions. The new foreign policy
should aim at friendly relations with all neighbours in the vicinity and beyond.

Analysis, Arguments and Findings


Figure 1 shows the dynamics of globalization and its effect on the policy of individual
nations. Global environment can change qualitatively and rapidly. To address the emerging and
routine policy issues, the foreign policy of Pakistan should be dynamic and alert. The moment some
change comes up from other countries, our think tanks must have already pondered those potential
urgencies.
It may be noted that the sole super power status of the US, burgeoning information
technology (satellite TV and social media), and the 9/11 events together created certain conditions
whereby America embarked on wars with several countries, including Afghanistan/Pakistan. These
wars created a new environment in many parts of the world and produced urgencies for individual
countries for which they were not ready.
In this context, Pakistan must have a multi-dimensional foreign policy that is robust in
spheres of bi lateral ism/multi lateralism/globalism and must be ready to address urgencies. Pakistan
obviously was not prepared for the phone call received from Collin Powel in 9/11s wake. This
happened to be a grave incident of the century but todays environment can create different
urgencies for individual countries. Therefore, Pakistan should have specialized think tanks working
on different regions but in an integrative way. We can learn such lessons from several countries,
particularly from Turkey, China, Iran, and the US.

Figure-1: Dynamics of Globalization and Need for Multi-dimensional


and flexible Foreign Policy

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Figure-2: Quantification of the Factors about Bi-lateral and Multi-lateral


Relations with Neighbouring Countries

China
With regards to China, Pakistan should work to improve relations by deepening economic
ties. The expanded trade should improve Pakistans economy in such a way that it creates
employment in Pakistan. Technology transfer on various economic ventures should be emphasized
for having sustainable growth in the country. To this end, Chinas state and people are eager to
develop stronger economic ties with Pakistan.
Geostrategic benefits can be expanded through the development of communication
infrastructure, including the use of the deep sea Gwadar port of Pakistan, and putting up the due
road/rail system to create links with the Central Asian states.

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Cultural relations with China seem to be quite weak as there is very little tourism between
the two countries. There should be special emphasis on building cultural relations between the two
important nations of the region. China is a booming economy and has a per-capita income of U
S$6700, indicating a huge potential of travel to Pakistan.
Military relations have been strong for the last several decades but can further improve
possibly through joint manufacture of defence equipment etc.

Iran
Iran is a powerful Muslim nation having a great pride in its history, culture, and civilization.
The country has huge energy and mineral resources along with a skilful populace. It is a holy land for
Shia Muslims spread around the world and enjoys a special status among all Muslims around the
globe. Iran rightly boasts about its history as a past ruler and creator of knowledge. The country is
led by powerful clergy and highly educated people who deal with diplomatic matters with utmost
expertise. Its leadership interact with global leaders with high level of personal and national
confidence. The speeches of former President (Mahmoud Ahmedi Nijad) of Iran at UN forums reflect
Iranian pride in their nationhood.
Iran borders Pakistan through the highly geostrategic province of Baluchistan. Iran sells
some energy (oil and electricity) to Pakistan. Pakistan used to have strong trade and logistic ties with
Iran during the 1960s and later. Both the countries were part of strategic agreements like SEATO and
CENTO.
Pakistan needs to improve its relations with this great Muslim civilization in several
dimensions. A look at Figure 2 shows low scores on all the five dimensions of mutual relations. Iran is
geographically linked with the Middle East, Turkey, Central Asian States, and Afghanistan, which
makes it highly significant from a geostrategic perspective. Pakistan needs to develop brotherly
relations for geostrategic depth and comfort. It will provide opportunities for trade and economic
gains. Pakistan and Iran share a common faith. Many people travel to the holy city of Mashhad for
pilgrimage, and tourism based on religion can grow easily. This can help develop public sentiment for
both countries, and thereby strengthen state relations.
In short, expansion of trade has a great potential due to cultural, religious, and logistical
factors. Based on the strong history of military relations, Pakistan should develop security ties for
mutual support. People of both the nations will appreciate this politico-military step as it will create
security-related comfort for both the countries. The two great powers of Asia (China and Russia) will
support such a relationship more eagerly as compared to the past. This is a new reality and both
countries must understand the nature of the emerging geostrategic environment and cash in on them
for mutual benefit.

Afghanistan
After the 9/11 events in 2001, Afghanistan was occupied and nearly 150,000 troops from
America and NATO were stationed there. Afghanistan is a religiously charged Muslim nation and has
strong cultural ties with the people of Pakistan. Pashto language is spoken in the K PK province of
Pakistan and the neighbouring regions in Afghanistan. There are strong trade ties between the two
countries as Afghanistan is a landlocked country, and most of its imports come through Pakistani.
These goods pass through Pakistan roads, and drivers are at liberty to spend time in both countries
freely. The international border between the two countries is porous and visa restrictions are
generally ineffective. However, since the occupation of Afghanistan by the US, border restrictions
have become strict affecting travel. It is known that militants who make terrorist attacks in Pakistan
find safe havens in Afghanistan. This can only be checked if the two countries develop brotherly
relations for creating strategic comfort for each other. Afghanistan can provide a corridor for trade
between Russia/Central Asia and Pakistan/China. It is a great economic asset for the whole region
and that is why there is a huge interest of all the great powers in this country. Strong ties can help
Pakistan to expand its trade with Central Asia. Pakistan needs gas/energy from Central Asia which
flows through Afghanistan.
The religious bond between the two peoples is very strong which strengthens their
emotional and mental ties. These ties can easily be used to develop tourism and trade and give
permanence to their friendly relations.
Social and cultural linkages are gaining new importance around the world. Pakistan should
be proactive with Afghanistan particularly on people to people exchanges. Ethnic differences with
Tajiks, Uzbeks and Hazaras can be diluted if common religion aspect is emphasized.
Both Pakistan and Afghanistan have been the centre-stage of the war on terror. The history
of strong security relations between the two countries makes it easy to develop mutually beneficial
military linkages. India has been promoted by the US to build Afghan army. India has established
several consulates along Pak-Afghan border which is great challenge for Pakistan and needs careful
scrutiny in policy formulation. In my view, the religious and cultural affinity between Pakistan and
Afghanistan can be put to use appropriately to offset the role of Indians in the security apparatus of
Afghanistan. Secondly, there is a huge amount of daily trade between Pakistan and Afghanistan; this
all-time active link must be used to neutralize Indian role in Afghanistan.

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Due to the ongoing war on terror in Afghanistan-Pakistan region, the relations between
these two neighbouring countries had been uncertain. The war has created certain fears among the
people of both the countries but we should address this issue by improving trade and investment,
cultural tourism, and religion-based interactions. Such moves will improve public sentiment towards
each other, and thereby build supportive relations between the two nations.
In summary, Pakistan and Afghanistan are strongly linked countries in terms of geography,
tradition, religion, daily trade, travel, and a porous border. These relations are long and sustainable.
Pakistan needs to build on all the dimensions and design an innovative support structure for the
benefit of the two nations. It will enhance national confidence of Pakistan, which is necessary for
becoming an important nation of the region and the world.

India
India remains the most important foreign policy challenge for Pakistan. It is a country of 1.2 billion
people and boastful about its democracy. The geopolitics of the region has forced antagonistic
relations between the two countries.
Due to the long history of conflict with India, Pakistans perceptions on the five dimensions of
bilateral relations (see Figure 2) are negative. This situation demands a careful scrutiny. For
example, cultural affinity between the two nations could be a positive factor but Indian domination in
cultural spheres, including mass media, has damaged the Pakistani identity.. Trade between the two
countries should have been mutually beneficial but the traded items indicate a different scenario.
Pakistan exports cement and gypsum to India, and the imports into Pakistan are mainly perishable
commodities like vegetables and fruits. Accordingly, trade between India and Pakistan leaves a net
negative effect on Pakistans economy. On account of generally negative effects of India-Pakistan
relations on Pakistani state, the scores allotted to all the dimensions are negative.

Turkey
Moving beyond the immediate neighbours, Pakistan should build supportive relations with
modern Muslim state of Turkey. Great sentimental relations exist between the two nations since the
days of World War 1 when India (Pakistan) sent army to the support of Turks. There is a significant
reciprocal positive public sentiment. Accordingly, there is a great potential of tourism and trade
between the two countries. The improved relations will increase strategic neighbourhood depth.
Turkish foreign policy focussed on such moves across several countries has created economic and
political benefits. Pakistan should come forward to advance brotherly relations with Turkey. It is
heartening to note that active trade relations exist between Turkish government and Punjab
government. These relations can be improved further for mutual benefit.

Russia
Russia is a resurging power and it has shown its weigh in the recent crises in Syria and
Ukraine. Russia is most relevant to Pakistans bright future. Pakistan seems to be attentive to the
emerging need to develop strong relations with Russia. The senior army command from Russia
visited Pakistan in 2011 and 2013; and in 2012, General Kayani of Pakistan visited Russia. These
visits were the first ever after the 1980s when military relations between the two countries got
strained due to Pakistans support to Afghan Mujahideen against the Soviets. Pakistan should build
on these initiatives and develop trade and tourism, along with building military ties. Such links with
Russia will augment support for Pakistan and eliminate any perceived threats from that part of the
world. Russia has already lifted a ban on purchasing Russian arms.
Russia is asserting itself under the strong leadership of Vladimir Putin. The prestigious
magazine The Economist of March 22, 2014 (page 13) acknowledged on the emerging influence of
Russia: Even if the West is prepared to take serious measures against Mr Putin, the worlds rising
powers may not be inclined to condemn him. This statement suggests the powers may not be
inclined to condemn him. This statement suggests the growing power of Russia not only in the
region but around the world. Putin seems to be determined to restore Russias place in the ranks of
great powers (Time, Maypowers (Time, May 19, 2014, page 29). The Economist of February 1,
2014 in its cover story: The triumph of Vladimir Putin tacitly acknowledged the growing power of
Russia. The details of the article seem anti-Russian but the fear of its rise as a great power was
equally evident.
It may be noted that large number of Muslims live in Russia, and there must be positive
religion-based mutual sentiment for each other. Similarly, about two-fifths of Russian army is
composed of Muslims and this religious context of both the nations makes them natural allies. Russia
is located very close to Pakistan although the two countries dont have common borders; the
geographical proximity dictates for strong relations with Russia.

US
Animosity with US is not good for any country. Pakistan should continue working with the US
but should clarify its security needs/concerns. Russia, China, Brazil, and the Muslim world as a
whole have created new conditions for Americans to operate carefully. The US has decided to
withdraw its forces from Afghanistan and has closed 21 military facilities in Europe recently. In the

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policy speech Obama gave at the US Military Academy, Westpoint, on May 28, 2014, he indicated a
shift in American policy towards using non-military means to address global issues. This was an
important change at least in the present politico-security circumstances around Pakistan.
The changing conditions must be understood comprehensively by Pakistan, which should
then formulate its bilateral/multilateral policies with its neighbours. In other words, Pakistan should
assert its sovereignty and develop multi-dimensional relations with neighbouring countries in
particular and other countries across the globe in general.

Conclusion
By improving relations with neighbours and other important countries around the world,
Pakistan should gain confidence as a successful state. Pakistan must improve relations with its
neighbours even further and attain power to sustain itself. The improvement of relations with China,
Iran, and Afghanistan should become more supportive and can be used to deal with the challenge
from India. It must be borne in mind that this is also the need of our neighbours. Pakistan should not
think that any country will be shy to have peace. In todays environment, we have to learn to live with
contradictions. Just to explain, India may have good relations with Iran but that does not mean that
Pakistan could not have equally friendly relations with Iran because India is not friends with us. Every
country wishes to have peace with its neighbours and Pakistan should become proactive to promote
friendly relations with all countries of the region including India.

Recommendations
1.

Pakistan should understand the rapidly changing global and regional environment; speed is the
game.
2. Pakistan should learn to live with contradictions and develop good relations with all neighbours.
3. Pakistan should strive for peace with all the immediate and distant neighbours.
4. Turkey and Russia should be considered by Pakistan as significant neighbours. Peace with
Arabian Sea and Indian ocean is also important for Pakistans future.
5. Pakistan should pursue multi-dimensional and duly flexible foreign policy based on dimensions
including (a) geostrategic, (b) economic/trade, (c) military/security, (d) public sentiment/opinion,
(e) culture/religion.
6. Pakistan should be proactive to deal with individual countries in relation to their specific needs
and with due flexibility.
7. Pakistans foreign policy should be alert to deal with fast emerging conditions in bilateral and
multilateral sense.
8. Pakistan should understand its short, medium, and long term interests with each country and
should be able to prioritize in the given or emerging conditions.
9. Pakistan should be able to look through its interests in the frames of bi
lateral ism, regionalism, and global ism. Sometimes, bilateral interests
are dominated by regional or global interests. However, the region
around Pakistan has become hugely important for the world in
geostrategic sense.
10. Pakistan should gain confidence by telling itself that it has survived a
long war on terror. It should be a great confidence booster to deal with
future challenges.

The Impact of the


Islamic State in Asia
Ahmed S. Hashim

Background: A Resurgence of Transnational Terrorism in Asia?

he dramatic successes of the Salafi-Jihadist terrorist movement, the Islamic State of Iraq and
Syria (ISIS) and its creation, the Islamic State (IS) in the far western part of Asia known as the
Middle East (or Southwest Asia) stunned the world in mid-2014. These successes were
facilitated by the presence of motivated and fanatical foreign fighters from Europe and from
Asia and by the tactical alliance with former Iraqi insurgents and former members of the Bathist
regime of Saddam Hussein.
Asian governments have become worried by the potential threat posed by the Islamic State.
Governments uncovered recruitment drives for the so-called jihad in Syria and Iraq, and arrested

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dozens of people either hoping to go on the jihad, engaging in facilitating recruitment, exhorting
donations, or conspiring to blow up infrastructure in support of the jihad. Some analysts have claimed
that the number of Asians from all parts of the continent outside of the Middle East (i.e. South Asia,
Central Asia and Southeast Asia) involved in the conflicts in Syria and Iraq on the jihadists side could
be as high as 1,000. The growing reach of ISIS/IS has been driven in part by social media and could
pose a security threat in the coming months as its adherents in Asia turn to it as an alternative to the
home-grown groups whose prestige and capabilities have been degraded.
Is Asia facing the spectre of renewed terrorism inspired largely by trans-national terrorist
groups elsewhere? This is a question that many in the various sub-regions of the continent are
asking themselves as 2014 came to an end. Asians participated in the war against the Soviet Union
in Afghanistan between 1980 and 1988. Those who survived returned to their homes with pride and
an inflated sense of their importance. Over a decade ago, many militant Islamist groups in Asia
viewed the Al-Qaida (AQ) attacks on the United States on 11 September 2001 positively.
Militant groups such as Jemaah Islamiyah (JI) and Abu Sayyaf (AS) in Southeast Asia
sought to mimic AQ by launching daring and bloody attacks within their own territories. Jemaah
Islamiyah, which set up cells throughout Southeast Asia had a short 12-year career, but it was a
violent one. Created by Abu Bakar Baasyir and Abdullah Sungkar, members of the Islamist
movement Darul Islam, the two believed that the JI should wage a jihad against Indonesia in order to
set up an Islamic state. Though they did not limit themselves ideologically to Indonesia but to all of
Southeast Asia, it was Indonesia, in particular, that suffered the most at the hands of the JI. Over the
course of a decade, JI conducted five major terrorist assaults in the country, beginning with the 2002
Bali nightclub bombings that killed more than 200 people of whom 88 were Australian tourists. This
was followed by well-executed attacks orchestrated against Western hotels and embassies between
2003 and 2005. There was a gap in attacks until 2009, when assaults on two U.S. hotel chains in
Jakarta showed that the JI still had teeth. JI was also infamous for its attacks on Churches and
Christian priests and its participation in inter-communal strife between Muslims and Christians in
Sulawesi.

Many observers began to refer to Southeast Asia as the second front after the greater
Middle East in the global war against terror. By the mid-2000s, the militants had over-reached
themselves: plots were uncovered and thwarted, terrorist leaders were killed or apprehended and put
on trial, security and intelligence services got better, and bilateral and multilateral cooperation
between states improved. Asia, it seemed, had dodged a bullet. In 2014, a new terrorist scourge in
the shape of ISIS seems to be having an impact in Asia in general, and once again, Southeast Asian

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countries have been thoroughly disconcerted by the presence of relatively significant numbers of
their citizens in the ranks of ISIS/IS and other jihadist groups.
The purpose of this report is two-fold. First, it intends to assess the current and future impact
of ISIS/IS on Asia beyond the Middle East. While there will be some discussion of the situation in
South Asia and Central Asia, the focus will be on Southeast Asia and Australia. Second, it will assess
the danger as objectively as possible. While we should not underestimate the potential dangers
posed by alarming levels of support for IS in the home countries, by the ability of would- be jihadists
to travel overseas, and by the potential impact of returnees from the jihad, we should not
overestimate the impact of ISIS and IS in the region either. Certainly the phenomenon of ISIS and IS
pose challenges for Asia beyond the Middle East (including in Europe and North America), but the
obstacles facing a second wave of terror in Asia, particularly Southeast Asia, need to be laid out.

AQ and ISIS/IS Rivalry in the Hearts and Minds of Muslims in the Indian
Sub-continent
South Asia defined here as Afghanistan, Bangladesh, India and Pakistan is home to
half a billion Muslims. Some analysts and government observers are concerned that ISIS/IS will
make inroads into South Asia; others are not so sure and argue that while it may have sympathisers
there is still a long way to go before it manifests itself physically in an operational capacity, and even
that may never happen.6 In Afghanistan and Pakistan, the Islamic State would be entering an arena
already replete with large numbers of empowered and well-equipped extremist groups that may not
take too kindly to its entry into their domain. Despite the disdain with which AQ is being increasingly
seen by younger and more disgruntled Sunni youth, AQ has a considerable amount of support in
Afghanistan and Pakistan because of long historical links going back to the Soviet-Afghan War. On
the other hand, despite the tenuousness of solid and accurate information, some of the more militant
groups in both countries may have either declared support for IS against AQ or split from the parent
group and created pro- IS splinter groups.

Afghanistan has suffered from rampant violence for over three decades. Its future following
the withdrawal of foreign military forces helping the Kabul government fighting the resilient Taliban
insurgents remains tenuous at best. The governments control over the country is weak. The
capabilities of the Afghan military and security forces against the Taliban insurgents is questionable,
and the Taliban themselves despite their decentralised nature and factionalism have managed
to bring large parts of the country under their control. This is the kind of uncertain environment that IS
likes and would move into if given the opportunity. Reports out of Afghanistan claim that IS

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sympathisers some of them former Taliban commanders have begun to recruit actively on
behalf of the caliphate in Helmand province in the southern part of the country. This brazen entry
into Taliban territory has sparked armed clashes between local Taliban units and the IS sympathisers.
Given the strength of the Taliban in Helmand, it is not clear how much traction IS sympathisers will
gain in Afghanistan.
Deadly jihadist groups such as the Tehrik-iTaliban Pakistan (TTP), which has been in the
doldrums in recent months due to pressure mounted by the Pakistani military and due to intense
factionalism and leadership rivalries, could team up with ISIS in order to revitalise themselves.In midDecember 2014, the TTP committed a deadly and horrific massacre of school children at an army
school in Peshawar to exact revenge for the Pakistani militarys offensive against them and to show
their ruthlessness and determination. This action shows that it is cut of the same cloth as ISIS.
Nonetheless, for the TTP to defect from AQ and recognise the Islamic State, would be a big step and
fraught with danger. AQ is still a recognised and well thought of organisation among extremists in
Pakistan with whom it has established close links the Lashkar-e-Jhangvi, the TTP and other
Pakistani Taliban factions claim fealty (bayah) to Mullah Muhammad Omar, the head of the Afghan
Taliban, whom they refer to as amir al-mumineen or commander of the faithful. What benefit would
the TTP gain by switching allegiance? The TTP derives its legitimacy from its long association with
the Afghan Taliban and common ideological backgrounds. Should the TTP break with AQ and the
Afghan Taliban which is associated with AQ it would transform itself into an outsider and
possibly become the focus of other extremist groups wrath. The Islamic State would not be in a
position to help it. Finally, even if elements within the TTP favour joining the Islamic State, the
fractious organisation is in no position to make such a major decision right now due to leadership
divisions.

All of the above factors do not preclude the possibility of elements within the TTP splitting
from the main body and declaring support for the Islamic State. What makes the TTP potentially
attractive to IS is its track record of deadly attacks and the fact that it is thoroughly anti-Shia, having
targeted Shias in Karachi and in the Kurram Agency. Nonetheless, defections are not unusual; in the
summer of 2014 several TTP members of the Mehsud clan a core element of the organisation
decamped because a non-Mehsud had become the TTP leader. In this context, in August the TTP
suffered yet another split when a group known as Jamaate-Ahrar, which was ostensibly inspired by
the successes of ISIS, broke off on its own. In the final analysis, IS may not need the TTP and its
associated problems. Pakistan is replete with deadly extremist splinter groups (eg. Sepah-e-Sahaba,
aka Ahl-al-Sunna wa-al-Jamaat) that might feel more empowered if they linked with the IS, and their
anti-Shia credentials are not any less than those of the TTP. Moreover, they are also known to attack
Sunnis who do not share their view of the world.
Both India and Bangladesh have been spared to some extent from terrorist violence of the
scale that afflicts the other two South Asian countries. However, both AQ and IS have begun to
recognise the alleged potential that lies in Indias large Sunni Muslim population, which has generally
been immune to the siren song of the radicals despite the fact that Indias Muslims have suffered
from relative deprivation, are sometimes suspected of harbouring loyalty to Pakistan, and have been

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the victims of communal violence over the years. Nonetheless, despite the emergence of what can
be called Indian jihadism, Indian Muslims have not been inclined to trans-national jihadist sentiment
nor have they mobilised to confront the problems they allegedly face at the hands of the Indian state
and the majority Hindu population.
The relative quiescence of Indias vast pool of Muslims (Sunnis) is what the extremists wish
to change. Two years ago, Ayman al-Zawahiri initiated the process of trying to mobilise Indian
Muslims for AQ. The process began before the emergence of ISIS as a rival to AQ. It was only in
2014, however, that Ayman al-Zawahiri declared the establishment of an AQ Indian-affiliate known as
al-Qaida in the Indian Sub-continent (AQIS) or al-Qaida fi Bilad al-Hind (AQAH) under Maulana
Esam Umar. This growing interest in Indias Sunni Muslim population was reinforced in al-Qaidas
first English-language magazine, Resurgence. In an article titled The Future of Muslims in India,
Maulana Esam Umar wrote: the time has come for the Muslims of India to play a proactive role in
the Jihad in Afghanistan and benefit from the experience of forty years of the Jihad so that they may
build a better future for coming generations. The article went on to declare that the Muslims of India
are discriminated against and suffer from humiliation at the hands of the Hindus.
IS has also moved to reach out to Indian Muslims; it makes use of local languages such as
Hindi, Punjabi and Bengali to attract recruits, sympathisers and people with needed skills. However,
now that the Islamic State has recognised the value of mobilising Indian Sunnis on their side, a
rivalry has emerged between AQ and IS for the hearts and minds of Indias Sunnis. For both sides,
winning the hearts and minds of the large Sunni population in India is important strategically and
ideologically; India will be the battleground between the forces of Islam and infidels just as Khorasan
Afghanistan, Iran and Pakistan before the final battle in the Middle East between the forces of
good and evil. India is also very much part of the rivalry between AQ and IS, and this could have
serious security implications for the sub-continent. It would not be far-fetched for both or either group
to promote as much tension as possible between neighbouring India and Pakistan. Moreover, given
the immense hostility that jihadi militants have for the Shia branch of Islam, any significant
radicalisation of elements of the Sunni Indian population could lead to intra-sectarian violence in
India among Muslims. Sunni extremists have already targeted Pakistani Shia over the years. India
does not need this on top of the existing Hindu-Muslim hostilitya factor that already affects
relations with Pakistan. Bangladesh, a poverty-stricken country with no end to problems, was
disconcerted by the fact that ISIS/IS influence seemed to have reached it. On 18 September, police
arrested one Abdullah al-Tasnim, the so-called emir of Jamaat al-Mujahideen Bangladesh (JMB)
along with six other members for acts contrary to the security of the state. These ranged from
accusations of seeking to travel to join the foreign fighter contingent in Syria to planning attacks
against government installations and fomenting assassination plots against VIPs. In late September
2014, police in Dhaka, the capital, arrested a 24- year old U.K. citizen of Bangladeshi origin who they
accused of coming over to recruit people to go fight in Syria.

AQ and ISIS/IS in Central Asia and Xinjiang


What has been the impact of the turmoil in the Middle East on Central Asia and the Chinese
province of Xinjiang? Terrorism undertaken by local groups has afflicted these two regions despite
the notorious attempts of the Central Asian and Chinese governments to limit reporting on the topic.
Islamists in Central Asian countries have been fighting secular authoritarian governments that are a
legacy of the Soviet era. The number of Central Asians involved in the jihad in Syria and Iraq varies
wildly according to the sources with estimates varying from 300 to 500 or even considerably higher. A
report from Kazakhstan estimates that the number may be as high as 1,400.
The countries of Central Asia vary in the strength of their state institutions and the
capabilities of their coercive instruments allowing some to eradicate or push out extremist groups
from their territories and implementing tough new anti-terrorism laws. The only problem is that the
groups do not go far away, they simply migrate to the nearest poorly governed or ungoverned space
to continue their activities and to develop links with like-minded extremists. Others like Tajikistan,
which hosts a number of banned extremist groups continue to arrest young men suspected of trying
to travel to join the IS in Syria. In early December 2014, Tajik authorities announced the arrest of 50
men allegedly planning to travel to the Middle East.
In the Chinese province of Xinjiang in the far western reaches of the country, the Turkic and
Muslim Uyghur population formerly a majority in Xinjiang and which many call East Turkestan
have been engaged in low level violence against Han Chinese migration into the territory and
discrimination in political, cultural and economic life.
For the longest time jihadist groups paid little or no attention to the perceived plight of
Muslims in Central Asia and China. They were remote and few people from the regions joined the
trans-national jihadist movement. Nonetheless, in 2009 a leading member of al-Qaida, Abu Yahya al-

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Libi, was the first senior member of the organisation to utter comments on the situation of the
Uyghurs.
In a video posted on an Islamist website on 7 October 2009, al-Libi urged the Uyghurs to
launch a jihad against oppressive China and called upon Muslims the world over to become aware
of the plight of the Uyghurs and to lend them support against the depredations committed by China:
The state of atheism is heading to its fall. It will face what befell the Russian bear. There is
no way to remove injustice and oppression without a true return to their [the Uyghurs] religion and ...
serious preparation for jihad in the path of God the Almighty and to carry weapons in the face of
those [Chinese] invaders. It is a duty for Muslims today to stand by their wounded and oppressed
brethren in East Turkestan... and support them with all they can.

In recent years, Islamist militants have begun to pay greater attention largely due to the
increased presence of Central Asians and Uyghurs in trans-national Islamist movements (the
numbers are still small in comparison with other countries) and due to the facilitation of
communication provided by social media. Uyghur militant groups such as the East Turkestan Islamic
Movement (ETIM) allegedly have a presence in remote regions of Pakistan where it has also
established links with other like-minded militant groups. Those links have allowed Uyghur militants to
propagate their tale of woes at the hands of the Chinese government. The countries of Central Asia
and the Peoples Republic of China are worried by what seems to be the sudden focus by AQ and
ISIS/IS on their respective regions. In July 2014, the so-called Caliph of the Islamic State, Abu Bakr
al-Baghdadi accused China of oppressing Muslims. In a speech that month, al-Baghdadi stated that
Muslim rights have been trampled upon in China, India, Palestine, among many other places.
Not to be outdone by AQs boss, Ayman alZawahiri issued some statements about the
Uyghur Muslims of Xinjiang. However, it was AQs first English-language propaganda magazine,
Resurgence, which explicitly took up the issue of Xinjiang or East Turkestan. In an article entitled 10
Facts About East Turkestan, the organisation sought to portray Xinjiang as having long been an
independent Muslim entity that was only recently illegally acquired by the non-Muslim Han Chinese:
in the last 1,000 years of its Islamic history, Xinjiang has remained independent for 763 years, while
237 years have been spent under Chinese occupation at various intervals. However, the
expressions of sympathy for oppressed Muslims in both Central Asia and Xinjiang, which both AQ
and ISIS have uttered in recent months, does not necessarily mean that they have the band-width
to do much of significance in an operational sense either by sending men or material to help local
militant groups in both places at the present. However, the threat to Central Asia and Xinjiang could
very well lie in the near future when nationals return from the wars in the Middle East. The Chinese
government estimates that 100 Chinese both Uyghur Muslims and Han Chinese are fighting in
the Middle East with jihadist groups.20 A recent media report suggested that the total number of
Chinese nationals fighting alongside ISIS may be as high as 300.

Islamic States Impact on Southeast Asia


It is Southeast Asia, which for purposes of this report includes Australia as well as those
Southeast Asian countries with Muslim- majority or substantial Muslim-minority populations, that has

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been the most worried by the impact of IS because of the number of foreign fighters from the subregion who have gone to Syria and Iraq. This worry stems from the lingering fear of what they could
do were they to come back, and because ISIS and its creation IS seem to have attracted the support
of small but increasingly vocal groups of Islamist militants in the sub-region who might conduct local
attacks on their own. The brutality of ISIS, so evident in its mass murder of Syrian and Iraqi soldiers,
Muslim civilians, minorities, and beheadings of innocent Western journalists, has been applauded by
young and disgruntled Muslims but widely condemned by most Muslims, including leaders in
Southwest Asia. In Indonesia, former President Susilo Bambang Yudhoyono called ISIS a humiliation
for Muslims, while Malaysian Prime Minister Najib Razak condemned ISIS for crimes committed in
the name of Islam.
In Spring 2014, Malaysian police arrested 20 ISIS-inspired individuals plotting to blow up
pubs, discos and a Carlsberg beer brewery. Much to the consternation of Malaysian security officials,
there has been no let-up in the number of people under suspicion or being interrogated or even
arrested for trying to travel to join the jihad or for expressing support for IS. Malaysia has expressed
particular concern at the threat posed by extremists to its exposed state of Sabah, which had been
targeted by Islamic militants from the southern Philippines, home to pro- Islamic State extremist
groups such as Abu Sayyaf.3 Malaysia has also been worried by the threat of extremist groups such
as ISIS seeking to recruit trained soldiers from the Malaysian armed forces following the arrest of two
soldiers for allegedly expressing support for the Islamic state. Not surprisingly, Malaysia has been at
the forefront of calling for further regional cooperation and intelligence sharing to fight the transnational jihadist phenomenon.
Tiny Singapore is a country that treats threats to its national security very seriously because
of the structural vulnerabilities it labours under: small size and the fact that it is sandwiched between
two very large neighbours, Indonesia and Malaysia; it is a multi-racial society which must work hard
to maintain harmony among its various communities. It is also a major commercial and financial
centre, a fact that makes it a target rich environment. One of its biggest worries in recent years has
been the danger of trans-national terrorism, which can threat its internal harmony and seriously
undermine its reputation as a stable and secure global economic hub. Unsurprisingly, Singapore
takes counter-terrorism measures seriously because it had been targeted in the past. Even then,
prosperous and well- run Singapore has seen at least two of its citizens joining IS.
This has been a source of concern but because of its efficiency and small size, Singapore
can hope to better contain attempts by citizens to travel to join the jihad and to deal effectively with
returnees because of their small numbers even if they expand beyond the current handful and
because it has a de-radicalisation programme and effective surveillance conducted by its police and
security services.
What concerns Singapore most is the likely impact of jihadists returning to Singapores close
neighbours, such as Malaysia and Indonesia, as these radicals could well have their sight on the
island state. The Deputy Prime Minister Teo Chee Hean told the Parliament: If this group expands in
Southeast Asia, it will pose a regional threat like the [terrorist Jemaaah Islamiyah] network which had
aimed to set up a Southeast Asian Islamic archipelago encompassing Singapore.27 Furthermore, its
decision in November 2014 to send combat support troops to aid the anti-IS coalition may lead
jihadist groups to focus on that country.
Indonesia worries the most about the ISIS threat in the region because of long historical
experience with terrorism, extensive attempts by local militant groups to mobilise on behalf of the
jihad in Syria and Iraq, and because of the fear that the returning fighters could threaten the security
of the country by injecting life and vigour as well as expertise into the largely moribund and poorlytrained local jihadist groups. All of this has been clearly reflected in statements by officials and senior
military officers. General Moeldoko, the commander of Indonesias armed forces, told a gathering of
people at the S. Rajaratnam School of International Studies in late October 2014 that regional
countries must work together to deal with the ISIS threat. He expressed particular concern about
what might happen when the jihadist fighters return to their home countries: When they return to
their countries...it is not easy to predict what actions they might conduct. This why we need to think
about scenarios to anticipate what might happen when they return.
Indonesia has an extensive history going back decades in trying to deal with violent Islamist
movements that have threatened its national security. The story goes as far back as the early years
of independence when Islamist political activist, S.M. Kartosuwirjo, proclaimed an independent
Islamic state in 1949 in West Java. This set the stage for the emergence of the Darul Islam
movement, which attained control over a number of provinces. Jakarta immediately perceived it as
an internal security threat and ordered the national army to crush it. This task took more than a
decade (1949-1962) of counter-insurgency campaigning that led to thousands of deaths. The
struggle of the Darul Islam movement inspired the emergence of Negara Islam Indonesia (NII)
movement in the 1970s, which also aspired to establish an Islamic state by revolutionary action. That

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movement, in turn, inspired various terrorist splinter groups eg. Komando Jihad to commit acts
of terror, including attacks on government installations and the hijacking of a plane from the national
carrier, Garuda. The most dangerous terrorist threat came with the emergence of Jemaah Islamiyah
in the mid-1990s and whose terrorist campaign was detailed at the beginning of the study. It is this
historical background that makes Indonesia very jittery about the current situation.
Indonesian Islamist organisations have paid considerable attention to the ongoing violence
in Syria and Iraq since 2011, with some radical Islamist groups declaring support for the Islamic
State. In 2012, Islamist organisations and charitable groups raised funds and sent teams of medical
volunteers to render aid to the Syrian civilian population caught in the crosshairs of a brutal civil war.
However, many may have travelled there to join jihadist combat outfits under the guise of
humanitarian aid. The Hilal al-Ahmar Society in Indonesia, associated with the JI and which is trying
to rejuvenate itself, has sent medical supplies, food and personnel. Some of the personnel have
been suspected of switching uniforms from relief worker to rebel. This dynamic has Indonesia
worried on two levels: first, fund-raising for the jihad in the Middle East has provided Indonesian
extremist groups with the experience in raising money at home; and second, the returnees from the
jihad could provide a well-experienced core or leadership cadre for the embryonic and largely
incompetent contemporary groups who might be seeking to emulate what JI did in the first decade of
the 21st century.
Another aspect that deserves scrutiny, but which is rarely mentioned, is the potential for
Sunni-Shia violence in Indonesia as a result of incitement by returnees against Indonesias Shia
population. The Sunni extremist movements are violently anti-Shia, this has been expressed in
statement and in deeds in Syria and Iraq and their stance may gain traction in Indonesia with
potentially dire results for inter-communal relations. Tensions between Sunni and Shia are a potential
problem that Jakarta will not be able to duck for much longer. As Chiara Fomichi, a well-known
specialist on Indonesian Islam said in an interview, throughout the 1980s-1990s, anti-Shia attitudes
were limited to government and religious organisations statements, requesting the Indonesian
ummah to hold on to their Sunni traditions and stay away from Shia Islam. This was not exactly a
positive attitude towards Shias; however, no physical confrontation ever took place. Even when the
first attacks occurred in the early and mid-2000s, these were minor incidents which were dealt with
locally and exploring the relevant social, economic and political rationales, with no suggestion that
tensions could be eased by Shias converting to Sunnism. In 2012-2013, a Shia religious school and
several houses were burnt in the so-called Sampang Incident, which led a hundred Shiites to flee
from Madura to Java. The governments diffident attitude the Shia villagers might be able to return
to their homes if they considered returning to the true teachings of Islam, implicitly encourages
open season on Muslim minorities by fanatics. Moreover, such views are not consistent with the
Indonesian Constitution, which allows freedom of religion.
The government of Indonesia tasked the National Counter-terrorism Agency (BNPT) with
maintaining surveillance of extremist activities of all kinds in the archipelago including monitoring of
open support for IS in the social media and with preparing for returnees from the jihad.
The ISIS danger to the Philippines is now small, but it can quickly grow, both in the country
and especially in the Middle East where there are hundreds of thousands of Filipinos. There have
been several reports about ISIS elements or sympathisers recruiting followers in Mindanao
universities and schools. Some 200 Filipinos are said to have left the country and joined the selfproclaimed Sunni Muslim caliphate occupying vast northern swathes of Iraq and Syria. Former
president, defence secretary and armed forces chief Fidel Ramos said recently that at least 100 of
our young Filipino Muslims have already infiltrated Iraq to undergo training to return and be jihadists
or militants. In a YouTube video in August, the terrorist Abu Sayyaf Group (ASG) and Bangsamoro
Islamic Freedom Fighters, a splinter group of the Moro Islamic Liberation Front (MILF), pledged
support for the Middle East rebels. We have an alliance with the Islamic State and Abu Bakr alBaghdadi, declared BIFF spokesperson Abu Misry Mama. Misry denied that BIFF sent fighters to
ISIS or was recruiting for it. But, he added, if they need our help, why not? And reported on
Monday in this paper, a Lanao del Sur militant group called Ghuraba (strangers or foreigners in
Arabic) said a Khilafah Islamiyah or Islamic caliphate has been established in the country. This is
mere propaganda designed to elicit support and recruits; none of the small militant groups have the
capabilities to establish a functioning caliphate or so-called Islamic State.
But a number of Filipino commentators are worried by something else. They argue that the
immediate danger posed to Filipinos by the self-styled jihadist movement is not in the Philippines, but
in the Middle East. There were an estimated 2.5 million Filipinos in the region as of 2012, including
1.2 million in Saudi Arabia; 930,000 in the United Arab Emirates; and about 200,000 each in Kuwait
and Qatar. If ISIS or any other extremists want to target or pressure the Philippines, they do not have
to strike halfway across the world. They can threaten, kidnap, hostage and kill Filipinos in their
region, most of who are in nations like the four cited above, where the majority faith is Sunni Islam

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the religion espoused by ISIS. Many Filipinos have urged their government to take action to counter
the potential threat to Filipino nationals in the Middle East by educating expatriates on necessary
security protocols and cooperating with police and intelligence agencies in host countries.
Commentators have implored the government to avoid any pronouncements and actions likely to
provoke ISIS attacks on Filipinos in the Middle East, whom the Philippines has zero capability to
secure. President Benigno Aquinos offer to help the U.S. in its war against ISIS has been seen as ill
advised by Filipinos. His aid offer would contribute nothing that America sorely needs to fight the
extremists, but would put countless Filipino citizens in the Middle East at grave risk.
On the surface it would seem that the jihadist threat to Australia would not be a concern to
that country. It is far from the Middle East and is not traditionally seen as being involved in the
problems of the region. This is simply a bogus argument. Distance does not save a country from
terrorists if they choose to target it. Australia has been involved in Middle Eastern issues. It has
relations with many Middle Eastern countries and has participated on the side of the U.S. in military
operations in that region. Furthermore, Australia has an Australian Muslim population of around
500,000. The vast majority, of course, are law-abiding citizens who wish to benefit from the Australian
dream, but it is clear that for many their low socio-economic status and limited upward mobility
opportunities has been a source of resentment. Finally, the outbreak of the brutal Syrian civil war has
resonated among Australian Muslims because many of them are either Syrian or Lebanese by origin.
Some of them are Sunnis and some are Shia and there has been some tension between the two
sects in Australia.
Not surprisingly, the Australian government first mentioned the Islamist jihadist phenomenon
as a national security threat in 2010. In the Australian Security Intelligence Organization (ASIO)
report to Parliament for 2013-2014, ASIO puts the terrorist threat posed by jihadists at the top of the
list of security threats to Australia. Australia has been mortified by reports that between 60- 80
Australians are involved with the Islamic State in Syria or Jabhat al-Nusra, the AQaffiliated rival of IS.
It is not clear how many Australians are involved with other jihadist groups in Syria and Iraq.
According to the Australian Federal Police, more and more Australians continue to slip through the
net of increased surveillance to go fight in Syria and Iraq. The Australian government has proposed
significant measures such as control orders to restrict the movement of suspected radicals and their
interactions with like-minded individuals or cancelling the permanent resident status of those who
had gone to fight with ISIS and other groups to try to stem the flow of its citizens to the jihadist
battlefield. The fact that it has also sent military forces to join the U.S. coalition to fight IS has ramped
up the IS threats against Australians.
What worries the Australian government were calls from IS members for sympathisers at
home to attack people in Australia rather than traveling to join the jihad in the Middle East.39 It is in
this context that the siege of the Lindt Caf in Sydneys Martin Place in mid- December 2014 must be
seen. The gunman, Man Haron Monis or Hossein Mohammad Manteghi, an Iranian immigrant who
had converted from Sunnism to Shiism had a long criminal record and a history of abusive comments
against the families of Australian service personnel. He cannot be classified as a lone wolf terrorist
acting alone on behalf of an ideology. Rather, he was an unbalanced individual with a sense of
grievance against the Australian state. His grievances were half-baked political ideas delivered in
street speeches in Sydney and finally at the Lindt Caf siege during which he bizarrely asked for an
ISIS black flag. Nonetheless, Australia should be prepared for more serious political copycats in the
coming months. Although the ideas of Monis are unlikely to motivate a copycat, the psychological
impact of his personalised terrorism and the media attention given to the event in Martin Place
cannot have escaped the attention of those with malicious intentions towards Australia.

