The more the nation gets isolated, especially in the international financial system, the greater its dependence on the Chinese.
For almost an entire week, Pakistan was swinging between the ecstasy of having escaped the international financial dragnet aimed at forcing it to end its dalliance with internationally proscribed terror groups, and the agony of having been put in the grey list by the Financial Action Task Force (FATF).
Initially there was triumphalism after Pakistan’s foreign minister Khawaja Asif jumped the gun and tweeted from Moscow that the FATF couldn’t reach a consensus on Pakistan. The next day there were reports quoting both US and Indian officials that the final word had still not been said on the issue.
A day later, the writing on the wall became clear when Asif sounded very downcast while speaking to a TV channel about the possible outcome of the FATF meeting in Paris. Even so, the next day, analysts embedded with the ISI appeared on Pakistani TV screens to debunk reports in the Indian and western media that claimed that Pakistan was going to end up in the grey list.
To buttress their argument, they tom-tommed the non-inclusion of Pakistan's name in the list of countries in the “grey list” as confirmation that Pakistan was out of the woods. But a day later, the drum-beaters of the Pakistani establishment got a rude reality check when the country’s de facto finance minister, Miftah Ismail, admitted that Pakistan was going to be put in the list in three months. Worse, there is a real possibility that Pakistan could well also end up in the “black list”.
In the next three months, Pakistan has to prepare an action plan of the steps it will take to conform to international norms on curbing money laundering and combating financing of terrorism. If the action plan is approved by the FATF in June, Pakistan will come under the “grey list”, which means its financial transactions will come under intense scrutiny and its financial systems will be closely monitored.
If, however, there is no consensus among FATF members on the action plan, Pakistan could well find itself in the “black list”, in the illustrious company of countries like North Korea, virtually cut off from the international financial system.
Once it became clear that Pakistan was going to be grey-listed, the euphoria gave way to despondency. But even as the reality started to sink in, the Pakistanis did what they do best when the chips are down: bluff that all is well.
Miftah Ismail and other serving and retired officials put up a brave face, claiming that the grey-listing is only a minor inconvenience and certainly not a case of the heavens falling. After all, they maintained, Pakistan had been in the grey list even in the past and come out unscathed.
Of course, the frenetic exertions by the Pakistanis to avoid getting grey-listed belied the spin that was given after it became clear that the nation was going in the grey list. In a way, the Pakistani attitude over being grey-listed is similar to that of a crook who fights hard to avoid getting sentenced for a repeat offence, but once convicted makes light of the sentence because he has already experienced it earlier.
Before the FATF meeting, the Pakistanis did what they normally do when the pressure starts mounting: make a show of taking action (most of it only on paper, and none of it on the ground) to assure the international community of their bona fides, and at the same time not only warn the West of the consequences of pushing Pakistan too hard but also blackmail by threatening to stop all cooperation.
Overnight, an ordinance was passed banning the UN-proscribed international terrorist organisation, Jamaat-ud-Dawa (JuD) and its “charity wing” Falah-i-Insaniyat Foundation (FiF).
A spate of new reports appeared on how the assets of these terrorist outfits were being frozen and seized. But this was a movie that had played out many times before. Quite aside the use of an ordinance (which has a shelf life of only four months) even though parliament was in session and a proper bill proscribing JuD could have been passed, it became clear within days that the entire drama of action against the JuD and FiF was an eyewash.
JuD chief Hafiz Saeed continued to fulminate and while government officials pretended to have taken over the assets and facilities, the fact was that the entire staff and system of these organisations remained the same i.e. cadres and jihadists of the JuD/FiF, who continued to run their operations pretty much without any hindrance.
But it wasn’t only the fraud of the action against JuD. The Pakistanis went into an overdrive to win over the Americans. Out of the blue, the Afghan Taliban made an offer of talks to the Americans – it is another matter that the text of the offer sounded like it was drafted by someone sitting in Aabpara (ISI headquarters).
