Will Trump admin's squeeze on security aid to Pakistan work?

For the squeeze to be effective, US will have to withdraw support to Pakistan at IMF and World Bank

Trump administration has announced that it is freezing security aid to Pakistan. This means a suspension of aid worth US$ 1.1 billion. US says that Islamabad continues to shelter terrorists despite several warnings from President Donald Trump. Will this suspension have any effect on Pakistan? The author takes a look at this question in this Business Standard Special.

The Trump Administration on the 4th of January announced the suspension of all security aid to Pakistan; approximately up to US$ 1.1 billion a year according to various estimates. What's new, you may ask? After all, we've seen this game before and we know that Pakistan had learned to game the US carrot-stick game like a pro. All indications now are that the US game has changed, the question though is how has it changed and what are the structural limitation that prevent the US from going the whole hog.   

President Trump's tweet on the 2nd of January, warning Pakistan of consequences, did not come out of the blue. Vice President Pence had previously delivered an extremely harsh and public warning to Pakistan during his visit to Afghanistan. Within 2 days, on the 4th of January, the State Department announced a suspension of all security related aid. Herein lies the key - non security related aid has not been suspended, neither has support for third party loans. Crucially this means continuing US support for the International Monetary Fund (IMF) and World Bank (WB) loans to Pakistan. Both these bodies are controlled by the US and its allies and provide much more economic relief than direct US aid. As per the IMF website, total loans and drawing rights for Pakistan stood at US$ 6.8 billion dollars and the World Bank showed commitments over a 5 year period from 2013 to 2018 totalling US$ 8.5 billion. What this means is that while Pakistani military operations might be affected a bit, a US$ 1.1 billion security aid cut-off while inconvenient is not even remotely threatening Pakistan’s economic and therefore social stability. To avoid this cut-off, Pakistan is required to capture or kill 25 specific terrorists by 15th of January and initiate a crackdown on the Haqqani Network and the Afghan Taliban. In fact it is perfectly foreseeable that Pakistan will not oblige the US on this score. In the past when aid cut-offs were threatened - as if on cue a high value Taliban or Al Qaeda target would be eliminated or detained by Pakistan security forces. 25 leaders on the other hand is far too many, and definitely not worth US$ 1.1 billion in the overall Pakistani scheme of things.

However, if the security aid cut-off is viewed as a first step in a progressive squeeze of Pakistan, resulting in US pressure at the IMF and WB, then the equation changes completely. To understand this it is best we look at a cost benefit analysis from the Pakistani point of view. First, should Pakistan cease cooperation and cut of the air and land supply route to Afghanistan, the US has no alternate supply routes with Russia and Iran being hostile. Moreover this is exactly when Pakistan's terror assets become even more salient. The web of terrorists Pakistan has created, is a significant military and economic asset. Using these assets deftly in the past has brought Pakistan "strategic salience". This takes two forms - nuclear and intelligence. Its use of terrorism in Afghanistan means that it is also the primary provider of intelligence to the US on terrorists of its own making. In short America will suffer a significant operational blind spot if it loses Pakistani intelligence, no matter how counterproductive that intelligence is. On the India front, Pakistan uses terror attacks to maintain the myth of the India-Pakistan border being the world's most dangerous nuclear hotspot. Again the drips of intelligence and cooperation it provides to the US on its military nuclear programme mean a whole lobby exists in the US. This lobby would believe that even this rudimentary access is critical to peace in the region. It is not exactly wrong - the moderating influence that the lobby exercises on Pakistan, probably, to some extent, prevents Pakistan from taking an even more extreme nuclear posture. The only problem is while both the Intel and nuclear lobbies believe they are moderating the Pakistanis, it is in fact they who dance to a carefully calibrated Pakistani tune, where engagement leads to fake cooperation - essentially a blackmail model. Because the intel and "restraint" offered are not quid pro quo for engagement, but rather a predetermined necessity for the Pakistani state, passed off to its interlocutors as a major concession.  

There are therefore 3 clear reasons for President Trump to resist further pressure on Pakistan: the supply of troops, the loss of Pakistani intelligence and increased Pakistani nuclear and terror adventurism across the India border. For the US to increase pressure on Pakistan, President Trump will have to go down the IMF, WB route and will simultaneously have to do 3 things. First find an alternate supply route to Afghanistan or challenge Pakistani airspace, flying aircraft over Pakistani territory challenging it to shoot down US planes and risk a major military reaction from the US. Second, he will have to overrule a powerful set of intelligence oriented bureaucrats within the US security establishment. Third, he will have to prepare India to take a significant increase in cross border terror without giving in to the temptation to retaliate and allow the full spectrum of US economic punitive measures to play out. 

This raises a particularly curious situation for India. How much pain can it withstand without retaliation, unsure of how much America will address Indian concerns, should the full spectrum of American economic actions bring Pakistan to its knees? Moreover will President Trump be willing to tolerate far more errant Pakistani behaviour in the short term in order to bring about greater Pakistani compliance in the medium term? The bright spot here is that that US aid unlike Chinese investment actually enriches Pakistan. While it mostly goes into the pockets of the military-landlord-industrial nexus, given the lack of economic alternatives, this is a crucial lifeline for the Pakistani elite that controls policy. The harsher economic measures described above combined with sanctions on the Pakistani military and those associated with it, stand a far greater chance than any previous US action of bringing about Pakistani compliance. The question really is does President Trump have the stomach for increased short-term pain?

Abhijit Iyer-Mitra is Senior Fellow at the Institute of Peace and Conflict Studies. He tweets as @Iyervval