ISIS Threat in Asia: Between Exaggeration and Underestimation


In the alarm generated about the potential for ISIS/IS to threaten the rest of Asia, many
analysts have voiced the opinion that we need to take a step back and analyse the situation very
carefully. Indeed, this should be the starting point. We must navigate carefully between the Scylla of
hysterical overestimation of the threat and the Charybdis of underestimating the threat of transnational terrorism. How serious is the threat of the Islamic State to Asia?
First, while there is cause for concern about the potential impact of IS in the rest of Asia, we
need to be realistic about the threat and its magnitude rather than alarmist, particularly in light of the
fact that the situation on the ground in Syria and Iraq is still evolving. It is not clear yet that any part of
Asia will become a second front in the fight against ISIS or IS. On 11 September 2014, U.S.
President Obama laid out what he promises to be a robust political and military strategy for dealing
with ISIS/IS. While we should not underestimate ISIS/ IS, we need to understand it may implode
sooner than later and its fighters scattered to the four corners of the globe if the U.S. and its allies
engage it successfully in these two theatres of operations in the coming week. Consequently, its

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military capabilities and its political stranglehold over important regions of Syria and Iraq will most
likely collapse.
However, this may not necessarily mean the end of ISIS. The U.S. has been proclaiming the
end of Al Qaida now a bitter opponent of ISIS/IS for years, yet it still exists and continues to
threaten the peace and security of many regions in Africa and the Middle East. ISIS/IS itself is not yet
and might never become a threat to the regions to be addressed in this report, that is, beyond Syria
and Iraq. The threat that ISIS/IS pose to both Syria and Iraq is a potentially existential one to their
national security and integrity. ISIS/IS does not pose that kind of threat to the rest of Asia. If ISIS/IS
implodes due to effective concerted action by the United States and regional powers, ISIS remnants
might return to their respective homes seeking to exact revenge for the failure of their state.
Second, while some jihadists have reportedly returned home to their respective countries, it
is not clear what they are doing or whether they are involved in extremist circles. Nor is it clear what
national intelligence and security services know about returnees or would publicly acknowledge
what they might know. We simply have no data on this particular aspect. In short, we have to make
inferences or educated guesses based on available data.
Third, the threat posed by returnees will take time to germinate. Both lone wolves
terrorists acting alone and small cell structures will take time to set up and operationalise. It is only
if they are nipped in the bud before they act or unfortunately after the commission of a terrorist act
will we be able to formally acknowledge the potential or actual threat posed by the returnees.
However, on the other hand, given the experiences with terrorism in the first decade of the 21st
century, intelligence, police and other security services are more professional and far better at their
jobs than in the past, as reflected in their being proactive and having better operational capabilities.
However, Asian governments must take into consideration a number of structural issues as
they devote time, energy and resources to the nature and characteristics of non-state threats. In the
1990s and early 2000s, there was the smug assessment that Asian states, then undergoing solid
economic growth and increasing regional harmony, would be immune to non-state threats. Security
services also tended to focus on opposition groups in countries that were making the uncertain
transition from authoritarianism to democracy. There was a curious neglect of the threat of
terrorism. 9/11 and the emergence of a significant level of terrorist activity changed all that and
security services began to focus their attention on that specific threat. They got better and the defeat
of the JI wave of terrorism came as a result of greater professionalism within the security and
intelligence forces aided by sheer luck and mistakes on the part of the terrorists. Information
gathering and intelligence processing of data on extremists is still sub-par in terms of accuracy and
rapidity of dissemination to the requisite authorities. Many individual nations do not have holistic
counter-terrorism strategies. Rather they have patchy counter-terrorism strategies and approaches
in the sense that they have aspects or organisations that are very good or effective at what they
specifically do; however, their efficiency is reduced by lack of coordination and cooperation with other
organisations or by inefficiency on the part of these other governmental organisations. Third, there is
a tendency in many countries in Asia (as well as other regions) to mine the experiences of past
dealings with the threat of terrorism particularly in the first decade of the 21st century for
lessons for the present. There is absolutely nothing wrong with that; that is how organisations,
including police and intelligence services, learn. There needs to be constant thinking outside of the
box, the terrorist threat of the past is not the terrorist threat of the present. There are similarities with
the past, but there are also substantial differences that personnel and analysts must take into
consideration as they construct their intelligence terrain of the terrorist threat posed by IS.
In conclusion, as we enter the year 2015 it is clear that IS continues to show remarkable
resilience despite the battering it has taken at the hands of coalition airstrikes and seemingly
revitalised Iraqi, Kurdish and Syrian forces. The extremist group has begun to show signs of fatigue
due to loss of senior commanders, desertions, rejection by Sunni Arab tribes in Syria and Iraq, and
inability to govern effectively the large amount of territories it has seized. Nonetheless, it remains a
threat to the countries of the Middle East (including countries where it has
established some symbolic but deadly presence as in Egypt and Libya), it
still draws the disgruntled and the adventurous, and its foreign fighters
remain a potential danger to their countries of origin. In this context, Asian
governments must maintain vigilance concerning the returnees and their
potential for causing mischief or providing organisational support and
technical skills to local extremist groups.

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The impact of the Islamic State


on Pakistan
Muhammad Amir Rana

Executive summary
The growing influence of the terrorist group known as the Islamic State (IS) is a worrisome prospect
for Pakistan. It appears that the militant landscape of the country will become more complex and
threatening after the emergence of the Baghdadi-led IS in Iraq and Syria. Because Pakistani militants
do not operate in isolation, it is natural for them to draw inspiration from the IS. As militant groups
prepare to enter into another phase of ideologically and operationally transformed jihadist discourse,
the implications for Pakistans internal security are severe. Apart from security implications, this
process will affect extremism discourse in the country and the behaviour of non-violent religious
organisations.

The Islamic States footprints in Pakistan

he Islamic State (IS) is a real and emerging threat facing Pakistan, and its influence is
increasing inside the country. Pamphlets praising the group were seen in Peshawar and PakAfghan border areas in mid-2014. Reports of graffiti supporting the IS are coming from across
the country, including Rawalpindi, Lahore (Shah, 2014), Karachi, Peshawar and Bannu.
Police have confiscated IS flags that were fixed to electricity poles in Taxila (Asghar, 2014), a city 35
km from the federal capital, Islamabad.
The Balochistan government reports a growing IS footprint in the province (Dawn, 2014) and
confirmation by the banned terrorist group Jundullah that an IS delegation recently visited the
province to unite various militant groups are major indications of IS interest in Pakistan.
A recent media report that the IS has recruited more than 12,000 people from Hanguin
Khyber Pakhtunkhwa and the Kurram agency of the Federally Administered Tribal Areas (Pakistan
Today, 2014) two hotspots of Sunni-Shia sectarian conflict apparently contradicts Federal Interior
Minister Chaudhry Nisar Ali Khans statement that the IS is not present in the country (The Nation,
2014).
Despite these reports there is insignificant evidence to suggest that the IS is present in
Pakistan. It is not known yet who is behind the graffiti referred to above possibly political parties
who may want to exploit the situation or are inspired by the IS; or sympathiser groups and individuals
who may or may not have direct links with the IS. It is possible that the Thereek-e-Khilafat
movement1 in Karachi and Tehreek-e-Taliban Pakistan (TTP) commanders who have taken an oath
of allegiance to Abu Bakar al-Baghdadi are behind some of the graffiti. The ideological association
and operational linkage between Pakistani militants and the IS are not new. The Balochistan chapter
of the violent Sunni sectarian group Lash kar-e-Jhangvi (LeJ) has been part of the IS since the
latters inception: the LeJ militants who went to Syria to fight against Bashar al-Assads forces joined
the IS. LeJ militants set up the Ghazi Abdul Rasheed training camp in the Iraqi city of Erbil in 2013
and the militants that trained in the camp eventually constituted the Ghazi Force (Rana, 2014).
Similarly, the banned terrorist group Jundullahs claim that an IS delegation visited Balochistan can
also be seen from this perspective. However, it is not clear if the IS delegation comprised LeJ
members from Balochistan who had earlier joined the IS and went to Syria or Iraq. Among the
probable objectives of the reported visit of the IS delegation to Balochistan, i.e. to recruit new
members for the group, to seek support from Pakistan-based militant groups or to set up the IS
chapter in Pakistan, the objective of obtaining new recruits appears prime and relevant because the
IS needs more human resources to retain control of the areas it has occupied in Iraq and Syria. The
IS would also be interested in developing relationships with the militant organisations that are active
in the Iranian part of Balochistan.
Apart from reports of the ISs physical presence in Pakistan, the ISs influence has triggered
transformations among many religious groups in Pakistan, affecting both violent and non-violent
religious organisations in the country.

The IS as an ideological catalyst


New influences and sources of inspiration can be expected to cause attempts at ideological
purification among religious organisations. These and other transformations among terrorist groups

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usually entail a process of abrasion, which sometime goes deep, but should not be regarded as
undermining the groups that undergo the process. Transformations do not make terrorist groups
weaker; rather, they provide them with new ideological strength that helps them to restructure
themselves and revamp their operational strategies. When a breakaway faction of the TTP, Jamatul
Ahrar, claimed that the TTP now belonged to it, it was in effect stating that it had replaced older
organisational and operational formations with new ones. This phenomenon is not unique to the TTP:
Pakistani terrorist movements have passed through many transformations during the last decade.
For example, the terrorist attacks in the U.S. on September 11th 2001 increased al-Qaidas influence
among Kashmir-based militant and sectarian groups in Pakistan, transforming major segments of
them (Rana, 2014).
Similar ideological transformations were behind the confrontation between Taliban
commanders Abdullah Mehsud and Baitullah Mehsud in 2004. Abdullah wanted to speed up terrorist
operations in Afghanistan, but Baitullah had embraced new ideological approaches. While the latter
did not object to the Pakistani Taliban helping its Afghan counterparts in Afghanistan, he stressed the
establishment of the rule of sharia law in the Pakistani tribal areas that were under Taliban control
(Rana et al., 2010: 74). Under the influence of the Arabs and the Islamic Movement of Uzbekistan
Baitullah also disagreed with Waziri militant commanders who wanted to focus on Afghanistan rather
than carrying out attacks inside Pakistan. In subsequent years differences between Hakimullah
Mehsud and Waliur Rehman Mehsud were primarily of an operational nature, but the latter was not
happy with the increasing sectarian tendencies in the TT P.
When ideological transformations occurred across Pakistani militant groups within the
broader framework of an Islamic state or caliphate, it gradually purified their objectives and caused
the development of various trends among them. Currently Pakistani militant groups have widely
diverse interests ranging from tribal and nationalist ambitions to sectarian, regional and even global
ones.

Impact on religious discourse


The ideology of establishing an Islamic state or caliphate espoused by various Islamist
terrorist groups is not new to Pakistan: most violent and many non-violent Islamist groups in Pakistan
believe in it, and even reject what religious leaders, scholars and religious-political parties such as
Jamaat-e-Islami and Jamiat Ulema-e-Islam have achieved thus far in Pakistan, e.g. in terms of the
Islamisation of Pakistans constitution and society. The country presents a unique and complex case
of religious activism that cannot be compared with that in any other Muslim country. Multiple religious
organisations are operating in the country with different objectives and with a mixed bag of
successes and failures.
The rise and success of the IS could play a very dangerous, inspirational role in Pakistan,
where more than 200 religious organisations are operating at the national and regional levels. These
organisations pursue multiple agendas such as the transformation of society according to their
ideologies, the enforcement of sharia law, the establishment of a caliphate, and the fulfilment of their
sectarian objectives through militancy. They could be influenced by the ISs success in various ways.
A few would limit themselves to providing just moral support, but others might actively provide
donations and financial assistance to the IS. Still others mainly religious extremist and militant
organisations could find inspiration in IS strategies and tactics. This is perfectly possible, since
even groups operating in two different regions can find common ground in the takfiri ideologies5 they
believe in and in the organisational links they share.
Pakistans religious-political parties claim that they are the custodians of the larger religious
discourse and tradition in the country. However, in the last two decades another form of religious
organisation has also emerged. These types of organisations are categorised as revivalist in their
nature and serve as agents of Islamisation and religio-socialisation, but believe that change is
impossible within the parameters of the constitution and with the current political dispensation. They
deem democracy and the democratic process to be inadequate for the type of change that they
advocate. Some of them see democracy as contrary to Islamic principles of governance and want to
replace it with their own version of the sharia. Others, such as Tanzeemul Ikhwan6 and Tanzeem-iIslami,7 believe that the sharia cannot be introduced in its entirety through the democratic electoral
process and consider the use of force to achieve power as an alternative. These organisations have
sectarian and militant tendencies and their dominant approach is characterised by their quest for a
complete change in the system. This is contrary to the approach of the religious-political parties such
as Jamaat-e-Islami and Jamiat Ulema-e-Islam, which focus on gradual change within the system.
Many extremist groups in Pakistan believe that change is possible only through armed revolt
against the state and its defence apparatus, and do not believe in a non-violent struggle to bring
about change. TTP, LeJ and smaller groups like the Tehreek-i-Khilafat fall into this category. The
appeal of their message increases when Islamists succeed elsewhere in the world. This builds

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pressure on the leaders of non-violent Islamic movements and political parties, because their
followers and cadres start comparing the achievements of their leadership with that of Islamist
movements that are succeeding elsewhere. Achieving a goal quickly always attracts ideological
movements and spurs extremists to adopt violent ways. If the IS sustains its momentum and
succeeds in maintaining control over the territories it has captured it can cause frustration among
groups such as Hizbut Tahrir and the student wings of religious-political parties in Pakistan that
believe in non-violent struggle for the establishment of a caliphate.

The ISs impact on the militant landscape


Surprisingly, an announcement of allegiance to the IS came from five Taliban commanders
who constituted the operational core of the TTP. Many were expecting the Jamatul Ahrar, a
breakaway faction of the TTP that was strongly influenced by the IS but not formally allied to it, to be
the first to take an oath of allegiance to the IS. But it seems that the group is wavering between the
Afghan Taliban-al-Qaida alliance and the IS as its future association. By declaring allegiance to the
IS, the Taliban commanders not only took the lead, but also captured the title of Khorasan.
Previously, leaders of Jamatul Ahrar tried to tag themselves as Khorasani, claiming they were the
first troops of the prophesied Islamic state of Khorasan. They believe the time has come for the
establishment of an Islamic state in this region comprising some parts of Central Asia, and Iran,
Pakistan and Afghanistan. However, it would be very difficult for Jamatul Ahrar to maintain relations
with al-Qaida and the IS at the same time, while also remaining loyal to the Afghan Talibans Mullah
Omar. The five defecting TTP commanders have strong sectarian credentials and seem to be
inspired by the ISs sectarian designs. Their likely future behaviour is unclear because the IS has
asked its followers to channel their resources to Syria and Iraq, where the group first wants to
consolidate its position.
On the other hand, the ISs influence on militant groups in Pakistan and Afghanistan is a
huge challenge for al-Qaida. The groups that were not happy with al-Qaidas operational strategies
are now more attracted to the IS. Their frustration with al-Qaida was mainly due to the conviction
that their ultimate objective of establishing an Islamic state and system could not be achieved only
through terrorist attacks. The IS model showed them the importance of controlling territory in order to
project and establish power on the ground. This was perhaps the main reason behind the
establishment of al-Qaida in South Asia. The growing realisation that operating through affiliates may
not work in the future forced al-Qaida to set up a separate branch in South Asia that may help it to
recruit members directly instead of relying on local associates.
The IS will also affect the Afghan Taliban. IS militants reject nationalism and consider the
Afghan Taliban as part of the religious-nationalist movement. Members of the Afghan Taliban who
have weak nationalist tendencies and are more inclined towards a purified ideological goal could
initiate such a debate in the groups ranks. While defections cannot be ruled out, it is unclear how the
IS will impact the Afghan Taliban movement, particularly when Mullah Omar wants to establish an
Islamic emirate in Afghanistan, while al-Baghdadi wants to extend his Islamic state to the whole
world.
The most important question relates to the future of the TTP. There is no doubt that the ISs
impact has worsened the TTPs internal crisis. While the group was already experiencing an internal
crisis over the issue of leadership, the Pakistani military operation known as Zarb-i-Azb (Sharp
Strike) in North Waziristan has further weakened its organisational structure. But we cannot predict
the collapse of the TTP. The IS factor has provided new life to the group. The movement is
undergoing an extensive transformation, but it has the potential to re-emerge as a stronger
ideological militant movement, possibly under a different name.
However, at critical stages names, tags and affiliations do not matter in militant movements.
It is a four-pronged form of strength that matters, including ideological and political vision, operational
capacity, effective propaganda, and a support base in society. It seems that the TTP has not yet lost
any of these characteristics.
As cited earlier, the Jamatul Ahrar (JuA) is largely inspired by the ISs successes. Even if it
completely breaks its links with the TTP and al-Qaida, the JuA will remain ideologically and politically
strong. As far as its operational capabilities are concerned, the new group has a strong nexus with
sectarian terrorist networks and factions of the Punjabi Taliban and the various Jundallah groups in
Pakistan.
The phenomenon of Jundallah is important in this perspective. Many groups are operating
under the name of Jundallah in Pakistan, similar to the Punjabi Taliban groups. While the Punjabi
Taliban emerged from the Deobandi and Salafist militant groups, Jundallah groups are mainly
breakaway factions of the Jamaat-e-Islami (JI) and its subsidiary student and militant wings. With the
exception of the Jundallah in Iranian Balochistan, the remaining identically named groups that are

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active in Karachi and the Peshawar Valley are of a similar nature. With their Islamist background,
they are naturally inclined towards the IS, and like a few commanders of the Hizb-i-Islami a JI
affiliate in Afghanistan apparently intend to announce their allegiance to the IS.
Seen from this perspective, the JuA is likely to have a close operational alliance with
Jundallah groups inside Pakistan. Conversely, the TTPs operational concentration will increase
inside Afghanistan. It appears as if a new formation or alliance of al-Qaida, the Afghan Taliban, TTP,
the local Taliban led by Gul Bahadur and the Islamic Movement of Uzbekistan will emerge that will be
challenged by an alliance of JuA and its Pakistani affiliates and breakaway factions of the Afghan
Taliban and Hizb-i-Islami.

Implications for internal security


In the short term IS-inspired small groups and commanders could launch sectarian attacks
in Pakistan. In this context the Balochistan government assessment report on the ISs presence in
the province is significant. The report claims that the IS has offered to join hands with some elements
of LeJ and Ahle Sunnat Wal Jamaat in Pakistan. At the same time the TTP commanders who have
declared allegiance to the IS have strong sectarian credentials and some of them belong to the
sectarian flashpoints of Hangu, Orakzai and Kurram agencies. Perpetrating sectarian violence will be
an easier way for them to prove their loyalty to the IS. In this context the coming months will be
sensitive, and security institutions will have to be extra vigilant to prevent the threat of sectarian
unrest in the country.
As far as the security implications for the border region between Pakistan and Afghanistan
are concerned, the IS has created a major survival challenge for the main militant actors in the area,
who could now attempt to prove their operational credentials. Specifically al-Qaida and the TTP led
by Fazlullah are facing immense pressure. They could launch attacks to prove that they are still
strong and relevant, and could lead entire militant movements in the region. At the same time ISinspired groups could launch operations in the IS style and try to capture towns and cities in the
border regions of Afghanistan. But such attempts in Pakistan have less chance of success, because
the Pakistani military has gained control of most ungoverned territories in the tribal region.
In a wider context, Abu Bakar al-Baghdadis statement of November 2014, which he issued
after an attack on his hideout in which he was injured, is significant (Kirkpatrick & Gladstone, 2014).
He ordered terrorists groups across the world to target the West and its allied Muslim rulers and
forces. At the same time the reports of reconciliation between al-Qaida and
the IS are significant (Joscelyn, 2014). Although al-Qaida and other terrorist
groups are facing internal crises and the Pakistani military operation in
North Waziristan has scattered their infrastructure, conciliation processes
will increase the chances of bringing the divided groups back into the fold.
From an internal Pakistani and regional security perspective, this would not
be good news.

Changing Regional Context Beyond 2016:


Pakistan-Afghanistan Relations
Senator Afrasiab Khattak

Introduction & Historical Background of Pakistan-Afghanistan Relations

akistan Afghanistan relationship in its initial phase was burdened with political baggage
from colonial past and the 20th century cold war. Unfortunately the unique commonalities in
history, culture, religion and ethnic make-up, instead of bringing them together, gave rise to
claims and counter claims that muddied the water.
The problem was further compounded by the political and ideological polarization in the
second half of the 20 century. Pakistan was, during that period, part of the US led Western military
pacts like SEATO and CENTO aimed at containing Communism. Afghanistan was technically neutral
but was regarded to be closer to former Soviet Union and India. The super powers of that era tried to
use their allies against the opposite camp. This situation handicapped the development of normal
good neighbourly relations.

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But in spite of the complicated nature of Pakistan Afghanistan relations of 1950 and 1960,
there were some positive aspects to it. For example the two sides were able to reach an agreement
for Afghan Transit Trade, which was an important foundation for durable relationship. This agreement
enabled Afghanistan to have access to Karachi seaport for the international trade. Similarly during
Pakistans two wars with India in 1965 and 1971, Afghanistan did not create any problem and also
assured Pakistan that there will be no negative activity in the border area of the two countries. So
Afghanistans cooperation enabled Pakistan to utilise its Defence resources on the Eastern Border.
The situation fundamentally changed when the erstwhile Soviet Union invaded Afghanistan
in 1980. Millions of Afghan refugees came to Pakistan during the war in Afghanistan in 1980s.
Pakistan supported Afghan resistance against the Soviet Union and a new bond of fraternity came
into being between the people of the two countries. There will be hardly any other example in history
of such large scale and positive interaction between any two countries.
Experience of the past few decades has proved this fact, beyond any doubt, that there
cannot be stability in one country at the cost of the other. We saw that conflict in Afghanistan
expanded into Pakistan and had a devastating fall-out. Thousands and thousands of people have
fallen victims to the menace of terrorism in both the countries. Again experience has brought the
point home to both states that without mutual cooperation they will not be able to defeat the scourge
of terrorism.
The people of Pakistan have watched with sympathy and interest the social, political and
security transitions in Afghanistan. They appreciate the steady evolution of a democratic Afghanistan.
It is a matter of historical record that major efforts were made by different Governments in
Afghanistan for social reformation. From initiative taken by King Amanullah Khan in 1920s to the final
effort made after the launch of the Bonn Process many of these efforts fizzled out because, apart
from some other factors, they failed to attract societal ownership.

Pakistan-Afghanistan Relations Beyond 2014


The enthusiastic participation of the Afghan people in the recent Presidential Election has
clearly indicated that majority of Afghan people support democratic process in their country, which
augurs well for the future stability of the country.
The way Afghan security forces have taken responsibility of defending their country by
replacing ISAF so far is a matter of tremendous satisfaction.
While high level contacts and interaction between the Defence Ministries and the leaders of
the Armed Forces are reassuring there is room for intensification of this relationship. Defence
Establishments in both the countries need to increase their cooperation in fighting terrorism, which is
a common enemy.
It is a matter of record that there is a consensus among all the major political parties in
Pakistan to have brotherly relationship with Afghanistan on the basis of sovereign equality. As we
have witnessed the newly elected Government in Pakistan in May 2013 reached out to the
Government of Afghanistan like the previous democratic Government, there is no difference of
opinion between the past and the present ruling parties in regard to the relationship with Afghanistan.
There is a lot of potential for expansion in this relationship. While there is need for further
institutionalization of relationship at the state level the people-to-people relationship also needs to be
further built and streamlined.
It is interesting to note that while there is a massive spontaneous interaction between the
citizens of both the States, systematic interaction between the civil societies of the two countries has
not yet reached the desired level. There is a lot of potential for expanding relationship between the
political forces of peace and democracy in the two countries. Parliamentarians, traders, intellectuals,
civil society activists and young people from both the countries need to be encouraged for greater
interaction. The young people will have a special role in enhancing the brotherly relationship for
which exchange of youth delegation should be high on the agenda.
Relationship between the two countries in culture, sport and information is another area of
the under unimplemented potential. Cultural, artistic and linguistic similarities make it possible for the
countries to exchange films, dramas, music and entertainment material. So far, individual artists or
groups do take their programmes from one side to the other side but the lack of systematic and
large-scale official exchanges is incredible.
It is difficult to imagine any other two neighbouring countries to be sitting on such a huge
potential. It is also strange that television (TV) cables in both countries do not show programmes
from the other country. Governments on both sides do not publicly give any reason but it is not
difficult to imagine that official discouragement at some level leads to this awkward situation.

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Consequently, only people with dish antennas have access to the TV programmes of the other
country. Due to lack of direct media connection between the two countries, both of them have to
depend on foreign, particularly Western news agencies, to get news from across the border.
It is unbelievable that during recent Afghanistan Presidential Elections there was not a single
Pakistani news camera to cover the Electoral Process. Everything was received through foreign
news agencies.
The situation is similarly weird in sports. Cricket being the most popular game in both the
countries offers tremendous opportunities for playing matches in both countries. But because of the
under-current of political trust deficit, the potential has not been realized.
The Afghan Parliament has approved Bilateral Security Agreement (BSA) with the USA (now
officially called the Security and Defence Cooperation Agreement) and the Status of Forces
Agreement (SOFA) with NATO. This development has paved ground for the ISAF follow up mission
called Resolute Support to start on January 01, 2015. This force will comprise of 12000 soldiers
including 9800 Americans. Pakistan has welcomed the emergence of National Unity Government in
Afghanistan after the Presidential elections and wishes every success to it.
The recent high level political and security contacts between the two countries have
demonstrated a positive trend in the relationship. Of particular importance was the maiden visit of
Afghanistan President Dr. Ashraf Ghani to Pakistan on November 14, 2014. Deliberation between the
top leadership of two countries during this visit has opened new avenues of political, security and
economic cooperation. Pakistan was impressed by the clarity of the vision of Dr. Ashraf Ghani
regarding Pakistan-Afghanistan cooperation. When Mr. Muhammad Nawaz Sharif, Prime Minister of
Pakistan, talked about opening a new page in the relationship of the two countries, Dr. Ashraf Ghani,
the President of Afghanistan, reciprocated by saying that he was altogether in favour of opening a
new book in this regard. Concrete proposals regarding expanding bilateral trade, starting joint
ventures in the field of energy augur well for the future economic cooperation.
Of particular significance was President Ashraf Ghanis offer to establish an export industrial
zone for Pakistani businessmen in northern Afghanistan. The Afghanistan President also raised the
issue of problems faced by Afghan Traders at Karachi port during the transit trade. Since the
aforementioned proposals are of utmost significance, it is imperative for the two countries to create
working groups comprising of the representatives from both public and private sectors to follow-up
for processing them through the concerned state institutions.

The Way Forward: Strategic Steps Towards Possible


Afghanistan Joint Plan of Action & Recommendations

Pakistan-

The potential for economic and trade relations can be realized only if there is peace in
Pakistan and Afghanistan. The recent spate of terrorist attacks in Afghanistan was aimed at, apart
from other things, for subverting the positive atmosphere created by the successful visit of President
Ashraf Ghani to Pakistan.
All those terrorist attacks were evil but particularly despicable was the attack on innocent
people busy in a volleyball match in Paktia Province of Afghanistan in which more than 80 people
died.
Similarly a heinous crime was committed in Peshawar on November 16, 2014, in which
innocent young students and their teachers were savagely murdered by terrorists. Peshawar tragedy
is a watershed moment in the anti-terror struggle of the people and Government of Pakistan. The
people of Pakistan have openly come out to demand decisive action against terrorists of all shades.
It is heartening to see that Peshawar tragedy has not only united the people of Pakistan in
their resolve to fight terror but Governments of Pakistan and Afghanistan have also enhanced their
cooperation for defeating terrorism. It is encouraging to see that both the Governments, instead of
indulging in blame game, have quietly increased cooperation in the common fight.
One would wish and hope that such cooperation should be further strengthened to take the
struggle against terrorism to a logical conclusion. We should urge both the Governments to go for
taking bold steps for building confidence between each other. Of paramount significance in this
regard will be mutually addressing each others concerns regarding pockets of terrorist on both sides
of the borders. This will go a long way in building confidence and removing irritants in the
relationships between the two countries.
Pakistan fully supports an Afghan-led and Afghan- owned process of reconciliation and
peace making. Pakistan will make positive contribution in facilitating the aforementioned process to
the extent desired by our Afghan brothers.

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Pakistani Parliamentarians endorse the initiative for a national reconciliation taken by the
High Peace Council (HPC) of Afghanistan and hope that all sides will show maturity and would
understand the vitality of peace for Afghanistan and the entire region.
There should be an inclusive approach on both regional and international levels, as zero
sum games in the past have led to perpetuation of the conflict.
We appreciate the positive initiatives taken by the immediate neighbours for establishing
peace in the region and intend to cooperate with them. We particularly welcome the keen interest
demonstrated by our great neighbour Peoples Republic of China in overcoming conflict and
establishing peace in our region. We hope that the Chinese support for peace and its vision for
economic development of the region will go a long way in stabilizing the region and in bringing it at
par with the rest of the world in economic development.
Pakistan and Afghanistan have not only wide ranging bilateral engagement but they are also
part of number of trilateral meetings and other multilateral processes geared towards establishing
peace and achieving stability. We are determined to work honestly and diligently to achieve the goal
of peace and stability.
The year 2015 is absolutely crucial for establishing sustainable peace in Afghanistan and for
defeating terrorism in Pakistan. It clearly underlines the commonalities in the destinies of the two
countries. While both the countries strive for peace they will have to be prepared to defeat the
terrorist who wants to inflict death and destruction on the people of the both countries.
If the past experience is anything to go by, they can achieve this
goal by further enhancing cooperation in combating terrorism. By defeating
the evil forces of terror both the countries can look towards 2016 and
beyond for an era of socio-economic development which seems to be the
common destiny of Asian countries. After all every indicator of socioeconomic development hints at 21 century being the Asian century.

New Great Game: Players, Interests,


Strategies and Central Asia
Qamar Fatima & Sumera Zafar

Abstract
The hinterland of Central Asia had been the centre stage of nineteenth century imperial rivalry
between Britain and Russia. The centrality of Central Asia did not diminish even in the New Great
Game, though changed its dimension. The disintegration of Soviet Union changed the geopolitical
realities in the region as well as in the world politics as the five Central Asian states, Kazakhstan,
Kyrgyzstan, Tajikistan, Turkmenistan and Uzbekistan emerged. The three factors accrued
significance to the Central Asian states in the International Politics. First factor is the geographical
location of the region. Its geographical location makes it the landlocked region with no access to the
Oceans. Hence it needs well developed land routes to access other countries. The second factor is
the closeness of the region to the important world powers such as Russia and China. These States
are rich in energy resources such as natural gas and oil. These three factors play an important role in
initiating the new phase of the Great Game in Central Asia. This research focused on the three
dimensions of the New Great Game which are geo-economics, geopolitical and geostrategic with
special reference of Central Asia. These three dimensions, according to this research, are
interconnected and the development in one dimension affects the other. The major players of this
New Great Game are Russia, China, United States, Iran, Turkey and Pakistan. These actors are
pursuing their policies to achieve their objectives in the New Great Game. Regional actors such as
Russia and China are trying to keep USA out of this region while USA aims to contain Russian and
Chinese influence in the region. Another important aspect of the New Great Game is the pipeline
politics. The involved stakeholders are trying to build the pipelines which fulfil their aims to dominate
energy reserves of this region.

Introduction

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eopolitics, as the word indicates, studies the relationship between the politics and the
geographical location of a region or of a state and its effects on the behaviour in conducting
the relations with other countries and directions it chooses to play its role in the world affairs.
In geopolitics different factors such as economy, demography, technology and strategic
options play their role in deciding states behaviour in the world politics.
The world has witnessed the new trends and patterns of geopolitical relations after the
collapse of the bipolar system because century long system of two power blocks changed after the
disintegration of the Soviet Union (Dhaka, 2005 & Dwivedi, 2006).
Central Asia according to Mackinders geopolitical theory is the Heartland of the world
politics. It has been the chessboard of imperial rivalry existed between British and Russian empires
caused by their expansionist polices. So there had been a competition between British and Tasrist
Russia for influence over Central Asia owing to its location at crossroads of different civilizations and
old silk route.The significance of this imperial rivalry was attributed by Mackinders geopolitical
analysisand named it as heartland. So whoso ever wanted to be an influential power player in terms
of political dominance with economic fruition had to turn towards Mackinder conception of Heartland?
(Fatima, 2012). The nineteenth and twentieth century imperial rivalry was ascribed as Great Game
first by Rudyard Kipling then by Arthur Connally, an officer from the British East India Company.
According to Hopkirk the Great Game involved three phases. The first one began with the
expansion of the Russian Empire in the Caucasus and Central Asia in the late eighteenth and early
nineteenth centuries, generating apprehensions in the East India Company, the defacto power in
India. Fearing Russias intentions, the company sent officers to explore the way, by land to the
northern border of India. During the nineteenth century, the British govt sought to engage more
intensely in Central Asian issues transforming the great game , until then , private in nature into an
essential element of the defence of the empire as well as foreign and colonial policy.The first phase
of old great game ended in 1907 with the signing of Anglo-Russian Convention. The second phase
began with same tactics of spying and manipulating local population and tribes. This phase lasted till
1917. The communist revolution in Russia did not abandon to manipulate the political dominance by
whatever means available, and the Bolshevik leadership resorted to liberate by means of armed
revolt, the whole of Asia from imperialist domination (Hopkirk, 2012). The centrality of Central Asia
remained unswerving during the entire period of old great game. This pattern of centrality can be
easily found in the latest version of Great Game waged by currency of world powers.
The Great Game resurfaced under the rubric of New Great Game with new notions, new
techniques, new players and new strategies led by differing objectives and aims.

The New Great Game Defined


The resurgence of Great Game took place with diversified objectives, strategies, players and
interests after a hundred years of period with the centrality of the energy reserves of the Central Asia
as well as Caspian Basins.(Foster, 2008 & Khan, 2006& Kleveman 2003). It is a geopolitical game
hingedon the energy resources of the Central Asian and Caspian Basin region. (Foster, 2008 &
Abilov, 2012).This is the complex strands of relations in the economic as well as in the strategic
spheres. This region is blessed with the huge reserves of natural resources, corollary is that the
region became the theatre of global rivalry which is known as the New Great Game waged after the
end of cold war. (Kurecic, 2010 & Khan, 2006).The New Great Gameentails twophases emulating the
old great game to some extent.

First Phase of the New Great Game


The first phase of the New Great Game caused due to the rivalry of oil companies which are
Bridas and Unocal (Abbas, 2012). This phase started from 1991. This was the year when
Turkmenistan wanted western oil companies to invest in the oil and gas sector. During this phase the
major stakeholders were:

Central Asian state of Turkmenistan which shares borders with Afghanistan and enjoys close
proximity with Pakistan and Iran. Saparmurad Nayazov was the head of the government.

An Argentinian oil company Bridas. This was the first company which invested in oil and gas
sector of Turkmenistan.
A US based oil company Unocal. This was the company which emerged as the rival of
Bridas.
Taliban regime which came to power from 1994 to 1998.
USA which supported Taliban regime in the initial years.
Pakistan which backed the Taliban regime. (Khan, 2006).

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At that time Argentinean company Bridas took a step forward and bid for leases in
Turkmenistan. Other Western oil companies hesitated to invest in Turkmenistan because there was
no legislation for the protection and safety of foreign investors. Bridas changed the whole scenario of
the region by proposing pipelines to export the Turkmen oil and gas to the world markets (Rashid,
2001)
In 1991 Bridas was given Yashlar block which was close to the Daulatabad gas field. In
1992 Bridas was given Keimir block close to the Caspian Sea. Keimir started operation in 1994.
Bridas started exporting oil from Keimer field in 1994 and also discovered a huge gas field in Yashlar
block intended to explore markets in South Asia for the export of gas therefore it put a plan to build a
pipeline from Yashlar field to Pakistans province Baluchistan via southern Afghanistan. The
proposed length of the pipeline was 875 miles. This proposal was an open access pipeline through
which other countries could transport their gas. This pipeline was of interest to the Afghan warlords
because they wanted to export their gas reserves in the northern country through this pipeline. In
1996 Bridas and Afghan government (headed by Burhan-ud-Din Rabbani) signed an agreement for
the construction of pipeline and the creation of International consortium. For this purpose Bridas
started negotiating with other oil companies. Unocal was an oil company which had experience in
Asia. Unocal was introduced to the Turkmen official for the first time during these negotiations in
1995. Before the finalization of negotiations differences emerged between Bridas and Turkmenistan
on the prices and profits of the oil and gas. Rashid (2001) identified another reason for the emerging
difference between Bridas and Turkmenistan. That was the Unocals interest in constructing another
gas pipeline from Daulatabad gas field of Turkmenistan without the cooperation of Bridas. Nayazov
considered it an opportunity to attract USA to invest in the development of Turkmenistan (Rashid,
2001). USA paid less attention to the Central Asian states immediately after their independence and
gave less priority to the CARs in the foreign policy (Cooley, 2008).
Unocal started following projects in Turkmenistan (Rashid, 2001).
Unocal put a plan to construct a pipeline from Daulatabad gas field to the Pakistans city Multan.
Daulatabad field has gas reserves of 25 trillion cubic feet.
Unocal also developed a group of oil investors. This was CentGas consortium. In this
consortium Unocal reserved 70 percent ownership. 15 percent was given to Delta and 10
percent was given to Russian state owned company Gazprom. 5 percent shares were given
to Turkmenrosgaz.
Unocal also signed an agreement for Central Asian Oil Pipeline Project. This pipeline will
transport oil from Chardzhou in Turkmenistan to Pakistans oil terminal. The plan was to
deliver one million barrel per day. Through this pipeline the producers of Central Asian states
of Kazakhstan, Uzbekistan and Turkmenistan can find markets in Asia.
Unocal formed a group with US private Foreign Oil Companies in Washington to pursue
their interests in Caspian region.
The USA started bypassing Russia in major projects. This was advantageous situation for
the Uzbekistan and Turkmenistan. Uzbekistan supported NATO initiative to establish Central Asian
NATO battalion. Two alliances emerged out of this scenario (Rashid, 2001)
a) First coalition was of USA, Uzbekistan, and Turkmenistan. USA was also using Pakistan,
Turkey and Israel for its interests.
b) Second alliance was of Russia, Kyrgyzstan, Kazakhstan and Tajikistan.
During this Afghanistan witnessed a major development as Taliban captured Kabul. The
regional scenario explained by Rashid (2001) was the regional grouping. In the one group there were
USA, Pakistan, Taliban and Saudi Arabia. While in the second group there were Russia, Iran and
Central Asian States. This scenario clearly showed the USAs interests in Taliban regime due to the
pipeline strategy. At the same time differences emerged between Unocal and Bridas when Bridas
charged Unocal of stealing its idea of pipeline. As Taliban captured Kabul Unocal considered it viable
to construct a pipeline.
Turkmenistan blocked all oil and gas fields of the Bridas. It cancelled all the agreements with
the company. But Bridas started negotiations with Taliban. Bridas offered Taliban to build pipeline
without putting the condition of internationally recognized government in Kabul (Rashid, 2001).
Bridas used relations with Saudi Prince Turki to influence Taliban. On the other side USA
used Pakistan and ISI to influence Taliban. Pakistan and ISI fully supported Taliban regime in
Afghanistan. Both the company projected that their pipeline was to bring peace in the region. Bridas
established its office in Kabul and its chairman concluded agreements with the Taliban. Unocal
provided humanitarian support and initiated aid programs in order to hold Taliban in their orbit of
influence. Taliban at the same time was fighting civil war with Northern Alliance (Rashid, 2001).
During the conference in Ashkhabad, an agreement was signed by Pakistan, Turkmenistan
and Unocal. Under this agreement Unocal was to raise finances and to start the construction of the

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pipeline by 1998. The whole Game changed when Taliban were defeated by Northern Alliance in the
Mazar-e-Sharif. Unocal linked the construction of the pipeline to the peace conditions in the
Afghanistan. After these developments USA started looking other options to transport Turkmen gas.
A major change in the USA policy towards this region was seen by its support for the TurkmenistanTurkey gas pipeline via Iran. The USA support for this pipeline was a major blow to the Afghan
pipeline. On the other hand Taliban ran out of time to control the internal situation in the country.
Unocals interests got another blow. The Iran and Australias BHP petroleum announced that it would
provide finance to construct Iran Pakistan gas pipeline. The major advantage of this pipeline was that
it was not to cross from the conflicted areas (Rashid, 2001).
In 1997 Unocal, Pakistan and Turkmenistan signed a pricing agreement for the transport of
Turkmen gas. Taliban were given transit fee of 15 cent per 1000 cubic feet. During this agreement
the internal situations and the civil war in Afghanistan was ignored. In 1997 Bridas again started
making efforts to influence Taliban and invited Taliban delegation to visit Bridas executives. This
delegation was headed by Mullah Ahmad Jan. On the other hand Pakistan influenced Taliban to visit
Unocal also. This delegation was headed by Mullah Muhammad Ghaus. The Taliban delegation once
again wanted USA to recognize their government in Afghanistan (Rashid, 2001) when Taliban regime
was not recognized by the USA they hindered the ideas of US oil companies to construct pipelines.
USA decided to end the Taliban regime in Afghanistan and was waiting for better opportunity. This
was gained after the event of 9/11 (Khan, 2006).
In 1998 civil war broke out in Afghanistan. This damaged the plans of both companies to
construct pipelines. USA withdrew her support from their support from the Taliban regime. There was
no possibility of peace in Afghanistan. USA bombed the camp of Taliban leader Osama Bin Laden in
1998. After this the Unocal cancelled its CentGas consortium. The change in the prices of the global
oil industry Damaged Unocal interests badly. It also cancelled the construction of pipeline in Turkey.
Unocals offices in Pakistan, Turkmenistan, Uzbekistan and Kazakhstan were closed. Bridas also
realized that it was not possible under such conditions to construct pipeline in Afghanistan. No US oil
company was ready to finance or construct the pipeline (Rashid, 2001).
The civil war in Afghanistan and the USA efforts to capture Taliban leader Osama bin Laden
brought to an end the first phase of the New Great Game. The second phase started when USA
waged a War against terrorism in which again Central Asia has a geopolitical role to play.

