Pakistan’s long struggle for democracy could get a boost from Trump, Rand Paul, and …the Saudis

In recent days, all eyes have been on President Trump’s January 1 tweet, which sent out an unequivocal message that it cannot be business as usual with Pakistan unless the latter takes concrete action against terror groups like the Haqqani Network.  Said Trump in his tweet:

The United States has foolishly given Pakistan more than 33 billion dollars in aid over the last 15 years, and they have given us nothing but lies & deceit, thinking of our leaders as fools. They give safe haven to the terrorists we hunt in Afghanistan, with little help. No more!

Trump’s tweet was followed by the US decision to withhold Foreign Military Fund (FMF) aid (worth 255 million USD) due to Pakistan’s inaction against terror groups. The Department of Defense has also suspended Coalition Support Fund (CSF) money to Pakistan (worth 900 million USD). In all, over 1.1 Billion USD has been suspended. Kentucky Republican Senator Rand Paul will be introducing a bill for ending all US aid to Pakistan. Said Paul:

I’ve been fighting to end Pakistani aid for years. But now we have a breakthrough. President Trump has publicly called to end their aid, and is currently holding up over $200 million of it. I want to end all of it.

The Kentucky senator has argued that the money provided to Pakistan can be used for building infrastructure in the US.

Reactions in Pakistan to Trump’s tweets were predictable. While some opposition parties said that US President’s assertive attitude vis-à-vis Pakistan is a failure of the present Pakistan Muslim League (PML-N)-led government to put forward Pakistan’s view point effectively, the PML-N government criticized the US President’s remarks and said that it was ready to provide audits, and that it has been on the front line in the war against terror. Pakistan Foreign Minister, Khawaja Asif, in response to Trump’s tweets stated:

Pakistan is ready to publicly provide every detail of the US aid that it has received over the last 15 years.

In the midst of all this, a number of noteworthy developments have taken place.

First, both Nawaz Sharif, President of Pakistan Muslim League and former PM, and Shahbaz Sharif, Chief Minister of Punjab province and PML-N’s PM candidate, met with the Saudi Crown Prince Mohammad Bin Salman on the night of January 1, 2018. There were speculations of various kinds with regard to the meeting. The first was that an agreement was being worked out where Nawaz Sharif would be exiled to Saudi Arabia in order to avoid the corruption cases filed against him in Pakistan. This, however, was flatly denied by his daughter Maryam Nawaz Sharif. A spokesman for the former PM also issued a strong denial in a press release. Said the spokesman:

He has always utilised these relations for national interest and never for his personal benefits.

The other major speculation was that the Sharifs met with the Saudi Crown Prince in light of the recent statements made by President Donald Trump, and had gone as a result of an understanding with the Pakistan army. Irrespective of whatever the reality was, it clearly shows that the Sharifs are still extremely relevant, not just because of their political influence in the province of Punjab, but also their strong networks in Saudi Arabia.

Second, Nawaz Sharif, who has – in spite of considerable domestic constraints – made concerted efforts at improving ties with India, had according to some news stories met with Pakistan National Security Advisor (NSA) Lt Gen Nasser Khan Janjua on December 28th, at the former’s Raiwind residence in Lahore. During this meeting, Sharif spoke about the need for mending fences with neighboring countries. The meeting was however dismissed as a false report.

Third, most interestingly the former PM, while reacting to Donald Trump’s attack on Pakistan as regrettable, launched an all out attack on the army and dictatorships in a speech on January 3, 2018. While he blamed Pervez Musharraf for capitulating to the US in 2002, the former PM also accused the army of propping up leaders through secret deals. He was alluding to the leader of the Pakistan Tehreek-E-insaaf (PTI) Imran Khan. Sharif also called for self introspection, and that it was time for Pakistanis to “ask ourselves why the world does not take us seriously.”

A few points need to be kept in mind:

First, Nawaz Sharif – who has been written off – remains the tallest and most mature political leader who realises the importance of strong ties with neighbors, and realizes the pitfalls of excessive dependence upon one country. During his speech on January 3, 2018 he categorically stated:

I would like to advise Prime Minister Abbasi to develop a policy that ensures we don’t need US aid so that our image is not attacked in this manner.

