Pakistan is supposed will be placed on the Financial Actions Task Force’s (FATF) watch list for terrorist financing in the upcoming FATF meeting in June. While this is a welcome move by the global community, the United States should implement economic sanctions against Pakistan to undermine Pakistan’s support for terrorism throughout South Asia. Putting Pakistan on the watch list for terrorist financing will weaken Pakistan’s economy through increased transaction costs and regulatory scrutiny which will decrease both the growth investment. Pakistan was on the same watch list for nearly 20 years before it was removed in 2015, and has continued to tolerate terrorist financing. Therefore, more must be done to adequately punish Pakistan for its continued support of terrorism.
Pakistan has continually supported terrorists or tolerated their practices in both India and Afghanistan. In 1948, armed Pakistani Pashtun militants were responsible for marauding Kashmir while Islamabad continues to provide weapons and soldiers for Kashmiri infiltrations in addition to providing a haven for anti-Indian terrorist groups such as Lashkar-e-Taiba (LeT). In Afghanistan, the Soviet incursion was driven back in 1989 by the US-Pakistani backed mujahedeen, but Pakistan has continued to support the Haqqani Network, an Afghan insurgent group that descended from the 1989 mujahedeen, in its ongoing fight against the United States and NATO in Afghanistan.
By sanctioning Pakistan, the United States can restrict its funding to foreign terrorist organisations, a move consistent with the United State’s goals of global counter-terrorism. Trade counts for 25 percent of Pakistan’s GDP of almost $300 billion and the United States account for 13.5 percent of Pakistani exports. Additionally, if the European Union, which accounts for 18 percent of Pakistan’s exports, and other international partners were to implement similar measures, then Pakistan’s revenue could be drastically reduced. Significant reductions in revenue could force Pakistan to change course as there would be less money available for the military, ISI, state-sponsored insurgents and the public sector. Therefore, these actions could potentially place great strain on the Pakistani economy.
The sanctions must be implemented because past actions have been ineffective in curbing Pakistan’s support for terrorists. President Trump’s suspension of $900 million worth of economic and military aid did not affect Pakistan’s behaviour, for Islamabad has escalated their attacks and infiltrations along the Kashmir Line of Control (LoC). Moreover, Pakistan can seek military equipment and aid from China. Limited sanctions have been placed on Pakistan in the past. In May 1998, President Clinton imposed sanctions on Pakistan through the Glenn Amendment for its testing of multiple nuclear weapons, following India’s nuclear weapons tests. Additionally, in October of 1990, President Bush was unable to certify that Pakistan did not possess nuclear weapons and used the Pressler Amendment to withhold economic and military assistance to Pakistan. Therefore, the implementation of sanctions against Pakistan is not unprecedented. However, their success depends on sweeping long-term sanctions that remain in place until Islamabad undertakes serious foreign policy reform.
Sanctions would have negligible effects on the United States’ economy and operations in Afghanistan. While Pakistan may close NATO supply routes into Afghanistan, aerial and Central Asian routes through the former Soviet States could be opened. When Pakistan closed the NATO supply routes in 2011, NATO utilised the Central Asia—Russia routes. Additionally, a trade agreement between the United States and India could be established to offset the minor economic damages to the United States as a result of implementing economic sanctions on Pakistan. As the relationship grows between New Delhi and Washington, the sanctions on Pakistan could earn the United States a favourable trade agreement with India which is forecasted to be one of the fastest growing economies in 2018. India is a more strategic partner in countering violent extremism throughout the South Asia sub-continent and is committed to halting the extremism emanating from Pakistan which makes India a welcome ally and partner in the future.
Overall, the negative effects of economic sanctions on Pakistan are negligible in comparison to the potential benefits gained from the move. If this support were ended, Afghanistan might be more easily managed by the United States and NATO as Taliban would lose a major sponsor. Additionally, if Pakistan were to cease its support for terrorism, then the path to rapprochement with India would be cleared of major obstacles.
(This article was originally published in the Indian Economist on March 5th, 2018 and has been republished here with permission from the author. Read it here.)