New Great Game: The Second Phase


The rivalry among major powers in Central Asia entered into a new phase when USA started
War against Terrorism (Burles, 1999). Kleveman (2003) stated that the major players of the second
and major phase of the New Game are different from the classical Great Game. In this New Great
Game the new players try to achieve their interests and objectives in the region (Saidmuradov &
Puseva, 2010). The involved actors can be identified as regional and trans-regional players.

Major Players

The Regional stakeholders in the New Great Game are Russia, China, Iran, Afghanistan,
Pakistan and Turkey. Dhaka (2005) states that these countries are using their historic, cultural
and geopolitical links to establish control over the Central Asian energy reserves and to benefit
from the strategic position of the region.
United States is the Trans regional actor in this New Great Game.

Smith (1996) &Khan (2006) have identified that apart from regional and trans-regional actors the
important aspect of the New Great Game is the role of Central Asian states. Their quest to use
the major power rivalry to benefit their economy and to play their role in the world affairs is a
turning point in the New Great Game.
The set of relations in this part of the world and its economic and strategic importance bears
effects on the world politics. This region is witnessing the attention of the global powers. Major
Powers are employing different strategies to achieve their objectives in this part of the world.
Therefore these relations should be studied as the geo-economic and geostrategic trends and should
be analysed at the global level. (Kurecic, 2010)

Three dimensions of the New Great Game


The New Great Game in Central Asia has three dimensions:

Geo-economic Dimension
This dimension revolves around the quest of the major powers to gain control to the energy
reserves of the region and to secure energy supplies for the future.

Geo-strategic Dimension

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This dimension revolves around the security interests and strategies of the actors involved in
the Central Asian region. This is linked with the strategic policies of the players to create hegemony
over the energy resources.

Geo-political Dimension
This dimension includes the role of Central Asian states and their strategies to find their own
place in the world politics (Smith, 1996). Two factors are important in this dimension. These are
energy reserves and the location of the region. Central Asian states are focusing these factors to
enhance their importance (Ahrari, 1996).
In order to study the geo-economic and geostrategic relations and the complex nature of
interest wars it is important to have an in-depth study of the Central Asian region

Central Asia in New Great Game: Role and Patterns


Central Asia is a landlocked region which is located at the Heart of the Eurasia. The clear
definitions of this region are not given and there are different criteria according to which the region is
defined in the academia. The historical facts revealed that the region was consisted of a large
landmass which started from the southern parts of the Siberia and runs to the Pakistan Afghanistan
and Iran. It also included Caspian Sea, former Soviet Central Asia, areas of Inner China, Chinese
province of Xinjiang, areas of Tibet and Inner Mongolia. In historical definition the vast landmass was
called as Turkestan (Kurecic, 2010).Kurecic (2010)stated thatCentral Asias borders are not clearly
defined according to the ethnical and cultural criteria. Central Asian population is a mixture of
different ethnic groups. For instance in Kazakhstan the population comprises the mixture of Russians
and Kazakhs.Central Asia inhabited by the Russian minorities owing to the colonization of the
Central Asia by Russia in the nineteenth Century.

Geo-Political Profile of Central Asia


The disintegration of Soviet Union in 1991 disintegrated the vast land mass of Central Asia
into the smaller states. These are Kazakhstan, Kyrgyzstan, Tajikistan, Turkmenistan and Uzbekistan.
(Chander& Arora, n.d) Kurecic (2010) estimates that the total population of the Central Asian states
is about 60 million and the total area of the five states is approximately four million square kilometres.
Regional Geography informs that Central Asia shares borders with the major powers of the region
including Russia and China and is also close to the countries like Afghanistan, Pakistan and Iran
which are facing instability and are the theatres of the war on terrorism (Najmitdinov, 2007 & Foster,
2008).Kazakhstans total area is 2.7 million square kilometres and it is the largest of five states. The
smallest Central Asian state is Tajikistan which occupied the area of 143,100 sq. km (Dhaka, 2005)
Kurecic (2010)stated that Caspian Sea is also considered as the part of the Central Asian
region. Eastern part of Caspian Sea touches the Central Asian region. Caspian Sea is a landlocked
water reserve (Foster, 2008). Caspian Basin is possessing huge energy reserves. It also increases
the strategic significance of the states, Kazakhstan and Turkmenistan, which are in possession of the
parts of Caspian Basin. These energy reserves of Central Asia as well as Caspian Basin are the
need of the economies of the world. In order to benefit from these reserves it is important to develop
a geo-strategy in connection to the geo-economy. The energy strategy according to Kurecic (2010) in
this region depends on different prevailing strategies.
Physiographic features mark it with steppe grasslands, deserts, plains, mountains and small
water reserves. Dhaka (2005) defined the physiology of the region that the steppe grasslands are
situated in the northern part of the region. In the western side of the region there are plains. The
eastern and southern sides of the region are having mountain peaks. The mountain ranges included
Koppeh Dagh of northern Iran, Afghanistans Hindu Kush mountain range, Pamir mountain range
which becomes part of Tajikistan southern side and the Tien Han mountain range which runs to the
western China. Deserts and semi deserts are also parts of the Central Asian region. In Turkmenistan
there is a desert of Karakurum (Turkic: Black Sand). The western part of the Uzbekistan is a desert
area which is Kyzylkum (Turkic: Red Sand).
Asian region has an inland water system. Its rivers and lakes are locked inside the region.
The major rivers of the region the Amu Darya and Syr Darya, both the rivers have tributaries which
are the major source of the water in the Central Asian states. The largest river of the Central Asia is
the Amu Darya. This river covers the distance of 1,578 miles and joins the Aral Sea in the northwestward. The main tributaries of the Amu Darya included Zeravshan River and the Kashka River.
Both these rivers flow to the desert of Kyzylkum and end there. (Dhaka 2005)

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Map of Central Asia


Note. From The New Great Game: Rivalry of Geo-strategies and Geo-economies in
Central Asia by Peter Kurecic, 2010, Hrvatski geografski glasnik, 72(1), p.22.
The climate of the region is dry. The irrigation in the region is dependent on the water
system of the region. The region experiences very low rainfall. The evaporation rate is high. Dhaka
(2005). Inter-regional trade is the vital factor of the economy of these states. The infrastructure in the
region during the Soviet domination shows the dependency of these states on Soviet Union in the
economic sphere. Khan (1994)stated that the infrastructure in the region is not sufficient to allow
these states to benefit the opportunities of accessing the world markets.
After the disintegration of the Soviet Union the states of Central Asian were given
Independence. Kurecic (2010) identified that the dependence of these states on Soviet Union before
their independence cost them heavily and they were unable to manage the economic affairs once
they were declared independent. Immediate after independence the GDP of these states declined.
They were not integrated to the world markets therefore it became a reason for the decline of GDP.
After an immediate blow the GDP of the states started in the late 90s. In 2009 Kazakhstan and
Turkmenistan witnessed the trends of increase in GDP. Major contribution in the increase in
Kazakhstans GDP was the oil export.

The Geopolitical Environment of Central Asia Three parameters


There are three parameters according to which Central Asias importance can be judged:
The geopolitical environment of Central Asia can be analysed by understanding the neighbouring
countries and the involving powers. Central Asia is having major powers as her neighbours. Russia is
the major power of the region as well as the former colonizer of the Central Asia. Central Asia
touches Russia in the north and shares eastern borders with China which is an economic giant of the
century. Iran and Afghanistan are neighbouring countries at the southern border. it shares close
ethnic and cultural links. This region is also experiencing close proximity to the countries like
Pakistan. Central Asia and Pakistan share historic links and the strands of tribal movements also
connect to Pakistan. Turkey is another important country with which Central Asia shares historic
connections (Khan, 2006 & Dhaka, 2005).
In the geopolitical environment of Central Asia, according to Dhaka (2005),some transregional links are also important. Among these the USA and other powers, which join hands with US,
are extending diplomatic ties with the Central Asian states. Central Asias relations with the regional
and trans-regional powers develop a geopolitical environment which enhances their importance in
the global politics.

Geopolitical location
Central Asia is a landlocked region (Balooch, 2009). It shares border with the major regional
powers. On the northern side it touches Russia. On the eastern side it shares borders with China. On
the southern side it borders with Iran and Afghanistan. Some trans- regional powers are also

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pursuing their policies in the region which includes USA and Turkey. The proximity of Central Asia to
the regional powers and the involvement of global players in the region enhance its geopolitical
importance (Khan, 2006).

Energy Reserves
Wasi (2002) stated that Central Asia is a region which is blessed with the vast reserves of
natural resources. The most notable are oil and gas reserves. According to her this region is hosting
the second largest energy reserves. This region is also rich in colourful metals such as gold, silver,
magnesium and uranium etc. these natural resources increased the geopolitical importance of the
Central Asia. The global players and the regional powers are trying to dominate these energy
reserves and are pursuing their policies to further their interests.

Geostrategic Pivot
The geostrategic importance of this region is the result of geopolitical and geo-economics
significance. Mackinder in 1904 stated that the Heart of the Eurasia would play an important role in
the world politics. According to his Heartland theory the power which controls the heartland would
control the world affairs (Blacksell, 2006). Mackinders Heartland includes the Central Asian region
also. Central Asia became the centre of attraction for the strategic players like Russia and China and
some Trans-regional powers like USA. The region enjoys close proximity with the regional powers as
well as the important countries which are now a days centre of strategic and security interests. These
are Afghanistan, Pakistan and Iran. The location and the battle for interests among the involved
powers in the region makes it strategic pivot.

Interests of the Major Actors in Central Asia


To understand the New Great Game it is necessary to discuss the interests and the
strategies of the involved actors in the Central Asian region.

Russia
Russia is an important regional power. Kurecic (2010) stated that Russia is enjoying
maximum benefits in the region due to its important geographical location. The basic objectives of
Russia according to Malashenko (2013) are:

To stabilize the region in order to prevent any outside power to exercise influence in the
region and to maintain her own influence.
Russia supports the authoritarian political system in the region. Malashenko (2013) states
that Russia finds authoritarian system more helpful in achieving her objectives in the region.
This region is the hub of energy resources which increased its importance in economic
sphere. One important Russian objective is to monopolize the energy transit routes
emanating from the region. Russia wants to control the pipeline routes to extract maximum
benefits of regional energy resources and to secure her energy reserves (Malashenko,
2013, Gorodetsky, 2003).
To protect Russian minorities living in the Central Asian states. (Dhaka, 2005 & Malashenko,
2013).
To eliminate and stop the spread of Islamic radicalism.
To contain United States domination and influence in the region.

Russian strategy in the region, according to Kurecic (2010),is opposite to the western geostrategy but Russian and Chinese interests converge in the region in economic as well as strategic
realms.Russia is playing an important role in the exploration, exploitation, development and
transportation of the energy resources. Russias role in the export of Turkmen gas and Kazakh oil is
very important step in the Russian policy towards the region. Duarte (2012)stated that Russia is
exploiting the natural resources of the region. Russia purchases the oil and gas at the very low prices
and then sale it to the world markets at very high prices. Russia is also using her strategic location to
maintain her dominance in the region. The geographical location of the Russia provides her with an
opportunity to control the pipeline routes for the export of the oil and gas reserves to the global
markets. Malashenko (2013) states that Russia is focusing to play an important role in the energy
projects in Central Asian states e.g. in Tajikistan and Kyrgyzstan Russia is an important stakeholder.
Therefore Russia in order to serve her interests is trying to take the region in her orbit to eradicate
extremism and terrorism from these states. Russia takes this region as a backyard and near abroad
after 1991 (Gorodetsky, 2003 & Abilov, 2012). To maintain her hegemony in the region Russia
maintains bases in the Central Asian states of Kyrgyzstan and Tajikistan (Cooley, 2008). Central
Asian states are also important for Russia from the perspective of NATO enlargement. CARs, for
Russia, serve the role of buffer zone against NATO enlargement (Gorodetsky, 2003).

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China
China is an important regional power as well as the emerging economic power in the world.
Fu (2010) identified aspects around which Chinese interests revolve in Central Asia. China wants
peace with the regional countries which include Russia and the Central Asian states with peaceful
borders and stability to control the situation in Xinjiang province. The security dimension of Chinese
interests is focused on the point to contain the nationalist elements in Xinjiang (Fu, 2010 & Burles,
1999).As China is worlds economic giant, its energy needs are increasing day by day (Burles, 1999).
China is an energy hungry country (Petersen & Barysch, 2011). Continued energy supply is
important for Chinese economic growth in the future. This need is an important aspect of Chinas
interests. It has always wanted to have control of the energy reserves of Central Asia to ensure
future energy demands with explicit intensions to exploit the energy reserves and the location of the
region in order to determine her role outside this region. The increasing control of the Central Asian
region will give opportunity to China to secure a geopolitical position.China wants to establish
multilateral relations with the CARs. China wants to develop partnership with the CARs in trade,
energy and transportation sector (Fedorenko, 2013).
China is the fastest growing economy in the world. In 2004 China became second largest
consumer of petroleum. This growing economy needs continued supply of energy and this demand
can be fulfilled by the Central Asian energy reserves (Fu, 2010). Energy strategy of China has two
aspects

To focus oil reserves of the Central Asian region.


To fulfil this demand Chinese National Petroleum Corporation signed deals with Kazakhstan
which holds largest oil reserves in Central Asia. By this China aims to play her role in other oil
projects in Kazakhstan and then makes her way to the Caspian energy resources.
To focus gas reserves of the region.
Another aspect of Chinas energy policy is to focus the gas reserves. China, in order to achieve
this objective is supporting the construction of pipelines to have an access to the gas reserves of
the region. Turkmenistan hosts the largest gas reserves in the region. Sino-Turkmen gas
pipeline started working in 2009. This pipeline is a major success of Chinese energy policy (Fu,
2010).China is also playing her role in other sectors such as security, trade and economy.
Chinese policy aims economic integration of the Central Asian region through different regional
organizations. For this purpose China is playing an active role in Shanghai Corporation
Organization (Fu, 2010).

United States
US is pursuing following interests in the Central Asian region (Blank, 2008):

To contain Russian influence in the region.


To contain Chinese involvement in Central Asia.
To provide opportunities to the Central Asian states to access world markets outside the region
(Blank, 2008).
USA, according to Fu (2010), wants to control the oil and gas transportation routes to create
antimonopoly over the resources of the region.
Fu (2010) identifies an important objective of the United States which is to promote western
democracy in Central Asia.
To eradicate terrorism and Islamic extremism from the region(Weitz, 2006& Wishnick, 2009).
Khan (2006)stated that US wants to establish bilateral relations with all the countries of the
Central Asia in order to achieve the objectives.
One of the major interests of the United States is to create a Greater Central Asia including
Afghanistan as the centre of the concept. Frederick Starr first gave this concept in 2005
(Saidmuradov & Puseva, 2010)
To achieve all the above stated objectives USA is following the strategy to contain Russia
and China in the region. To achieve the policy objectives, according to Starr (2005),USA is
developing relations with the regional governments. USA is using different strategies to contain
Russian and Chinese monopoly. These can be achieved by enhancing regional cooperation,
promoting economic activity and by developing network of oil and gas pipeline network which can be
used for two purposes i-e- to enhance trade and economic activity,to transport energy reserves of the
region to the west. The United States prime motive which is to contain Russia and China can be
achieved by promoting regional integration. Regional states cannot play their role if they remain
isolated Starr (2005) or if any opportunity to link their economy to the global market would be denied
to them. Through economic activity the Russian exploitation of the natural resources would be

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contained (Starr, 2005). For a successful strategy it is important that regional governments must
consider US developmental projects as beneficial opportunities (Starr, 2005)rather perceiving those
projects as a threat. USA is encouraging Central Asian governments to introduce following reforms:
a) Regional governments should conduct free and fair elections to promote democracy.
b) Judicial reforms should be introduced
c) Civil rights projects should be encouraged.
Central Asian region claims its importance after US started war against terrorism. US led
war on terrorism brought new era of opportunities for Central Asia (Jonson, 2006). US focus in
Central Asia after 2000 shifted to eliminate (Kurecic, 2010):

Human trafficking
Drug and narcotics
Arms sale
Religious extremism and terrorism.

To achieve the geopolitical objectives US focused on three countries which are Kazakhstan,
Kyrgyzstan and Tajikistan. All the three countries are important regional state as they share borders
with China. Kurecic (2010)argued that these countries are strategically important and USA wants to
eliminate the influence of Russia and China in these countries. USA wants to limit the Chinese
strategic as well as political influence in these countries. Jonson (2006)stated that Tajikistan is a
gateway to the Central Asian region from southern side. This becomes the route for drug trafficking,
human trafficking, movement of weapons and ideas regarding extremism. Therefore US is paying
special attention towards Tajikistan in order to achieve desirable results in the Afghanistan Due to its
strategic location Tajikistan has an important role to play in this New Great Game (Jonson, 2006).
USA wants to control the pipelines and the basic aim is to end the Russian monopoly in the
pipeline sector. USA is having bases in the Central Asian states. These bases were established
under the label of counter-terrorism and with the presence in the region US exploits the routes and
communication links of the regional states. US support all those projects which allow no role for
Russia (Kurecic, 2010).The US interests faced major setback when Central Asian states demanded
to vacate the bases. The step was taken firstly by Uzbekistan government when US criticized the
government operation against rebels in Andijon (Kahn, 2006).
US took some steps in order to achieve energy strategy.

In 2005 US purchased an oil company Petro Kazakhstan which is a major step to achieve the
energy objectives.

In 2006 it also achieved China International Trust and Corporation.

US also signed different agreements for pipelines with the Central Asian states. Irans Interests
in Central Asia:

Iran is an important regional player. It shares borders with the Central Asian region. Irans
security stakes are high in region. Iran is pursuing following interests in the region:

Smith (1996) argues that Iran wants stable and peaceful Central Asia.

Iran wants access to the Central Asian oil and gas reserves and wants to control the routes
which export the energy reserves to the global markets.

To maintain cultural links with the Central Asian states.

Iranian strategy in the Central Asia revolves around Irans cultural, security and economic
concerns. Irans prime objective, according to Smith (1996), is the stability in the Central Asian
region. The fragile regimes and the instability in the states are major concerns for Iran. But the
isolation of Iran at the international level prevents it to take any action regarding security concerns.
Any action taken by Iran would be unacceptable to the Russia and United States. Therefore Iran is
dependent upon other regional actors such as Russia for the security and stability of the Central
Asian states.
Iran is focusing to strengthen her relations with the Central Asian states. Turkmenistan is a
Shia state so Iran is using the close cultural ties to take more benefits from the Turkmen gas
reserves. Iran views Turkmenistan as a gateway to the Central Asia. Therefore establishing relations
with the Turkmenistan would means access to other regional states (Kurecic, 2010 & Behzadi, 2010)

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Iran, according to Kurecic (2010), is pursuing the pipeline strategy which is to transport the
Caspian Sea oil to Iranian ports of Bandar Abbas and Bandar Khomeini to be exported to the world
markets. The success of Irans strategy is based on gaining the influence in Turkmenistan,
Azerbaijan and Kazakhstan. But here other major actors involved in the region are such as Russia
and United States would not accept any role by Iran in the region.
Iran also enjoys some advantages in Central Asian region. The ethnic ties with Tajikistan are
strong. Tajiks follow Iranian culture. Dhaka (2005) identifies another advantage that is the model of
Islamic government in Iran. This can bring Iran in close relations with Central Asian states in future.
Dhaka (2005) stated that Irans role in Central Asia becomes limited when it comes to the economy.
Irans economy faced major declines after the revolution of 1979. Then war with Iraq in 1980s
becomes major setbacks for Iranian economy. Therefore Iran is economically not able to play a
significant role in the region (Dhaka, 2005).Iran is trying to establish economic bloc including
countries of Pakistan, India, Nepal, Sri Lanka, Bangladesh and Afghanistan to promote trade with the
Central Asian states (Balooch, 2009).
Considering the economic conditions of Iran and her isolation at the international level it is
very clear that Iran is unable to provide aids and assistance in cash to these countries. Iran can
establish infrastructure and can initiate joint ventures(Dhaka, 2005).
To increase her influence in the region Iran-Turkmenistan gas pipeline is important for Iran.
Through this pipeline Turkmen gas would be exported to European markets via Iran. Iran also
concluded agreement with the Kazakhstan for oil pipeline which would transport 2 billion barrels of oil
from Kazakhstan to Iran crossing Caspian Sea (Foster, 2008).
With the above stated scenario it is clear that Iran has a limited role to play under these
conditions.

Turkeys Role in Central Asia


Turkey is the regional actor in the New Great Game. Turkey is the US ally and trying to
enhance its role in the global politics by engaging herself in the Central Asia which is considered as
one of the most important strategic region (Fedorenko, 2013). Kurecic (2010) stated that Turkey
herself holds strategically important position. It is situated at the location where it serves as the
bridge between The Middle East, South-Eastern Europe, Caucasus, and the Caspian Sea regions.
Turkeys main aim is to play a significant role in transporting the energy resources f Caspian region,
Middle East and Russia to the Western markets (Ipek, 2006). Turkeys strategy involves the
completion of East-West Energy Corridor. This Energy Corridor is important as it aims to transport
the energy resources of Caspian Basin and Central Asian region to the western markets without
using Russian territory. The main aim is to bypass Russian role (Ipek, 2006). Turkeys role is
enhanced by the following factors:

It is a stable country.
A reliable western ally
It is a country which allows routes of pipelines from Central Asian and Caucasus region to the
west.
Its interests do not clash with the interests of the Western powers.
Turkish model of secular Islam is more familiar to the Central Asian people.
Turkey has strong ethnic ties with the Central Asian states.

Dhaka (2005) & Ahrari (1996)stated that Turkey was used by US as a card to play in Central
Asia. In the beginning Turkey focused education, telecommunication, transportation sectors and
cultural linkages. But the western support reduces in the aftermath of the issues of Kurdish human
rights. The unrest in the Kurdish areas makes them unfavourable for the pipeline routes. This
reduces Turkish importance and as a result Turkey lost her influence in the region. Central Asian
states also rejected Turkish role as a regional dominator.

Pakistan

Pakistans interests are derived by three main factors. These are:


The Muslim identity and the historical cultural links with the region.
Pakistan is trying to take benefit from the geographical location. Pakistan is located between the
regions of South Asia and West Asia. As Central Asia is a landlocked region it needs outlets to
the world. Pakistan through its Karachi port and now recently developed port of Gawadar can be
a shortest route for the Central Asian states to the outside world.

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Pakistan is hopeful about her gains in the Central Asian markets due to the experienced
Business community which wants to extend their activities in the region.
Pakistans main interests in the region are:

To find a place in the economic activity and market development of the region.

To enhance her trade with the region

On the security front Pakistan is a victim of terrorism and same is the threat to Central Asia. The
Uzbek tribes are also a part of terrorist activities. Pakistan wants to have bilateral relations with
these states to curb the extremist elements and threats. Pakistan has signed many bilateral
trade agreements with the CARS. Pakistan is also building gas pipeline From Turkmenistan to
Pakistan via Afghanistan this pipeline will finally reach India (Khan, 1994& Abbas, 2012).

Geo-Economic Dimension of the New Great Game


Geo-economic dimension of the New Great Game represents the rivalry of major powers for
the energy resources of the Central Asian region. Energy reserves of the Central Asia and Caucasus
are the main focus of the New Great Game. Malashenko (2013) highlighted the significance of
Central Asian region by stating that there are transit routes for energy which are an important aspect
of the New Great Game.

Locations of Resources
Energy reserves of the region are concentrated in the following basins (Dhaka, 2005):
i.
South Caspian
ii.
North Caspian
iii.
Usturt
iv.
Mangyshlak
v.
Amu Darya.
Turkmenistan claims that it has 22 billion barrel of natural gas reserves. In Kazakhstan oil
reserves are concentrated in Tangiz and Karachaganak oil fields (Dhaka, 2005).
Table 1: Oil and Gas reserves of Central Asia
Billions of Barrels
Trillion Cubic Feet
Country
Proven
Possible Total
Proven
Possible
Total
Azerbaijan
7
32
39
7
32
39
Kazakhstan 9-40
92
101-132
1
15
15.1
Turkmenistan .55-1.7
38
38.55-39.7
9-40
92
101-132
Uzbekistan .3-.59
2
2.3-2.59
.55-1.7
38
38.55-39.7
Note. From Central Asia: Centre of New Great Game by Abdul Hafeez Khan, 2006,
The Dialogue, 1(4), p.63.
In Central Asia oil reserves are estimated to be 15-30 billion barrels. The natural gas
reserves are 230 -360 trillion cubic feet (Dhaka, 2005).
Pipelines Routes: Oil and gas pipeline routes from Central Asia

Asian Affairs

96

Note. From Central Asia: Centre of New Great Game by Abdul Hafeez Khan, 2006, The
Dialogue, 1(4), p.65.
Kurecic (2010) stated that quality of Central Asian oil is very good. The huge energy
reserves and good quality attracts major powers to pursue their objectives in this region. The oil and
gas reserves are the major point of conflict among the major actors involved in the region. The
involved powers are trying to exploit these resources for their future energy demands. The major aim
is to export these energy reserves to the global markets and to control the pipeline routes. But
Kurecic (2010)indicates that these objectives are restrained by geographical limitations.
One important aspect of this New Great Game is that the Central Asian states do not
possess such technology and also lack economic resources. This offers bulk of opportunities to the
stakeholders to invest in these sectors and to establish their influence in the region (Kurecic, 2010).
Central Asian states depended heavily on Russia for the trade, economy and transportation
of energy reserves. Russia is having firm control over the transport pipelines of gas and oil from the
region to the global markets. USA and other allies are supporting the construction of pipelines with
different routes to end Russian and Chinese monopoly in the region. For this purpose private oil
countries at international level and the state owned companies of different countries paid attention to
invest in Turkmenistan which is having huge gas resources (Petersen & Barysch, 2011).
Central Asia is a landlocked region. This region has no access to the Oceans; therefore it
needs to construct pipelines to transport its oil and gas reserves to the global markets. Through
these pipelines this region gains access to other countries (Foster, 2008). To export the energy
reserves of the region all the involved players are proposing different routes and pipelines which best
served their objectives. The proposed routes run through Russia, Georgia, Afghanistan, Iran,
Armenia and Turkey the routes and different consortia are as follows (Khan, 2006):

The Northern Route


This route runs from Baku to the Russian cities which are Grozny and Tikhorestsk and then
to the Black sea port of Russia which is Novorrosyisk, this route can transport 120,000 barrels of oil
which is aimed to be increased up to the 300,000 barrels of oil per day. Russia would be the major
beneficiary of this route. It would increase Russian domination over the resources of the region
(Khan, 2006). Russia is trying to influence the flow of gas from Central Asian region. The policy of
Russia is to earn a role in the pipeline routes of the natural gas. Russia does not want Western bloc
to exploit energy reserves of the CARs. If it is not possible to stop the flow of the natural gas from the
region then Russia preferred markets in the east (Petersen & Barysch, 2011).

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The Advanced Contemporary Affairs (Book 92)

Map of Baku-Tbilisi-Ceyhan oil pipeline. Note. From Postmodern Imperialism: Geopolitics


and the Great Games p. 143, by Eric Walberg, 2011, Atlanta: Clarity Press Inc.

The Western Route


This route runs from Baku to Tbilisi and the endpoint will be the Georgian port which
is Supsa. Another pipeline is Baku-Tbilisi-Ceyhan oil pipeline (Walberg, 2011). USA and her ally
Turkey decided to develop a route from Baku to Ceyhan which is a Turkish port in the Mediterranean.
This route bypasses Russia Mihalka (2007). Its major beneficiary would be US and the Western bloc.
US prime aspiration is to limit the Russian role in the region which can be fulfilled by this route. This
proposed pipeline will be passing from Kurdish areas which are witnessing instability which will affect
this pipeline construction. The East- West energy corridor for the export of energy resources of
Caspian Basin and Central Asian region is an important strategy to develop western routes (Ipek,
2006).

The Caspian Pipeline Consortium


In this group the regional countries and oil companies are actively involved. These include
Russia, Kazakhstan, Oman, Chevron, Lukoil, Rosnft-Shell, Mobile, British Gas, Kazakh Munaigas
and Oryx. Through this pipeline they plan to transport 1.34 million barrels of oil per day. This pipeline
will run from Kazakhstans Tangiz oil field to Tikhorestsk to the Russian port in the Black Sea
Novorossiysk. This pipeline will utilize part of already existing Russian pipeline from Tangiz to Grozny
(Khan, 2006).

Iranian Route
Iran has proposed another route and pipeline. This will run from Azerbaijan to the Tabriz for
refining process of oil. Then it will be exported through the Persian Gulf port of Iran. This route is
facing US and other actors objections. Turkmenistan and Iran has signed an agreement which
facilitate the transportation of Turkmen gas to Turkey via Iran (Khan, 2006).

Chinas Proposed Pipelines


China has also make plans to build an oil pipeline which runs from Kazakhstan to the
Chinas Tarin Basin. This is a long range project and it will take much time to develop. It will transport
14 million tons of oil per year and will fulfil 5 percent of Chinese total oil export (Fedorenko, 2013 &
Mihalka, 2007). China also concluded an agreement with the Central Asian states for the transport of
the natural Gas. Through this project Turkmen gas is transported to China via Uzbekistan and
Kazakhstan. This project started functioning in 2009(Fedorenko, 2013).

Asian Affairs

98

Map of Turkmenistan-Afghanistan-Pakistan-India pipeline Note. From IP and TAPIin the


New Great Game: Can Pakistan keep its hopes high? by Seher Abbas, 2012, Spotlight
on Regional Affairs, 31(4), p.20.

Turkmenistan-Afghanistan-Pakistan-India Pipeline
With the coordination of the Asian development Bank Turkmenistan, Afghanistan, Pakistan
signed an agreement to transport Turkmen gas to the Pakistan via Afghanistan. India joined this
project in 2008. The important aspect of this project, according to Foster (2008), is the support of
United States for this project. Turkmenistans proven gas reserves are 8 trillion cubic meters. This
pipeline will connect Daulatabad gas field in Turkmenistan to the Afghan cities of Herat, Helmand and
Kandhar passing through Quetta and Multan to the Indian city Fazilka. This pipeline will transport 33
billion cubic per year. Afghanistan as the bridge between Central Asia and South Asia will enjoy the
maximum benefits of this pipeline project which will become largest developmental project in
Afghanistan. The transit fee of US $ 160 million per year will enhance the development in the country
(Foster, 2008). Through this pipeline regional cooperation will be promoted (Palau, 2012 &
Fedorenko, 2013).

Iran-Pakistan-India Pipeline
Iran has vast reserves of oil and natural gas. Irans reserves made it the second largest
producer in the world. Iranian gas field South Pars was discovered in 1990 which increased the gas
reserves of Iran. The discovery of South Pars gas field allows Iran to export its gas to the other
countries in the region. Therefore Iran proposed IPI pipeline which is Iran- Pakistan and India
pipeline. This is also called peace pipeline. The agreement for the construction of pipeline was
concluded in 1995 in which Iran and Pakistan decided to construct a pipeline linking Karachi to the
South Pars gas field. India later joined the agreement. This extension benefits Pakistan with the
transit fee. Through this pipeline Pakistan will get 60 million cubic meter gas per day and India will
get 90 million cubic meters per day. China is also trying to join this project(Asghar & Nazuk, 2007.,
Munir, Ahsan & Zulfiqar, 2013). Russian company Gazprom and Britains company British Petroleum
are showing interests in this project for the construction of the pipeline (Foster, 2008).
Foster (2008) stated that the two pipelines; TAPI and IPI, are considered as the rivals. IPI
proposed the secure route to transport Irans natural gas to the Pakistan and India. On the contrary
TAPI will pass the war torn country Afghanistan and its route is not very safe.

99

The Advanced Contemporary Affairs (Book 92)

Map of Iran-Pakistan-India pipeline Note. From A pipeline through a troubled land:


Afghanistan, Canada and the New Great Energy Game by John Foster, 2008, Foreign
Policy Series, 3(1), p.8.
Table 2: The detail of Different gas pipeline projects which originate from
Central Asian region and transport its energy reserves to other countries is
shown in Table 2:
Pipeline
TAPI

IPI

Route
Length,
(Source &Volume
recipient)
Turkmenis 33 BCM
tan,
1,700
Afghanist km
an,
Pakistan,
India

Iran,
33
Pakistan,
India
BCM
2,670
km

Cost
US$
bn
$7.6

Comp Partners
Financi Support
letion
ng
Date
2015 Special
ADB
USA
venture
company
held
by
national
companies.
May bring in
private
partners
$7.5 2015 Iran,
Partner Russia
Pakistan,
s
India (may separat
subcontract ely
in private
companies)
2010 Turkmenistan Partner Russia
Kazakhstan s
Russia
separat
ely

Caspia Turkmenis 20
n
tan
&
Coastal Kazakhsta
n
toBCM
initially
Russia
Central Turkmenis 30 BCM $7.3 2011 Turkmenistan Partner China,
Asia- tan
&2,000
Kazakhstan s
Russia
Separat
China Kazakhstakm
n to China
ely
South Azerbaija 8.8 BCM $1.2 2006 Consortium EBRD USA
Caucas nexpand
of companies
us
Georgia - able to
led by BP &
Turkey
20 BCM
Statoil
692 km

Trans- Turkmenis 30 BCM $5.0 n.a. n.a.


Caspia tann
Azerbaija
n
South Russia to31
2013 Led

n.a.

by

USA

Russia

Oppose

Certainty
Supply

Russia

Security
problems

USA

Political
problems
opposition

USA

Good

of

US

Good

Russia

Phase
1. OK
Phase
2.gas
addition al to
Azerbaijan
(Iran,
Turkmenistan)
Russia, Iran Hurdle: Russian
oppositi on
USA

Good

Asian Affairs
Stream Italy
&
Gazprom and
Black Sea BCM
ENI
900 km
NabTurkey3,300 $12. 2013 Project
ucco
Austria
km
0
company
owned
Rising
to
Equally
by
companies of
31 BCM
Austria,
Hungary,
Romania,
Bulgaria,
Turkey,
Germany

EU, USA

100

Hurdle:
gas addition al
to (Iran,
Turkmenistan)

Gas pipeline projects from Central Asia. Note. From A pipeline through a troubled land:
Afghanistan, Canada and the New Great Energy Game by John Foster, 2008, Foreign
Policy Series, 3(1), p.11.

New Silk Road Strategy


The New Silk Road strategy is a step by United States to maintain her presence in the
Central Asia after the withdrawal of her forces form Afghanistan. In 2011 the New Silk Road strategy
is announced by Hilary Clinton, US Secretary of State. US aims to enhance the regional cooperation
in the sectors of trade, energy and transportation and to further promote the regional stability
(Fedorenko, 2013).
The old Silk Road was the connecting route between Europe and Asia. For many decades
the Old Silk Road served as a land route to conduct trade and other relationships between the
regions. It was a big land route which connected Europe and Asia and many other smaller routes
stemmed out of it after the technological advancement and the development of maritime routes the
historic Silk Road lost its significance. The political situations in the region also faded away its value.
The New Silk Road project is vital in improving regional cooperation, political scenario of the region.
It allows Central Asian states to benefit from the diversify trade opportunities. At the same time it
attracts investment in the sectors of energy and transportation. This will provide CARs with the
opportunities to play their role in the New Great Game. The New Silk Road also focused
development in Afghanistan after withdrawal of US forces (Fedorenko, 2013).
United States announced the New Silk Road project in 2011. By this project US aims to
achieve regional cooperation and better trade facilities for the Central Asian region. It will greatly
enhance the trade and economic activity in the region by attracting investments in the economic
sector of Afghanistan as well as the Central Asia. The New Silk Road will also link the region with the
global markets. Different trade routes emanating from the New Silk Road will increase the
significance of the region in the global economy and it will allow Central Asian states to play their role
in the world politics. The important aspect of the New Silk Road strategy is to limit the influence and
role of Iran in the Central Asian region (Fedorenko, 2013). In the New Silk Road strategy two projects
are of prime importance. These are:
Turkmenistan-Afghanistan-Pakistan-India (TAPI) gas pipeline. This pipeline will transport the
Turkmen natural gas to the three countries. This pipeline will be functional in 2017. It will be
a major pipeline route which will transport the Turkmen gas to the Pakistan and India via
Afghanistan(Abbas, 2012 & Fedorenko, 2013).
CASA-1000 is another important part of the New Silk Road strategy. It is a project in
hydropower sector. In this project the hydropower from Kyrgyzstan and Tajikistan will be
delivered to Afghanistan and Pakistan.

Geopolitical Dimension of the New Great Game- The Role of CARs


The role of Central Asian states is very important in the New Great Game. They are the
regional stakeholders in this game. Their future depends upon their own role. This major power
rivalry gives them an opportunity to decide for their alliances, friends and the government models
and also to gain economic benefits from this New Great Game (Ahrari, 1996).
Central Asian states after the disintegration of Soviet Union were in a fragile economic
condition. Their motive is to gain economic benefits and their enhanced role in the region.
Considering the geopolitical developments in the region, the CARs slipped out of Russian influence
by 1999. For their enhanced role in the geopolitical game they decided not to depend only on Russia.
Therefore it was only Tajikistan who joins Russian military initiatives while other states declined
(Mihalka, 2007). Their aim is to integrate their economy to the global markets. They responded to the
initiatives of the other countries to balance the Russian influence (Petersen & Barysch, 2011). For

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The Advanced Contemporary Affairs (Book 92)

this they want to use their economic resources which are much valued in the global market. The
regimes of Uzbekistan, Turkmenistan and Kazakhstan are exploiting this power rivalry in the region
by allowing western oil companies to invest in the region (Fu, 2010, Petersen & Barysch, 2011). The
Central Asian states are building pipelines to export their resources to the world market. They are not
building pipelines with one country or under Russian influence. They are building pipelines on
different routes. This will reduce their dependence on one power Russia and provide economic
benefits (Fu, 2010).
Malashenko (2013)identified that the fate of Central Asian states depends upon their
strategic choice. These states opted not to depend on one actor involved in the region. Central Asian
states decided to develop links with different players in order to gain maximum benefits of their
involvement in the region. CARs are establishing working relations with United States, Russia, China
and Europe. The objective of the CARs is to achieve a balance in promoting the role of the major
players in the region. They are not ready to allow one major power to play a dominant role in the
region and to control the regional trade, transportation and energy resources. Central Asian states
are trying to establish links with different powers in order to extract maximum benefits from the New
Great Game (Malashenko, 2013).
The CARs are extending their cooperation to different countries in order to preserve their
independence (Wishnick, 2009). The geostrategic dimension is providing them opportunities to play
geopolitical role.
Some of the steps, taken by the CARs to secure their geopolitical role in the New Great Game, are
as follows (Mankoff, 2013 & Weitz, 2006):
In 2001 Kyrgyzstan provided Manas Base to US Air Force. This Base was used by US Air Force
to transport. In 2003 Kyrgyzstan allowed Russia to establish her military base in Kant.
UzbekistanprovidedKarshi-Khanabad base to US in 2001. This base was later closed in 2005
after US opposed the operation by Uzbek forces in Andijon city (Weitz, 2006 &Wishnick, 2009).
In 2004 Uzbekistan entered into a strategic cooperation with the Russian government for the use
of military facilities located on their territories. Uzbekistan also joined Russian initiatives to create
joint antiterrorism force (Weitz, 2006). USA and coalition forces needed Uzbekistan to provide
them with bases for War against Terrorism (Jonson, 2007).
Tajikistan provided facility of refuelling to the aircrafts of the coalition forces in War against
Terrorism. Dushanbe airport was used for this purpose. In October 2004 Tajikistan provided a
permanent base to the Russias 201st Motorized Infantry Division. This base is located in
Dushanbe.
Turkmenistan also provided facility of refuelling to the aircrafts of the coalition forces.

Kazakhstan developed a transit centre for the coalition forces. Kazakhstan extends cooperation
to both regional states and trans-regional actors in order to come out of Russian influence.
Kazakhstan gained importance in the geopolitical game after the discovery of its huge oil
reserves. Kazakhstan is trying to minimize her dependence on Russia. Therefore Kazakhstan is
taking steps to establish relations with various involved actors. Kazakhstan is extending relation
with the west. It is a member of NATO, and also provides bases to USA and coalition forces. To
acquire regional influence Kazakhstan became the member of SCO, CSTO, and Central Asian
Eurasian Economic Community. Kazakhstan is also constructing pipeline with the cooperation of
different countries. Kazakhstan aims to attract investment in its oil fields by extending relations to
different stakeholders (Jonson, 2007).
Central Asian states are also playing important role in pipeline politics. They are taking
initiatives in constructing different pipelines. This improves their relations with important regional and
trans-regional countries and enhanced the geopolitical role of the CARs.
TAPI is a pipeline which will transport Turkmen gas to Afghanistan, Pakistan and India.
Turkmenistan Kazakhstan and Russia constructed Caspian Coastal pipeline.
Turkmenistan and Kazakhstan also constructed pipeline to transport natural gas to China.
Some other pipelines are also planned by Central Asian states to transport their energy
resources to other countries.

Role of Organizations and Central Asia- A Geopolitical Dimension


In Central Asia the regional organizations are established to promote economic integration
which involves Central Asian countries. These organizations are promoting economic activity and
also addressing security issues in the region. Most importantly the development of different
organizations is an attempt by CARs to balance the influence of western organizations in the region
(Cooley, 2008). Some of the organizations and groups working for the integration of the Central
Asian states are as follows:

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102

Common Wealth of Independent States:


After the disintegration of Soviet Union the five states of Central Asia and the three states of
Trans Caspian region make a collective security arrangement which is known as the Common
Wealth of Independent States (CIS)(Dettke, 1996).Dhaka (2005) stated that the important part of the
CIS is the treaty which ensures the collective security which does not allow any CIS member to join
such alliance which is against other members. It also ensures the mutual assistance if any of the
member is attacked by the outside power. CIS work can be accessed by its efforts to promote and
maintain peace in Tajikistan. Kurecic (2010) and Weitz (2006) stated that after May 2000 the
Collective Security Treaty was renamed as Collective Security Treaty Organization (CSTO). CIS later
fragmented into two groups:
a) Kazakhstan, Kyrgyzstan, Tajikistan, Armenia and Belarus joins the Russian group
b) Turkmenistan, Uzbekistan, Ukraine, Azerbaijan, Georgia and Moldavia formed a second
group which was a strong opponent of Russian domination in CIS. The objectives of the
Collective Security Organization were to promote regional integration and to cooperate with
other organizations such as UNO.