The Pakistani army chief made a trip to Kabul and addressed an international conference in Munich where he said all the right things and held out all the correct assurances. While the general was playing good cop, two civilians — Miftah Ismail and interior minister Ahsan Iqbal — played the bad cop.
The former expressed confidence that Pakistan will be able to defeat the US-sponsored move, while the latter warned that putting Pakistan on the grey list would have a negative impact on the country's war on terrorism and extremism. Meanwhile, to drum up support, the Pakistanis all of a sudden decided to send troops to Saudi Arabia, thereby hoping to win Saudi (or more appropriately, Gulf Cooperation Council) support.
In the end, neither the Saudis nor the Chinese (on whom the Pakistanis were depending to once again bail them out), nor their new friends the Russians, were able to stand by them.
When push came to shove, the Americans cut deals with the Saudis and Chinese, who decided to advance their interests even if this was at the cost of Pakistan's interests. In any case, it didn’t make sense for either the Chinese or the Saudis to jeopardise their relations with the US for the sake of a basket case like Pakistan.
The Russians too refused to back the Pakistanis. Only the Turks stood by them till the very end. Interestingly, all of Pakistan's friends got more out of fixing Pakistan than backing them. In the case of the Turks, they knew their vote wouldn’t change anything and so they voted for Pakistan. Incidentally, Turkish companies have got some very sweet deals from the Pakistanis, and there are insinuations that members of the Erdogan family are “wetting their beaks” in these deals.
The Saudis have got the Pakistani soldiers (payback for the money they have invested/gifted the Pakistanis) and preferred to get an assurance of membership of FATF rather than go against the Americans in favour of the Pakistanis. The Russians are believed to have been convinced by India. But the biggest gainers were the Chinese.
They reportedly got US and Indian assurances of support for the chairmanship of FATF next year. And while they told the Pakistan's that their hands were tied because they “didn’t want to lose face” by backing the losing side, they get more leverage over the Pakistanis by pushing them further in the hole than by pulling them out of it.
The more Pakistan gets isolated (especially in the international financial system), the greater its dependence on the Chinese, who can then push for making the RMB as legal tender in Pakistan, becoming Pakistan's outlet to the world, all of which makes the colonisation of Pakistan so much easier.
The big question now is whether the Pakistanis will wake up and smell the coffee, or will continue to engage in their sordid game of deception — making a big show of cracking down on terrorism but pretty much allowing the terror organisations to function unmolested.
With the Americans turning the screws like they haven’t over the last decade and a half, there isn't going to be much wriggle room for the Pakistanis to try and bluff their way out. Nor is their bluster likely to find much traction. The more sensible lot in Pakistan will understand that the FATF is only the first shot that the Americans have fired. There is a lot more stuff in the US arsenal that can cause serious financial and economic damage to Pakistan. The Trump administration has given enough signals that it won’t hesitate to use the stick.
The problem for the Pakistanis is that politics is in a state of deep flux. The civilian government is under siege, what with the judiciary running amok, the military playing its sordid games and indulging in political engineering, and the opposition baying for blood.
Add to this the fact that general elections (assuming they are held) are just a few months away. By June a caretaker government will be in office. Until then, the civilian government has neither the risk appetite nor the incentive to take any tough decision, even less so given that the military establishment will want the civilians to take the fall for any tough decision.
Complicating matters more is the fact that the “deep state” has been hyperactive in bringing the terrorists into the political mainstream (much to the discomfiture of the incumbent government).
Given that the guys being mainstreamed — JuD and by extension FiF — are the primary reason for the grey-listing of Pakistan, only adds to the problems of the Pakistani state.
The civilians could of course queer the pitch for the military establishment by forcing the generals to take the call and the fall for either acting against the terrorists or even deciding to take on the rest of the world for the sake of their terrorist assets. Either way, Pakistan's difficulties are only going to increase.
This commentary originally appeared in Newslaundry.
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Sushant Sareen is Senior Fellow at Observer Research Foundation. His published works include: Balochistan: Forgotten War, Forsaken People (Monograph, 2017) Corridor Calculus: China-Pakistan Economic Corridor & China’s comprador ...
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