Second, Sharif’s aggressive approach towards the army may not be appreciated by many in, or outside of, Pakistan. The Saudi Prince is supposed to have put forward his discomfort with Nawaz’s approach towards the army, saying it will destabilise Pakistan. Nawaz is not likely to cave in easily, and is likely to use every opportunity to attack the army, and will make attempts to restore civilian supremacy. This is clearly evident from his speech on January 3, 2018.

Third, post the 2018 Parliamentary elections which PML-N is likely to win, efforts will be made to reach out to India, since a better economic relationship with India will fit in with the overall goal of Pakistan becoming more self-reliant. PML-N would also like to send a clear message to Pakistan’s army about who the real boss is. The Pakistani army will off course continue to sabotage such efforts, but Nawaz Sharif seems determined to make one last ditch effort. This will off course require PML-N to take decisive action against terror groups targeting India.

External forces should stop treating the Pakistani army with kid gloves. While the US has taken the lead in taking a strong stand against the Pakistani army, China too needs to do a rethink of its short term goal of using Pakistan to contain India. Terrorism and instability will have an impact on China in the near run as well as long run. The outside world, while being firm with the Pakistani army, should continue to make efforts aimed at strengthening democratic forces within Pakistan.

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India needs to work harder, both in its own backyard and in its near-abroad

While there is absolutely no doubt that Donald Trump has on more than one occasion sent harsh warnings to Islamabad – calling upon Pakistan to give up its support for terrorist groups or face the consequences – Trump’s predecessors had begun to reduce aid to Pakistan. During the Obama years, for example, American aid to Pakistan dropped from over 2 Billion USD in 2014, to a little over 1.1 Billion USD in 2016.

In his latest tweet, Trump minced no words, saying that Pakistan had fooled the US all these years, and that US will not take this lying down:

The United States has foolishly given Pakistan more than 33 billion dollars in aid over the last 15 years, and they have given us nothing but lies & deceit, thinking of our leaders as fools. They give safe haven to the terrorists we hunt in Afghanistan, with little help. No more!

Trump tweeted early morning on New Year’s Day.

Earlier in the year, during his August speech pertaining to Afghanistan, Trump had categorically stated that it no longer could be business as usual, and that Pakistan needed to stop extending support to the Haqqani network and other groups. Said the US President:

We have been paying Pakistan billions and billions of dollars, at the same time they are housing the same terrorists that we are fighting. But that will have to change. And that will change immediately.

A number of senior officials in the Trump Administration, such as the Secretary of State Rex Tillerson, Defence Secretary Mattis, and Vice President Mike Pence have hinted that harsh steps for Islamabad are a real possibility, some of which include not just withdrawal of aid to Pakistan, but also the removal of Pakistan’s non-NATO ally status.

During his recent visit to Afghanistan, Pence stated that President had put Pakistan on notice. Said Pence: “President Trump has put Pakistan on notice. As the President said, so I say now: Pakistan has much to gain from partnering with the United States, and Pakistan has much to lose by continuing to harbor criminals and terrorists.”

In an oped written for the New York TimesTillerson stated:

Pakistan must contribute by combating terrorist groups on its own soil. We are prepared to partner with Pakistan to defeat terror organisations seeking safe havens, but Pakistan must demonstrate its desire to partner with us.

China – which has strategic and economic interests in Pakistan, with the primary one being the China-Pakistan Economic Corridor (CPEC) – has stood by Pakistan. While reacting to Trump’s August 2017 address, State Councillor Yang Jiechi said:

“We should attach importance to Pakistan’s important role in Afghanistan and respect Pakistan’s sovereignty and legitimate security concerns.”

India’s reactions

New Delhi has understandably been closely observing these events. Trump’s warnings to Pakistan are viewed as positive news for India, and the Trump Administration has also pleased New Delhi by speaking against violent groups that are targeting India. The US, for example, has lent support to India’s demand for declaring Jaish-E-Muhammed (JEM) Chief, Masood Azhar, a designated terrorist by the UN (this move has of course been stalled by China).

Realists in New Delhi will however be keeping an eye on the following issues.

First, sections of the political class in Pakistan, as well as old hands in the American administration will not allow things between Islamabad and Washington to go downhill. A number of Pakistani politicians, such as Sherry Rehman, have already stated that while Pakistan should have its own independent policy, and it should not be submissive, it need not be excessively aggressive. While such politicians may not publicly say so, the fact is that there is a large swath of the Pakistani population which may not be very comfortable with the US, but is even more uncomfortable with the increasing Chinese presence in Pakistan as a consequence of CPEC.