GUUAM Group
The states of Georgia, Ukraine, Uzbekistan, Azerbaijan and Moldavia gathered to form an
alliance which was to focus political as well as economic sectors. It also opposed Russian
domination in the CIS. This alliance worked for the development of Eurasian, Trans- Caucasus
transportation corridor (Kurecic, 2010).

Shanghai Corporation Organization


In 1996 the Shanghai Corporation Organization was formed. Its members included China,
Russia, Kazakhstan, Kyrgyzstan, and Tajikistan. It is a security organization and holds important role
in strategic developments of the region (Weitz, 2006 & Cooley, 2008). In 2001 Uzbekistan also
became member. SCO directly challenges USA increasing domination and influence in the region.
Fighting terrorism and extremism is also the goal of SCO (Kurecic, 2010).This organization has
worked effectively to improve the regional economic sphere. It initiated projects to develop land links
among the regional states, telecommunication networks and infrastructure projects (Cooley, 2008)

Conclusion
Central Asian states are facing many internal challenges. These challenges lead the region
towards the state fragmentation, exposing it to the menace of terrorism, crime radicalization, and
internal problems of refugee flows. They are also facing the dangers of extremism, crime and drugs.
The region again is gaining focus in the world politics by the rivalry of the great powers which are
pursuing their interests in the region. This geopolitical game is due to the conflicts of the greater
powers which include USA, Russia, China and other regional powers. The goal is to control the
energy and economy of the region. This power contest in the region is neglecting the security threats
these weak, fragile states are facing which is victimizing the stability of the region. Stability of the
region can be achieved by linking it to the world economy. This can only be made possible with the
Russian and Chinese support (Mankoff, 2013).
The role of the Central Asian states is very important in the war against terrorism. USA and
other allies, at the start of the war, wanted Central Asian states to play their role in the war by
extending their cooperation to the security organizations, including ISAF and NATO, which were
conducting operations in the Afghanistan. Central Asian states accepted these roles. (Mankoff, 2013)
stated following reasons for this acceptance:
These states wanted to eradicate extremism and terrorism from the region to ensure stability and
security of the region.
These states wanted to come out of the Russian and Chinese influence by extending their
support and cooperation to the US in the war against terrorism.
Central Asian States wanted to extract maximum economic benefits of their geopolitical position
by allowing routes and bases to the US and NATO troops. These states have shifted the focus of
the US and allies to the region by allowing them transit routes for the supply line in Afghanistan.
This has shifted the attention of the US and allies from Pakistan to these states. Central Asian
states after these measures are gaining importance in the world politics from the security
perspectives also along with
the economic and energy dimensions.
The rent of the transit routes is a step to support their fragile economies. The role of the Central
Asian States in the war against terrorism enhanced the United States involvement in the region
which is a geopolitical strategy of these states. This involvement is helping these states to
overcome regional as well as internal threats and challenges (Mankoff, 2013).

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One of the major strategy and role played by the Central Asian states in the war against
terrorism is to allow coalition forces to use their land in the war against terrorism. They allowed US to
establish bases and station their forces in the region. They provided all logistical support through the
Northern Distribution Network. Central Asian States allowed US and allied forces to establish bases
in their territories. Details of the bases and facilities are as follows (Mankoff, 2013):
a) Kyrgyzstan concluded agreement in 2001 allowing US to use the Manas Base. This base
remained in the use of US Air Force. It provided transit facility. US used this base to transport
equipment into the Afghanistan (Mankoff, 2013 & Cooley, 2008).
b) Karshi-Khanabad base is located in Uzbekistan. The US and Uzbekistan signed an agreement in
2001 which allowed US to use this base for the land transportation of equipment as well as
personnel. This base served as the logistic centre for US missions and operations. USUzbekistan relations got adversely affected by the criticism of US over the operation conducted
by Uzbek forces against the protestors in the city of Andijon. After this Uzbekistan closed the
base for US military use in 2005 (Mankoff, 2013 & Cooley, 2008).
c) Tajikistan has also extending cooperation to the ISAF. Tajikistan is providing refuelling facility to
the coalition aircrafts taking part in war on terrorism. For this purpose Dushanbe airport has been
used. It also allowed coalition aircrafts to use her air space to enter Afghanistan for the
operations.
d) Turkmenistan allowed humanitarian operations to be conducted from her land. It also provided
refuelling facility to the coalition aircrafts.
e) Kazakhstan also extended her cooperation in the war. Kazakhstan allowed access to her
facilities and also established a transit centre to be used by the coalition forces (Mankoff, 2013 &
Cooley, 2008).
The development of the Northern Distribution Network in 2009 was also a geopolitical
achievement of the Central Asian States. US, Russia, the Caucasus, Central Asian States, NATO
and ISAF partners signed an agreement in 2009 and established the Northern Distribution Network.
This network was established for nonlethal supplies which included food supplies, rehabilitation
equipment, and vehicles. The ports of Baltic and Caspian Sea are connected to Afghanistan via
Russia, Central Asia and the Caucasus through this network (Fedorenko, 2013).This network
enhanced the role of Central Asian States in the war on terrorism and also provided them with the
opportunity to play a greater role in the strategic game in the region. This network also shifted focus
of attention from Pakistan to the Central Asian States. Before establishing
NDN, USA was using Pakistans land routes for nonlethal supplies. About 90
percent of the supply was transported through Pakistani land routes by using
Karachi port. After establishing NDN, US relied more on Central Asian routes
and three-quarter of the nonlethal supply was transported through NDN. This
minimized the US reliance on Pakistan. Mankoff (2013) stated that the allied
forces route through Central Asian States is costly as compared to routes
through Pakistan but they are comparatively more secure.

Tea Leaves for Tanks


A Study of Trade Links, Peace and Perceptions in Pakistan,
India, Afghanistan and Iran
Ayesha Siddiqa, Ali Arqam, Aoun Abbas Sahi & Farid Kasi

Abstract

his paper aims to understand and explain the impact of trade and business on peace in South
Asia focusing on Pakistan and its three neighbors: Afghanistan, India and Iran. The basic
research question is if trade, especially formal trade relations will induce peace and whether
institutionalizing of trade relations has stakeholders in Pakistan and its neighbors? While
there are many existing studies on trade relations, this research will bring new perspective from the
business community.
India, Pakistan and Afghanistan have been in a cycle of conflict for decades. India and
Pakistans historical rivalry usually does not give hope to observers of peace and stability in South
Asia. Afghanistan and Pakistan have their own rivalry, though interdependent on India-Pakistan
relations. Indeed, these are very complex sets of relationships grounded in animosity rather than
mutual understanding. While Iran and Pakistan did not experience the kind of tension that can be
observed, from time to time, at other borders, the past three or more decades have seen a rise in
sectarian tension in Pakistan which feeds bilateral strain between Islamabad and Tehran. But all of

Asian Affairs

104

this goes side by side with growing neo-liberal tendencies in the region, which means, policymakers
think in terms of improving economic performance as well.
This paper explores how the business communitys various interests are in favor or opposed
to more open borders. Would the possibilities for peace and stability in the region increase if
governments would just encourage trade? Based on numerous interviews in various regions of
Pakistan, Afghanistan and India, this paper offers perspective from both an official standpoint and
that of the business communities. Notwithstanding official policies on enhancing bilateral trade, what
do business people think appears viable in terms of future connectivity? Can these states finally
break away from the cycle of enmity to embrace common markets and interests?
Talking to stakeholders amongst the business community in Pakistan, India and Afghanistan,
it is not difficult to assess a change in mood regarding trade with India. The bulk of the people in
different markets in Sindh and Punjab were prepared for the government to expand trade ties with
the traditional rival, India. There are many who find the market more lucrative and naturally open as
compared to markets of other trade partners such as China. The objections that were raised either
came from particular segments of the community which is aligned with the military and militant
organizations, or those who fear they are not sufficiently competitive and will lose out such as the
auto and pharmaceutical sectors. The agriculture sector, which was initially the one which objected to
trade liberalization with India in 2011 and 2012, seems to be gradually changing its perception.
However, even agriculture and many other stakeholders prefer to step cautiously and not rush into a
deal without protecting their own interests. More important, the positive opinion was still far from
turning into a critical mass which can change government policy, especially apprehension of the
security establishment that seems to be one of the biggest proponents of extreme caution in trade
liberalization. As far as Pakistans military is concerned and despite claims to the contrary, the
defense establishment remains skeptical of ties with India or that trade could precede resolution of
outstanding disputes. The military does not even appear moved by calculations regarding dividends
that may accrue to its own military business complex.
Official initiatives are critical for a substantive change in policy on India. This was also visible
in Pakistans trade relations with other neighbors like Afghanistan and Iran with whom there are
greater informal than formal trade links. In many respects, the Afghan and Pakistan markets appear
to be well connected. Pakistan is a dominant player in Afghanistans undocumented economy. It is
not just drugs and weapons but a lot of legal goods which are smuggled illegally. Part of this
informality is weak systems and structures and corruption on both sides of the border. The informality
is now part of the business culture which will have issues once the government tries to intervene.
The official stakeholders on both sides will have to negotiate and find means to convert the
undocumented economic ties.
A consensus at the policymaking level regarding the form of trade relations would need to be
worked out. This is certainly the case with Iran-Pakistan trade relations which have dwindled over
years. While ethnic and sectarian factors play a role, a major hindrance is in the form of American
sanctions on Iran. As a result, Pakistans banks do not open letter of credit (LC) for trade with Iran.
Consequently, the bulk of business is carried out informally. This also means limited beneficiaries
and stakeholders. This in turn means very few who would have an interest in expanding trade
relations.
A birds eye view of Pakistans trade ties with three of its significant neighbors shows that
while public opinion is inclined for a shift for economic imperatives, it is politics which will continue to
dominate the debate at least for the foreseeable future. This is unless a concerted effort is launched
at advocacy to create stakeholders in the society that begins to demand a substantive shift in the
future.

South Asian Geo-Political Perspective


The years 2013-14 were crucial for South Asia in terms of several geo-political
developments. The noticeable changes refer to the NATO and US troop pullout from the region,
signing of the bilateral security agreement (BSA) between Kabul and Washington, new elected
regimes in Afghanistan, India and Pakistan, and a rapprochement being negotiated between Iran and
the US. There are many who believe that the South Asian region needs to coalesce and build a
sense of regionalness for which trade is certainly one of the options. With an end of the war on
terror, the environment is rife with challenges but offers opportunities as well if the regional states
find a way to cooperate with each other.
South Asia as a region is in dire need of peace. A glance through the region, we can see the
dicey strategic triangle: Afghanistan-India-Pakistan in which the two larger states will compete for
greater influence in Afghanistan. In some respects, Afghanistan is a geo-political proxy for both
Islamabad and New Delhi.

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The first and more overbearing rivalry pertains to India-Pakistan bilateral ties which have
remained abnormal since their birth as independent states in August 1947. The countries have
fought threeanda-half conventional wars and hundreds of border skirmishes. The Kashmir valley
remains a major point of contestation between the two rivals. Over years, as latest research points
out, the enmity has transformed from a territorial to an ideological contestation. A recent work on the
strategic culture of Pakistan points out how the countrys politically powerful military has internalized
hatred and mistrust of India as part of its strategic culture. The strong suspicion that India never
accepted Pakistan as an independent entity and, thus, did not accept the partition tends to make
Islamabad nervous about Indias intentions. Pakistan is not entirely to be blamed for such perception
as Indias larger size and hegemonic ambitions as a regional power constantly make Pakistan
uneasy. The 1971 IndoPak war resulting in the dismemberment of East Pakistan is an event that
Pakistans military and its powerful establishment do not forget. The never-ending hostility has led to
nuclear proliferation, particularly by Pakistan. The two sides have also engaged in proxy wars with
the use of non-state actors.
The bilateral enmity has evolved over time and is not limited to Kashmir or the territories of
India and Pakistan but has now extended to Afghanistan. Pakistans security establishment is
uncomfortable with Indias independent relations with Kabul and its continued presence in
Afghanistan. Historically, Pakistan has looked at Afghanistan from a two-front situation in relation with
India. Despite that Kabul and Islamabad have a bone of contention over the demarcated boundary;
the British drew the Durand line that was contested from time to time, Kabuls perceived threat to
Pakistan is primarily from the lens of possible support it could provide to New Delhi during its conflict
with Pakistan. A popular perception amongst the strategic community in Pakistan is that India will try
to exacerbate strategic pressure on Pakistan by exploiting the ethnic and border tension between
Afghanistan and Pakistan. Thus, a military operation, though of a limited scale, could add to the
troubles of Pakistans military if confronted with a conflict situation on the eastern front with India.
New Delhis historic ties with Kabul are viewed with suspicion. Although Kabul and Islamabad have
never fought a war, Pakistan did make efforts to destabilize the government of President Daud in
Kabul by training Islamist warlords during the mid to late 1970s.
From Islamabads perspective, the situation changed after the Soviet invasion of
Afghanistan in 1979. The war, which was fought by proxy by the US and Pakistan during the 1980s
against the Soviet forces, changed Afghanistans political scene. Although the 1988 Geneva Accords
ending the war was not backed by the Zia ulHaq regime mainly because it did not provide a formula
for a Pakistan friendly regime in Kabul, the Soviet withdrawal from Afghanistan created a geostrategic gap that Pakistans Army tried to fill in by backing one warlord after the other. The process
finally culminated in support provided to a more homogenous Pushtun militant group, the Taliban.
Despite Pakistani diplomats claim that the Taliban were never under Islamabads control, the Taliban
rule during the mid-1990s did establish Pakistans influence. This situation shifted again during the
mid1990s did establish Pakistans influence. This situation shifted again after 9/11 and Afghanistans
invasion by NATO and US forces. It also brought in other forces into Afghanistan, including India that
has used its soft power in the form of culture and economic aid compounded with hard power in the
form of restricted military and intelligence support to rebuild influence in Afghanistan. Since 2001,
Pakistans key policy towards Afghanistan has aimed at saving the country from drifting into Indias
sphere of influence. This is done through playing the ethnic card. It is a popular perception in
Pakistans strategic circles that the Pushtun are naturally inclined towards Pakistan, at least more so
than the Dari speaking Afghans or those that belong to the Northern Alliance. One of the dimensions
of this approach is for Pakistan to encourage absorption of some portion of the Taliban into the new
political setup in Kabul.
The ethnic dimension also means that Afghanistan has, since the beginning of conflict
during the 1980s, turned into a bone of contention between Pakistan and Iran. This was certainly not
the case during the 1970s when Pakistan and Iran had friendly ties. In fact, Pakistans strategic
depth during the 1960s and 1970s was Iran and not Afghanistan. The Shah of Iran had helped
Pakistan during the latters second war with India in 1965. They had both joined the US security pact
Central Treaty Organization (CENTO) during the 1950s and were part of an economic cooperation
mechanism called the Regional Cooperation for Development (RCD) an economic cooperative
council between Iran, Pakistan and Turkey which was later expanded during the 1980s to include
Afghanistan as well. However, it was the US war against the Soviet invasion of Afghanistan that
started to change the dynamics of Pakistan-Iran relations. A glance at some of the newspaper
archives from 196980 indicates Pakistans dependence on Iran. Then ruled by the Shah Tehran
helped Pakistan during its 1965 war with India. In many ways, Iran was viewed by Islamabad as a
source of its strategic depth vis--vis India. The Shah of Iran was the first head of the state to visit
Pakistan in 1950. The bonhomie continued despite ideological differences which is evident from the
fact that the Zia regime and some of its key members were happy to welcome Ayatollah Khomeini in
the late 1970s.

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The relations started to change after the 1990s mainly on the issue of Afghanistan. Other
factors include the rising Saudi influence that had certainly increased due to close cooperation after
1979 during the war in Afghanistan against Soviet forces. Irans support of the idea of a changed
ethnic power balance in Kabul, which brought the Shia Hazaras into the limelight versus the majority
Sunni Pushtuns drew the wedge.9 Furthermore, Islamabads support of Taliban regime in
Afghanistan during the 1990s added to the tension. Since the end of the Taliban government, other
issues have cropped up such as Tehrans suspicion that Pakistan is either supporting other militant
groups to operate inside Iran or is not discouraging violence by non-state actors inside Iranian
territory.
From Pakistans standpoint an emerging bilateral issue pertains to increased cooperation
between Tehran and New Delhi. In 2003 both countries signed a defense and several other
agreements. One such agreement was linked to India developing the Chahbahar port complex and
the Chahbahar-Zaranj (Afghanistan) railway link. These communication channels are meant to
provide access to goods from Central Asia to India via Iran. Pakistan views this as offering
competition to its own Gwadar port which Islamabad is developing with Chinese help. This would
naturally undermine Pakistans future role in Afghanistan especially in reference to accessing
resources of Central Asia. While India and Iran are cooperating to develop infrastructure in
Afghanistan, Pakistan hopes to benefit from its partnership with China, which has developed stakes
in Afghanistan, and the cultural and historical linkage that exists between the Pustuns of Pakistan
and Afghanistan.

Are Peace and Trade Co-Related?


The South Asian region emerges as a hotbed of tension and rivalry. Nevertheless, the area
also offers many opportunities provided the various significant stakeholders find a way to
communicate. This paper aims to look at trade and its potential in facilitating peace and stability in
the region. This is not the first paper on the subject, especially as far as India-Pakistan ties are
concerned. Many donors believe that increasing commercial activities would generate the capacity
for these states to bring down geopolitical temperature, which will, in turn, help resolve the larger
issues of conflict. So, if India and Pakistan develop an understanding or find a way to talk instead of
have conflict, it will prove helpful not only for these two countries but for the future of Afghanistan as
well. It is feared that an India-Pakistan rivalry in the wake of NATO and US forces exit from Kabul
could disrupt all that was achieved in Afghanistan since after 9/11.
Therefore, the important question for a lot of external stakeholders (in particular) is how to
get a conversation going between the two traditional rivals. The larger question is how to develop
shared interests in the development of Afghanistan and the region at large? This is why economic
activities, which can be considered as a means to create a sense of shared advantages and stakes
in the development of the region in general could be a way forward. Interestingly, there seems to be
lesser push for the idea from key stakeholders in the region and greater pull from the donor
community which is currently engaged in financing studies and building advocacy groups for trade
inside stakeholder states, especially between India and Pakistan. There are several studies which
have been commissioned to look at enhanced commercial activity between India and Pakistan. The
British DFID and American USAID have financed several research and advocacy projects, which,
while being encouraging, also has its downside in terms of making the initiative controversial.
Several people that we came across during the course of the research were doubtful on the issue of
increasing bilateral trade due to American and British involvement.
Notwithstanding such skepticism, it is important to understand the notion behind the high
hope attached with the idea of trade building peace. The US, Britain and the European Union in
general share the perspective that hostilities can be overpowered through building common interests.
Indeed, the European Union, despite its structural issues, does give hope about how old rivals could
join hands. The entire European and western notion about the link between trade and peace dates
back to the 16th century. Philosophers like Erasmus and Immanuel Kant conceptualized ways to
narrow nations differences. Kants historical essay of 1795: Perpetual Peace: A Philosophical
Sketch talked about ways to build mutual trust, something that Europe of those days thought about
in order to attain peace. Indeed, others like Baron de Montesquieu suggested economics as means
to achieve mutual trust. He was one of the first people to argue that trade and commerce can help
build common stakes. Later, other thinkers like Cobden, Angel (1913), Viner (1937), and Hirschman
(1945) expressed similar views.
However, trade as source of peace is not a subject on which we come across a consensus
in European political philosophy and history. For instance, Marxist theorists view trade as Marxian
based theories contend that colonialism and imperialism go hand in hand with trade. They argue that
countries essentially use military force to expand trade. This then means that trade no longer
connects but divides. The more powerful nations will use military power to oppress smaller nations

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and create opportunities mainly for themselves at the cost of others. From the Marxist perspective,
trade then is a tool of oppression and imperialism. There is yet another point of view that examines
trade from in greater intricacy. For instance, Timothy L. Fort argues that it is not just any business but
ethical business that encourages peace. Others such as Polachek talk about competing edge of
trading partners as having influence. So, in case of visible price difference, which may occur due to
war, states may avoid conflict to reap greater dividends. Or greater the stake in terms of volume of
trade the greater incentive to avoid conflict. Furthermore, the more flexible a states import demand
and export supply the greater that country engages in violent behavior with others. Some economists
have questioned the efficacy of multilateral trade and have viewed bilateral trade as more beneficial.
Ultimately, trade only works if states perceive their gains and understand that gains are equally
beneficial. In fact, trade has to result in a perception of a win-win situation and not where underlying
differences originally separating the countries remain drastic. This, as we may find out during our
debate of India-Pakistan trade is what tends to hamper any trade initiative there is little consensus
as yet in Pakistan that trade would result in equal benefits. In case of India and Pakistan a perceived
imbalance is not just limited to trade but to larger strategic gains or losses as well. We will see some
of this debate in the following sub-section. But more importantly, the issue of cross-border trade
between Pakistan and its three key neighbors is a matter which requires careful introspection. Right
now, as it will be debated in the paper, the stakes are tilted towards the informal sector. There are far
more profits in economic illegality rather than legality. This means that the documented portion of
commerce is far less and thus there seem to be limited stakeholders that would form a lobby for
formalization of trade relations. What are peoples perceptions, who are the stakeholders and how do
states convert the nature of trade and commerce are some of the issues which will be touched upon
in the course of this research.
The key objective of the research paper is to evaluate the current possibilities of trade
between Pakistan and its three neighbors: Afghanistan, India and Iran. The study will highlight the
challenges and opportunities and perception of the business community towards trade.

1. India-Pakistan Trade
Instead of starting alphabetically, the paper will start with Pakistans most tedious strategic
relationship the bilateral trade ties with India. This, as mentioned earlier, is because links with New
Delhi are viewed as the key driver and contributor to relations between Islamabad and its other
neighbors as well.
Currently, Pakistan represents a very small share of Indias total imports and exports, and
vice versa. Pakistan represents about 3 percent of Indias, and India constitutes 0.5% of Pakistans
total foreign trade (see following figures). According to a study conducted by the Lahore University of
Management Sciences (LUMS), the total trade (exports plus imports) between India and Pakistan in
2011-12 averaged only a little(exports plus imports) between India and Pakistan in 2011-12
averaged only a little over $2.5 billion.21
Table 1: PAKISTANS EXPORT TO SAARC REGION
ITC
TradeMap; US$ million
Year
2006
2007
2008
2009
2010
2011
2012
2013
Total

AFG.
BD.
BH
IND
MLD
NPL
SL
Total
991.5
266.8
0.1
326.7
3.0
2.4
177.6
1768.1
837.7
279.3
0.0
291.7
4.0
0.8
208.6
1622.0
1447.6
422.3
0.0
354.6
6.4
0.8
216.7
2448.4
1373.9
367.4
0.0
235.3
3.6
1.0
217.0
2198.1
1684.7
636.8
0.0
275.0
4.0
0.7
283.9
2885.0
2660.3
947.2
0.0
272.9
5.5
1.3
347.7
4234.9
2099.3
696.0
0.0
348.0
5.7
1.3
300.9
3451.2
1998.1
718.4
0.0
402.7
8.5
0.6
316.4
3444.7
13093.0 4334.2
0.1
2506.9
40.5
8.9
2068.7
Historically, the situation was different especially up until 1965 when India constituted 70
percent of Pakistans trade. This situation had persisted since 1947. The 1965 war changed
conditions drastically. India tried to change the situation by granting Pakistan Most Favoured Nation
(MFN) status in 1996. The idea was to generate incentives for peace for Pakistan by increasing its
share of Indias trade. The bilateral trade in 1996 stood at US $ 180 million. The MFN status had
limited impact as it did not change the economic or political situation. One of the reasons was that
Pakistan did not reciprocate the gesture. Furthermore, as many of the stakeholders from the
countrys business and industry argue that trade could not take off due to Indias high Non-Tariff
Barriers (NTBs) which remain one of the major bone of contentions in improving confidence of
Pakistans business community in trading with India. Consequently, neither did Pakistans share of

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108

Indias trade increase, nor did it pave way for political reconciliation between the two neighbors.
Later, in 1999 a political initiative was initiated through the shortlived Lahore peace process and the
resultant Lahore Declaration. Trade was identified as one of the agendas in the composite dialogue.
This process proved short lived as Pakistan Army launched a secret military operation Kargil that
scuttled the peace process which was resumed later in 2004 by the then Musharraf government that
seemed eager to resolve bilateral differences. In fact, after 2004 the Musharraf government took
initiatives like increasing the number of items in the positive list of goods that India and Pakistan
could trade in.
Catching on the peace wave in the region multilateral aid donors jumped in to encourage the
thought about economic cooperation as a means for peace and stability. The World Bank, for
instance, financed a study in 2001 conducted by economists Ijaz Nabi and Anjum Nasim Trading
with the Enemy in Regionalism and Globalization that argued in support of granting MFN status to
India. The objective of the Nabi-Nasim study was to analyze trade and the manner in which it will
impact economic welfare, particularly in Pakistan. The research highlighted certain areas in which
cooperation could be established such as agriculture. This sector, however, did not seem prepared to
cooperate even in November 2011 when the then Pakistan Peoples Party (PPP) government
decided to grant India MFN status. In a later study conducted by the State Bank of Pakistan in 2006
Table 2: PAKISTANS IMPORTS FROM SAARC REGION
ITC Trade Map; US$ million
Year
AFG.
BD.
BH.
IND.
MLD.
NPL.
SL.
Total
2006
64.9
55.9
0.3
1115.0
0.2
4.0
71.0
1311.2
2007
89.5
62.3
0.1
1266.2
0.0
1.5
59.8
1479.4
2008
85.5
86.0
0.0
1691.5
0.0
1.5
66.2
1930.7
2009
121.2
76.1
0.2
1080.4
0.0
0.8
55.8
1334.5
2010
138.4
73.9
0.0
1559.9
0.2
1.3
53.4
1827.1
2011
199.5
82.7
0.1
1607.3
0.0
2.0
61.1
1952.9
2012
235.1
59.5
0.1
1572.6
0.1
1.6
83.4
1952.4
2013
307.6
57.3
0.0
1874.1
0.1
0.6
63.5
2303.2
Total
1241.7
553.7
0.9
11767.0 0.5
13.4
514.2
14091.4
supported the assertion of the aforementioned study. There were other studies like Naqvi and
Schulers in 2007 which concluded that bilateral trade could multiply two to four times of its current
basis. All these studies not only highlighted the importance of increasing the bilateral trade but also
estimated the gain from enhancing of trade. In 2011, Asad Sayeed of Collective for Social Sciences
Research (CSSR) did a study on Gains from Trade and Structural Impediments to IndiaPakistan
Trade asserting that various factors as state-business relations, protectionism and military
resistance to improvement of bilateral relations in a bid to prevent its political legitimacy to be
undermined and colluding with the right wing politics to pressurize consecutive governments have
contributed to slow progress despite prospects of economic growth and gains to businesses and
consumers. Then there was the study conducted by the R&D cell of Karachi Chamber of Commerce
and Industry (KCCI) also in 2011, Freer Trade with India: Its Raison dtre and Impact that analyzed
various aspects of free trade with India. 26 In 2012 and 2013, PILDAT produced discussion papers
on trade liberalization presenting perspectives from both countries highlighting legal aspects of steps
taken by both the government as negative list on part of Pakistan, 27 not granting MFN status to
India and sensitive lists, protectionism, tariff and non-tariff barriers from India acting as impediments
to trade between the two states despites high potential and prospects of mutual gains.28 Not to
mention various sectorwise studies by Sustainable Development Policy Institute (SDPI), Pakistan
Institute of Trade and Development (PITAD) and The Indian Council for Research on International
Economic Relations (ICRIER) that analyzed different aspects of bilateral trade, the composite
dialogue, stakeholders perspectives, nature and effect of Informal trade and bids to formalize trade
and its benefits.
Referring to MFN status, the PPP government was eager to grant this status to India to
encourage peace but also to fulfill its obligations to WTO. After the decision in 2011 to grant MFN to
India, an announcement was made on February 29, 2012 by the Pakistan government announcing
that the MFN will become effective in 2013. Despite the announcement and willingness to open up
trade with India, the PPP government gradually lost its capacity to do the same. In fact, there was
opposition against trade with India from within the Zardari presidency and certain segments of the
PPP. The agriculturist lobby was at the forefront in opposing the idea of granting MFN status to India.
Their argument being that it would harm Pakistans agriculture that could not compete against a very
heavily protected Indian agricultural sector. Members of the agriculture lobby also talk about the lack
of transparency on the Pakistani side regarding the process. The agriculture lobby, for instance, was
not taken into confidence which led to their resistance at that point in time. Nonetheless, sources

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The Advanced Contemporary Affairs (Book 92)

also talked about stakeholders in the government who were more inclined towards the military
establishments perspective of taking a cautious stance towards opening up trade with India.
In fact, the Pakistan militarys threat perception vis--vis India seems to be one of the
biggest impediments to trade normalization between the two states. This is despite that the elected
government of Nawaz Sharif has trade and peace with India as one of the primary agendas. The
federal minister of commerce, Khurram Dastagir Khan was of the opinion that Pakistan has a lot to
gain with opening up trade links. No country can grow economically without increasing regional
trade. Look at Europe, North American or Southeast Asia all prospering economies focus on their
regions so should we is a philosophy that the young commerce minister believes in. He further
stated that both sides were working slowly but consistently in eliminating hindrances and
misunderstandings. Despite the eagerness of the government the India-Pak trade continues to look
like a pipe dream, thought journalists and public intellectuals like Najam Sethi does not share this
pessimism. He was of the view that things will begin to improve between the two governments by
early 2015 and one could even expect a visit from the Indian Prime Minister Narendra Modi, who, in
the eyes of many Pakistanis, has cut for himself the figure of a belligerent Indian head of the
government from whom Pakistan cannot expect any kindness. The Indian diplomats in Islamabad
also appeared hopeful about trade picking up and the fact that in Pakistan people do not look at India
as negatively as they used to.
But there is a general feeling that expanding trade may not seem as easy as it sounds.
Currently, there are two sources of opposition to expanding trade with India: (a) the military
establishment and (b) certain segments of the business community which is concerned about the
negative impact on business.
The most powerful opposition comes from the military, which at best would want the political
government to be cautious about trade. According to the former chief of militarys PR agency, the
InterServices Public Relations (ISPR), Maj. General Athar Abbas the army would only want the
political government to be more cautious and not open up immediately. There was a general
impression that the former army chief General (retd) Ashfaq Pervez Kiyani had given a go ahead to
the previous political government to pursue trade with India with the only condition being taking a
cautious approach. But it still seems that the GHQ Rawalpindi is unsure of this option or to delink it
from Kashmir and other matters. While the Indian diplomats in Islamabad continue to argue that New
Delhi looks at trade as a CBM and Pakistan must understand this, there are elements in
policymaking in Islamabad who believe that trade negotiations rather than trade be used to extract
other political concessions. The Indian argument is that since Pakistan does not represent a major
market, increasing trade would tantamount to concession on Indias part. In some of the recent
track-II dialogues many of the Pakistani participants, especially those considered close to the
military, questioned the idea of expanding trade. It is not as if the military has not had the issue
evaluated. The Lahore University of Management Sciences was asked to review the bilateral trade
issue from the perspective of how it would benefit the militarys multiple enterprises. The study
concluded that certain sectors like cement, fertilizers and others would benefit tremendously.
However, there was no followup from the military which resorted to silence on the issue. Even a
former Indian High Commissioner had argued in a research paper that Pakistan military could be
attracted to peace with India through the lens of trade which may benefit the burgeoning militarybusiness complex in Pakistan. Such a perspective can at best be termed as naive since it does not
capture the fact that Pakistan military continues to think of war fighting as its primary activity, and
believes that removing India as the main boggy would reduce its organizational significance that is
essential for its political and economic stakes. Thus, the business complex is an interest which
depends more on politics of the military rather than prospects of bringing in greater opportunities.

Formal Trade
Pakistan and Indias most direct and logical trade route is the Wahgah-Attari and KhokraMunnabao trade corridors. There are others which can also be opened up like Sialkot. However, the
formal trade is either through air or sea or a limited amount through the Wahgah-Attari border. Most
of the debate regarding MFN status also revolves around opening this border further. This would
reduce the transportation cost which means increase profits for manufacturers and businessmen. At
a glance, Pakistans business community, especially traders or those who have an advantage believe
that opening the direct route for greater trade will be beneficial. This also means that manufacturers,
who do not have an advantage, feel pressured by the idea as it would result in flooding the Pakistani
market with Indian products that are cheaper and will be readily available due to lower transportation
costs. In fact, the representative of the agriculture sector, who are actively engaged in trade
negotiations, were of the view that trade in agro products should not be done through Wahgah but
from Karachi to not allow India the price advantage.

Business and Industry

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110

Some critical segments of business and industry are readily available to support the
militarys resistance towards trade. This is not to argue that the business community is not ready to
trade with India. In fact, one of the arguments made in the following sections of the paper, especially
the section dealing with market perception, is greater willingness of Pakistani businessmen to trade
with India. However, not all share such willingness. While certain sectors appear more willing, some
other critical sectors still remain resistant to the idea. In fact, almost all the studies on trade
liberalization between the two states have identified four sectors which are sensitive to trade or
demand protectionist measures against free flow of Indian goods to the markets. These sectors
include agriculture, automobile, pharmaceutical, cotton ginning and textile.

Agriculture
The agriculture sector was one of the main proponents against giving MFN status to India. It
attracted attention because of the significant place agriculture has in Pakistans economy. In 2012-13
agriculture contributed 21.4% to GDP amounting to over Rs. 5,474.1 billion (at current prices). The
sector generates employment for over 45% of the countrys total labour force. This means that about
60% of the rural population depends upon agriculture for its livelihood. It has a share in the countrys
exports as well, such as a 10% contribution in total exports in 201112. The main items are rice
(184.4 billion), fruit (Rs. 32.1 billion), fish (Rs. 28.6 billion), raw cotton (Rs. 47.4 billion), and meat
(Rs. 15 billion).3 Although Indias agriculture in comparison contributes less, that is 14.0% of the
GDP at current prices in 2011-12 (around Indian Rs. 14,173.7 billion which is equivalent to Pakistani
Rs. 24,431 billion),4 the agriculture sector is considered socio-politically important and is estimated
at five times as large as Pakistans. Its significance lies in the fact that the sector employs about
58.2% of the labour force.
For Pakistans growers the main concern is that Indian agriculture is heavily protected and
subsidized so trade liberalisation could flood Pakistani markets with Indian goods and Pakistani
commodities will be pushed out due to higher cost of production. The following table captures these
concerns.
Table 3: Subsidies Provided in Financial Year 2012
(Amount in Millions USD).
Name of Items
In Pakistan
In India
Fertilisers
356
15171
Irrigation
193
6303
Electricity and Others (Seeds, Tractors, Crops342
16158
Insurance
Total
897
37632
Percent of GDP
0.4
2.2
A comparison of input costs in India and Pakistan presented to the Economic Coordination
Committee (ECC) of the Cabinet chaired by the Finance Minister reveals that agriculture inputs are
much cheaper in India as compared to Pakistan.
Key Informants from this sector suggest that these reservations emanate from lack of
subsidies or very low subsidies to the sector as compared to India and higher cost of production
difference in prices of various items.
Table 4: Differences in Price of Fertilisers37
Name of Fertiliser

Price in Pakistan

Price in India

Diff.
in
Percentage
Urea
1790(17.40 USD) 459-510
459-510
250-
(4.06-5.06(4.06-5.06 USD) 290%250-
290%
Diammonium Phosphate(DAP) 3580 (34.80 USD) 1931-2125 1931
212584 - 92%84
(18.78 20.66 USD)
92%
Muriate of Potash (MOP)
3610 (35.10 USD) 1445 (14.04 USD)
150%
In bordering Indian provinces of Gujarat farmers pay Rs 0.60 per unit and Rs 0.90 in
Rajasthan which amounts to Rs 1.02 and Rs 1.53 per unit, respectively in Pak rupees. The farm
sector pays per unit cost of Rs 10.35. Not surprisingly, most of the agriculture related private
associations such as the Farmers Association of Pakistan (FAP), Kisan Board, Muthida Kisan
Mahaz, Guava Growers Association, Basmati Growers Association, Mango Growers Association,
Livestock Farmers and Breeders Association opposed the decisions to grant MFN to India.
Respondents from the Agriculture sector in Sindh expressed concerns over imports of Cotton yarn
from India. They were already facing problems with fluctuations in prices, high cost of productions

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and low economic activity. Imports of raw cotton add to their grievances. The fruit and vegetable
growers were unhappy about these items coming from Wahgah border into Punjab and KPK. They
were of the view that giving access to Indian fruits and vegetable from Wahgah crowds out Pakistani
growers. For instance, it creates problems for growers in Sindh, who despite the surplus growth,
cannot compete due to higher rate of production and transportation to Punjab. Similarly, farmers in
Punjab were not excited about the idea of opening up trade from the Wahgah border.
The loud protest and having people in right places in decision-making such as in the
presidency helped in getting the decision postponed. Representatives of the Farmers Association of
Pakistan (FAP) were of the view that the Pakistan government was about to sign the MFN in 2011
and had lied to its own Senate with the claim that it had consulted all stakeholders. The FAP objected
to this and blocked the move by arguing that they were not taken into confidence.
But the Commerce minister argues that the agriculture sectors fear of being flooded with
Indian goods is imaginary as the current negative list agreed upon by the PPP government in 2012
allows most agriculture products. Yet there is no flooding of Pakistans market by Indian goods.42 A
major shift took place between 2011 and 2012 when both countries agreed to shift from a positive list
that is all products they could trade in to a negative list which meant they could trade in anything but
on items on the list. The idea is to eventually open up everything except things on the sensitive list
which has nine items pertaining to the agriculture sector that include tobacco, mango, wheat,
coconut and palm oil. In any case there are other routes through which agriculture products are
being smuggled (this will be discussed in the following section).
Both governments seem to have worked to allay each others concerns and also of their
own stakeholders by establishing the India-Pakistan Joint Business Forum in 2012 to further trade
talks. They have not only agreed to meet on a regular basis but have also engaged in a conversation
to negotiate a separate trade agreement on agriculture on the pattern of NAFTA. The FAP is of the
idea that since it cannot stop India from giving subsidies to its farmers, it would make sense for
Pakistan to protect itself through a separate treaty on agriculture for which an MoU would be signed
between the two states. The growers want to take a gradual approach and certainly not open trade in
agriculture from the Wahgah-Attari border that would challenge Pakistans products more than if
goods were to come from any other route. In the last meeting held in September in New Delhi, the
Business Forum debated the idea of working out schedules for trade which means that both sides
would setup a time frame for import of each others agro products so that it does not flood the market
and damage the local industry. They even talked about establishing certain trigger mechanisms such
as shortage or pricing that would allow a state to begin imports even if the schedule did not allow it.
For instance, as FAP representative explained, in case of the price of onions or tomatoes going
above the market price, the trigger mechanism would get activated and allow Pakistans government
to import from India to provide comfort to the consumer. Many growers, however, did complain about
Indias non-tariff barriers (NTBs). Experts argue that some of the Indian NTBs pertain to all imports
such as restriction of products with high level of arsenic. But Pakistans growers are of the view that
the NTBs become more restrictive in case of Pakistan. Nonetheless, the agriculture lobby seems to
have changed its perspective on trade liberalization which will be discussed at greater length in the
section on market perception. Members of FAP even claimed that they looked at prospects of Indian
investment into Pakistani agriculture over the next ten years. Notwithstanding the urgent need to
protect themselves, they did look towards benefits of trading with India like import of agriculture
machinery, seeds and other products which would reduce their own input costs.
The farmers in Pakistan generally wanted the government to take a cautious approach but
not reject the idea of exploring opportunities that would benefit them as well. Pakistan is third largest
producer of dates which is one of the items exported to India.
The growers in Sindh, in particular because they grow 50% of dates grown in the country,
are willing to consider India as a market. Date growers in Khairpur, Sindh that produce a major chunk
of Sindhs total produce of dates complained about lack of refrigeration facilities that restrict their
internal and external market. The cold storage facilities have grown, on the other hand, in Punjab
where they are now one of the stakeholders in policy on trade liberalization. The government had
encouraged people to invest in such facilities and thus it is believed that an overall policy should be
considerate in protecting such investment as well.
Respondent from agriculture sector complained that due to lack of investments in storing
and packaging facilities huge quantities of dates are perished. There is tremendous potential to
increase exports of Dates to India if storing and packaging facilities have been introduced and
various Para-tariff and non-tariff barriers on it are reduced by India.

Auto-Industry

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The automobile industry is prominent in the antitrade liberalization lobby. They fear a
negative impact of opening up trade due to gross comparative disadvantage to local industry in terms
of credit and other resources as energy. The sector is taken seriously because of its socioeconomic
significance. Although not a big player in the international market, it contributes significantly to the
local market, especially employment generation. With a turnover of Rs. 299 billion, the sector
contributes about 2.8% to GDP and employs over 1.5 million people. The following table cited from
the LUMS May 2014 paper highlights Pakistan automotive industrys production capacity. This is no
comparison to India where production capacity is around two million vehicles a year.
Indias total turnover exceeds US$60 billion with a total production of 20,366,432 vehicles in
2012.
At a glance, the auto industry in Pakistan opposes trade liberalization. There are general
problems like energy crisis and the poor law and order situation in the country that does not allow
producers to use their production capacity to the optimal, thus, increasing cost of production. This
makes the industry even less competitive. However, the auto industry in Pakistan is not a monolith. It
can be divided into three: (a) car manufacturer, (b) two and three wheelers and (c) auto parts. Most
resistance seems to come from car manufacturers that feel threatened of being wiped out in case the
government allows trade liberalization with India. Given Indias existing advantage, they feel they will
not be able to compete. Pakistan, it is also believed, would be at a natural disadvantage due to
Indias NTBs like high emission standards which Pakistani manufacturers will not be able to meet.
They also argue that India follows a protectionist regime for its auto industry. For instance, India has
100% tariff protection on Completely Built Units (CBU) while Pakistan has 50100%. Then there are
other issues such as cost depreciation which makes cost of the import of raw materials quite high in
Pakistans case. So, the car manufacturers clearly dont want restrictions on trade with India lifted.
What they recommend, nonetheless, is transfer of technology and joint ventures. But here is an
exception. Suzuki motors, which is one of the major stakeholders, wants trade liberalization. This is
primarily because the OEM in Japan has directed Suzuki-Pakistan to import engines from India. In
this case, direct trade would reduce the cost.
Table 5
Car & LCV

Trucks and Buses Tractors

Two
&
wheeler

135,000

2,500

51,000

820,000

Excess Capacity 49%

9.8%

51%

33%

Installed Capacity275,000

25,500

100,000

2,500,000

Production

Three

Table: Pakistan Automotive Manufacturers Association


The two and three wheelers manufacturers are in a better shape. However, even they are
apprehensive about trade liberalization. The Indian NTBs and high tariff rates are their main
concerns. The auto part sector, however, appears more inclined towards liberalization. Traders of
auto parts maintain that they are already importing different auto parts from Japan, Thailand and
China. Indian parts also make it to the markets through informal ways. If formal trade of cheaper auto
parts is allowed from India, it will help us provide these items on cheaper prices to the consumers as
informality hardly benefit traders and consumers but profits are reaped by those directly involved in
informal trade. They support imports of auto parts because it will benefit them through decreasing
cost of productions, hence earning more but they wont agree to the imports of cars as it will shift the
benefits to consumers as well as make them less competitive.
Commenting the overall resistance of the auto industry some experts, nonetheless, believe
that the auto industry in general is making excuses for not being competitive as it is highly
pampered.52 Other key informants subscribed to this view and said that the auto industry received
greater protection even in the sensitive list which means that it will not be opened up to competition
with India.

Pharmaceutical
The Pharmaceutical sector too has similar concerns regarding Indian counterparts. It is an
important sector because of a high local component in manufacturing. The sector contributes about
1% of the GDP out of which 60% is the share of local companies and the remaining is done by
multinationals. It is certainly a fraction of Indias pharmaceutical sector which is the third largest in the
world crossing the US$25 billion mark. Pakistans pharmaceutical industry was valued at USD1.63
billion, while pharmaceutical market of India was estimated at USD 21.7 billion, making it thirteen
times larger than pharmaceutical sector in Pakistan. As compared to Pakistan annual sales of about

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US $ 200 million, Indias exports exceed US$ 10 billion. But Indias main strength in this area
pertains to the fact that, unlike Pakistan, it does not depend on foreign sources for raw material. In
Pakistans case the dependence is on India (40%) and China (45%). Furthermore, India has an
established R&D and quality control infrastructure. For example, out of the over 500 units in India
that have international certifications and registrations for export, 150 units are US FDA approved.
Pakistan, on the other hand, has none.
The manufacturers are resistant about MFN standards. Protection and Indian NTB apart,
they are concerned about their inability to compete. They argue that they already suffer from low
profit margins as the sector is heavily regulated to keep the prices artificially low, higher input costs,
energy crisis and law and order issue. Their reservations are based on disadvantages regarding
trade with an industry thirteen times bigger in size with wide range of products, low cost of
productions, FDA approved labs, access to international markets. They fear that, in case of free
trade, Pakistani markets will be flooded with Indian products, devastating the local industry and in
absence of stringent quality checks sale of substandard and spurious drugs could increase resulting
health hazards. But one of the key objections pertains to trading in finished and value added goods.
They have little problem in importing of raw materials which will bring down their input cost. Another
strong comparative advantage is in surgical goods manufacturing. Pakistani surgical goods
manufacturing industry has enjoyed extensive growth during past several years. Despite its exportorientation, the sector trades only two percent of its annual export with India, which needs to be
increased.56

Other Sectors
The other sector that seemed to resist pertains to textile and cotton ginning. Textile is the
most important manufacturing sector of the country and has the longest production chain with the
potential of value addition at each stage of processing from cotton ginning and spinning to fabricmaking, dyeing, finishing and production of garments and other products. In Pakistan Textile industry
has a long chain, from the production of raw materials to fabric and fashion and plays a major role
contributing to the national economy. Being the 4th largest producer of cotton and employing 45% of
national workforce in textile and allied industries our value creation in this sector is limited as
compared to the global textile and apparel market of US $1.9 Trillion. The textile industry contributes
55% in national exports.
Again like the auto industry, there are several component of the business and not all are
evenly opposed to trade liberalization. The most opposition comes from cotton yarn manufacturers
who are worried about import of cheap cotton yarn from India destroying the local market. There was
complaint about dumping of Indian cotton yarn in January 2014 which was harmful for the industry. It
is also claimed that in FY- 2013/14, there was a 98% increase in the import of yarn from India. In real
terms, the import of cotton yarn increased from Rs. 4.2 billion during July 2012 February 2013 to
Rs. 9.2 billion during July 2013 February 2014.60 Therefore, the Pakistan Cotton Ginners
Association (PCGA) has demanded the government to impose complete ban on the import of cotton
lint and yarn from India through Wahgah border. 61 Many of the cotton yarn producers and sellers in
the yarn market in Faisalabad interviewed for this study were nervous about Indian yarn which they
say is of finer quality than produced in Pakistan. While one of the stakeholders was of the view that
the Pakistan government had gone out of its way to appease the Indians without any appreciation of
how it would damage Pakistans interests, some other sources suggested that certain other business
lobbies that benefitted from this import influenced the decision.

Table 6

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Share of Textile Exports, Pakistan Business Council59


But the textile manufacturers and the fashion industry in general was far more excited about
the idea of doing business with India. Although concerned about Indian NTBs, some of the top-end
textile manufacturers and fashion designers were hopeful about their ability to compete with India. In
a recently organized Lifestyle Pakistan event by Trade Development Authority Pakistan (TDAP)
based on Pakistani textile apparels, leather apparels, furniture and other items, there were huge
demands for Pakistani brands at consumer levels also there are opportunities of business to
business partnerships which are further emphasized in the Indian trade exhibition 2014 in the month
of November (16-27 November 2014).month of November (1627 November 2014). The Rawalpindi
Chamber of Commerce and Industry believed that exhibitions and symposiums were a great way of
introducing Pakistans products in India. Some of the top Pakistani designers we spoke with were of
the view that India was a large market they were attracted to because it was a readily available
market that would absorb Pakistani products. According to one particular designer, while Indian top
range designers are looking at the rest of the world, for Pakistans fashion industry India is the main
market. In fact, there is a lot of space in the fabric, fashion and furniture industry on both sides. The
urban upper-middle class in Pakistan, in particular, is attracted to India. This is because, as one
trader pointed out, for the liberal upper class India provides a social depth that they feel they lack in
their own country. However, the lack of visa facility, absence of display centers in each other
countries were identified as a major issue. The Indian attitude such as problems faced by Pakistans
artists in performing in India due to opposition from the countrys religious right or problems created
by custom authorities due to right wing bias were also talked about as one issue.
The ceramics industry, which is located in Central Punjab, is another sector that did not
seem excited with the idea of trade liberalization. Their main concern was that the lack of electricity
and gas made them very non-competitive. The fear was that they would get wiped out if Indian
products were allowed.

Informal/Illegal Trade
But there is a much larger question which ought to be asked about the ability of the religious
or political right in both countries from stopping trade with each other. Be it the attraction of products
or the price factor, consumers on both sides, especially Pakistan have had a steady access to goods
from across the border. As it is, there is a much larger informal trade between the two countries.
Apparently, there is an estimated trade of US$ 2 10 billion between the two countries in the form of
smuggling. Bed sheets, dry fruit, and embroidered cotton are some of the popular products from
Pakistan to India. The popular item going the opposite direction include silk, pharmaceuticals,
costume jewelry, cosmetics, tires, etc.65 In fact, some large wholesalers of medicine talked about
Afghanistan being used as one of the transit routes for Indian medicine.66 Another study done by
two economists Nisah Taneja and Radhika Saini the results of which were provided by Pakistans
Ministry of Commerce put the estimates of informal trade at US$ 1 billion annually.
Informality comes from demands of goods not met through formal ways due to hindrance
caused by political hiatus or higher costs of trade through formal means.
Manufacturers and producers at different sectors have concerns over its volume and size
but traders and merchants have little interests in the overall debate of formalizing it and have mixed
views over this issue. Traders interests are driven by consumer demands which need to be

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addressed through supply chains, whether formal or informal. Traders and merchants from Karachi
dealing in auto parts, textile apparels and different consumer items from cosmetics, imitation Jewelry,
Ayurvedic medicines and other medicinal herbs, pharmaceutical items from India, tobacco items and
small addicts as Paan, Gutka, Betal - nuts have to rely on supplies through informal channels for
varying reasons. Some of the merchants have opined that trade through formal channels will help
lowering the price hikes caused by monopolies of a few people who have access to the informal
channels.
For those that smuggle Indian auto parts from the Afghan borders rely on individual contacts
in border towns as Chaman and Taftan at Balochistan or Peshawar, Khyber Pakhtunkhwa. However,
this method has its problems as well such as wastage caused due to delays and price fluctuation.
Others smuggling Indian spices complained about Some of the spices ingredients like cinnamon,
cardamom, black cardamom and black cumin seeds are exclusively Indian imports and we have to
rely on a few suppliers who bring it through quasi-formal or informal channels via borders or sea
routes. Then there is also the issue of unreliability of the product. Some of those dealing in informal
trade of pharmaceuticals and herbal medicine complained about sometimes running into problem of
getting outdated medicine. As one trader said:
In Smuggled items, we hardly have the luxury of complaints or taking back the items with quality
issues. The comparative advantage is minimized or diminished due to complaints with items bought
in quantities.
Informal channels also give rise to flow of banned items as various spurious tobacco
products as Gutka is banned in both states. Still high demands and easy availability of different
Indian brands as Citi, 2100, Fit, JM, Ratna etc have been made possible through informal ways.
There is a lot of money to be made through smuggling of banned items. Given the profits, the traders
are happy to pay huge bribes to get the products across.
Nonetheless, as Mediratta points out, there is a difference between smuggling and informal
trade. While smuggling involves trade in banned items or small and medium sized enterprises trying
to make money through tax evasion, there are big players also involved in informal trade which is
done to mainly circumvent bureaucratic red-tape that is mindful of the state politics rather than
economic considerations. Dubai, in fact, serves as one of the key points informal trade.
Irrespective of size of business, the informal trade rely on the traditional social and familial
connections across the border that makes such transactions possible. Respondents from traders and
merchants associated to businesses of textile apparels (traditional Bridal, Banarsi, Silk fabrics),
Jewelry, BetalLeaf and Betal nuts in market places at Karachi, Hyderabad and other cities belong to
traditional business family clans on both sides of the borders like Memons, Ansaris, Gujaratis,
Marvaris and Beharis. They refer to cultural affinities on both sides making Karachi and other parts
an attractive market place for Indian goods and items from different sectors.
Respondents from Silk Industry, dominated by Ansari clan who are associated to the trade
for centuries talked about competition posed to Pakistans products from Indian products brought
through different channels. These traders also complain that there are times that even low quality
Indian product is in greater demand. In such cases the price differential plays an important role. But
then, as cloth wholesalers in Lahore and Multan pointed out, Indian products face a lot of competition
from Chinese products. Nevertheless, what benefits Indian products is cultural affinity and the fact
that people get attracted to Indian fabric unless there is an impressive difference between the Indian
product and others available in the market. Several fabric wholesalers from one of the largest
wholesale markets in Punjab at Shah Alami, Lahore said that there are times when local products are
sold as Indian, indicating demand for product from across the border.5 A similar view was expressed
about spice trade reflected in other areas such as spice trade. Spices traders have referred to some
of the traditional spices items as cinnamon, cardamom, black cardamom and black cumin seeds
which are imported from India through informal channels via borders or sea routes. In some sectors
such as the betal leaf, nuts and tobacco market the local demand, which cannot be met from local
production of these items, cannot be met without informal and formal imports from Nepal, Sri Lanka
and India. Traders from the betal leaf market were of the view that there is a greater preference for
Indian produce. There are times that even local produce is sold as Indian which also means at a
higher price.
There are certainly others such as the agro sector that did not welcome informal trade as it
affected their market. They pointed out the Kashmir border as one of the major smuggling points for
agriculture goods. Since both India and Pakistan allow ethnic Kashmiris resident in the disputed
territory on either side to import goods, there is a racket that allows people to do the same. However,
these goods are then not sold in Kashmir but find the way to other bigger markets. In Pakistans case
it means Punjab which disturbs the demand for local produce. Farmers were of the view that the
government would have to tidy up its act and stop smuggling while it negotiated with the other side.

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Market Perception
It would be fair to argue that despite tactical reservations regarding trade liberalization, the
overall attitude of Pakistans business and industry and even the consumers has undergone change
as far as trade with India is concerned. The paper offers a view from the market in two significant
provinces of the country to capture the change in attitudes.

Perspectives from Sindh


The study in Sindh was based on interviews with key informants and stakeholders from the
following sectors:
- Key informants 12
- Agriculture 5
- Fruits and Vegetables 3 - Automobile Dealers 3
- Automobile Parts 4 - Pharmaceuticals 5
- Herbal Products 3
- Spices 4
- Silk Fabrics 4
- Textile and Apparels 4
- Betal leaves, Betal Nuts 5 - Cosmetics and Jewelry 5
- Tea leaves 4
For the business community in Sindh the most relevant issue pertains to opening direct
trade through regional trading posts and railway links. At the time of partition, a major train route
between the two states was connecting Sindh and Rajasthan through a train service Sind Mail.
Khokhrapar railway station was established almost a hundred years ago as the first railway station of
Sindh on India-Pakistan border. It had witnessed one of the worlds largest migrations after partition
when millions of people had left for respective countries in the wake of partition violence. The station
was a business hub before the partition took place as it linked the prosperous area of Nara valley
with Rajasthan. The valley comprised of todays Sanghar, Mirpurkhas, Tharparkar and Umerkot
districts. Rice and other grains were produced in huge quantity in the area. The train service was
discontinued after the track was destroyed in PakIndia war of 1965. In 2006, the route was revived
after a long gap of 41 years by starting a weekly train service Thar Express linking Karachi and
Jodhpur. The capital city Karachi, being the port city, having a vast sea coast, a major gateway to the
whole country for international trade and its territorial connect to the province of Baluchistan make it
very important commercial, economical and geo-strategic location in Pakistan. Trade with all the
countries including neighbours Afghanistan, India and Iran, whether formal or informal have the city
as a key channel and largest market place for the goods and commodities as well.
Traders and businessmen from the city present perspectives of not only the province of
Sindh, but for its diverse ethnic makeup constituting the business communities provide an insight into
the views, perspectives, hopes and insecurities of the people from almost all the regions across
Pakistan as well as people with different political leanings and influenced by religious inclinations.
On question about bilateral relations between the two states, most of the respondents
reverberated the mainstream narrative, which is a perception of India as the enemy and refer to the
decades long history of conflicts and mutual distrust. But when it comes to normalisation of relations,
there were varying views with most of them supporting the process. (56%) favoured relations, some
strictly oppose it citing reasons from history to religious notions (16%), some of them support the
process by linking it with resolving disputes like Kashmir (18%), while a very few (10%) were
indifferent to the question.
An observation is the age factor of the respondents and how it is linked to their views on
relations with India. Majority of the respondents above the age of 40 were supportive to the
developments in bilateral ties and termed it a positive sign that despite incidents of terror, border
skirmishes and other political issues, people can travel across the borders and trade at formal and
informal levels has not been forestalled. They were also hopeful that the current government of
Nawaz Shareef led PMLN will make significant progress in this respect, which will help facilitate
cross border movement.
Respondents between the ages of 20-30, who hardly have any past memories of their elders
association to India or any memories of the rivalries between the two states, were more responsive
to the question due to political environment around and the polarization over Pakistan relations with
India or rest of the world. Some of the respondents have ruled out the prospects of any improvement
at the states level citing different reasons. 45% of the respondents believe that both the states are
responsible for the slow progress in improvement of trade relations, 23% respondents hold India
responsible for this, 14% considers extremists on both sides are hindrance, 10% considers Pak
military doesnt want good relations and 8% hold the views that world powers want both the states at
war with each other.

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Respondents from Umarkot, a town near border with India and part of Dhat region, an area
of about 400 Square Kilometer split between the two states, has traditional religious, social and
ethnic ties, recalled the early decades of partition till the first IndoPak war when movement of men
and trade commodities was not restricted on either side. Various commodities could have easily
been exchanged with neighboring towns of Rajasthan and Gujarat states of India.

The respondents were hopeful of the process of normalization, which had produced the
opening of the Khokrapar-Munabhao route after a closure of decades but were frustrated with its
slow progress. Thar Express on Khokhrapar-Munabhao railway route barely made a difference as it
doesnt help in formal trade activities, except for the use of baggage facility to the passengers, no
trade commodities can be transported and traders have to use Lahore-Amritsar route.
Key informants from the traders and business communities suggest that its because of the
regional and international scenario that changing political regimes have hardly affected the overall
process of normalization between the two states. Since Indias granting of Most Favoured Nation
(MFN) status to Pakistan in 1996, both the political and military government in Pakistan, despite
various impediments had to choose the path of normalization of relations. That is why Governments
of PPP and PMLN in their stunts at the office and Musharraf government during these years had this
as a common trait. A respondent referred to trade on Line of Control (LoC) Pakistan India border in
Kashmir as a precedent, which stops after border skirmishes but only temporarily as it resumes after
a short period.

Respondents in support of bilateral relations suggest that during the last decade, despite
political disquietude on various occasions, cross border movement of various trade items have not
been fully curtailed. Consistent demands of particular commodities on both sides lead to informality
as political issues act as hindrances in formal trade processes.

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Lack of enthusiasm on Pakistan side, except a few sectors is rooted in dismal opportunities
for Pakistani businessmen, uncertainty on the political front and reservations of some sectors as
agriculture, automobile industry and pharmaceutical companies. While traders associated to the
business of consumer products are of the views that since consumer demands of various Indian
brands, equally popular across the borders due to its promotions over satellite TV channels have
contributed to outpouring of it through various informal ways, as consumer demands have to be met.
On questions about outstanding issues, most of the respondents were least concerned
about it and kept repeating the state narrative but they were not hopeful about any resolution to
these issues. Some of the respondents stated that outstanding issues add to the environment of
distrust and hostilities towards each other. Despite hyperbole and overstatement about mutual
relations, token steps like trade exhibitions of fashion apparels and consumer items, as the recently
organized TDAP event of Lifestyle Pakistan exhibition in Delhi which only serves as an elite activity
and not as an act to consolidate trade relations.
Majority of the respondents (45%) from the traders communities were not sure of the
question of linking trade relations to the overall status of bilateral relation between the states. While
some of them stated that since bilateral disputes lead to uncertainty and distrust among either sides
of businessmen, that is why these disputes need to be addressed (30%) while a few suggested both
should be delinked (25%).
Key informants from the traders and business community suggest bilateral relations and
issues curtailing its improvement should be shouldered by the political government of both sides, and
trade and business relations should not be linked and aspirations of the business communities be
demonstrated through policies regarding trade and not the state narratives on both sides. They
reiterated that reservations pertaining to trade with India are magnified due to charged political
environment and due to its suitability to the hawkish elements both in media and policy circles.
Businessmen have similar concerns over trade with China and its repercussions over businesses
there, but they are hardly been fore grounded due to political reasons.
The bilateral political issues may be the cause of hindrances in expanding trade. There were
some key problems that traders and businessmen from Sindh talked about. For instance, members
of the Hyderabad Chamber of Commerce (HCCI) and Sukkur Chamber of Commerce (SCCI) were of
the view that allowing trade on the only trade route of Lahore-Amritsar and not opening the
Khokhrapar-Munabhao trade route is discriminatory towards trades and businessmen of Sindh and
show an element of distrust regarding inhabitants of the province, who just like others want to get
benefitted from the opportunities coming with trade liberalization with India by exporting their surplus
quantities of fruits and vegetables as they have to bear additional transportation charges and delays
in delivery due to a long way through Lahore-Amritsar reaching to Rajasthan and Gujarat. Although,
the train service has been revived in 2006, a weekly train service Thar Express is there for the
passengers but the talks of making it a trade route and constructing infrastructure and a road link to
assist the trade has not yet materialized. According to the information available, about 50 km road
needs to be paved and made usable for traffic. There has been no allocation for this project in the
Sindh Budget 2014-15. Using Lahore-Amritsar trade route for farmers or businessmen in Sindh
tantamount to additional transport cost that cuts into their profit.
One of the biggest complaints, however, pertained to problems faced in getting visas. The
two governments tend to go for an overkill in terms of security which creates bureaucratic hurdles
for businessmen whose movement is restricted to limited cities. 90 Similar complaints were raised by
Pakistani participants in two recent events, Lifestyle Pakistan (September 2014) and 34th Indian
International Trade Fair (IITF) (November 2014). The difficulty in getting visa and restrictions by
Indian Custom department was one of the major complaints of many of the participants. More
specifically from Sindh, businessmen were of the view that trade liberalization cannot happen without
ease of movement for which they proposed opening up the consulate in Karachi. The matter seems
irresolvable, as it is a reciprocal move. The Indian Consulate cannot open without a Pakistani
Consulate opening in Mumbai, which, in turn seems a difficult venture due to attitude and influence of
the religious right wing in Maharashtra state in India.
Opening banking facilities in each other countries is also a key issue. Some of the
businessmen interviewed talked about problems they normally face in transferring money especially
after trade fairs and other events. They were of the view that using non-banking channels is both a
problem and a risk they dont want to take. Besides business community, banking facilities would
also help ordinary people moving across the border for religious or family events.

Perspective from Punjab


Punjab the largest province of the country is traditionally considered as a hub of opposition
against peace with India. A popular notion is that since the bulk of the military and civil bureaucracy
comes from Punjab, there is an aversion to building ties until the outstanding Kashmir dispute is
resolved. Although Kashmir is not the only issue that can block improvement of bilateral ties, the
matter is certainly the only major issue that gets peoples attention, especially in Punjab. However,
due to efforts of successive governments since the 1990s, and more specifically the Nawaz Sharif

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government, the minds of people seem to have moved towards looking at India-Pakistan relations
beyond the zero-sum game.
For the purpose of this study, interviews were conducted in six cities of Punjab: Rawalpindi,
Lahore, Gujranwala, Faisalabad, Multan and Bahawalpur. There were a total of 61 interviews from
the following category of respondents:
- key informants: 8
- Textile & Cotton Yarn manufacturing: 6
- Fabric & fashion: 4
- Hosiery:2
- Pharma:5
- Auto:2
- Ceramics: 10
- Service Industry: 14
- Traders:10
There was a general willingness regarding the question of doing business with India. Most
key informants had a positive opinion. However, they were cautions about the possibilities. For
instance, according to IA Rehman, who is director of the Human Rights Commission of Pakistan and
founding member of the India-Pakistan Peoples Forum any movement on trade depends on the
outcome in Afghanistan. Any hostility as is being predicted by some, could reduce possibilities on the
trade front. But he did talk about how India-Pakistan trade cooperation could open up avenues for
businessmen from both countries in Central Asia. Rehman further added that tired of trading with
Europe and the West, a market that posed problems especially after 9/11, the Pakistani businessman
was eager to explore the regional market. Other key informants from the Ministry of Commerce,
particularly the federal minister was of the idea that Pakistans future lay in expanding regional trade.
But Rehman was cautious about the possibilities since a lot depended on how the military felt about
opening up ties with India. Rehman was certainly more cautious about the possibilities of trade
liberalization than editor and television anchor Najam Sethi who was of the view that things will begin
to change for the better. While this prediction may not come true, big stakeholders and key
informants like Syed Babur Ali equated the inability not to open up trade as a death wish that was
not allowing us (Pakistan) to grow. He believes that Pakistan must open up because a smaller
country tends to benefit more in case of trade liberalization. Syed Babur Ali is also reputed to be one
of the stakeholders who had approached the former army chief General Ashfaq Kiyani to give a go
head for easing trade with India.
Key informants, who were connected with previous government such as the former foreign
ministers Khursheed Kasuri and Hina Rabbani Khar also talked about efforts made during their
tenure in paving way for trade liberalization. Kasuri claimed that one of the major problems pertains
to Indian NTBs. He further added that even the former Indian Prime Minister Manmohan Singh
admitted to the problem and his inability to deal with his bureaucracy.
It became very obvious from the interviews that certain key informants vehemently opposed
trade liberalization that represented particular interest groups in Pakistan such as the religious and
militant right groups. A key representative of the Jamaat-ud-Dawwa in Faisalabad condemned the
idea as Indias trick. The JuD, it is important to note, runs its grassroots organization amongst traders
and agriculturists. The respondent was unwilling to accommodate the idea that there were people in
Pakistan keen to open trade with India. Another respondent from a religious background did not
agree with this notion. Maulana Tahir Ashrafi, who represents one segment of Deobandi religious
thinking in the country, was of the view that Deobandi traders did not oppose trade liberalization. He
was correct as we found out from discussion with some traders in Multan and Bahawalpur from the
Deobandi sect.
In fact, moving beyond key informants to the business community in Punjab the bulk of
opinion could be divided into three catagories:
- nay sayers
- keen to open trade
- cautious about trade liberalization.
These categories depended largely on the nature of business activities of the respondent.
For instance, the ceramic and sanitary ware manufacturers in Gujranwala were not keen to open up
trade. They were concerned about their own deficiencies like shortage of gas and electricity that
would not allow them to compete with India. Moreover, they claimed that India was ahead of Pakistan

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in manufacturing technology in their particular field. The naysayers also include cotton yarn
manufacturers from Faisalabad.
However, there is an entire category of businesses that are excited about trade liberalization
such as textile, fabric and fashion design, furniture, and traders in general. Barring one textile
manufacturer, who claimed to have been one of the earliest proponents of trade with India but turned
against the idea in later years, other manufacturers clearly see benefits. Tariq Saigol, who represents
one of the biggest textile groups in the country, his reasons for opposing trade was based on
economic but mostly political grounds. He found Indias capacity to dump goods, like China does with
Pakistan, as a threat. He also claimed that since Pakistans textile industry was no longer competitive
due to shortage of gas and electricity and other reasons, it would be at a disadvantage against the
bigger neighbor. Such disadvantage is magnified by the problem of the BJP coming to power in India
and has a leader who, according to Saigol, still does not accept Pakistan as a reality.
But this particular problem did not bother another big stakeholder in textile like Mian Mansha
who seems keen to trade with India and even open a branch of his bank, the MCB Bank on the other
side of the border. Manshas issue was more about seeking concessions from New Delhi such as
reduction or removal of NTBs that seem to bother a lot of Pakistani business. Respondents from all
the sectors of industry who have been engaged in exports with India have complained about tariff
and non-tariff barriers, which are not Pakistan specific but in some cases implemented more strictly
in case of Pakistan or some traders complain an element of bias on the Indian side when it comes to
Pakistani products. Representatives from the agriculture sector, in particular, complained about how
NTBs like non-issuance of visas for Amritsar result in losses. Such NTBs results compound with
problem of bureaucratic red-tape and cause delays inSuch NTBs results compound with problem of
bureaucratic red-tape and cause delays in deliveries in case of perishable items, thus, resulting in
losses and make it difficult to find place in Indian Markets.
In a study done by Ishrat Hussain, former Governor of the State Bank of Pakistan, he
pointed out a list of NTBs identified by exporters:

Sanitary and phytosanitary measures


Technical barriers to trade
Quotas and import licenses on 600 items
Aggressive use of safeguard and anti-dumping measures
Frequent invocation of countervailing duties
Stringent license requirements from the Bureau of Indian Standards
Multiple custom clearance requirements
Non-standard custom valuation methodology
Stringent and lengthy certification requirements
Restrictions on rail movement of goods
Complicated and restrictive visa requirements
Long dwell times at ports and border points
Transit restrictions
Absence of testing labs at border crossing points
State governments restrictions on the use, sale, and consumption of certain goods
Uncertainty about movement of goods between Indian states
Non-acceptance of letters of credit issued by Pakistani banks

The Federal Pakistan Chamber of Commerce and Industry (FPCCI) also identified attitude
of the lower bureaucracy as a major hurdle. According to the chamber, the mind-set of fieldoperating
customs officers and other government officials is excessively bureaucratic and negative about trade
between the two countries, resulting in undue delays.
All these issues notwithstanding, there are many who want bilateral engagement to grow.
Furniture manufacturers like Interwood already have a contract for clients across the border. There
are others like cement manufacturers eyeing the market next door. Already eight Pakistani Cement
Companies are exporting cement to India mostly through land routes. Exports increased by 40
percent during the last fiscal year (FY14). Pakistani cement is cheaper for Indian buyers due to its
competitiveness to the North
Western Indian states such as Punjab, they said and added that the demand for cement in
Indian Punjab alone is estimated around two million tons and Pakistan companies can easily
penetrate in this market with major market share if trade barriers are removed. Given the perceived
slowdown in construction in Afghanistan after pullout of the US and NATO forces, the cement

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industry in Pakistan, which had experienced a boom due to developments in the north, is likely to
seek other markets. In fact, the LUMS study had appraised the military of how its own cement
industries that are part of the military business complex could benefit from trade with India. But for
the military, the cost of diverting from the Indian threat seems higher than the benefits that may
accrue from trade.
Clearly, the new businesses that have emerged are excited about the prospect of exploring
a vibrant market. But the biggest constraint is that these are not large enough to impress the
authorities to change policies. Be it intermediate cities like Bahawalpur or large cities like Multan and
Lahore, the trader merchants, especially those dealing in fabric and electronics seemed keen on
trade liberalization. Interestingly, it included merchants who would otherwise finance religious militant
groups. It seems that for these traders were able to distinguish between their ideological commitment
and making money. During conversations with traders in the electronics market in Lahore it appeared
they were keen on trade liberalization which would help them escape, what appeared as, Chinese
monopoly. These traders were not happy with Chinese products and their lack of option in
maneuvering with Beijing. In their mind opening up to India would increase their options.
As is obvious from the following chart, a larger number of respondents were open to the idea
but wanted the government to operate on the side of caution. Besides the fear of Indian NTBs, there
seemed to be a greater issue with their own government. The fear was that the government might
grant MFN and then introduce policies without consulting the stakeholders. However, we did not get
a sense that there was a principled stance against trade liberalization, at least based on historical
political priorities of the state. For instance, it was only a limited number of the sample that gave
linked trade with the Kashmir issue (see figure 4).
Figure 1

Interestingly, respondents from Rawalpindi (North Punjab), Lahore, Faisalabad and


Gujranwala (Central Punjab) were more inclined to delink the issue. In fact, in minds of most, the
issue stood de-linked. For instance, majority respondents had a problem with the question about
whether trade could be done without first solving the Kashmir issue.
Numerous stakeholders considered such questions of political nature which they were not
eager to answer. They tend to look at trade purely as an economic issue that can happen
independent of an outstanding dispute. According to one respondent, whom from appearance
seemed ideologically conservative:
Have we managed to solve Kashmir in more than 60 years? We cant solve the problem
with our present conditions. We should talk to them, trade with them and use the opportunity
to strengthen ourselves. It is after we become capable that we will sit down on the table with
them and make them sit down with us and discuss resolution of the issue.
Another trader in the electronic market was of the opinion that:
...trade is not a Muslim or non-Muslim issue. It is about benefit to customer. If you can get
something from a nearer country at lesser cost then it doesnt matter if it is Indian or
Chinese....we must trade with India to reduce our poverty.
Figure 2: Should Resolution of Kashmir Issue Precede Trade Liberalization?

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Asked about his opinion regarding what militant organizations such as Jamat-ud-Dawwa
(JuD) said about trade with India the respondent said: we listen to and support Hafiz Saeed but
cannot follow everything he says. However, the trader underscored the need to have a strong
regulatory framework to ensure that India does not take advantage.
The shift in opinion, as it appears from this study does not indicate that India and Pakistan
are close to turning the corner as far as peace or trade liberalization are concerned. This is partly
because of informal trade which means that interested stakeholders continue to do business without
facing consequences of a confrontational politics. As long as goods continue to flow in and out
through third countries like Afghanistan and Dubai, the business community or the consumer will not
feel the pressure of the impact of politics on economics. As the former foreign minister Hina Rabbani
Khar said liberalization will only happen once there is a critical mass of those in favor.118 What we
see now is a positive opinion which is still not at a point of consolidating into an essential push which
turn the policy perspective around.

2. Afghanistan-Pakistan Trade
In some respects, Pakistan-Afghanistan trade is a bigger mystery than India-Pakistan
economic relations. In order to understand the dynamics of bilateral trade interviews were conducted
in Lahore, Islamabad, Peshawar, Quetta, Kabul and Jalalabad.
The Afghan-Pakistan trade link is a more complex relationship due to the high element of
informality. According to figures given in table 1 for 2013, which were provided by Pakistans Ministry
of Commerce, the formal trade between the two countries is approximately US$ 2.38 billion. Formal
bilateral trade had grown from US$ 177 million in 2001 to the abovecited 2013 figure (see table ).
Table 71: (Value in US$ million)
Year

Exports

Imports

Total

Balance

2000-01

140

29.5

170

110.9

20010

169.2

22.9

192.1

146.4

200203

315.7

34.8

350.5

280.8

2003-04

492.9

47.4

540.3

445.4

200405

747.722

38.9

786.7

708.7

2005-06

1063.4

47.5

1110.9

1015.9

2006-07

753.9

76.2

830.2

677.6

2007-08

1143.6

91.3

1235?

1052.3

2008-09

1398

93

1491

1305

200910

1572

139

1711

1433

201011

2336.7

172

2508.7

2164.7

There is an expectation that this would increase to US $5 billion by 2015. However, there
appears to be a gap between expected and actual growth. Indeed, trade between the two countries
had also experienced a steady decline since 2011. Most of exports from Pakistan include eatables,

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medicine, cement, petroleum products, leather, wheat, rubber, manufactured products, paper goods,
footwear, tents, canvas products, oil seeds, yarn, juices, electrical machinery, fruits, vegetables,
chemical products, rice, household equipment, etc. Afghanistans exports to Pakistan mainly consist
of fruits and dry fruit.
The extent of Afghan-Pakistan trade, however, is difficult to fathom due to a larger portion
being informal which means undocumented. There are only two legal border posts for trade between
the two countries at Torkhum and Ghulam Khan. But the bulk of trade is largely undocumented which
goes through these two border passes or from other illegal crossings across the porous border. In
fact, as pointed out by one key informant: Afghanistan has two kinds of economies documented
and undocumented Pakistan practically controls the bulk of Afghanistans undocumented
economy. Islamabad has an edge on other stakeholders such as Iran and India because of tribal
connections and traditions. A senior bureaucrat of the KPK government emphasized that the tribal
affinities mean that Pakistan will remain central to Afghanistans economy and politics. Another
example relates to the fact that other interested players like Iran do not have a long history of
banking with each other. Money destined for Afghanistan has largely been channeled through
Pakistan at least since the 1980s. Despite this, the difference between two categories of players in
bilateral trade is visible those who engage in or have experience of formal trade versus informal.

Formal Trade
There are several reasons for this state of affairs but one key factor is the bureaucratic red
tape on both sides. Respondents from the business community attributed the recent decline in
bilateral trade to procedural hurdles by the state bureaucracies involved which are linked to political
rift between the two states. Pakistani traders consider the 18% duty imposed on imports from
Pakistan as discriminatory especially in comparison with imports from Iran and India. Other issues
include NTBs, lack of physical infrastructure, security threats, extortions demanded by local militants
in turbulent areas and corrupt practices at the borders by the levies and frontier constabulary (FC).
Bribery is rampant at the border posts. Moreover, there is a lack of financial facilities at the borders
which works as a deterrent. For instance, several traders talked about how inappropriate facilities at
Torkhum and Ghulam Khan means they have to come to Peshawar or an urban center to pay dues.
In addition, while there are now some Pakistani banks operating in Afghanistan, there are no Afghan
banks on the other side of the border. In case of trade from the Chaman-Wesh (Spin Boldak) border,
traders rely on other ways rather than banking channels because Afghan traders still are not
acquainted with banking procedures and documentary requirements.
A common perception notable amongst the business community and key informants in KPK
was that business and trade from Pakistan was dominated by Punjab and thus there was no effort
made to encourage direct ties between them and Afghanistan. For instance, there is no direct flight
between Peshawar and Kabul or even Peshawar and Central Asia. Even official sources in KPs
provincial government believe that the economic and trade structure is poised in favor of the federal
government or Punjab and not the province. A related reason, according to another key informant for
such state of affairs is because the tribal areas are not industrialized or developed. Even KPK cannot
boost of major industries. Peshawar has a limited customs dry port which means that provinces like
Punjab and Sindh with bigger and better infrastructure benefits more.
When you engage trader-merchants or their associations such as the Peshawar Chamber of
Commerce and Industry into a conversation, most of the discussion is on transit trade rather than
formal trade between the two countries almost as if the former category does not matter. Transit
trade pertains to goods destined for Afghanistan via Pakistan. The first formal Transit Trade
Agreement (APTTA) was signed between Islamabad and Kabul in 1965 and revised in 2010. In 2012
it was further expanded to include Tajikistan which would be allowed port facilities in Pakistan at
Gwadar and Karachi. The 1965 APTTA was meant to formalize the transit trade facility provided by
Pakistan to Afghanistan since 1947. The agreement designated Karachi and Port Qasim as entry
and Torkhum as exit points for points for goods destined for Afghanistan. This arrangement gave rise
to a parallel economy since many containers destined for Afghanistan went missing. Pakistans
primary anti-corruption agency National Accountability Bureau (NAB) imitated a case based on a
report that suggested there were 28,000 missing containers. This means that these containers never
reached Kabul and their goods were sold in Pakistan instead. Stakeholders obviously contest the
figure and challenge the assertion that transit trade facilities were used by them for smuggling. They
point out that the fact that the figure for missing container was reduced from the initial 28,000 figure
to around 7,000 in a latter report, indicates that such problems occur due to poor infrastructure. It is
often that there is no electricity at the Torkhum border post which means data entry problems.
Although some members of the chamber of commerce contested this position, NAB officials
confirmed leakages in transit trade.
There are other problems at Torkhum too such as the poor road infrastructure, worsening
law and order condition, problematic restrictions by Pakistan government and visa problems created
by the Afghan authorities. Cement, which is one of the major Pakistani export to Afghanistan; 50
percent of Pakistans cement export goes to Kabul, has experienced reduction which is partly due to
introduction of new duties imposed on trucks transporting cement from Pakistan. Some of the

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respondents were concerned about Kabul bringing cement within purview of 3rd Schedule of Sales
Tax Act 1990 that increased their tax burden. In any case, cement business from Pakistan is affected
due to decline in construction in Afghanistan because of NATO pull out, fear of low economic growth
in Afghanistan, increased cost of production of cement in Pakistan, and increased competition from
Iran. Tehran has an advantage in offering low prices due to reduced cost of production. In Pakistan,
on the other hand, the shortage of gas supplies have forced cement industry to switch to coal but a
recently introduced import duty over it has nullified that advantage in price.
Furthermore, as a representative of the Pak-Afghan Joint Chamber of Commerce and
Industry (PAJCCI) pointed out the Afghan authorities impose higher duty on Pakistani goods (110%)
as compared to imports from other countries. In any case, many of the traders and businessmen did
not seem excited by the APTTA 2010 which was also meant to provide Pakistan access to Central
Asian Republics. However, they were of the opinion that this was not happening.

Informal Trade
There is yet another side of the picture which seems to do better than formal trade.
According to the World Bank, about forty percent of Afghanistans total trade is informal, a substantial
part of which is through Pak-Afghan borders. A study by PAJCCI estimated the value of formal trade
as almost equal to formal trade which means about US$ 2.4 billion. In fact, interaction with those
engaged in informal trade helps to draw three conclusions. First, Afghanistans dependency on
Pakistan cannot be underestimated. Second, there are a larger number of stakeholders who have an
interest in keeping the undocumented trade strong. Third, the fact that there are numerous state and
nonstate actors that benefit from the undocumented economy, it will be difficult to strengthen formal
trade until and unless there is concerted effort from both Kabul and Islamabad to do so.
In fact, some key informants pointed out towards the politics behind informal trade. While
they were of the view that there were beneficiaries of informal trade on both sides of the border,
Pakistans military authorities were pointed out as a significant player that would like to keep its
domination over Afghanistans undocumented economy. Reportedly, this was part of the older
tradition of controlling or neutralizing tribes. The Afghan government under Daud had offered lower
duties to attract Pushtun traders during the 1970s resulting in Pakistan creating similar facilities like
markets in tribal areas which were given to trusted tribal leaders. Later on, official favors grew into a
larger patronage network that facilitated drug trade, 90 percent of which is channeled through
Pakistan.134 But more important, Pakistan serves as the crucial transit point for flow of drug related
black money to Afghan drug lords. This illegal and undocumented economy was never eliminated
after 9/11. In fact, it is claimed that the US presence only changed the interlocutors and controllers of
this trade without any impact on the actual business.
Referring to informal trade in legal items, Pakistan is a significant player in terms of supplies
of critical items like wheat and flour. The following table and map point out border crossing for
informal trade.
Pharmaceuticals are another high demand product which uses both formal and informal
channels. Afghanistan is considered the biggest export destination for Pakistani medical drugs.
Afghanistan has a share of almost twenty percent in Pakistans total exports of pharmaceutical goods
which has an annual increase of thirty percent. In 2011, Afghanistan received Pakistani drugs worth
$29.1 million. But there is far more which goes informally. Respondents from the pharmaceutical
trade suggest that these products smuggled into Afghanistan with prices inscribed in Pakistani
currency are sold in there for the same amount of Afghan currency which doubles the profit margins
of the traders as well as exporters. Manufacturers tend to blame lack of procedures in Kabul that
hinder smooth flow of business that forces producers to use informal means instead.
Table 8 Main Informal Border Entry Points
Entry Point (Pakistan)

Province (Afghanistan)

Nawa Pass

Kunar

Gandao

Nangarhar

Khardani

Paktia

Ghulam Khan

Khost

Shkin

Paktika

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The Advanced Contemporary Affairs (Book 92)

Map of Informal trade exchange points


The lack of procedures is considered as an opportunity to make money by many especially
those involved in smuggling of vehicles and auto parts. Pak-Afghan Chaman border is a heaven for
both smuggled cars and automobile spare parts. Many of the showroom owners both local and
migrants from Afghanistan have become millionaires due to the illicit trade of automobile cars and
spare parts. Respondents from the trade suggest that cars of any brand are available at 40% the
original price.
According to an estimate by some of the respondent it was stated that annually from 50,000
to 100,000 cars are smuggled from both Dubai and Japan via Afghanistan. It is also noted that stolen
cars from different parts of the country are brought to the remote districts of Baluchistan, broken into
its basic parts and then sold to the major spare parts markets of the country in major cities. Business
of smuggled cars or its parts has been carried out through dozens of informal entry points in
Baluchistan and Khyber Pakhtunkwa. One can easily acquire various parts of imported cars in
almost all the major markets in different cities that are popularly known as Kabuli parts (those
smuggled through Afghanistan). Sale of used cars brought through formal channels (Karachi port)
has increased due to easy availability of their parts brought through informal channels. Since local
production does not meet requirement of the market, cars are imported from abroad. This includes
cars smuggled via Afghanistan.