In the US too, there are sections in the State Department which follow the approach of engaging with moderate forces in Pakistan given the country’s strategic importance. There is a section of the US establishment which does not want Pakistan to totally drift away from Washington’s orbit, mostly because China is beginning to take a larger role in the whole of South Asia, including Afghanistan. One of the declarations of the first Foreign Minister-level trilateral dialogue between China, Pakistan, and Afghanistan was the extension of (CPEC) into Afghanistan.

Said the Chinese Foreign Minister:

So China and Pakistan are willing to look at with Afghanistan, on the basis of win-win, mutually beneficial principles, using an appropriate means to extend CPEC to Afghanistan.

Both New Delhi and Washington will closely watch this development.

Apart from Beijing, Pakistan will rely on Saudi Arabia to soften Washington’s approach vis-à-vis Pakistan. The Sharif brothers, both Nawaz and Shahbaz, have strong connections in Saudi Arabia and while there were speculations that the Saudis were trying to broker a deal between the Pakistani military and the Sharifs, there is also a view that there’s an understanding between the Pakistani army and the Sharifs, and that the latter would use their links in the Saudi establishment to soften the Trump Administration, which has strong ties with Riyadh.

In conclusion, there is an increasing awareness with regard to the nexus between the Pakistani army and terror groups targeting India. Yet New Delhi should be more realistic in its calculations, and it needs to not just bank on Washington. Instead, India should also leverage its economic ties with Riyadh and Beijing to put more pressure on Pakistan. While there is no doubt that strategic convergence with Washington has increased phenomenally, Trump’s harsh words against Pakistan are not just driven by any conviction, but also by simple transactionalism. This very transactionalism has also created space for China to become more pro-active in South East Asia and South Asia. New Delhi thus needs to be pragmatic, deft, and leverage its economic rise more effectively.

Worth a gander

  1. good update on the mayhem in the Middle East
  2. as good as that update is, though: Iraq, Saudi Arabia to reopen border crossings after 27 years
  3. great read on Russia’s Far East and Russia’s travel writing genre
  4. in Russia, Lutheranism (Protestantism) is considered a “traditional” religion (h/t NEO)
  5. how social is reason?

BC’s weekend reads

  1. Saudi-Iran Conflict Is Not America’s Fault
  2. Gains from trade: China and the United States
  3. How Bad Is Trump’s Brand of Authoritarianism?
  4. How Hiroshima Became A War Crime
  5. Art and Porn in Edo Period Japan
  6. The [True?] Meaning of Marxism

What’s the difference between Saudi Arabia and Islamic State?

One has captured the rent associated with being a state in the post-World War II world order. This means that one of these polities gets to build embassies in other states. It gets to participate in congresses. It gets to fly its flag at the United Nations and has access to the World Bank, military hardware markets (“for defense”), and FIFA tournaments.

Rent capture isn’t all good, of course. There are still costs. When Saudi Arabia beheads people, for example, it gets condemned internationally. Its reputation suffers. It has to repair relationships and launch rigorous public relations campaigns. Saudi Arabia has to do these things because if it looks intransigent to enough of its fellow states, there might be official repercussions for its actions. Saudi Arabia can’t just go around killing and looting and raping at will. It has to formalize its killing, looting, and raping through the international order by coming up with a national interest. (A national interest is also important for shoring up domestic support for such activities.)

But incorporating Islamic State into the international order is unfathomable. It’s an immoral action rewarding an immoral pseudo-polity. Besides, the sovereignty of the states of Iraq and Syria would be violated and their borders destroyed. It’s better to just keep bombing the region Islamic State claims to govern and arming the factions that claim to be its enemies. That’s been our policy towards the post-colonial world since 1945 and, while imperfect, it’s been working out well so far…

The Saudis, the Holy Lands, and double standards

I know we’ve been linking to Irfan and the PoT heads a lot lately, but there’s a good reason for it. Check out Dr Khawaja’s thoughts on the recent death of King Abdullah:

The late Pakistani journalist Tashbih Sayyid, editor of Pakistan Today, put the point to me in this way: “Muslims complain so loudly about the Israeli occupation of Jerusalem and the West Bank. What about the Saudi occupation of Mecca and Medina?” It sounds like a joke, but it really isn’t one. He might well have added: What about the Saudi occupation of the Arabian peninsula?