Perspective from Pakistan on Bilateral Trade


The interviews conducted from key informants and the business community helped in
forming five broad perceptions. First, despite benefitting from informal trade traders and
businessmen from Punjab tend to underplay trade with Afghanistan. The KPK and Baluchistan based
traders are more focused on trade with Afghanistan. But they also express frustration for lack of
infrastructure, especially on the Pakistani side, that would encourage a smoother traffic of goods and
people. Second, sectors that have to use formal channels are less excited about prospects of
expanding trade or even setting up infrastructure in Afghanistan. For instance, in case of service
industry such as education sector key stakeholders were reluctant to setup shop in Kabul due to
security reasons. Although there was evidence of some informal cooperation, there is reluctance to
do formal investment. Third, Pakistans business community feels that there were no gains for them
by renegotiating APTTA because it did not open up channels to Central Asia. In fact, small and
medium sized entrepreneurs complained about not getting direct access to Central Asia via
Afghanistan. They claimed that trucks destined for Central Asia from Pakistan are emptied in
Afghanistan and goods transferred to Afghan owned trucks for onwards transportation. However,
some sources attributed this to a deliberate move by the traders not to use truck drivers that may
then be used by Pakistans intelligence to gather information or conduct other activities.140 The role
of intelligence agencies on both sides of the border was one of the deterrents in creating trust
between people and business communities.
Finally and more importantly, the profits from informal trade being relatively high,
businessmen are more inclined towards maintaining the structure rather than adapt to the more
difficult formal structure. They see red-tape as a deterrent especially for businessmen the bulk of
whom are not educated. There is a preference for systems that can help them avoid interaction with
bureaucratic channels. Interestingly, some sources also identified Pakistans state bureaucracy and
military as one of the stakeholders in keeping the economy informal due to Pakistans domination of
the undocumented part of the Afghan economy.

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Referring to traders supporting informal economy, this preference explains why many of the
respondents favored Taliban regime as compared to American regime. They said informal trade was
much higher in Taliban era as compared to Americans. Some of the respondents complained about
proliferation of stakeholders that have to be bribed. While during the Taliban regime they had to pay
to local commanders, now more people have to be bribed. But financial kickbacks are not just an
issue of informal trade. This happens in case of formal trade as well in which officials on both sides of
the border have to be bribed. It is just that in informal trade profit margins seem to be higher.
In Pakistan, there were two kinds of opinions regarding the future of trade with the northern
neighbor. There were businessmen who were concerned about American withdrawal turning
Afghanistan into a less lucrative and stable market. The small and medium sized entrepreneurs in
Pakistan have benefitted tremendously in the last decade due to money being invested in
infrastructure development. Despite competition from India and Iran, there is a confidence that ethnic
connections and nature of terrain benefits Pakistans business sector. Despite concessions being
offered by Iran, the Afghans also find it more profitable and easy to trade through Pakistan. For
instance, the medical service industry in Afghanistan is serviced by Pakistan. Most of the machinery
is smuggled across the border and it is easier to get technical experts to service the machines and
provide other facilities. But this also means that they prefer greater structural informality and use of
traditional links. Interestingly, most of the traders interviewed in Quetta were in favor of Taliban due to
close ethnic ties with the Taliban members, some of whom were also in business partnership with
traders. When asked about the American exit many of the traders were of the view that it will bring
the Taliban back and informal trade will flourish. The traders would rather use the Taliban than go
through formal channels even like the chamber of commerce which was termed as mafia of
smugglers and shopkeepers.
On questions about Pak-Afghan relations or the political disquietude between the two, most
of the respondents were of the view that their businesses were hardly affected by the flurry of
opinions in political circles on both sides. Most of the people associated to the business of
commodities and goods traded across Pak-Afghan borders through Baluchistan are benefited from
the greater informality between the two states. A remarkable number of these traders have migrated
from Afghanistan during Soviet war era and have now become permanent residents of these border
towns and provincial capital Quetta as well. Some of these traders relish on nationalities of both
countries, which help them travel through the borders without any restraints. Respondents from the
border town of Chaman, Baluchistan have stated that their National identity cards having permanent
addresses of Quetta or other distant towns of the Province. Some respondents complained about
state support and patronage to this whole practice of informality regarding travel and trade across the
borders. One respondent quipped that:
Most of the businesses and properties are owned and bought by the people migrated during the
Soviet-Afghan war. They have turned into billionaires due to illicit trade across the borders.
Apparently, the free access given to the Afghans has altered the socio-cultural fabric of the
provincial capital in Baluchistan turning Quetta into more of an Afghan city.

Perspective from Afghanistan on Bilateral Trade


A total of 10 interviews were conducted for the study out of which 3 were in Jalalabad and 7
in Kabul. The key informants and stakeholders were generally bitter about attitude of the Pakistan
government as being not friendly and responsive (a similar complaint was heard on the Pakistani
side as well). In fact, in February 2013 Afghan traders even wanted to complain to UN authorities
over attitude of Pakistani authorities but were stopped due to intervention of Afghan commerce
ministry. According to one trader, his truck carrying goods worth US$ 15,000 was stranded in
Pakistan for several weeks. Resultantly, authorities asked him to pay US$ 20,000 in demurrage. So,
he left the truck behind. He further added that in 2013 several Afghan traders left their trucks full of
goods in Pakistan instead of paying high demurrage charges. Again in 2013, nearly 3,500 containers
were stuck at Karachi for several months. Given this attitude an Afghan official was of the view that
Pakistan never considered Afghanistan as a business opportunity. They always see it from a
security perspective. At occasions, this bitterness extends to reservations about Pakistans politics
such as support to the Taliban. Many believe that Pakistan to be a source of support to the Taliban
who then conduct violence in Afghanistan. There was also an expression of greater resentment
against Pakistans intelligence agencies and Punjab. This is despite that Afghan traders feel
comfortable in Punjab and Sindh where they cannot relate ethnically. However, the impression was
that in such places they were able to melt with the larger Pushtun community (in peoples
imagination). The respondents claimed that the Punjab and Sindh police treated them better than
that of the KPK. Since law enforcement officials of the former cannot distinguish between the
Afghans and their own Pushtuns, even the Afghan traders are treated with respect. In KPK, on the
other hand, they get a tougher time because officials know the difference and are more suspicious of
the Afghans.
But the suspicion or bitterness is part of the story. The other side of the picture pertains to an
almost seamless connectivity with Pakistan. During visit to markets in Wazir Akbar and Sheri Nao,
Kabul it was observed that most of the goods and items were from Pakistan. Products of everyday

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use like water, yogurt, milk medicines, are largely imported from Pakistan. The shops are flooded
with Pakistan goods. The history of Afghan refugees, who have lived in Pakistan and returned to
Afghanistan or whose families continue to live there, means links. This also means a market that has
developed a taste for Pakistani goods. There are many who continue to travel back and forth to meet
members of their extended families that have remained in Pakistan. Such connections have an
impact. For instance, it was noticed that despite availability of medicines from India and Iran, which
were available at cheaper prices, many preferred Pakistani medicine and food items. The doctors
who have qualified from Pakistani institutions are preferred over those from other regional states.
Respondents also mentioned that in case of medical issues and emergencies people prefer to
consult Pakistani doctors which is a reason why private medical practice in Peshawar seems to
thrive. People tend to find shortcuts such as bribing the police and border security to cross over into
Pakistan for medical emergency. The tribal and ethnic connections help in such situations,
particularly if it is a matter of women and children. In this respect, access to Pakistan was found to be
easier than other countries that would require valid documents. In any case, the years of sole
dependence on Pakistan has resulted in good contacts across the border which has resulted in
sustained linkages. The connection can be observed from the long queues outside Pakistans high
commission and consulates.
The ethnic factor seems to play an important part in economic and social dependency.
Despite investment in Afghanistan by Iran, India, China and other countries, respondents talked
about a natural affinity with Pakistani goods and services. There is, in fact, a need to distinguish
between peoples bitterness on political issues and preference for Pakistani products and the country
at large. While talking about problems created at border, bribery and other issues, most respondents
seemed to prefer Pakistan to other neighbors like Iran. The majority of respondents, who were all
Pustuns, talked about discomfort encountered while dealing with Iran due to the ethnic factor. The
significance of the ethnic factor could also be felt from the comparative attitude of Afghan officials
that we talked to during the study. For example, the Pushtun officials were more welcoming. The
ethnic factor can certainly be used by Pakistan to its advantage, especially to build social influence.
Pakistan and its educational institutions are still liked in Afghanistan. It is common to come across
people who have their children studying in Pakistan. There is a preference for Pakistans educational
institutions as compared to Iran s because of the ethnicity and language barrier.
Nevertheless, political issues and poor security, which was identified as a major deterrent by
most respondents on both sides of the border, remains a hurdle. A more proactive policy by Pakistan
that capitalizes on the natural advantages and goes beyond military security could be mutually
advantageous for both Islamabad and Kabul.

3. Iran-Pakistan Trade
Iran was once one of Pakistans major geo-political and trade partners. Once jointly part of
American security alignments like Central Treaty Organization (CENTO), IranPakistan bilateral
trade today has dwindled due to American sanctions on Iran. According to one study, in 2003- 2004
Pakistan imported US$ 265 million worth of goods versus US$ 92 million worth of exports (see table
9 for more current figures). Pakistans major imports from Iran are textiles, agricultural products,
fruits, and iron ore, meat, petroleum products, petrol, charcoal, wax, blankets, shoes, plastic
products, etc. Pakistan was the first country to begin importing iron from Iran. Irans imports from
Pakistan, on the other hand, comprise of sports goods, surgical instruments, meat, rice, wheat,
finished leather, sewing machines, cotton sewing thread, gunny bags, etc. Reportedly, import of
wheat was stopped in 1996 due to disease in the crop. A request was made by the Pakistan
government to lift the ban in 2003.
Table 9

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The main feature of Iran-Pakistan trade ties pertains to the larger component of informal
trade. It has become so significant that people have become much more comfortable with the idea of
informal trade. The ethnic differences and increase in sectarian tension has also played a critical role
in keeping the options limited. Today, people in major provinces like Punjab and Sindh do not
conceptualize economic ties with Iran. There is probably more discussion on the does and donts of
economic ties with India than with Iran. The most popular discussion of business with Iran is
represented by the traffic of illegal oil that has benefitted certain individuals or mafias.

Formal Trade
The political tensions between Iran and Pakistan such as differences over Taliban rule in
Afghanistan during the 1990s or Pakistans alignment with the US, and increased sectarian violence
in Pakistan had an impact on economic ties as well. Nevertheless, successive governments have
tried to revive relations. In March 2004, the two neighbors signed a Preferential Trade Agreement
(PTA) with the intention of reducing custom duty on 647 items (Pakistan would give concession on
338 products and Iran on 309). It was also agreed that the PTA would ultimately be converted into a
Free Trade Agreement (FTA). The governments also agreed to declare two of their border regions as
twin provinces.147 While Iran developed its border posts and related facilities, the road from Quetta
to Iran border on Pakistans side denotes a dismal picture. Traders talked about absence of basic
facilities on a road, which is almost 600 km long, such as toilets. Anyone using the road has to use
the traditional methods like holes dug into the ground used as toilets.
Despite agreements and promises, Iran-Pakistan trade relations have remained limited to
select items (see table 10 for Pakistans exports to Iran).
Rice is one of Pakistans most important exports to Iran. According to the data procured from
Iranian Customs, Iran imports about 99% of rice from UAE, Pakistan & India. Pakistan has about
40% of market share which it feeds through both direct exports or indirectly (approximately 20%)
through Dubai. However, Pakistani businessmen dealing in rice are apprehensive about Indias gains
in Irans market and Pakistan governments inability to benefit from its advantage of having a
common border with Iran.149 In any case, Pakistani traders feel constrained due to their inability to
open a Letter of Credit (LC) because of the U.S sanctions. Although basic items like food, medicine
and medical services are exempted, State Bank of Pakistan is still unwilling to open the LC.
Table 10

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According to a respondent the precarious law and order situation in the province of
Baluchistan further aggravates the situation. Many a times a container is hijacked and the driver is
harassed and tortured by criminals. He further added that it takes 10 to 12 hours for a container to
reach the PakIran, Taftan border where the Pakistani side has provided no facilities like cold storage
to keep the rice. There are times when the Iranian border is closed without warning which causes
huge loss to traders. Problems get exacerbated due to lack of branding of Pakistani rice. According
to one respondent, a properly branded item gets $500 to $600 extra per ton. As compared to
Pakistanis Indians are quicker in adapting to the changing market trends. Pakistan lacks this quality
because the business is still in the hands of unprofessional players. What adds to the problems is
lack of basic infrastructure facilities like technical training institute to provide skilled manpower to the
rice industry, lack of R&D on seed development which may bring higher production yields &
commercial viability for farmers, lack of paddy drying & storage facilities to avoid myotoxins, nonavailability of globally accredited labs to ascertain conformance to food safety standards and
authentication (Basmati).
Meat is another of Pakistans critical exports to Iran due to preference for high quality cow
meat.154. Respondents shared their view about Iranians preferring meat from Pakistan due to its
taste and aroma. Similarly, there seems to be a preference for Pakistans citrus fruit popularly known
as kino. Notwithstanding formal support from the state such as training programs and help for
prevention against disease and lack of credit facilities and proper road infrastructure, kino is exported
to Iran. Sharing their problems, respondents complained about lack of railway facilities to transport
citrus quicker than 12 to 14 hours it takes for the fruit to reach the Iranian border. Due to lack of
infrastructure, it is feared that Pakistan may be losing its market.

Informal Trade
However, traders continue to export citrus often informally rather than formally. Fruit is send
in open trucks without proper packing and crating which means these are often in bad condition
when they reach their destination. This spoils the market of Pakistani kino in Iran and affects even
formal trade.
The dominant dimension of PakistanIran relations is informality. Although definite figures
are not available, Pakistans Ministry of Commerce officials provided an estimate of about US$ 800
million worth of informal bilateral trade. Notwithstanding political issues, Pakistani stakeholders
attributed the higher amount of informal trade also on random changes in Iranian policies or issues
created by border security on Pakistans side. It is important to note that the bulk of the informal trade
is through barter. This means that traders bring petroleum products, asphalt, sulfur or other such
items and take Pakistani products in return. This saves them from exchange of money or using legal
or illegal methods to transfer funds.
The Iranian product most in demand in Pakistan is petrol. While travelling from Quetta to
Karachi via RCD (Regional cooperation development) highway, one notices many a shops bearing
different colors of flag and oil barrels. These are the local fuel stations for Iranian petrol which is
easily available through bribing Pakistani officials. Most of the trade is through Baluchistan as it costs
less in transport. Some of the stakeholders interviewed talked about tricks fitted with hidden tanks
that can carry about 400 liters of fuel. But the transporters are not the real players. The fuel is
brought to dumping stations which are owned or controlled by influential personalities from urban
centers like Karachi. There are about 800 such stations that can store 90000 liters of fuel. Due to
Iranian petrol a decline of 10000 to 15000 liters is seen in the locally produced petrol because of its
low price. Reportedly, there was a demand for 80,000 to 90,000 liters of smuggled fuel in Karachi in
2013. The demand increased mainly due to hike in fuel prices. One of the respondents was of the

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view that Lyari, Karachi had most dumping stations because of the ethnic factor. Majority of
smugglers are of Baluch origin which means they have their closed network.
The Pak-Iran border is also used for human smuggling. People from different parts of
Pakistan such as Central Punjab and KPK as well as migrants from neighboring states and countries
from South Asian Republics and Central Asian region (CARs) use this route. This illegal business is
run through a network of agents and law enforcement agencies.

Perspective on Trade with Iran


Formal and informal trade put together, the balance of trade appears to favor Iran. The
business community in Punjab did not appear excited about trade with Iran. Despite reaping benefits
like cheap Iranian crude, trade ties are not likely to expand until formal trade is enhanced. But
businessmen in Baluchistan continue to favor informal trade as it helps cut costs. One of the reasons
for such preference is that given the poor state of economic infrastructure in Baluchistan, business
community opts for ways to maximize their financial gains. Furthermore, the Baluch insurgency and
rising terrorism are two other factors that make trade or any economic activity a risky option. It was
also observed that as compared to Afghanistan, Iranian border and the business routed through it
suffered more due to sectarian politics.

Conclusion
Without doubt, trade is the way forward for anchoring peace and stability in South Asia. It is
certainly a key for Pakistan to improve its relations with its neighbors. However, there are some
broad conclusions which can be deduced from this study.
First, the civil society and business community at large consists of stakeholders that are
keen on peace and have stakes in cross border trade. The attitude in the country has certainly
shifted away from the pure animosity towards India to people wanting normalizing of relations. In
fact, talking to businessmen in Pakistan one tends to come across a rare sense of confidence that
you dont get while talking about politics or social issues. Many of the people were willing to take on
the challenge of trade liberalization and competing with India. Many were of the view that if they
could survive a free trade agreement with China that dumped its goods in Pakistan, they can deal
with India as well. In fact, there is a preference for the Indian market, which, it is believed, can absorb
Pakistans products as opposed to China where there is little appetite for Pakistani goods.
There is actually no consensus amongst the business community on the issue of trade
liberalization. But it is apparent that industries that have a competitive edge or are hungry for new
markets are not averse to the idea of opening up trade with New Delhi. Pakistans products have
improved in quality and are much sought after during trade festivals in India. What such stakeholders
complained about were non-tariff barriers, visa restrictions and lack of facilities to exhibit their
products on a permanent basis. There are many who look at India as a potential market. This
includes textile industry, fashion, furniture, sports, surgical instruments and others. However, the
voice of naysayers remains dominant because of political bias amongst the policymaking circles,
especially the military, compounded with overall influence of those who dont want change. The auto
industry is a significant player in Pakistan due to the number of people it employs. This sector has
spearheaded the campaign against trade liberalization joined by others like pharmaceutical,
ceramics and others. These industries have the ears of the government and are using it to not
become competitive. Their concern is that given the infrastructural problems in Pakistan such as
shortage of electricity and gas supply, they will not be able to compete with India. There are also
genuine concerns regarding NTBs. But there are other sectors like agriculture that was the most
resistant to trade liberalization but has now negotiated its way to a better understanding on the issue.
Key stakeholders from agriculture were even of the view that Indian investment into agriculture
should be welcomes. Nevertheless, they proposed caution and a gradual opening up. The industry
should be able to protect its interests first which seems to be their mantra.
What Pakistan seems to lack is a strategic vision in which trade and overall economy get
priority. Therefore, its not just liberalization with India but also trade with Afghanistan on which there
seems to be an absence of a clear policy framework. Afghanistan is an interesting case as the
markets of the two countries seem connected. Due to tribal affiliations, loose border controls,
corruption on both sides, and cultural dependency of the Afghan peoples, especially the Pushtuns on
Pakistan, the trade scene can be vibrant. In fact, there is a lot of trade activity but mainly in the
informal sector. Afghans that had migrated to Pakistan but have moved back to their own country still
prefer Pakistans service industry like health and education. There is a constant flow of goods and
services between the two state territories. However, on Pakistans end there appears to be a
reluctance to prefer formal trade relations. Talking about formal trade, businessmen would constantly
refer to Afghan transit trade in which many in Pakistans transportation sector had major stakes. But
there is little talk of increasing trade of goods and services through official channels. The bulk of
businessmen, who are involved in trade with Afghanistan, are conscious of greater profit margin. It is

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also easier to avoid the bureaucratic red-tape. Also, because of the porous border there is always an
alternative to formal trade. A larger incentive is also the channeling of drug trade and capital in which
Pakistan plays a significant role. There are many beneficiaries who may not like to be distracted by
official restrictions. Unfortunately, for a combination of reasons there is little debate in Pakistan to
formalize trade and economic ties with Afghanistan.
Similarly, there is little debate regarding increasing trade ties with Iran with whom business
potential dwindled since the 19780s. Bulk of trade with Tehran is in the form of illegal trade which
means that dividends are not obvious to the common citizen. For instance, there is a constant flow of
smuggled Iranian oil into Pakistan which is used to circumvent high fuel prices. But the advantage is
obvious mainly to those who are direct beneficiaries. The buyer may not be conscious or have the
information. There is little plan or inclination to improving these trade relations which is primarily due
to competing geo-political interests in Afghanistan and sectarian-religious tension between the two
states. The sectarian bias and resultant barriers cannot be underestimated. In recent years a proIran perspective is not allowed in newspapers, especially in the vernacular. Such issues speak
volumes about lobbies inside Pakistan that stop improvement in ties. The sectarian and ethnic bias is
on the Iranian side as well which has an impact in terms of trade with Pushtun dominant Afghanistan.
The Afghan traders talked about relative discomfort due to ethnic reasons in dealing with Tehran
despite that they were offered better trade concessions.
Nevertheless, and this is the second conclusion, improvement in trade relations are directly
dependent on Pakistani state re-defining its priorities. Islamabad ought to shift its emphasis from
purely military security to enhancing economic, social and cultural ties with its neighbors. This,
unfortunately, is not likely to happen as long as civil-military relations remain balanced in favor of the
latter. Pakistan needs to bring about a paradigm shift as far as India and Afghanistan are concerned
which does not seem likely in the near future. Some of the donors have begun to finance advocacy
campaigns to build a consensus in Pakistan on trade, especially with India which is a good idea
because this may generate the critical mass which is required to pressure the state to shift its
priorities. Even if the military has to be made to re-think its options, a critical mass of opinion that
favors trade liberalization is required.
Third, there is a need for greater dialogue amongst business community from across the
border both with India and Afghanistan and internally in Pakistan. At this juncture, the strategic
environment can drift in two different directions. The India-Pakistan hostility can increase to a boiling
point where it consumes all the goodwill and willingness generated in the past decade or more. As
conditions change in Indias Kashmir and the possibility of violence increases, a more right wing BJP
government appears far more willing to react sharply to any acts of violence. The media has also
begun to focus more on the cross border rhetoric. But the other option is for both governments to
create a space for building peace. Trade has a role to play in this regard.
Fourth, India is an expanding market and Pakistan could benefit from it. Clearly, there is a
difference of withdrawal from Afghanistan, business opportunities are likely to decline which, in turn,
will opinion between the political government and the security establishment on how far to open up.
Given Pakistans internal political conditions it does not seem very likely that the political government
would take the risk of excessively sell the trade liberalization project. However, the government ought
to put more efforts into building confidence of the business community regarding trade liberalization.
One way of doing that is through increasing transparency of decision-making especially pertaining to
trade and commerce. The current debate on trade with India, in particular can be broken down into
three groups: (a) those that are clear about benefits of liberalization, (b) stakeholders who fear
liberalization, and (c) those that are apprehensive of liberalization due to lack of transparency of the
overall policy framework and how it might affect them. The political government may have the right
intent but it seems to have lost a lot of time in not conducting an internal dialogue. For instance,
many of the manufacturers and traders in Gujranwala, which is the hometown of the commerce
minister complained about lack of clarity on certain key issues and dialogue with the government.
Fifth, while viewing lobbies that work against trade liberalization, which is an important
segment of formal trade relations, we ought to consider the role played by influence of beneficiaries
of informal trade. Improving formal trade relations with India become secondary because of a parallel
informal trade economy. Businessmen are often weary of formal trade because it can get affected
due to official policies or political relations. They find it easier importing goods from third countries
which may have higher cost but lesser political cost. In case of trade with Afghanistan and Iran,
informal or illegal trade dominates. The stakeholders, which include state bureaucracies, have
benefitted from this kind of trade. This turns them into a lobby that works against trade liberalization
or its formalizing. Furthermore, in case of violence and political instability increasing in the wake of
the US and NATO keep traders inclined towards informal trade.
As far as Iran is concerned, over the last three to four decades Pakistans dependence
shifted away from Iran. The fact that Tehran became marginal to Islamabads security interests also

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resulted in reduction in business and cultural ties. Although successive governments promise to
improve relations, the prospect of real change does not seem likely. Interestingly, despite Iran and
Pakistan both being Muslim states, the passion for improving trade relations with Iran seems lesser
than for India. The bulk of bilateral trade being informal also means that the
impact of economic cooperation is not visible to the common man. The
Iranian oil is smuggled to major urban centers like Karachi. Nevertheless, it
goes unnoticed.
Pakistans economy has a lot of potential. However, for it to
capitalize on its potential, the policymaking and national narrative must be
re-evaluated and reformatted in a manner that it looks at the world through
the lens of cooperation rather than conflict.

Post-2014 Afghanistan:
Likely Scenarios and Impact on Pakistan
Prof. Dr. Adnan Sarwar Khan

Abstract

Though it would be quite difficult to predict, by and large, the post-2014 Afghanistan would have both
positive and negative scenarios, from the standpoint of Pakistan and much of the rest of the
international community, in the interconnected and interdependent perspective of the Liberal
theorists, i.e., that not only the players and actors of the international system, sub-systems, and subsub systems are interdependent but that the effect of the policies and moves of one has an impact
on others, at the bilateral, regional and international/global levels. Likewise, the scenarios would be
unfolding and developing in the short, medium, and long term basis; especially in the backdrop of its
most sensitive phase-2014-2020.

Introduction

his paper/presentation is based on the idealist-cum-realist theoretical framework of


understanding and pragmatic applications of issues involved in the matter. This approach is
adopted so as to strike a balance between what is being done and what ought to be done ,
by the balance between what is being done and what ought to be done , by the concerned
countries; particularly by Pakistan, the United States/NATO/ISA F, Afghanistan, India, Iran, China,
Turkey, the Russian Federation, Central Asian States as well as the non-state actors-the resistance
forces, the Afghan Taliban, (AT), and Tehreek-i-Taliban Pakistan, (TTP), in and around Afghanistan.
In this regard, it is important to understand that the post 2014 Afghanistan (and the likely scenarios;
its impact on Pakistan) is going to be an interconnected and complex phenomenon which cannot be
seen from Pakistans standpoint only though indeed it would be one of the key countries in this
connection.

Post-2014 Afghanistan

The post 2014 Afghanistan is nobodys guess and though it would be very hard to foretell; let
alone fully assess the emerging situations, by and large, it would have the mix and mess of both
positive and negative scenarios for all the situations, starting for Afghanistan itself the state,
government and its people. However, equally important is to know that, at the moment; and since
long, the main aims and objectives of the different entities in and around Afghanistan have been
working at cross-purposes or at divergences rather than at points of convergences. Therefore, the
emergence of the likely scenarios would be basically as these countries would like them to be insofar
as they could possibly affect them. The impact too would be, in a big or small way, on all the
important state and non-state entities starting primarily with none other than Afghanistan and
Pakistan.

Positive Scenarios

In the light of the recently held first phase of Afghan Presidential elections on April 6, 2014,
which has passed quite successfully, there is a probability that a stable and democratic Afghanistan
may finally emerge after the completion of its second phase on June 14, 2014. In this case, it is
further expected that much against all the fears of insecurity, the new Afghan government with the
support of majority of the people would be in a position to thwart much of the security threats from
the militants in a quick or at least in a gradual but certainly consistent manner. This would be more so
in the back up support of about 10,000 US troops; 9,800 to be specific, still there till December 2016.
However, this would mostly depend on the conclusion, which is quite likely, or otherwise of the
Bilateral Security Agreement, (BSA), of the new Afghan government with the United States.
In such a scenario when the BSA is in place in the backdrop of smooth transfer of power in
Afghanistan after the successful elections, the chances of early peace would become bright, despite

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the Taliban threats. The overwhelming majority of the Afghans would get a great moral booster by
this achievement of the transfer of power. At the same time, even in this apparently reasonable
strong and stable situation, the Afghan government and people would be clearly advantaged if an
intra-Afghan dialogue also gets initiated in earnest, good faith, consistently and most seriously; this
can finally lead to the sharing of power by most of the stakeholders, particularly the mainstream
leadership of the Afghan Taliban with the Afghan government, provided the former gets into the
democratic dispensation for the good of the country.
However, for this to be truly productive, the Afghan government and the resistance would
have to change their respective mindset of just not ruling this unfortunate country but to also take up
the real responsibility for its present and long term future based on the lessons drawn from the past.
This approach could only be adopted if there is a complete paradigm shift of thought. This would
require great vision. It seems quite difficult as of now but is not impossible if the proud Afghans at
long last realize their true worth in the background of their great history as a nation. Indeed, the
Afghans must have the guts to give pleasant surprises instead of just indefinitely and senselessly
indulging themselves in endless and quite useless violence, for whatever purposes. If this is not
realized, they can be thrown by the basic law of nature, into the dustbin of history, forever.
i.
There are also fairly good chances that consequent upon the politically sound and stable
Afghanistan, the US/West and the rest may significantly increase their financial assistance for
the country. The Afghans need it more than ever. However, in this regard, the Afghans
themselves have to make it more than sure that it is very transparently utilized and in this
connection infrastructural development would have to be given top priority so that Afghanistan
instead of becoming a parasite on others, stands on its own feet and starts positively competing
with the regional countries, economically speaking, in this era of geo-economics. Financial
corruption has already earned a very bad name for the Afghans particularly in the last two and a
half decades or so. This is their unmaking. They must listen to the wake-up call for becoming a
self-respecting nation-state. Certainly, any kind of democracy cannot flourish, anywhere, if it is
devoid of good governance and accountability.
ii.
This possibility of politically and economically stable country can be greatly complemented if
Afghanistan concludes treaty of peace, friendship and cooperation with all its neighbours as well
as other regional and global powers. The true sense of a non-aligned and neutral Afghanistan
can then be translated into practice with a modern and moderate Islamic Republic, with all its
traditional values preserved. In this scenario, the emergence of Afghanistan as a zone of peace
should also not be out of sight. This would invariably mean a wholly new set of relations of the
regional and global players with the country in question. This by no means would be an easy
task but as it is said, politics makes strange bed fellows. The Great Game now in its current
shape, ought to be converted, sooner than later, into the perpetual phase of peace: The Great
Game later, into the perpetual phase of peace: The Great Game Changer, for development and
progress in Afghanistan between itself and its neighbours, regional and international players.
One can, by some stretch of imagination, be at least cautiously optimistic in the overall system of
power play of power politics by the big/influential states of the region and the world, even after
the end of the Cold War, in the era of the so- called New World Order which instead has turned
out to be the New World Disorder.

Negative Scenarios

In most of the national, regional and international situations, as everybody knows, the
positive aspects are alternated with the negative ones. This situation is all the more relevant in case
of Afghanistan 2014 and beyond. Overall, after the prospects of positive scenarios, the following
negative sides can also be as roughly or neatly sketched:
i.
The post 2014 situation may erupt into a full scale insurgency coupled with a fierce civil war
in the length and breadth of the country or its main cities. This would actually mean that not
only known resistance groups but some hitherto silent opposition, the nationalists, may also
join the ranks and files of the Afghan Taliban and the remnants of al Qaeda. As a result of
the decreasing number of the US troops till 2016, it is feared in this scenario that the
Talibans attacks would become more deadly exposing the country to serious insecurity,
chaos and bloodshed, particularly in the northeast and southeast of the country.
This doomsday scenario may quite unwillingly compel the US to rethink about its complete
withdrawal after 2016 and instead force them to re-deploy some sizable military presence; in
the combat format, for the next decade or so, i.e., by 2020-2025 say; as per the US long
term strategic agreement of 2012 with Afghanistan. It is in this scenario that, if not the US,
the NATO is dropping clear hints that there will be no problem getting enough allied troops to
reach the 12,000- force total that officials believe is needed in Afghanistan to train and assist
Afghan forces beyond 2014.
This number may increase to 14,000 to 15,000 according to Afghan Minister of Defence
Besmellah Muhammadi after a meeting of NATO and ISA F Defence Ministers was held in
Brussels, on June 7, 2014.5 In any case, over and above, the failure of Afghan National

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iii.

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Army/Afghan National Security Forces would be, in the first place, a national shock for the
nation looking forward for their ability to take up the challenge head on, resolutely and
competently.
Quite understandably, this kind of a doomsday scenario would ultimately result in 3-5 years
takeover time of most of Afghanistan by the resistance force, reversal to the pre- 9/11
situation and the proclamation of the Islamic Emirate of Afghanistan. Still, however, pockets
of opposition to such a regime would be certainly there as was the case in the Talibans
1996-2001 rule by the Northern Alliance. This, if at all it happens, may involve Iran again in
the repeat display of 19992011 in active support for the opposition/resistance side from
the periphery against the Taliban rule at the centre, i.e., Kabul. Verily, it would be very ironic.
Consequently, the political, diplomatic and military/security boycott/sanctions of the Talibans
Afghanistan by the states of the region and the world at large/the international community
would be quite intense. There will be general de-recognition of the regime except by the
most important front line country-Pakistan, which would be doing it only with the overt or
covert approval of the US/international community for the necessity of serving as a bridge
between Talibans Afghanistan and the rest of the world. However, this scenario is the least
possible and would be avoided by all concerned at all costs.

Impact on Pakistan

Pakistan-the frontline country, the third time in this part of the world, since the beginning of
the Cold War, would be-for better or worse-the most affected country; both at the bilateral and
regional levels. Pakistan, despite all the criticism levelled against it, has been playing a pivotal role in
the struggle against terrorism, particularly since 9/11. And though some of its policies in this regard
might not have clicked the way it had liked, Pakistans resolve and determination, in this connection,
was second to none all along during the crises. In this connection the do more mantra,
notwithstanding, Pakistans contribution has been unmatched and is duly recognized also, in the
same breath, by all the critics US, Afghanistan, and Iran, to name a few. In the same continuation,
more worrisome is the fact that Pakistans closest friend, none other than the Peoples Republic of
China, has also shown its concern about the militancy in the Tribal Areas of Pakistan which has its
repercussions in Uighur region of the country.

Positive Impact
i.

ii.

Clearly, Pakistan would immensely benefit from an economically and politically stable
Afghanistan. Pakistan; which has already been contributing from time to time significant
economic/financial and infrastructural development assistance to Afghanistan since 2002 can
greatly increase their bilateral trade by taking it to 5 billion dollars mark in the next two years.
The two countries can further do well by documenting and formalizing the non-official, day to day
trade between the people of the two countries. Pakistan can also have direct land route outreach
to Central Asian countries for trade; something for which it has been waiting so impatiently since
their emergence as independent republics in 1990-1991. This great boost and boom in trade can
make Pakistan a regional hub through the port city of Karachi all the way up through the Afghan
Trade and Transit Agreement, ATTA; first signed in 1955 in its enhanced form. Here, in fact, one
must say that from amongst South Asian countries, Pakistan stands at the top due to its long
geographical contiguity with Afghanistan.
Geostrategic importance of a country implies the significance with respect to its location and the
advantages it incurs because of its geography and it can help exercise a worthwhile influence on
international level due to this. Pakistan is a link with the Persian Gulf and a gateway to China
and the rest of South Asia. It provides access to the warm waters of Indian Ocean for landlocked Central Asian states and the Arabian Sea. It has common border with India. It is located
close to the oil-rich Persian Gulf. The Strait of Hormuz is in close propinquity to Pakistan. It is a
bridge between South Asia and South West Asia. Access to Afghanistan is given by the Khyber
Pass and the Karakorum highway provides access to China. Karachi port provides refuelling
stop for ships. This prized location of Pakistan cannot be taken over by any country, let alone
India. Both Afghanistan and India know it very well.
The people to people contact and trade between the two is so intense and spread over that even
in the worst of politics and strategic relations, the trade and business of the two countries cannot
be decreased, let alone stopped. This is an amazing reality; something which is always a
permanent redeeming factor between the two: a matter of envy for some other regional players.
The two countries can also enter into the (long over-due) joint defence agreement or treaty of
friendship and cooperation burying decades old hatchet and thereby heralding a new era in their
otherwise not very smooth relations since 1947.
India-Pakistan competition for sphere/area of influence in Afghanistan may speedily decrease
and instead cooperation can increase. However, for this to happen, India would have to
understand Pakistans economic, geographical, cultural, historic, ideological and geo-strategic
importance for the government and people of Afghanistan.

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Moreover, India could do well by not exploiting Afghanistan soil for raising groups prepared there
to come into the Tribal Areas of Pakistan; and the other cities as well as in Baluchistan and
Karachi. This scenario in this respect would depend much on Indias long term reading of the
situation from the regional context. Here, India has to make a crucial choice not to plunge into a
turf war with Pakistan on Afghan soil and instead do whatever it can from the side lines to
encourage Pakistan to push for a negotiated settlement between the Afghan Taliban and the new
leadership. In the same context Pakistan and Iran can also have a new beginning on
Afghanistan. The inculcation of the vital element of trust between and among India, Pakistan,
Iran, and Afghanistan; as well as between the United States, Pakistan and other countries
mentioned above is indispensable. All of them have to, somehow, quickly move beyond just their
narrow national interest based on short term objectives.
The speedy return of the remaining Afghan refugees from Pakistan to Afghanistan will enable
Pakistan to have a better law and order situation and with a more focused attention on the socioeconomic conditions of its citizens, particularly those in FATA, Khyber Pakhtunkhwa, Balochistan
and Karachi.

Negative Impact
i.

ii.
iii.

In case of civil war, the (new) influx of Afghan refugees would be accelerating thereby further
overburdening Pakistans already fragile economy. This situation may also result in putting
internal security of Pakistan at additional risk. At the height of the Soviet intervention in
Afghanistan, 1979-1989, there were at least four million refugees housed by Pakistan: over all,
6.2 million in both Pakistan and Iran. Even after that, till now, specifically after 9/11 there are
reports that this number, is not less than two million even by conservative estimates. By this
standard, the refugees in case of civil war in Afghanistan can swell up to four million again. This
would be unbearable for a cash-starved Pakistan.
Also, there may be the dreadful scenario of Pakistan been used by the warring Afghanistan
commanders, war lords, and drug mafia for transit route for drug trafficking to finance their war
machines.
The renewed and reinvigorated Indo-US-Afghanistan equation, at Pakistans expense, can put
Pakistan in a very tight geopolitical/geostrategic position. This may again compel Pakistan to
think of having relations with some good Taliban if the situation worsens.
Pakistan will furthermore rely on a defence/security oriented foreign policy of a very difficult twofront nature. Both India and Afghanistan have sine 1947 kept the situation tense what with
Afghanistans Durand Line stance and Pakhtunistan stunt, forcing Pakistan to join SEATO,
(Southeast Asian Organization), and CENTO, (Central Treaty Organization). during the Cold
War.

Conclusion

The post 2014 Afghanistan can be a new Afghanistan with a new history in place of the
current one filled with blood and brutality. Any shape it will take is going to be largely the decision of
the Afghans and Afghans only more than any other state or non-state entities. The Afghans have to
make sure that due to their unending internal rifts they do not provide any opportunity , whatsoever,
to any internal or external elements to exploit them for their vested interests. It is for this reason that
Pakistan supports an Afghan led and Afghan owned solution of the conflict with no favourites.
From Afghanistans side it is necessary that the blame game is given up. It must understand
that a chaotic, unstable and crises-ridden Afghanistan is completely against Pakistans national
security and economic interests. Pakistan just like Afghanistan does not want to see vacuum in
Afghanistan after the US withdrawal. This can be a very strong common concern to work upon in the
post 2014 Afghanistan scenario. Afghanistan must not unnecessarily distrust Pakistan. That will be a
nonstarter unfortunately.
Pakistan has already played a very positive role in the recently held Presidential elections by
looking after the border so that no militant elements can cross into Afghanistan for attacks during the
event. Now, it is Afghanistans turn to reciprocate. In sum and substance, Afghanistan, Pakistan and
the others will have to go the extra mile to accommodate one another for the long term peaceful and
prosperous future of the people of the region. Rhetoric would have to be converted into reason,
rationality and reality; by all, without exception. Above all , the usual difference between policy and
posturing will have to be shunned by the powers which call the shots. And yet, in the short term, this
may not fully mean that the traditional combination of diplomacy, peace and power in the pursuance
of national interest of states on any serious controversial matter will fade away so rapidly. It is just to
say, nevertheless, that diplomacy ought to be given more chance for the negotiated settlement of the
disputes.
After the US withdrawal from Afghanistan it would be a serious blunder if Pakistan is
sidelined and its all -time significant role is ignored. The US/West should not make any mistake
concerning Pakistans due role in Afghanistan. The United States must trust Pakistan as Pakistan
should also be doing it for the United States. In addition, Afghanistan and Pakistan ought to fully

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capitalize on the Istanbul Process for the solution of the problem for which Turkey, as a host and
go-between, is playing a fine role for the last couple of years. This should be done by choice and not
by compulsion, as mostly is the case with US-Pakistan relations. The deadly embrace of United
States with Pakistan; using Bruce Reidals terminology, must change into friendly embrace. Taking
Pakistan fully into confidence is very essential with regard to 2014 and ahead. Pakistan in the region
holds tangible significance for the US17 (and for that matter for the other countries as well). This
reality must not be overlooked by anyone- regional or international powers. On Pakistans part also
equally important is the fact that there is a drastic foreign and defence policy shift in order to
contribute towards Afghanistan and regional stability.
In case of very unstable post 2016 Afghanistan, some international organizations and
countries, like the United Nations, the Organization of Islamic Conference; Germany and Japan which may be acceptable by the majority of Afghans - can play the role as peacekeepers for the
transitory period in the country to help the government and the people there. It must be pointed out
here that Germany and Japan have been playing a very positive non-combatant role under the
banner of ISAF 2001. Germany enjoys Afghan trust as friends in need since the 1920s.enjoys
Afghan trust as friends in need since the 1920s.enjoys Afghan trust as friends in need since
the 1920s.
In a positive development the US Deputy Secretary of State, William J. Burns during his visit
to Pakistan on May 9, 2014, met with the advisor to Prime Minister on Foreign Affairs Sartaj Aziz,
Special Assistant to the Prime Minister Tariq Fatimi and Chief of the Army
Staff General Raheel Sharif, and discussed the post 2014 scenario in
Afghanistan and matters relating to Afghan Peace and reconciliation
process. Now, finally, Pakistan ought to be considered a part of the solution
rather than part of the problem by all concerned.
Pakistan, in actuality, just wants this much; nothing less, nothing
more.

The Role of Neighbours in Stabilizing Afghanistan:


Focus on Iran and Pakistan
Didier Chaudet

Introduction

istorically, the Western analysis of Afghanistan could have led us to believe that this country
is an island, disconnected from its regional environment. One can hear about Pashtun
tribes, local minorities, international actors coming from far away to intrude in local affairs,
but rarely of the connections those different local groups have at the regional level. Still
nowadays it seems possible, for some, in the West but also elsewhere, to talk about Afghanistan
without having a real knowledge of the fields composing the Afghan regional environment, as if
Kabul could be analysed without having Teheran, Islamabad, or even Tashkent in mind. Of course
such an approach is far from the truth: it explains why the Americans came, at the beginning of the
War on Terror, with the notion of AfPak. It was a simple recognition of something well-known
regionally: Afghanistan and Pakistan, are, as Karzai once said, twin brothers, joined at the hip
through the Pashtun population, divided in two by the Durand Line. But as some explained, it would
have made as much sense to talk about an Af-Ir region, with the cultural, linguistic, political and
diplomatic links between Iran and Afghanistan, as well as a local Af-Ir strategy, as European and
American policy makers have to admit that broadly speaking, Iran has been good for Afghanistan.
Those facts make Iran and Pakistan of primary importance in Afghanistans regional environment.
But Central Asia and Xinjiang are also connected to this country, for better and (mostly) for worst. It
explains Chinas Silk Road approach, promoted by Xi Jinping during his visit to Central Asia
between the 3rd and the September 13th, 2013, and the notion of Greater Central Asia, promoted
by Frederick Star from the CACI (Washington D.C.) and partly responsible for the birth of a Central
and South Asia section at the State Department. They show the international recognition of the fact
that links between Afghanistan and its Northern/Eastern neighbours are also of importance.
Indeed, to think about Afghanistan politically speaking without taking into account its regional
environment would be limited at best. It is particularly true in terms of security: all the neighbours of
Afghanistan have been directly or indirectly threatened or attacked by non-state actors which have

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used Afghanistan as a safe haven, and who have found allies in the Taliban (being the TTP or the
Afghan Taliban) and the drug traffickers active there. Even if the Afghan regional environment has an
amazing cultural, political and trading history in inheritance, for now those countries are linked for the
worst, not for the better. Hence the importance of Afghan stability for the region: foreign powers can
intrude in Afghan politics and leave to focus on other issues, seen as more important at the time
(Syria, Libya, Ukraine...). Regional countries do not have this luxury: even if they dont want to focus
on Afghanistan, they have to, for their own safety. And of course, it is particularly the case for the
countries most connected with Afghanistan historically, culturally, politically, and diplomatically, the
ones sharing important borders with this country, i.e. Iran (936-kilometre-long border) and Pakistan
(2 640- kilometer-long border). More than any other regional countries, they need a stabilized
Afghanistan to protect the stability of at least part of their own respective territories. Afghanistan has
been, and continues to be, enduring curse for them, as we will see in the first part of this
presentation.
Once this fact is confirmed, the second part will analyse the diplomatic choices the Iranians
and the Pakistanis have done on
Afghanistan, while the third part will focus on the Iran-Pakistan relationship, to see if regional
cooperation is truly possible. Indeed, the main question is: are Iran, Pakistan, and broadly speaking
the neighbours of Afghanistan, up to the task? Will they be able to work together and adapt their
foreign policy choices in such a way that Afghanistan could actually have a chance for more stability
and peace after 2014?

The Afghan Issue being an Enduring Curse for its Regional Environment
Before going into detail to see if the regional actors could be up to the task and truly help to
stabilize Afghanistan, one should ask oneself: what are the incentives for the regional actors to be
helpful to Afghanistan? The general answer is of course to explain that to help Afghanistan is, in
more ways than one, to help themselves. And it is particularly true for Pakistan and Iran.

A Burden and a Security Risk: What the Afghan Issue Means for Teheran
One can divide the problems coming from Afghanistan to Iran into three main issues:
First, one needs to take into account the drug trafficking coming from Afghanistan to Iran. It
is no small matter, as one can see through the last official numbers related to this plague. As
explained by the Iranian Minister of Interior, A bdol reza Rahmani Fazli in a declaration to the press
made on the 18th of March 2014, the authorities have seized 530 tons of drugs since March 2013.
Seventy seven per cent of it is opium coming from Afghanistan. Drug addiction has become a grave
health and social issue for Tehran: 1.3 million Iranians are addicts, and it appears that there are 130
000 more added each year. Six million Iranians are affected one way or the other by problems linked
to drugs. And things will get worse before they get better: the importance of drug trafficking has made
the criminal underworld stronger, and eager to prosper through the drug market. Traffickers do not
limit themselves to Afghan opium and heroin anymore.
They invest the money gained from this Afghan-Iranian business on other drugs one can
find now in Iran, like cocaine and, more recently, meth. Important beneficiaries of such traffic are the
Taliban themselves: they were collecting no less than $125 million a year in opium production in
2009, before it actually came to be used in the high-end value aspects of the heroin industry. And to
fight such industry will be difficult, as it feeds half a million families in Afghanistan itself. Hence Iran is
condemned for now to wage a true War on Drugs all by itself, without real support from the
international community. Because of this war, between 3 700 and 4 000 Iranian soldiers and
policemen lost their life in fights with traffickers at the Afghan-Iranian border. Those traffickers are
often heavily armed. And Tehran has to spend $1 billion a year on anti-drug trafficking operations. At
the end of the day, the Iranian forces can only contain the threat. Only through a stabilized
Afghanistan with true rule of law and a center controlling the whole country is there a chance to truly
fight the problem at its source.
Second, there is the impact of the Afghan refugees: of course, from an external point of
view, it is easy to criticize human rights violations, which indeed happen. But it makes no sense to
make such criticism without remembering that Iran and Pakistan alone are the one having to deal
with an important number of refugees and illegal immigrants coming from Afghanistan. In the 1980s,
the refugees/migrants were around 2 million, in 1991-92, up to three million, and at the end of the
2000s decade, they were still around 2.5million: 954 000 legally, 1.5 million illegally. Numbers in 2013
seem nearer 3 million again, with 800 000 registered as refugees, and two million are believed to be
illegal migrants. In comparison, the Western world has had to deal only with 36 000 asylum seekers

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in 2012, and 60 000 in 2013. Afghan refugees came to Iran at first during the Iraq Iran war, in the
1980s, as it needed the manpower that this migration represented. But after the war, Afghan
refugees appeared to compete with the working poor in Iranian cities, and government had trouble
dealing with them. This created resentment against them though the Iranian authorities did not favour
this xenophobia. But the economic situation in Iran weakened by American sanctions was not helpful
in facing the migrant burden. Since the time of Ahmadinejad, there has been a policy of encouraging
both legal and illegal migrants to go back home. But conditions in Afghanistan are an obstacle. The
deportation policy against illegal migrants is clearly not working. In 2009, over nine hundred a day
were being deported which fell to less than 800 in 2010..yet as many cross the border illegally every
day in search of work. This situation is likely to continue till Afghanistan is stabilized.
Last, but not least, there has been an Afghan impact on Iranian security: especially in the
1990s, it appeared very clearly to the Iranians that important Afghan political actors were strongly
anti -Shia, hence anti- Iran. Iran and local Shia Afghans tried to find a common ground first with
Hekmatyar, then with the Taliban. Tehran was surprised by the rise of the Taliban at the time, as it did
not have sufficient intelligence and contacts in the Afghan south and the east. But in 1995 they
became aware of the Tali bans radically anti-Shia ways: the Taliban, at that time, invited the leader of
the Hizb-e-Wahdat, the only Hazara political party, Mazadi, to talk. But they used the excuse of a
clash with another Shia group on the battlefield to kill the whole Hazara delegation. From 1996 the
Taliban opened the Afghan territory as a safe haven to all Sunni Iranian rebels from the Turkmen and
the Baloch minorities13. Afghanistan has also been a safe haven for anti -Shia militants from other
nationalities, like miscreants guilty of sectarian killings in Pakistan. Later in the 1990s, the killing of
Hazara civilians, as well as the murder of 8 Iranian diplomats and one journalists from the Iranian
consulate in Mazar-i -Sharif in August 1998 was proof enough that the Afghan Taliban were, at least
at the time, ideologically driven against the Shia Muslims and the Iranians. According to some
observers the hawks around Mullah Omar wanted to provoke a war with Iran after defeating the
Northern Alliance. In fact, only Iranian restrain checked the situation from worsening. It is feared
extremist groups active in Afghanistan may pose such a threat again after 2014. Hence Iran needs
not only a stable Afghanistan, but a neighbouring state with democracy and rule of law. Only this way
can the relationship be peaceful.
A twin brother but also a source of trouble: the impact of the Afghan issue on Pakistan.
Pakistan has to deal with exactly the same problems related to drug trafficking and refugees.
As far as drug consumption and drug trafficking are concerned, the recent numbers are particularly
striking: Pakistan consumes 44 tons of heroin each year, and 110 tons of heroin and morphine transit
through Pakistan to other countries. There are 4.25 million addicts. In KPK alone, 11 per cent of the
people are said to use drugs. Of course this is directly linked to the situation in Afghanistan since the
1980s16. In 1980, one needs to keep in mind that there were only 50 000 drug addicts in whole
Pakistan. Everything changed because Pakistan became an important transit route for the drugs
originating from Afghanistan. Now because of this easy access to drugs, and their cheaper cost
only US$4 a gram, when the same quantity costs $100 in Europe and $200 once in the US17 ,
there are 600 000 more drug users each year. KPK is an easy target for drug traffickers, but
Pakistani Balochistan is also easy access from Kandahar and Helmand, two important Afghan
producers of opium. Drugs from Afghanistan are entering as much through this territory as they do
from K PK or FATA. The influx of drugs and criminal influence coming to Baloch territory from
Afghanistan to Pakistan and Iran has to be taken into account when one talks about security issues
connected with funding of terrorist activities from drug money. Indeed, the financial side of drug
trafficking is hurting Pakistan strongly. It feeds terrorism, and give great power to the criminal
underworld, and to non-state actors, in South-West Asia (Iran, Afghanistan, Pakistan) as a whole.
Since the beginning of the decade 2010 it clearly appears that the Taliban are not only part of this
business, they are also ruling it, giving them the financial means to have influence and create trouble
at the Afghan-Pakistani border. The criminal world inside Pakistan has clearly been made strong
through the drug trafficking of the Talibans which generates no less than US$2 billion a year. There
is cooperation between the Pakistani mafia, the Taliban, and Latin American cartels, which explains
the appearance of South American cocaine in Pakistani cities.
On the issue of refugees again the situation is similar to Iran. According to the Minister for
States and Frontier Regions, Abdul Qadir Baloch, Pakistan has spent no less than U S$200 billion in
30 years for the Afghan refugees4. Pakistans economy is not under international sanctions like
Irans, but it is still a weak one, where the working poor are numerous and can easily see the Afghan
refugees as competitors. The Afghan refugees are active in the countrys economy, and they work
hard for their survival. But no country could accept many poor foreigners on its land for an extended
period.

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The impact of Afghan problems on Pakistans security is more crucial. It is easy to see that
without the Afghan Taliban, without the War on Terror, there would be no TTP, no Pakistani Taliban
targeting the state. Afghan troubles have destabilized the tribal areas since the 1980s to some
extent. Traditional tribal authorities have been severely shaken by the flow of weapons and money
that has given power to the mullahs and young men. After the disillusionment brought by the civil war
between Afghans when the Soviet Army left, the Taliban appeared as a solution that deserved
support not only on the Pashtun territories in Pakistan, but also in the tribal areas in Pakistan.
Indeed, over time, the Pakistani Taliban who founded the TTP and the Afghan Taliban grew apart in
terms of tactics. But Pakistani Taliban are still fighting in Afghanistan and not necessarily only in
Pakistan. And there are suspicions that some Afghan Taliban are offering support to TTP brothers in
return. To fight side by side for decades, to have close ideological links (even if the TTP has been
much more influenced by foreign jihadists), and even closer business links (drug smuggling for
example)makes the possibility of an ever stronger alliance among these groups against regional
states, quite plausible. This necessitates to have North Waziristan totally under government control
by the end of 2014, to face any mischief from a regrouped terrorist combine with an anti-Pakistani
agenda.
Iranian and Pakistani Policy Choices towards Afghanistan So Far Can the problems that
involve Afghanistan and Pakistan have an impact on Iranian and Pakistani foreign policies? This
question is addressed in the second part.

Iran as a Force of Stability for Afghanistan?


Bias automatically creeps in when one talks about Iran in the West as if Teheran has dark
designs in the region, on its West and East ignoring the reality of Iranian foreign policy, which has
been, especially since 1989, more defensive than aggressive in nature. Indeed, the Iraq-Iran War
(September 22, 1980 August 20, 1988) was a national trauma proving the Iranians resilience, but
also the limits of their states power and ability to impose its will outside its borders. It is only natural
that after this first Persian Gulf War, Iranian diplomacy has been mostly dominated by pragmatism,
associated with traditional national pride and the desire for independence, something pretty natural
for any free country. And the Iranian approach towards Afghanistan is no different. Rather than
imagining an Iranian neo-imperialism the Iranians for reason explained in imperialism the Iranians
for reason explained in part 1 have had a constructive approach with the desire to talk with different
actors to ensure Afghanistan does not fall into total chaos, or become a safe haven for extremists,
two outcomes that would be highly detrimental to Irans interests. Such an approach is aligned with
the interests of the US and the international community, though the West, for ideological and
geopolitical reasons, has been unable to take that into account while dealing with the Afghan issue
since 2002.
Before the beginning of the War on Terror, the Iranians were the first to understand how
dangerous the regime of the Taliban could be, and how it could spread terrorism in the region. As a
Shia country, they experienced first-hand the anti-status quo attitude of the Afghan Emirate. After
October 1998 and the Iranian show of force at the border, with the mobilization of 200 000 soldiers, it
became obvious that reconciliation was not possible with the Taliban. Indeed, the
moderate/pragmatic Taliban, especially affiliated to the Emirates Foreign Ministry wanted to
appease their neighbour. But they were opposed by an important force inside Afghanistan at the
time: al Qaeda, and the hawkish section of the Taliban following an ideological, anti -Shia agenda27.
This situation made Iran the most active force against Tal i ban influence, even before 2001. In 1998,
the Americans had also been struck by terrorists, but far away from home, in Eastern Africa: there
was a beginning of a convergence of view between Iran and the US, but of the two, the Iranians were
the one with the clarity of view and objectives. By the end of the 1990s, they had sent millions of
dollars worth of weapons to Ahmad Shah Massud. More importantly, they helped the Northern
Alliance, internally very divided, to stay unified. They reassured the Shia Muslims in the coalition with
their support, and they opposed the tendency of the Uzbeks to oppose one another, following the
rivalry between Rashid Dostum and Abdullah Malik at the time. Thanks to this important involvement,
when the US understood, too late, the danger of the Tal i ban, after 9/11, Iran was able to be the best
possible ally. Iran facilitated the Northern Alliance partnership with the US and it was the Iranians
again who made the Tajik-dominated alliance accept Hamid Karzai , a Pashtun, as the president of
the post-Taliban regime. Unfortunately, as a reward for their support, the Bush administration
grouped Iran with two totalitarian states in the infamous Axis of Evil speech at the beginning of
2001.
Still, such ingratitude did not make Iran eager to change its positive policy in Afghanistan.
Irans geography compels it to want Afghan stability. It explains why the American accusation did not
stop the Iranians from signing a Good Neighbour Agreement with Afghanistan in December 2002.

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The goal of Teheran here was to reassure the Afghans that they will always respect their countrys
territorial integrity dispelling any fear of Persian neo-imperialism on Western Afghanistan. The
agreement has imperialism on Western Afghanistan. The agreement has been very helpful to the
Karzai government: it is important to remember, for example, that between 2001 and 2009, the
humanitarian help of Iran to Afghanistan was of US $600 million, an important amount for a country
with its own financial troubles. Moreover, it has been very active in investing and rebuilding
Afghanistan, especially its West. Again here, it is a question of national interest combined with
regional ones. To help rebuild Herat in particular, to build roads and electricity essential for trade and
to win Afghans hearts and minds, is also the best way to secure the Eastern flank of Iran. Indeed,
after being opposed by the Taliban, it appears that from 2009/2010, the Iranians accepted they were
part of the Afghan reality, and began to build diplomatic relationship with them. But it is not different
from what the Afghans, Pakistanis, Americans themselves have tried to do in the last few years. It
does not mean any ideological convergence. It is just pragmatism, the same one that made Iran so
helpful to Afghanistan so far. And it is actually in continuity with an older position of the Iranians, from
1997: the conviction that peace is possible in Afghanistan only through political talks, not military
means.
There have been persistent rumours of Iranian weapons being used by the Taliban in their
fight against NATO forces. It has been easy to deduce from these accusations the charge of double
game against Iran, the same accusation too often heard against Pakistan, the main ally of the West
in the Afghan War. But the fact and the matter is, there is no concrete proof of Iranians supporting the
Taliban. One can take as an example the first time there has been such accusation, in 2007.
Allegedly this Iranian weaponry appeared at the time when the Taliban began to have some control
over parts of the Iranian-Pakistani border. The idea that the Taliban, or the drug lords, were buying
weapons in a country where than can sell heroin is not far-fetched. Again in 2009 there was rumour
of a landmine called Dragon which could destroy large tanks. One Taliban commander who is said
to have mentioned the Dragon it turned out was actually referring to two or three TC-6 mines put
together. Those mines are manufactured
There have been persistent rumours of Iranian weapons being used by the Taliban in their
fight against NATO forces. It has been easy to deduce from these accusations the charge of double
game against Iran, the same accusation too often heard against Pakistan, the main ally of the West
in the Afghan War. But the fact and the matter is, there is no concrete proof of Iranians supporting the
Taliban. One can take as an example the first time there has been such accusation, in 2007.
Allegedly this Iranian weaponry appeared at the time when the Taliban began to have some control
over parts of the Iranian-Pakistani border. The idea that the Taliban, or the drug lords, were buying
weapons in a country where than can sell heroin is not far-fetched. Again in 2009 there was rumour
of a landmine called Dragon which could destroy large tanks. One Taliban commander who is said
to have mentioned the Dragon it turned out was actually referring to two or three TC-6 mines put
together. Those mines are manufactured...in Italy, have been in the Afghan territory since the jihad
against the Soviets, and are rather easy to obtain.
Last, but not least, this accusation is clearly not taking into account the fact that because of
the never-ending state of war in Afghanistan, the trafficking of Western, Russian, Chinese and
Iranian weaponry has become a common thing. If the origin of a weapon makes the country in
question responsible, then the US would be in trouble: in April 2012, to illustrate this particular kind of
illegal activity, a journalist talked about 232 P226 pistols that found their way to the hands of LeJ
militants, anti-Shia militants accused of terrorism in Pakistan. This weapon often used by NATO or
American forces, like the Navy Seals, is manufactured by SIG Sauer, a German firm: does it mean
that Americans or Europeans are responsible? One way or the other, to use this story to define the
Iranian policy towards Afghanistan would not help to understand it.

Pakistani Diplomatic Choices towards Afghanistan, Past and Present:


Taking the Evolution into Account
At the same level of Iran at the international level, Pakistan is often criticized by Western analysts, at
a more regional level, specifically on its relationship with Afghanistan. In some Western minds in
particular, Afghanistan would be the innocent victim, and the NATO forces indirect ones, of Pakistani
policies. The problem of such an analysis, is that it is very far from the truth. There is a need to
analyse rather than criticize the history of Afghanistan-Pakistan relationship, to understand that it has
not been, in the long term, a relationship between an abuser and a victim, but rather traditional
geopolitical rivalry that has turned horribly wrong, hurting the two countries. Rather than to assign
blame (the easiest thing to do for people far away, but not the best way to help stabilize a region),
there is a need to understand, but also to see the evolution and changes. And as far as the Afghan-

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Pakistani relationship is concerned, nowadays, one can be moderately optimistic, as bilateral ties
appear to be better than what they used to be.
The opposition between Pakistan and Afghanistan appeared from the birth of Pakistan, in
1947. Kabul opposed the entry of this new country to the UN, and it was the only state to go that far.
It comes from the fact that from an Afghan point of view, part of Pakistan was historically Afghan and
taken away from them by the British, mostly Pashtun-dominated areas like the FATA area. Of course,
the Pakistani state could not recognize such an ethnic claim. The Afghans have historically financed
and helped rebellions on Pakistani territories from Pashtun tribes in the 1950s, and in the 1970s
there has been support to Baloch as well as Pashto separatists. Especially after the 1971 trauma,
Islamabad could not be passive in the face of such a risk. It explains the tendency to support an
alternative to ethnic nationalism.
It appeared very clearly in the 1990s when Pakistan switched their erstwhile support from
Hekmatyar to the Taliban. But such support did not mean submission from the Tal i ban to Islamabad.
Indeed, one can see that until 2001, they did not recognize the Durand Line, and gave shelter to
sectarian terrorists. Also when Islamabad tried to make them listen to reason after 9/11, they stayed
stubborn and unreasonable34. In his autobiography, Abdul Salam Zaeef, the Talibans Ambassador
in Pakistan before the US invasion of Afghanistan, admits the embassy was active in recruiting
informants in Pakistani ministries.
It appears that until recently Kabul and Islamabad have been focusing on their own security
priorities rather than to find a common ground. There have been accusations coming from all sides,
about safe haven given to have been accusations coming from all sides, about safe haven
given to groups striking in neighbouring countries, when in fact it is acknowledged on the two
sides that to totally control the Afghan-Pakistani border is extremely difficult. And because of such
accusations, there has been so far a lack of trust that makes regional actors eager to pressure each
other rather than to work with each other to obtain desired results. It explains why the Afghan
intelligence services have created links with the TTP as revealed a few months back with the arrest
of Latif Mehsud in the Afghan territory. Criticism is not as widely heard on this matter than the one
focusing on Pakistan (often in a very caricatural way) but again here, there is no sense in assigning
blame. The main problem of the rivalry between Afghanistan and Pakistan is that it has been mainly
beneficial to non-state actors and terrorists, who are killing Pakistanis and Afghans.
It explains the diplomatic action coming from Pakistan since 2012, showing a vision that was
there before but not as clearly explained by the Foreign Ministry itself: making sure that Pakistan is
seen as being part of the solution, not of the problem. Pakistani diplomats have done their best to
convey this message to Kabul, and to create links with all the ethnic groups, not just the Pashtuns as
they used to do. They try also to push the Afghan Taliban they know to talk to Kabul and the US, in
order to bring peace to the region.
In conclusion one can see that there is hope at the end of the day, both Iran and Pakistan
have chosen a policy that is of course defending their national interest, but also focusing on how to
be a positive force for Afghanistan. What matters is that we see foreign policies of regional actors not
focusing only on their national interests, but also thinking about what is best for Afghanistan and the
region.

Could Iran and Pakistan Work Together to Stabilize Afghanistan? The


Difficulty of Regional Cooperation
Hence so far, we have seen that 1. Pakistan and Iran had their stability clearly threatened by
Afghan issues and 2. They acted with this approach in mind, protecting their national interests of
course, but also adapting their diplomacies to some extent, in order to take into account Afghanistan
and how to be part of the solution for its stability, not part of the problem.
The only problem here is that it is not enough. Whatever the good intentions of each
regional state, if they are wary of each other, if they see them as enemies, as competitors, the
regional environment will not be able to help stabilize Afghanistan. There is a need to see if Iran and
Pakistan can work together, and if nothing outside of the bilateral relationship could destabilize it.

Can Iran and Pakistan get along? A General Approach


Historically, Iran and Pakistan had been getting along before 1979. Their cooperation was
particularly efficient in opposing Baloch separatism. After the 1979, Islamic Revolution in Iran
Pakistan which was closer to Saudi Arabia under General Zia was apprehensive of changes
happening in Teheran. Moreover, despite Western and anti-Shia propaganda, Ayatollah Khomeyni

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was a pragmatic statesman who appreciated the importance of regional stability though SaudiPakistan relationship and Pakistani support to the Tal i ban in the 1990s remained areas of concern
for Iran.. Hence the tensions between Tehran and Kabul in 1998 have to be associated with tensions
between Tehran and Islamabad at the same period. But despite these misunderstandings on both
parts, still, there has never been any hostility between the two countries, even less so between the
two peoples. The diplomatic links have always been there, and rational actors on the two side have
been able to see beyond irrational fears and pressure from other actors.
Actually, there has been recognition in the two sides that they needed each other, at least at
the South-Western Asian level. Iran needs to have an Eastern border as peaceful as possible, as it is
already engaged in tensed situation on its West, with opposition from Saudi Arabia, Israel, and the
US, against any Iranian policy in the Near East. As for Pakistan, it needs also to develop friendly
relationship on its borders after 2014 since for the present China alone truly qualifies as a friendly
neighbour. Whether for security reasons or on energy issues, to not work together would be
detrimental to both. During the Zardari government, the rapprochement appeared very clearly, and
it was particularly linked to a common unhappiness against the US, for different reasons, but based
on the same conclusion: perhaps a too strong intrusion of non-regional powers is not the best way to
achieve stability for all in the region. Besides this opposition, there is an obvious, more positive
explanation to the rapprochement: the fact that Iran and Pakistan could have the best of
relationship based on energy trade: Iran needs to sell its gas, in particular on its East, to reach
important markets like India and China; and Pakistan is in dire need of energy resources. The idea of
a Iran-Pakistan Pipeline, that could become a true peace pipeline between Iran, Pakistan and India,
or, alternatively, a pipeline strengthening a positive diplomatic relationship between Iran, China, and
Pakistan, would be of great interest for both the countries.
After change of government following general elections in Pakistan relations between the
two neighbours have been strengthening despite trouble on the borders due to terrorist activities and
the delay on Iran Pakistan pipeline due to American pressure. In April 2014, after four of the five
abducted border guards were able to go back safely to their families, the Iranian Parliament
approved a security pact with Pakistan. It focuses on the main issues for Pakistan, Iran, but also
Afghanistan: terrorism, and trafficking (mostly drug trafficking, but also human trafficking). It is a
particularly important document, organized around one single article and 11 clauses clearly
explaining the areas of collaboration between the states, how they should work together, who are the
relevant actors in each of these countries, etc. It is most probably the best answer given to the
terrorists who tried to push the two countries against one another.
The Pakistani Prime Minister is eager to build an equilibrium in their relations and try to
make Iran-Pakistan friendship and cooperation, especially on the I P pipeline, a reality. During his
visit in May 2014 to Tehran, Nawaz Sharif made it clear that the anti-Iran terrorist group responsible
for the kidnapping of the border guards, Jaishul Adl, was a common enemy who needed to be
eliminated. It is interesting to remember that in his delegation, Sharif brought with him Abdul Malik
Baloch, the Chief Minister of Balochistan: it is a gesture showing Pakistan is truly serious about
securing the Iran-Pakistan border. Hence despite the pessimistic analysis one reads about TehranIslamabad relationship, it is obvious Iran Pakistan relations continue to be robust and resilient.

Other Actors as Spoilers?


But sometimes even with the best of intentions, two states are unable to trust each other.
Not because of any true issue between them, but rather because of third actors wishing to oppose
any bilateral friendship. Which are the states one could have in mind eager to oppose Iran-Pakistan
friendship?
First, the US comes to mind. It has strongly opposed the pipeline project so far. But it would be a
mistake to think that what has happened before defines a foreign policy forever. After 2014, it is
important for American status and interests that Afghanistan does not fall into civil war or becomes a
safe haven for international terrorists again. And to avoid that, combining regional forces, especially
Iran and Pakistan, could be good policy. Officially the US does not oppose any policy seeing Iran be
a positive force in Afghanistan, or any cooperation between regional actors to help give the Afghans
a better chance at getting stability for their country. And even after 2014 it will need Pakistan helping
stabilize Afghanistan. In the name of expediency and result, it might avoid opposing Iran on this
subject then. But it will all depend on the Iran-US relationship as a whole. If tensions run high at
some point an Iran-Pakistan relationship based on rationality and stability in Afghanistan and its
regional environment could suffer. Still despite tensions in the past we have already shown that Iran
was keeping a positive course on its Afghan policy, no matter the problems with the U S. And it would
make no sense for the Americans to put their hard work to stabilize Afghanistan in jeopardy, because

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of tensions with Iran. Hence we could bet the American power will not be a spoiler for a potential
Iran-Pakistan good relationship.
Second, Saudi Arabia: again here, it is important to understand foreign policy evolves. There
is, indeed, distrust between Iran and Saudi Arabia, but this will not necessarily be there forever.
Recently one can notice diplomats from the two sides eager to discuss with each other, to create
new links. Most importantly, Saudis are not particularly focused on the Afghan issues, like the
Westerners, they have other priorities, closer to home. They have also understood that transnational
jihadist terrorism could be a problem for them: Al Qaeda sees the Saudis, the Iranians, and the
Pakistanis as equally their enemies after all. Besides, Saudis do not have strong enough influence in
Kabul to oppose Irans influence. Saudi Arabia has some influence in the Muslim world as a whole,
but it is able to project power mostly in the Near East and, to some extent, to North Africa. Hence,
seeing regional cooperation develop to help stabilize Kabul will not be a problem for Saudis, even in
a situation of continued competition with Iran.
Last, but not least, India: will India-Iran relationship be a problem for a Iran-Pakistan
relationship, with Afghanistan in mind. It is even less likely than a Saudi opposition, in fact: at the end
of the day, India needs to avoid chaos in South Asia as a whole. The landslide victory of the BJP, and
the rise of Narendra Modi to power, was not possible because of Hindu nationalism, but because of
discontent against corruption and lack of economic performance under the Congress. Despite his
tough talk during the political campaign, what will define Modis success or failure in the near future is
economy, and the evolution of the job market inside India. Hence, pragmatism, and the search for
stability in the region, will most probably be his choice, and it would be actually the most rational one
for India. New Delhi worries about radicalism taking power again in Kabul after 2014. Iran-Pakistan
cooperation can be a way to avoid that, hence it is in Indias interest to support such friendship, or at
least not to oppose it.
In fact, the real spoiler of regional friendship will not necessarily be a state. States can make
terrible mistakes, have short-term approaches,, but none in the region or elsewhere want to radically
destabilize the area, as it would be in nobodys interests... except terrorist groups and non-state
actors. Terrorists and non-state actors like criminal syndicates actually thrive in an environment of
distrust and tensions between states. While Afghanistan, Iran, and Pakistan criticize each other
about a terrorist group or drug trafficking, terrorists targeting each of these countries, drug dealers
selling poison regionally and internationally, work together and prosper as long as the regional
countries cannot work together. Those groups can have links with states, but at the end of the day,
they have their own policy. And this policy cannot accept regional cooperation: without distrust
between states, non-state actors cannot operate in peace. There are Sunni extremists, historically
from the Jundullah movement, who are at war with Iran. They have been connected to TTP and
other Afghan non-state actors. They have created tensions between Iran and Pakistan this year, and
they will make sure to do it again, to undermine any kind of Iran-Pakistan friendship, which would be
detrimental to them... Iran and Pakistan understand that.

Conclusion
It seems that for real regional cooperation to happen, for the Iran-Pakistan bilateral
relationship and for regional cooperation at the level of the whole Afghan environment to work, there
will be a need, first of all, of political will. If Teheran or Islamabad let others pressure them, or allow
non-state actors do mischief in this part of the world, cooperation will be difficult. And without
cooperation, despite their best intentions, there will be no true impact of the regional environment to
stabilize Afghanistan. As the most important neighbours of Afghanistan, an Entente cordiale
between Iran and Pakistan, and later with Kabul, is essential. If the international community is
serious about Afghan stability, it will take that into account. If Great Powers are not wise enough to
follow this policy, and if they try, like in the past, to use Iran, Pakistan, or Afghanistan in one of their
new Great Games, it will be the responsibility of the political elites in those countries to refuse the
role of pawns. Through their histories those three countries know all too well that to be used by a
stronger state is never worth it, but is, on the contrary, a perpetual source of trouble. But even doing
that will not be enough: in order for the regional states to trust each other and to avoid nurturing
suspicion in the West, there will be a need to respect, without any ambiguity, Afghan sovereignty, by
all the regional actors. It is something all foreign actors should do, of
course, but the best way to avoid Great Powers interference will be to win
the hearts and minds of the Afghan people. And it can be done even without
spending a lot of money: just by respect of their states institutions, and
making them understand that their neighbours, like them, just wish to get

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some stability, peace, and economic growth, after this long and destructive
war on terror.

Thaw in Iran-US Relations:


Opening of Chahbahar Trade Link
and its Impact on Pakistan
Dr. Nazir Hussain

Abstract
The South and South-West Asian regions are witnessing changes with far-reaching strategic
implications; popular revolts, political transitions, military withdrawal and above all the thaw in IranUS relations after thirty years of intense hostility.
The political changes in the region can usher a long term continuity/stability and chances for mutual
accommodation; however the post-withdrawal Afghanistan presents a challenging security situation.
Moreover, the thaw in Iran-US relations may augur well for the region and open new opportunities
and challenges, including the prospects of Iranian Chahbahar Port becoming a hub of trade and
commercial activity in the region.
These changes constitute formidable challenges to Pakistans strategic environment in post 2014
scenario. Therefore, this paper makes an endeavour to explore the possibility of long term
understanding between Iran and US, prospects of Chahbahar Port as a regional trade hub and its
impact on Pakistan.
The paper would argue that despite a thaw in Iran-US relations, a long term understanding is difficult
to emerge in the near future due to internal and external factors/actors. However, Chahbahar
becoming a regional trade link is an immediate reality as Iran-India and Afghanistan have signed a
trilateral agreement to develop this port into a regional hub connecting South Asia, Central Asia and
West Asia. Under these circumstances, Chahbahar would pose a serious challenge to Pakistans
long term ambition of becoming a trade and energy corridor despite operationalization of Gawadar
Port.

Conceptual Foundation

he state, being the legitimate actor in international system, pursues its national security
objectives through trade, diplomacy and wars. The interplay of economy and military makes a
perfect combination for a state to enhance its status, role and position in the regional and
global security environment. History has shown that military adventures without strong
economic backing have resulted into state failures. However, economic modernization has led to
tremendous leverage in regional/global power politics; the two contrasting examples are the Soviet
Union and China.
Another fundamental factor, fashioned in the beginning of 20th century, is geopolitics that
still plays a far-reaching role in a states position vis--vis power politics. Geographical isolation,
natural barriers and interconnecting frontiers play a dominating role in the formulation of a countrys
security policy. From Halford Mackinders Heartland Theory, Nicholas Spykmans Rimland Theory to
Zbigniev Brzezinskis Eurasian concept, all have dominated the discourse in international relations
debate on geopolitics.
The Iran-US relations can be seen in the context of geopolitics and geo-economics. Iran is a
regional power in the Middle East dominating through its strategic geopolitical setting; bordering
Central Asia, South Asia and West Asia, occupying the strategic Strait of Hormuz with controlling of
1500km of eastern side of the Persian Gulf from Hormuz to Shatt-al-Arab, and placed next to the
hotbed of global war on terrorism Iraq and Afghanistan. This geopolitical positioning cannot be
ignored by any great power having security interests in these regions China, Russia and the US.
On the other hand, the US being the only super power of the contemporary global system, having
tremendous military, economic and political power with strong national security interests cannot be
dismissed easily. Therefore, the interplay of geopolitics and economics compelled both Iran and the
US to rest their relations after thirty years of intense hostility.

Historical Context

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Monarchial Iran was the pillar of US policy in the Middle East along with Saudi Arabia,
however the establishment of a revolutionary regime in 1979, transformed everything turning allies
into bitter foes. The US Embassy hostage crisis, the freezing of Iranian assets, the labeling Great
Satan and Axis of Evil along with the policy of regime change further aggravated Iran-US relations.
The pragmatic presidencies of Rafsanjani and Khatami tried to maintain working relations with the
US Administrations but the opening of Iranian nuclear controversy in 2002 forestalled any chances of
mutual understanding for betterment. Subsequently, a stringent sanction regime was imposed on
Iran through the UN Security Council that brought severe economic hardship to Iran but hardened
the Iranian stance on its nuclear programme. The government of Ahmadinejad by its rhetoric and
anti-US/Israel stance earned further hostility resulting in strong resistance in the US Congress for
any dialogue with Iran.
President Barak Obama brought a significant policy shift through his policy of change and
made indirect contacts several times by greeting the Iranian people on Nouroz, the beginning of the
Persian new year. These moves were taken as propaganda tactics by the Iranian establishment
dominated by the hardliners. However, Hassan Rouhanis surprising victory as Iranian president
brought a sea-change in the Iranian foreign policy posture. The use of social media by President
Rouhani through his tweet massages greatly changed the perception of US people towards Iran.
Subsequently, the telephonic conversation between Barak Obama and Hassan Rouhani in New York
on the sidelines of UNGA session ushered a new era of resetting Iran-US relations; the two countries
agreed to resolve the Iranian nuclear issue through diplomacy.

Iran-US Thaw
Despite animosity and belligerent posture, both Iran and the US, have been complimenting
each other by design and default. At the height of Iran-Iraq war (1980-88), the US provided much
needed military spare parts and other essential items (as most of the Iranian military equipment was
American version) to Iran worth $150 million in lieu of its support to the release of US hostages in
Lebanon; this episode came to be known as Iran-Contra Scandal that severely jolted the Reagan
Administration. During the presidencies of Hashmi Rafsanjani and Muhammad Khatami, the US and
Iran maintained their business and social contacts through third party; the Swiss Embassy for the US
and Pakistani Embassy for Iran. Several US citizens and journalists also visited Iran on goodwill
tours.
In the aftermath of 9/11, Iran was one of the first countries which offered help and assistance
to the US against global War on Terror. The US dismantled Taliban in Afghanistan, who were bitter
ideological/security threat to Iran. Subsequently, in 2003 another Iranian political and security threat
was removed in Iraq by overthrowing the Saddam regime. Irans geopolitical setting and influence in
Iraq and Afghanistan is crucial for the US fight against Non-State Actors. Without the support and
cooperation of Iran, the US would be unable to maintain peace and stability in these countries.
Moreover, the unrest and revolt in the Arab world, Syrian crisis, Iran- Saudi rivalry and the
resurgent Russian/Chinese posturing in the fast changing Middle Eastern security dynamics,
enhanced Iranian regional position; swaying from Iraq to Syria, Lebanon and Sudan, and from
Afghanistan to Central Asian States to Russia. Moreover, Iran restored its relations with Egypt after
thirty years (though scuttled after the removal of Muhammad Morsi) and successfully convinced
Turkey to change its policy on Syria, which brought surprising benefits for Iranian regional influence.
The strong backing of Russia/China also made crucial impact on Iranian regional position.
Therefore, the combination of politics, economy and security, along with the realization by
both Iran and the US, that many of their actions are complimentary to each other and they cannot
ignore each other, led to the resetting of their diplomatic postures. Both countries also realized that
thirty years of bitter hostility and conflict-ridden relations have yielded nothing substantive for each
other in particular and the region in general. The real change was the new outlook of President
Rouhani towards the outside world, who realized that rhetoric and bluffing will not work anymore, and
Iran has to move forward to earn its rightful place in the regional security affairs. Therefore, the
telephonic conversation between President Obama and President Rouhani led to the historic thaw in
the US-Iran relations.
Subsequently, the nuclear talks between Iran and P5+1 in November 2013, led to an interim
agreement to resolve the nuclear issue of Iran. The agreement was for six months stipulating Iran to
halt its strategic enrichment efforts and the removal of US/Western sanctions and unfreezing the
Iranian assets. The interim agreement is presently being debated in Vienna for a final deal; the last
meeting was held in May 2014 which remained inconclusive.
The thaw between a regional power, Iran and a global power, the US could not have been
averted for long; they were destined to normalize their relations compelled by regional and global
dynamics. However, to assume that this temporary thaw would result in a long term strategic

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understanding between Iran and the US is premature at this point of time. There are several factors
that may undermine the normalization efforts; the domestic factors, Israel and Arab allies, outcome of
the Syrian crisis and, more importantly, the fate of the nuclear negotiations.
At the domestic front, both Iran and the US are facing tough resistance; there are several
groups in Iran, who have differing perceptions about the rapprochement; from a cautious welcome to
outright rejection. However, the Iranian supreme leader has given his consent for continuing the
negotiation that has silenced the hardline stance for the time being; now it would largely depend on
the outcome of Vienna negotiations which dominate the normalization debate. On the other hand,
Obama Administration is facing stiff resistance from the Congress and powerful Jewish lobby;
President Obama even threatened to veto any further move by the Congress to put Iran under
sanctions.
Regionally, both Israel and the US Arab allies, especially Kingdom of Saudi Arabia (KSA) are
apprehensive of any rapprochement or long term political understanding between Iran and the US,
as that would undermine their position in the region. This led President Obama to visit KSA in March
2014 to assuage the fears and apprehensions. Nonetheless, despite these assurances the US
Middle Eastern allies are not in favour of any such development that can give an upper hand to Iran
in the regional security affairs.
Importantly, the outcome of Syrian crisis would also have bearing on Iran-US relations; the
Syrian presidential elections would most probably see the Bashar-al-Assads regime intact, the
Iranian strategic support to Bashar would entail a long term Iranian regional supremacy in the Middle
East. Moreover, the vetoing of UN SC resolution to refer the Syrian case to the International Criminal
Court (ICC) on May 22, 2014, the fourth time that such resolution has been vetoed, is a clear
manifestation of strategic support provided to the Syrian regime by Russia and China. This situation
in the region emboldens Iran and strengthens its bargaining position on the nuclear issue.
The fourth round of nuclear negotiations at Vienna between Iran and P5+1 that ended on May 16,
2014, remained inconclusive; however both sides have shown their willingness to continue the talks.
President Hassan Rouhani has expressed optimism that the nuclear talks would result in a final
agreement. Iranian foreign minister, Javad Zarif has stated that a comprehensive nuclear deal
between Iran and the six world powers is possible if the parties to the talks with Islamic Republic set
illusions aside. On the other hand, the Western powers are apprehensive about Iran fulfilling its
commitments to the Interim Nuclear Agreement to be expired in July 2014. They have also put
further conditions on stalling the Iranian long-range missile programme that threatens the western
states and Israel. However, the IAEA in its latest monthly report (May 2014) has acknowledged the
substantive progress made by Iran on its Interim Agreement.14 Given the situation, the nuclear
negotiation would linger on for an indefinite time and no immediate resolution is evident in the near
future, hence a major hurdle in the Iran-US full normalization.
Therefore, in light of the above analyses, the thaw in Iran-US relations seems a temporary
respite for easing of tension between the two countries and somewhat stabilizing the regional
security environment. However, this temporary thaw does not seem to constitute a long term political
or strategic understanding between Iran and the US in the near future, hence the prospects that the
US may use the Iranian Chahbahar Port for its eventual withdrawal from Afghanistan seems a distant
reality. But despite this situation Chahbahar still constitutes a long term challenge to Pakistani
strategic environment in the post 2014 period due to the Iran, India and Afghanistan accord.