Here’s an article on Saudi Arabia’s criticizing Norway’s human rights record. This criticism comes from a country where it’s illegal for women to drive. Of course, to be fair, Saudi Arabia is making progress. It abolished slavery in 1962.

I don’t agree with defenders of Israel who insist that the movement to divest from Israel is “anti-Semitic,” but I do think there is a double standard in the way activists think about and deal with Israel by contrast with Saudi Arabia. Saudi Arabia has all the features that members of BDS find objectionable in Israel. Like Israel, Saudi Arabia is guilty of systematic human rights abuses. Like Israel, Saudi Arabia gets massive and systematic U.S. support. Like Israel, Saudi Arabia exerts enormous influence over the U.S. government. The difference is just that Saudi Arabia is a lot worse than Israel on every relevant dimension.

Read the rest, it’s an excellent analysis as usual.

Jacques has a piece on Islam in France up over at Liberty that you might want to check out, too. He doesn’t make any new arguments that he hasn’t made before, and I don’t think he is advancing the conversation at all (see here and here, for example), but it’s still worth the read.

What’s up with Oil and the Saudis?

In case you haven’t noticed, the price of oil has dropped dramatically and has not rebounded as yet. As I write, the price of the most common form of crude oil is under $54 per barrel, about half of what it was in mid-2014. What’s going on?

Several factors contributed to the fall. One was increased U.S. production, much of it shale oil. Also, U.S. consumption has not been rising apace with GDP in part because of higher fuel efficiency. Demand in Europe and Japan is muted due to low growth or recession.

Those things did not happen suddenly, however, so the drop would appear to be overdone. Large producers, who have a lot of pricing power, would normally cut production in this circumstance. (Pricing power means a change in their production has a noticeable effect on the world price.) The Saudis have considerable pricing power and their production decisions are controlled by their government. Why have they not cut production? I believe they are engaging in predatory pricing.

Predatory pricing is illegal in the U.S. and elsewhere, under anti-trust law. Predatory pricing occurs when a supplier cuts his prices for the purpose of bankrupting a competitor, or at least driving the competitor out of the market. The predator is willing to suffer losses or reduced profits temporarily, while holding the prices low. Once the competitor is gone, the predator’s pricing power will have increased enough that he can raise prices a lot and make up for losses suffered during the period of predation. Predatory pricing is definitely possible in free markets but is very risky for several reasons: (1) the predator can’t be sure how long it will take to ruin his competitor, (2) he can’t be sure how long he can maintain low prices without sustaining ruinous losses or perhaps face a shareholder rebellion, (3) it’s possible the competitor, or someone who has bought his assets in bankruptcy, will come back to life and start competing as before. For these reasons (and others, such as the difficulty facing regulators who are supposed to distinguish predatory motives from “innocent” business strategy), I believe there is no reason to outlaw predatory pricing.

The situation is a little different in the international oil market because the Saudis and many other major players are government controlled. They are not constrained (much) by the market forces outlined above. They are not accountable to shareholders and are only vaguely responsible to the population of Saudi Arabia. They have substantial latitude to pursue political motives even if their profits suffer.  And anti-trust law does not operate across national borders.

What might the Saudis want to accomplish politically? They hate Russia and Iran, both of which rely heavily on oil exports. They don’t hate the U.S., at least not openly, but they surely wouldn’t mind sticking it to U.S. and Canadian shale oil producers. Those producers are largely market-driven and thus have limited ability to withstand predatory pricing. The Saudis could indeed drive smaller firms out of the market, and also less profitable operations of larger firms.

That might not be such a bad thing. There has been a huge land rush into shale oil and fracking. In any such boom, whether in energy, mining, or computers, many small firms fall by the wayside. If the Saudis ruin some marginal firms or projects, that’s not such a bad thing.

We little guys are sitting pretty. We’re paying a lot less for gasoline. If we hold shares of the major oil firms we’re probably OK, as their share prices have held up and their dividends look solid. The same is true of the pipeline operators. Only if we hold shares of marginal energy firms or oilfield service companies are we in any trouble.

So – go for it, Saudis! Stick it to the evil governments of Russia and Iran and help us clean out some of our marginal energy operations.