Chahbahar as a Regional Trade Hub


The Chahbahar seaport is just outside the Strait of Hormuz, in Irans Free Economic and
Industrial Zone. The Iranians built this port away from the heavy sea-traffic in the Persian Gulf waters
and to provide easy access to coming ships besides connecting it to Afghanistan and Central Asia. A
road and rail communication system is being created between Chahbahar, Herat and onward to
Central Asia. India also wants to develop this seaport to avoid Pakistani route to reach Iran,
Afghanistan and Central Asian States; India has committed over $100 million for the construction of
Chahbahar and connecting transport network of 200km from the Port to Zaranj and Herat in
Afghanistan. Moreover, Iran, India and Afghanistan are to sign a trilateral agreement to develop this
facility for common trade and commerce purposes.
Chahbahar seaport is just 70km away from Pakistani seaport of Gawadar, which is
developed with Chinese assistance and help. Both these ports constitute competing grounds for
each other as both address the same audience. The Gawadar port has many issues; the security
situation in the restive Baluchistan, non-availability of connecting road/rail links to main highways,
and slow pace of development and operational issues. On the other hand, Chahbahar has no such
issues and is being developed at a fast pace, and even the Chinese have shown their interest in this
port. The emphasis and urgency shown by Iran, Afghanistan and India in putting the Chahbahar Port

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ahead of Gawadar in terms of regional trade and commerce hub. Moreover, India is keen to trade
with Afghanistan and Central Asian States and at the same time avoid Pakistani restive/unwilling
route, hence Indian preference for Chahbahar remains paramount.
Whether or not Iran-US relations develop to the extent that they utilize the Chahbahar port
for eventual US withdrawal from Afghanistan but the changing political dimension, as two new
governments are in the offing in Pakistans neighbourhood; Narendera Modi has become Indian
Premier and Dr. Abdullah Abdullah is a likely winner in the Afghan presidential elections, Pakistans
Gawadar Port would face serious challenge to compete with Chahbahar as a regional hub of trade
and commerce.

Implications for Pakistan


With fast changing political dynamics, the post-2014 strategic environment poses serious
challenges to Pakistans security. The US withdrawal would create a political/security vacuum in
Afghanistan. Although Pakistan has categorically stated that it has no favourites in Afghanistan yet it
watches developments in the neighbouring country with legitimate concern.
The thaw in Iran-US relations is a welcome development but it creates severe security
implications for Pakistan, both positive and negative. In the renewed Iran-US interaction, Pakistan is
forestalling any negative development in the case of an eventual attack on Iran; Pakistan cannot
afford to have another war in its neighbourhood that has severe security implications. Moreover, this
thaw would reduce the much undesired US pressure on Pakistan to develop the Iran-Pakistan (IP)
gas pipeline, enhanced trade activity between Iran and Pakistan, and increased Iranian investment in
Pakistan. Iran is keen to enhance the electricity supply to Baluchistan from 100mw to 1000mw and
agreement to this effect has been made during Prime Minister Nawaz Sharifs May 2014 visit to Iran.
Both the countries have decided to enhance their bilateral trade to $5 billion per annum. Iran is also
interested in constructing an oil refinery in Baluchistan with a capacity of 400,000 barrel of oil per
day; opening new avenues of employment opportunities for the underdeveloped Baluchistan.
The thaw could also result in letting Pakistani territory off the use by Non-State Actors
against Iran and reduced Iranian-Saudi rivalry in Pakistan and hence improved security situation.
Pakistans security environment has internal and external concern which tend to erode governments
writ and affect its efforts for economic stability. Moreover, this situation would release the pressure off
from Pakistan to take sides in the Middle Eastern security dynamics, which is a tricky dilemma for the
government.
In the negative implications, the Chahbahar Port would still constitute a formidable challenge
to Pakistans desire to convert Gawadar as a regional trade hub. Whether or not the Iran-US thaw
culminates into a long term political understanding, Chahbahar Port would be a preferred choice of
the US for its activities in Afghanistan; as Pakistani political parties and public have several times
halted the US/NATO supplies from their territories, and there remain high risks of attacks and terrorist
activities. Moreover, the tripartite accord between Iran, India and Afghanistan to enhance their trade
and economic interaction through Chahbahar, building of transport network from the Port to
Afghanistan and onward into Central Asia, heavy Indian investment and reported Chinese interests
point towards the significance attached by the regional states to the Chahbahar port.

Conclusion
The post-2014 strategic environment is unfolding many challenges for Pakistan in the
regional security affairs that require a well-knitted prudent diplomacy and visionary leadership. The
governments decision to respond positively to Indian Prime Minister Narendera Modis invitation to
attend the swearing in ceremony by Prime Minister Nawaz Sharif is a welcome development. The
meetings between Nawaz Sharif and Indian leadership; Prime Minister Narendera Modi and
President Parnab Mukarji, have sent positive vibes and it would impact positively on future IndiaPakistan relations. The Pakistani premier has already visited Iran and rebooted the Iran-Pakistan
strained relations. The next is the move to welcome any winner in the Afghan presidential elections
and visit him without waiting for an invitation. These political transitions are for the next 4-5 years and
if a positive new beginning is made it can result into a long desired peace, stability and prosperity in
the region.
The thaw in Iran-US relations is much welcome development for
Pakistan in particular and regional security in general. Pakistan can benefit
from this changed equation in its neighbourhood and can improve its internal
security, politico-economic stability and much needed progress and
development for its peopl e.

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Pak-China Economic Corridor:


The Hopes and Reality
Aarish U. Khan

Introduction

egional connectivity is an important element of the recently unveiled Vision 2025 of the
Government of Pakistan. The Pak-China Economic Corridor (PCEC) is mentioned as an
integral element in realizing the potential of regional connectivity and trade with the South
Asian Association for Regional Cooperation (Saarc), the Association of South East Asian
Nations (Asean), the Central Asia Regional Economic Cooperation (CAREC), and the Economic
Cooperation Organization (ECO).
On his part, Chinese President Xi Jinping also proposed forging China- Pakistan
Community of Shared Destiny during his meeting with President of Pakistan Mamnoon Hussain on
February 19, 2014. According to Chinese analysts, the Pak-China Economic Corridor (PCEC) serves
as the backbone of President Xis proposal. President Xis foreign policy concept of Community of
Shared Destiny is predicated on cooperation for mutual benefit with certain key characteristics; the
most important one being the pursuit of common of interests through mutually beneficial
partnerships. Another important aspect of the concept is that it embraces incongruence of interests
but calls for strengthening of trust among nations through mutual understanding. Chinas peripheral
or neighbourhood diplomacy, as explained by President Xi Jinping at the Conference on Diplomatic
Work with Neighbouring Countries in Beijing in October 2013, is based on four principles: amity,
sincerity, benefit, and inclusiveness.
A major milestone for establishing the China-Pakistan Community of Shared Destiny was
achieved in May 2013 when an agreement was signed to establish the Pakistan China Economic
Corridor (PCEC) to connect Pakistans Gwadar Port with Kashgar in the western part of China close
to Pakistans border. China is developing a Special Economic Zone (SEZ) in Kashgar, which would
mean rapid development of the area requiring substantial external resources from or through
Pakistan utilizing the developing port city of Gwadar. Pakistans Gwadar Port provides this lessdeveloped western part of China an easy access to the warm waters of the Arabian Sea and
considerably reduces the time and resources required for transporting trade goods to and from
western China and West Asia. It is argued that the development of the PCEC would bring
unprecedented economic rewards for Pakistan as well.
Questions regarding the on-ground pace of development and the contours of the PCEC after
its completion are essential. Answers to these questions would determine how effective the PCEC
could be in furthering the economic objectives that it aspires to achieve and in supporting the
economies of Pakistan and China in the long run through Pak-China and regional connectivity as
envisioned in the Vision 2025 document. This paper attempts to answer these important questions,
especially whether the short-term or early harvest projects are on schedule or not, because progress
on the short-term project would serve as a decent barometer for the timeline for the long-term ones.
Additionally, the paper also critically analyzes the dividends that the PCEC is expected to bring to the
country.

Community of shared destiny: High hopes


In his speech at the Opening Ceremony of the Think Tank seminar on Building ChinaPakistan Community of Shared Destiny in the New Era on August 5-6, 2014, Chinese Ambassador
to Pakistan Sun Weidong made his governments commitments with respect to Pak-China relations
amply clear. He said:
China hopes that Pakistan plays a greater constructive role in regional and international
affairs. We would like to work with Pakistan to safeguard peace, stability, development and
prosperity in the world... We need to transform deep friendly emotions into tangible fruits of
cooperation to consolidate the foundation of bilateral relations, raise up the level of
cooperation and bring more benefits to the two peoples.
Another Chinese scholar who has also served as the Chinese Ambassador to Pakistan,
Zhou Gang, went a step further by calling for Pak-China cooperation as a means of guarding against
international hegemony and unilateralism. He said: China and Pakistan must guard against
hegemony and unilateralism, and safeguard their own sovereignty and security interests. They must
learn the lesson of turbulences from West Asia and North Africa, firmly safeguard their domestic
security and stability, steadily promote their reform, and oppose the interference of foreign forces in
their internal affairs.

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Chinese scholars have used terms and phrases like common interest, shared responsibility,
common affection, and shared intellect for the community of shared destiny between Pakistan and
China.
The importance of the PCEC is amplified by the fact that it is also going to link up with the
greater Chinese plan of the Silk Road Economic Belt (SREB) that would connect China with Europe
through Central Asia. The five connections proposed by the Chinese leadership for the Silk Road
Economic Belt are: policy exchange, road network, currency circulation, and peoples friendship.
Connecting with the SREB, the PCEC is of immense significance to China as well. Therefore, we can
say that with serious long-term focus on the project by both Pakistani and Chinese leaderships, the
PCEC has the potential to further cement the close bonds between the two countries in the days to
come.
Linking Gwadar with Kashgar and onward with Central Asia is aimed at improving Pakistans
trade and investment relations with China as well as Central Asia.(13) It is hopedthat at some point in
time the Iran-Pakistan gas pipeline project could be extended to include China in it as well. The
importance of Gwadar seaport for trade between the Persian Gulf and the western part of China
which includes the Middle Eastern oilis also underscored by the fact that it could reduce the time
taken for goods transportation to that part of China by around two weeks. In terms of distance, the
PCEC would reduce the trade route distance of 16,000km between the Arabian Sea and the South
China Sea to 2,500 km.
Construction of an oil pipeline from Gwadar to Kashgar through a distance of around
2,500km to carry Middle Eastern oil is also envisioned. The PCEC is also considered important for
Chinas trade with Afghanistan as well as its strategic projection into West Asia and Africa.
Kashgar is destined to grow exponentially after the operationalization of the SEZ in the city.
If the development of Shenzhen, the city that pioneered the concept of SEZs, could provide us with
an insight into the growth patterns of SEZs, we could expect Kashgar to grow at the rate of over 20
percent per annum, because Shenzen grew at the astounding rate of 25.8 percent from 1979 to
2009, and a 4,176 times increase in 30 years. Pakistan could, thus, enormously benefit from it during
its development as well as operational phase. The development of communication infrastructure
would also help the tourism industry of the picturesque Northern Areas of Pakistan bordering China.
There is a perception that Pakistans potential to export to China is rather limited. It is
argued that China already exports a variety of products that Pakistan could export to it. There are
however, avenues for Pakistani businesses for export business in China. For instance, China is the
largest consumer market for gemstones, which is an opportunity for Pakistan. Pakistan has a
potential yield of 800,000 carats of Ruby, 875,000 carats of Emerald, and 5 million carats of Peridot,
which remains under-utilized. According to Shah Faisal Afridi, President of Pak-China Joint Chamber
of Commerce and Industry (PCJCCI), China being the worlds largest consumer market for gems and
jewellery, could help in utilizing Pakistans full potential through investment in the sector and
promoting exports of gems to China. Pakistani and Chinese business communities also hope that the
PCEC will enhance cooperation in the agriculture sector as well through greater transfer of
technology in the field. The establishment of the PCEC is expected to not only enhance existing
trade relations between the two countries but also boost transit trade opportunities for the western
part of China through Pakistan.

Foundations of cooperation framework for PCEC


There are strong bilateral trade relations between the Pakistan and China. Currently around
$12 billion per year, trade between Pakistan and China is estimated to reach $15 billion in the next
couple of years. The volume of bilateral trade between Pakistan from January to May 2014 was $6
billion, exhibiting a 12.66 percent growth rate. China also has substantial investments in Pakistan
with more than 120 Chinese companies operating in the country. The importance of Chinese
investment in Pakistan is well acknowledged by the leadership of Pakistan. For instance, during his
July 2013 China visit, besides the government-to-government interactions, Prime Minister Nawaz
Sharif held meetings with the Chinese business community to encourage them to invest in Pakistan.
The high-level state visits of the leaders of the two countries have assumed great
significance lately for their role in carrying the shared perceptions of development forward and also
for signifying the importance the two countries attach to their relations with one another. In keeping
with the spirit of the relationship between the two countries, several high-level official visits have
taken place between Pakistan and China since the assumption of office by the current government,
In May 2013, Chinese Prime Minister Li Keqiang visited Pakistan to sign the landmark PCEC
agreement. Prime Minister of Pakistan Mian Muhammad Nawaz Sharif visited China in July 2013, his
first official visit abroad since assumption of the office. In February 2014, President of Pakistan
Mamnoon Hussain, visited China wherein Chines President Xi Jinping put forward the proposal of
forging China-Pakistan Community of Shared Destiny. President Hussain visited China once again
in May 2014 to attend the 4th summit of the Conference on Interaction and Confidence-Building
Measures in Asia. Prime Minister Sharif visited China again in April 2014 to attend the Asia Forum in
Boao in April 2014. President Xi Jinping was scheduled to visit Islamabad in September 2014, but

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the visit was postponed due to political crisis and protest demonstrations in Islamabad. The
postponement was compensated for when Prime Minister Sharif visited China again in November
2014. Several important agreements have been signed between the two countries in these high-level
state visits. According to one estimate, the total number of agreements signed between the two
countries exceeds 250 with the Treaty of Friendship, Cooperation and Good Neighbourly Relations
signed in 2005 providing the foundation for recent developments.
Quite a few important agreements of this long list were signed during the recent visits of
high-level state leaders mentioned above. Eight cooperation agreements were signed during PM
Sharifs July visit to China. A broad agreement for the Pak-China economic corridor was among
them. Another of the agreements was for laying a fibre-optic cable from the Chinese border to
Rawalpindi for improving Pakistans access to international communications networks with 85
percent financing coming from China over the three-year period of the $44 million project. Pakistan
and China signed five agreements in the fields of economy and trade, regional connectivity, energy
and people-to-people contacts during President Mamnoon Hussains China visit in February 2014.
The agreement on early harvest projects in the economic corridor included the upgrading and
realignment of the Karakoram Highway up to Islamabad, the construction of the Karachi-Lahore
Motorway, the construction of new Gwadar Airport, and finally the establishment of economic zones
along the PCEC. Nineteen different agreements related to the implementation of the PCEC were
signed during Prime Minister Sharifs China visit of November 2014.
The PCEC is a multidimensional project encompassing Pak-China connectivity through road
and railway networks, laying down of fibre-optic cables, the operationalization of the Gwadar Port,
and several energy projects. Under the PCEC, China has committed to helping Pakistan with: the
construction of a fibre-optic cable from the Chinese border to the capital of Pakistan; the upgrading
and realignment of the Karakoram Highway linking Kashgar with Abbottabad; the construction of the
new Lahore-Karachi Motorway, and an early completion of pending work in nine power projects.
Chinese cooperation for the construction of the Diamer-Bhasha Dam and the completion of the
Nandipur power project are also part of the PCEC. Implementation of the projects under the PCEC
has been divided into three phases. Short-term projects are estimated to be completed by 2017;
medium-term by 2025, and long-term by 2030.
Oversight of the implementation of the projects under the PCEC was given to a high-level
Joint Coordination Committee (JCC) on implementation of the agreement on July 20, 2013. The JCC
met for the first time on August 27, 2013. On the very same day, Pakistans Federal Minister for
Planning and Development, Ahsan Iqbal and the visiting Chinese Vice Chairman of National
Development and Reforms Commission (NDRC), Zhang Xiaoqiang, in augurateda new division in
Pakistans Foreign Office exclusively dedicated to Chinaand taking into account the increasing
cooperation between the two countries.
The second meeting of the JCC on the PCEC was held a year later in Beijing on August 2021, 2014. The focus of the second meeting was on early harvest projects, particularly: the
rehabilitation and realignment of the KKH, the construction of the Karachi-Lahore Motorway, Orange
Line Metro Train in Lahore, and projects related to the Gwadar Port, and capacity building and
training. The third meeting of the JCC followed the second one the very next week, on August 27,
2014 wherein the focus, once again, was on short-term projects.

The plan and progress


Early harvest projects related to transport and communication infrastructure under the PCEC
include: the rehabilitation and realignment of the Raikot-Islamabad section of the KKH; the
construction of Karachi-Lahore Motorway; the construction of Orange Line Metro Train in Lahore; the
upgrading of the existing railway track from Karachi to Peshawar; the development of dry port and
cargo holding facilities in Havelian; the construction of Eastbay Expressway in Gwadar; the
construction of Gwadar International Airport; the construction of breakwaters at the port; the
designing of berthing areas and channels at the port, the infrastructure for Export Processing Zones
and port-related industries in Gwadar; the construction of necessary facilities for fresh water
treatment and supply in Gwadar; and the construction of a hospital and a vocational training institute
in Gwadar.
The overall scope of the PCEC is much broader than the early harvest projects. For
instance, as mentioned above, the construction of the Diamer-Bhasha dam is part of the PCEC in the
field of energy cooperation. There are also two other coal-based power projects under the PCEC in
Gaddani and Sahiwal. In the field of transport infrastructure, the construction of a new rail link from
Gwadar to Jacobabad via Besima and Khuzdar is also part of the PCEC.(38) Establishing Special
Economic Zones along the route of the PCEC is another important element of the corridor. In his
speech, at the Opening Ceremony of the Think Tank seminar on Building China-Pakistan
Community of Shared Destiny in the New Era on August 5-6, 2014, Ambassador Sun Weidong
mentioned the RuYi-Masood Textile Industrial Park in Faisalabad, and power projects like thermal
power plant in Port Qasim and solar power plant in Quaid-e-Azam Solar Park in Bahawalpur as part
of the PCEC. While anMoU has already been signed for the RuYi-Masood Textile Industrial Park,

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several other special economic zones are planned on the PCEC, especially in Gwadar, South
Punjab, and Sindh.
Following is an overview of the recent developments in the fields of road construction,
railway lines, and Gwadar seaport related projects under the PCEC (energy projects are not under
the purview of this study):

Roads
Improving the road link between Pakistan and China is an important element of the PakChina Economic Corridor. Improvement of the existing road link all the way from Gwadar on the
southern seacoast of Pakistan to Khunjerab Pass in the north on the border of China involves
several road construction projects.
The Karakoram Highway (KKH), that connects Pakistan with China across the over 15,000
feet high Khunjerab Pass on the Pak-China border, was completed in 1979. Rehabilitation and
realignment of the highway is an important component of road construction projects under the PCEC.
Starting from the town of Hasanabdal in Attock district of Punjab adjacent to Rawalpindi, the 806 kmlong KKH goes all the way to the Chinese border.
The rehabilitation of the Hunza-Raikot section of the KKH had already been completed
before the signing of the PCEC agreement. The PCEC envisages the rehabilitation and realignment
of the Raikot-Islamabad section of the KKH. The focus of the PCEC is on the rehabilitation of the
existing route of KKH with only minor realignments to avoid certain landslide-prone areas or some
sharp turns at least up to Mansehra from where the Burhan-Mansehra Motorway would connect it
with Islamabad as an alternative route. On November 29, 2014, Prime Minister Sharif performed the
groundbreaking ceremony for the construction of the first part of this 110km four-lane motorway. It
would start from the town of Burhan on the Islamabad-Peshawar Motorway (M-2) and would end at
Mansehra via the town of Havelian where a dry port is planned under the PCEC on November 29,
2014. The project is scheduled to be completed by the end of 2017. The Raikot-Thakot Section is
also scheduled to be completed by the same time. Since the sections from Raikot onward to Sost
and Mansehra to Thakot are already rehabilitated, and there is a motorway from Burhan to
Islamabad, the completion of the other two projects, that is the Raikot-Thakot Section of the KKH as
well as the Burhan-Mansehra Motorway, would complete the rehabilitation of the KKH up to
Islamabad by 2017.
At one place called Attabad in Hunza, a realignment of the KKH is required because a lake
was formed in January 2010 after a massive landslide, which submerged 19km of the highway. A
tunnel is being dug with Chinese assistance at the site of the Attabad Lake for the KKH to bypass it.
In his meeting with Prime Minister Sharif, China Overseas Port Holding Company Limited (COPHCL)
President Sun Ziyun said that work on Attabad Lake would be completed by 2016 with assistance
from China Development Bank. Bypassing the Attabad Lake is not part of the PCEC per se though,
since work on it started before the inking of the PCEC agreement.
One strange anomaly of the PCEC is that while the construction of the Diamer-Bhasha Dam
is part of it, the required large-scale realignment of the KKH due to the presence of the reservoir is
not being considered at the moment. The 7.5 million acre feet water reservoir of the Diamer-Bhasha
Dam could submerge 100km of the highway. The Ministry of Planning, Development, and Reform,
which is taking the lead on the PCEC, insists that the cost of any realignment of the KKH caused by
the reservoir will have to be borne by the Ministry of Water and Power that would in turn take the lead
in constructing the dam, as and when required. Therefore, the current plan of the PCEC does not
factor in that aspect.
It was reported that in a meeting presided over by Prime Minister Nawaz Sharif in August
2013, the realignment of KKH along the Chilas-Naran-Mansehra route was discussed to provide a
shorter route and to bypass the section of the road affected by the future construction of the DiamerBhasha Dam. It is pertinent to note here that as per the current (Mansehra-Thakot-Besham-DassuChilas) alignment of the KKH, it hardly ever shuts down completely for traffic during winters all the
way to Gilgit because of its unique low-altitude trajectory (except for the last part of it near the
Chinese border while crossing Khunjerab Pass at the altitude of 4,693 meters (15,397 feet). A
realignment of the KKH along the Chilas-Naran-Mansehra route would make it more susceptible to
closure during winters because the 4,173 meters (13,691 feet) high Babusar Pass that divides
Mansehra district from Gilgit-Baltistan region is closed for traffic throughout the winter due to heavy
snowfall in the area. The Chilas-Naran-Mansehra route could result in a halted flow of trade goods in
the summer as well because of heavy tourist traffic on that route during the season.
The KKH would be connected with the road network of Pakistan through the existing
Islamabad-Peshawar Motorway (called M-1) at Burhan. M-1 connects with the Islamabad-Lahore
Motorway (called M-2) while another network of highways and motorways will connect it with Gwadar
and Karachi. Another important element of the road network of the PCEC is, thus: the LahoreKarachi Motorway that would connect Lahore with Karachi via Khanewal, Multan, Sukkur, Khairpur
and Dadu. Work is already near completion on the Lahore-Multan section of the motorway, while land
has been acquired for the Multan-Sukkur and Sukkur-Dadu sections. There is an existing motorway

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(called M-7) between Dadu and Karachi that would be connected with the new Multan-Dadu
Motorway. During a meeting in August 2013, the prime minister also asked for the provision of
interconnectivity between various road networks of the country, i.e. between the Motorways, the
Indus Highway, and the GT Road for instance.
Interconnectivity projects are not part of the PCEC though. See Figure 1 below for the
planned alignment of the PCEC road network.

Railways
Supplementing the road link between China and Pakistan with a rail link is another essential
ingredient of the PCEC. There is no doubt that this added connection will greatly benefit the
connectivity project. On June 21 last year, Prime Minister of Pakistan Mian Muhammad Nawaz Sharif
called for out-of-the-box ways for building a rail-link between Pakistan and China at a meeting in his
office. He proposed starting work early on the upgrading of existing railway tracks up to Havelian in
Abbottabad district. The keen personal interest of the prime minister is, perhaps, one of the reasons
that the upgrading of the existing railway track from Karachi to Peshawar, and the development of a
dry port and cargo handling facility in Havelian are two early harvest projects of the PCEC.

A 23-member delegation of Chinese railways experts visited Pakistan in October 2014 to


assess the feasibility of $3.5 billion investment and complete the rehabilitation and replacement of
tracks from Karachi to Peshawar. The feasibility assessment was aimed at the prospective
investment of about $3.5 billion for replacement of rail tracks over 375km, deep screening of ballast
over 1,260 km, conversion of un-manned level-crossing into underpasses at 50 places, conversion of
manned level-crossing into flyovers at 250 places, realignment of 40 big curves, strengthening of 500
bridges and doubling a 438km track at various places between Shahdara and Peshawar. The
feasibility assessment is scheduled to be completed by the end of February 2015. A medium-term
project for a new rail link from Gwadar to Jacobabad via Besima and Khuzdar connection is also on
the cards but its implementation has not been started yet.
While a lot of excitement has been generated in the media about establishing a bullet-train
link between Karachi and Peshawar, it is not planned under the PCEC. Perhaps, the upgrade of the
Karachi-Peshawar rail link (called ML-1) would help in slightly improving the speeds of trains plying
on that route. As the Director/General Manager of Sinotec Song Shuangping, a Chinese company
operating in Pakistan for about a decade, envisioned electric passenger trains running up to speeds
of 180 km/hr and goods trains with speeds of 120 km/h in an interview.

Gwadar
Development of the Gwadar seaport is the foundation on which smooth functioning of the
PCEC would depend. Therefore, all the projects under the PCEC related to Gwadar are priority

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projects. According to the PCEC plan, the construction of the Eastbay Expressway, completion of the
Gwadar International Airport, construction of breakwaters, and dredging of berthing areas and
channels, are to be completed by 2017. Similarly, the integrated development of Gwadar, that
includes: infrastructure for the export processing zone and port related industries, necessary facilities
for fresh water treatment and supply, and construction of a coal-based power plant, a hospital, and a
vocational training institute are to be completed within the same time frame. In March 2014, Gwadar
Port Authority (GPA) Chairman Dostain Khan Jamaldini shared with the media after a three-day visit
of CEO of COPHCL, Zeng Qing Song, that the company was planning on investing $775 million in
the city. He added that China would invest $1.8 billion in nine development projects in Gwadar,
including expansion of Gwadar Port and construction of an airport. On the occasion, he also claimed
that construction work on the Ratodero-Gwadar Highway would be completed by 2015.
It was reported that at a meeting with senior Pakistani authorities in August 2013, a
delegation of the China National Reforms and Development Commission offered assistance for the
development of Mirani dam command area in Kech district and execution of a solar energy project in
Gwadar, besides bringing investment in other sectors in Baluchistan.(64) The Planning Commission
denies any of these projects being under consideration within the framework of the PCEC though.

The real and present challenges


According to Dr. Luan Jianzhang, Vice Director General of Policy Research Office at the
International Department of the Central Committee Communist Party of China, some of the greatest
challenges in the way of successful completion of the PCEC are: the security situation in Pakistan,
political unrest, administrative issues, and the skill-level of the Pakistani workforce working on the
project.
The security situation in Pakistan would remain a major issue in the way of realizing the full
potential of the PCEC. Since I have extensively covered the question of security in some of my
previous works, I would only point out here that such is the level of anxiety in China vis--vis
Pakistans security that the Chinese authorities closed the Pak-China border for trade and traffic
owing to security concerns during Chinas Independence Day celebrations in the first week of
October 2013. Therefore, if any trade will take place between Pakistan and China or between China
and the rest of the world through Pakistan, security of the PCEC will have to be a priority.
As far as the security of the PCECs connectivity infrastructure is concerned, the motorway
from Gwadar to Ratodero (the M-8) is particularly tricky. Work on the project has halted a few times
in the past because of the bad security situation in the restive areas of Baluchistan that it passes
through. The trickiest leg of the PCEC road network with respect to security is the link between
Gwadar and Ratodero that passes through a large sparsely populated territory of Baluchistan
experiencing an active insurgency. From 2007 to July 2014, 1,040 terrorist attacksthat is 23
percent of the total reported from Baluchistan occurred in Awaran, Gwadar, Kech, Khuzdar,
Lasbela, and Panjgur districts, which are on the route of the PCEC. Taking cognizance of the
additional security measures required for the PCEC in Baluchistan, Pakistans top project sanctioning
authority, the Executive Committee of the National Economic Council (ECNEC) approved Rs.5.2
billion for recruiting 6,000 new personnel, who will be joined by 4,000 reserve police personnel to
make a 10,000 strong constabulary force for protection of the PCEC in Baluchistan.
Violent incidents reported from other districts of Pakistan in KPK, Punjab, and Sindh, which
will be home to the PCEC are not very high in number. The planners of the PCEC have actually
opted for a longer alignment of the road network, avoiding the relatively shorter trajectory of linking
Gwadar with the KKH via the Indus Highway that goes through Khyber Pakhtunkhwa (KPK), because
of security concerns. Some analysts have voiced their opinions against bypassing the shorter route.
They argue that it would deprive these marginalized areas of Khyber Pakhtunkhwa and Baluchistan
from much needed economic development. There was also a debate in the Senate in June 2014
about the PCEC route in which certain senators criticized the bypassing of the Pakhtun and Baloch
areas in connection with the PCEC. A leader of a regional political party from KPK recently
announced in a public rally that his party would take to the streets if the under-developed areas of
Baluchistan and KPK were ignored for the PCEC. Whether avoiding the marginalized areas of the
country because of security concerns is the right choice or not, there is a serious need for improving
the law and order situation in the country in general. Besides, sooner or later the shorter and more
economical trajectory will have to be incorporated into the PCEC. Figure 2 below shows the planned
alignment of the PCEC in comparison with the shorter but insecure route that could have been
adopted if security in the areas was not a big concern.

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Although there is a political consensus in Pakistan when it comes to Pak- China relations,
political instability in Pakistan can and has affected the smooth- sailing of the PCEC. Very few would
have guessed at the inception of the current parliament and government having taken charge
from another democratically elected government through a smooth and peaceful transition of power
that there would be a serious political turmoil in the country in about a years time. Yet, there was
a political crisis in the country with serious consequences for some of the projects under the PCEC.
A very glaring example of how it impacted the Pak-China relations was when the Chinese president
had to cancel his scheduled visit to Islamabad for signing several agreements amid the political
chaos in the capital. With long-term plans like the Vision 2025 in place, there is a serious need for
political stability, and a continuity of policy and planning, especially in connection with foreign
relations.
Making use of the existing physical and institutional infrastructure is different from building it.
Pakistan has not been making very good use of the land-based route between Pakistan and China or
between Pakistan and any other regional country for that matter. Despite an international road
transport agreement between Pakistan and China in 1993 that became operational in 2006, the landbased trade between Pakistan and China is only a fraction of the total trade between the two
countries. Similarly, while Pakistan has transit, transport, and communication with a host of regional
countries, its trade with them still remains miniscule. While a variety of reasons are given by
Pakistani officials for then under-utilization of the existing institutional mechanism for intra-regional
trade, they fail to alter the disappointing reality.
With respect to China as well, Pakistani officials point toward certain administrative
procedures employed by the Chinese authorities, such as: the requirement for Pakistani truckers to
offload at Tashkurgan instead of Kashgar as per the agreement, delays in the issuance of visas to
drivers as well as clearance of passengers at Tashkurgan, and heavy quarantine charges etc.
Chinese officials contend, however, that Pakistan is not singled out for such quarantine checks. They
maintain that trucks moving within China from some parts of the country to the others are also
subjected to such measures. They agree, however, that these procedures need to be reviewed and
that the situation could improve for transporters in the future.
As far as railways are concerned, although hundreds of millions of dollars are planned to be
spent on rehabilitation of the Karachi-Peshawar rail link, there is a big question mark on the capacity
of Pakistan Railways for utilizing the infrastructure it already has. With 94 percent of passenger traffic
and 97 percent of goods transported by road within Pakistan, improvement of a railway line does not
seem to be the only requirement of Pakistan Railways. There are serious capacity issues that would
need to be addressed as well. For instance, the ongoing feasibility study would only assess the
infrastructure requirements for the upgrading of the track. It would be worthwhile to know how much

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value would be added to the goods transport in the country after the upgrade is complete, keeping in
view the abysmal state of performance of the institution.
Although the projects related to the Gwadar Port have been given priority by the
government, the Chairman of the Gwadar Port Authority, Dostain Khan Jamaldini, recently told the
Senate Standing Committee on Ports and Shipping that delay in various projects related to Gwadar
had increased their costs from Rs8 billion (around $79 million) to Rs100 billion (around $992 million)
in six years. He specifically mentioned lack of progress on the construction of a power grid, the
failure of Pakistan Railways to acquire land for the railway lines, and the failure of the Civil Aviation
Authority (CAA) to acquire land for connecting roads for the airport.
The difficult geography of northern Pakistan that connects it with China is another major
challenge. Some of the geographical obstacles are being overcome; for instance, the bypassing of
the Attabad Lake with the help of a tunnel being dug through an adjacent mountain and the widening
and rehabilitation of the KKH all the way from Chinese border. There are several other issues that
remain unaddressed; for instance, as discussed above, there is no clarity on the contours of the KKH
in case of the construction of the Diamer-Bhasha Dam that would end up submerging a good 100km
of the newly rehabilitated road. Moreover, the Khunjerab Pass remains closed from November to
May each year because of heavy snow. The enormous 4,693 meter (15,397 feet) altitude of the
Khunjerab Pass presents truckers with another challenge: they have to offload 30 percent of their
cargo for the crossing because the diesel engines of their vehicles cannot operate at the optimal
levels due to low levels of oxygen at that height and low air pressure. In addition, the KKH is
susceptible to natural calamities like quakes and slides, as was the case when a massive landslide
led to the creation of Attabad Lake in January 2010 and the subsequent submergence of a portion of
the Karakoram Highway (KKH). Will an upgrade of the highway resolve all of these problems related
to the rugged nature of the geography that the KKH has to traverse? Nobody is really sure. There is
no denying the fact, however, that improvement of the highway and motorway network all the way
from Gwadar and Karachi to Gilgit would substantially reduce the time taken by trucks from the coast
to the Chinese border.
There is also a need for greater clarity on how the PCEC would affect trade patterns
between Pakistan and China; would it mean even more imports from the latter or the other way
round. Some observers are already pointing out that free trade with China has affected certain
sectors Pakistans economy because of competitive imports from China, such as: paper, paperboard,
and ceramics.
Being mindful of the concerns that greater connectivity with China could potentially result in
greater imports from it, Khalid Mehmood suggests that China should relocate its intermediate level
industry to Pakistan while focusing itself on the high-tech side, which would provide Pakistan with
industrial investment from China in the form of joint ventures with guaranteed buy-back
arrangements.
Except for the RuYi-Masood Textile Industrial Parkthe contours of which are not very clear
yet eithernothing of the sort is on the table in the PCEC at the moment. Hasan Askari Rizvi calls for
linking South Asia, Central Asia, and West Asia. For that, however, he rightly points out that Pakistan
will not only have to take care of its domestic economic and security situation, but it will also have to
normalize economic and diplomatic relations with India. This is a very realistic way of looking at the
potential of the PCEC for regional connectivity, and regional connectivity in general as enunciated in
the Vision 2025. Direct trade with India and Afghanistan will have to be improved for realizing the
goal of regional connectivity under the framework of Vision 2025.

Conclusion
The Vision 2025 document rightly calls for regional connectivity, not only through the PCEC,
but also through other such arrangements with regional countries. President Xis idea of a ChinaPakistan Community of Shared Destiny for the pursuit of common interests through mutually
beneficial partnerships has the potential of taking Pak-China relations to an even higher level. While
the PCEC actually preceded China-Pakistan Community of Shared Destiny, the spirit of the two,
however, have been the same.
For China, the PCEC links up with its more ambitious Silk Road Economic Belt (SREB)
project, thereby adding to its significance, especially in the backdrop of the development of a Special
Economic Zone (SEZ) in Kashgar. Moreover, Gwadar is important for China to connect its less
developed western part with Persian Gulf and beyond for trade. The PCEC could also be
instrumental in western Chinas trade with Afghanistan, and even India, transiting through Pakistan.
Pakistan would also benefit from the transit of Chinese trade goods via Pakistan. The PCEC also
increases the market potential for Pakistans exports to China in the field of textile, agricultural
products, and minerals, besides adding a boost to tourism in the northern reaches of the country.
Developing on a strong foundation of friendly relations between the two countries, the
multidimensional PCEC is receiving the highest level of government interest in both the countries.
With agreements already inked on road, rail, and fibre-optic links, the development of Gwadar port,

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and a host of energy cooperation projects, the PCEC is very much on its way in realizing the goal of
bringing mutual prosperity to the two countries.
When one looks at the progress on various infrastructure projects under the PCEC, road
projects appear to have taken the most promising start. The KKH is already rehabilitated up to Raikot
and would be completed all the way up to Thakot by 2017. The first leg of the Burhan-Mansehra
Motorway up to Havelian would also be completed around the same time. Bypassing the Attabad
Lake is likely to be completed before that. Work on the Lahore-Karachi Motorway link is also on
schedule. The only question that remains unanswered is the substantial realignment of KKH that
would be required after the construction of the Diamer-Bhasha Dam; and also the fact that a
substantial amount of money would be spent on a road that is likely to be submerged under water by
another project also incorporated into the PCEC. At some later point most probably after the
security situation would have improved in Baluchistan and KPK the relatively shorter route of the
Indus Highway connecting with KKH on the one end and Gwadar on the other, would need to be
made part of the Pak-China connection. This would be crucial in dispelling the grievances of the
people of those areas for being neglected with respect to this project. At this point, however, the
security situation is dictating the route options, which is quite understandable.
Railway is one aspect of the PCEC where a lot of optimism is rather misplaced. From the
dreams of bullet trains between Karachi and Peshawar to that of railways overtaking road network
options for trade, the expectations seem quite inflated. Given the prevalent inefficiency in Pakistan
Railways, it is difficult to assume that even the pumping of millions of dollars into the upgrading of the
Karachi-Peshawar connection would bring any substantial benefit for the PCEC unless some tough
managerial decisions are taken in the institution regarding the improvement of its working. While the
government has given priority to the projects related to Gwadar, slow progress on the projects has
already increased their costs by a dozen times.
Although the security situation in Pakistan has improved considerably, it could still put a
question mark on the development potential of the country in a variety of ways. For Pak-China
cooperation on the PCEC to develop smoothly, a consistent improvement in the security situation in
the country and the safety and security of Chinese nationals working in Pakistan would be a must.
The recent political unrest in the country has also had a direct bearing on the PCEC the
cancellation of Chinese Presidents visit in September for the signing of several agreements being
one glaring example. The host of administrative issues pointed out in the previous section would
need to be addressed as well in order to reap the full benefits of the project.
While the establishment of Special Economic Zones in certain areas along the PCEC
alongside the relocation of some intermediate level industry from China will help boost Pakistans
export potential vis--vis China, the PCEC will not be fully utilized unless it
will be connected regionally as envisioned in the Vision 2025 document of
the Government of Pakistan. Pakistans location at the cusp of Central Asia,
South Asia, and West Asia makes it ideally suited for inter-regional trade.
The infrastructure developed under the PCEC would help Pakistan realize
the dream of becoming a regional trading hub, but for which Pakistan,
Afghanistan, and India would need to improve their diplomatic relations as
well.