Misreading the Signs: Russian Foreign Minister Sergei Lavrov and Khawaja Asif

Pakistan faces isolation and uncertainty. The Financial Action Task Force, an international watchdog on financing terrorist activities, has its sights trained on Pakistan

The Financial Action Task Force (FATF) set up in 1989 by the western G7 countries, with headquarters in Paris, acts as an ‘international watchdog’ on issues of money-laundering and financing of terrorism. It has 37 members, including all five permanent members of the Security Council, and countries with economic influence. Two regional organisations — the Gulf Cooperation Council (GCC) and the European Commission (EC) — are also members. Saudi Arabia and Israel are observers. India became a full member in June 2010.

The FATF is empowered to ensure that financing of UN-designated terrorist organisations is blocked. It has the power to publicly name countries not abiding by its norms, making it difficult for such countries to source financial flows internationally.

Pressure on Pakistan

Pakistan is particularly vulnerable to pressures from this task force as the Afghan Taliban, Haqqani Network, Lashkar-e-Taiba and Jaish-e-Mohammed — all internationally designated terrorist groups — operate from its soil. Pakistan has long claimed that it has done its best to prevent terrorism emanating from its soil. It has also averred that there is no firm evidence against the Lashkar-e-Taiba and the Jaish-e-Mohammed, even after these groups have publicly acknowledged that they were promoting terrorism in India.

Pakistan has also rejected evidence like wireless transcripts of conversations of Jaish terrorists involved in the Pathankot airport attack and the vast evidence available internationally of the Lashkar’s role in the Mumbai 26/11 attack. The Americans and their allies have focused attention primarily on Pakistan support for the Haqqani Network in Afghanistan.

Pakistan has believed that sooner, rather than later, the Americans would cut their losses and withdraw from Afghanistan, leaving the country open for a Pakistan-backed Taliban takeover. President Donald Trump, however, has made it clear that he is determined that the US would not “lose” in Afghanistan. He is augmenting the US troop presence and moving fast to strengthen the Afghan armed forces, including its air force. American economic assistance to Pakistan has been placed on hold. In addition, the US has mobilised its NATO allies to take a tougher line on Pakistan. The NATO allies are also expanding their deployments in Afghanistan. More recently, the US initiated moves to get the FATF to place Pakistan on the “grey list” at its next meeting in June.

Predictable Trouble

The American effort in the FATF on Pakistani funding of terrorist groups predictably ran into problems initially. Pakistan had mobilised support from China, the GCC led by Saudi Arabia, Turkey and Russia, to counter the American-led move. Islamabad banked on Russian support, given the bonhomie on the part of Russian Foreign Minister Sergei Lavrov when he invited his Pakistani counterpart Khawaja Asif to Moscow, on the eve of the FATF meeting. Further, despite parliamentary opposition, Pakistan declared, just before the meeting, that it would deploy additional troops in Saudi Arabia. It clearly expected Saudi support in the FATF after its decision was announced. Lavrov’s bonhomie led the inexperienced Asif to proclaim prematurely that Pakistan had succeeded in prevailing over moves to place it in a FATF “grey list”.

The Americans responded immediately to these developments. Saudi Arabia and the GCC fell in line with American demands for the FATF to act against Pakistan. European powers like the UK, Germany and France remained steadfast in their determination to corner Pakistan. Russia quietly receded to the background. Recognising that its support for Pakistan would leave it isolated in the FATF, where it was aspiring to become vice-chairman, Pakistan’s ‘all weather friend’ China pulled back its support. The only country that continued supporting Pakistan was Turkey whose egotistic President Recep Erdogan would certainly not win an international popularity contest today.

Pakistan will now have to provide a detailed action plan on actions it proposes to take on curbing funding for UN-designated terrorist groups. It would then be placed on the ‘grey list’ where its financial flows would be subject to intense international scrutiny. Pakistan would, thereafter, be placed on the FATF ‘black list’ if it failed to present a credible and comprehensive action plan to the FATF by June. This would virtually end any prospect of it receiving adequate financial flows.

Show of Action

There has been disappointment, anger and frustration in Pakistan at the FATF decision. Hardly anyone in Pakistan is prepared to publicly advise that it is time for Pakistan’s army to end support on its soil to armed terrorist groups acting against India and Afghanistan. While Pakistan claimed it had closed Lashkar offices, it was soon found that only the gates of these offices were closed, while routine activities continued inside.

In these circumstances, India should urge members of the EU and Japan to join the US and end providing concessional credits to Pakistan. Given its precarious foreign exchange position, Pakistan will inevitably have to go to the IMF for a bailout in a few months. Institutions such as the IMF, World Bank and Asian Development Bank need to be persuaded to withhold concessional credits to Pakistan, even if it takes some token measures to claim it has acted against the terrorist outfits.

India should urge that no concessional credits should be provided till Pakistan irrevocably dismantles the infrastructure of terrorism on its soil. China will not follow suit; but its “aid” for the China-Pakistan Economic corridor will only increase Pakistan’s already heavy debt burden.

The withdrawal of Chinese support in the FATF has shaken the Pakistan establishment’s belief that Chinese support to “contain India” has no limitations. China recognises that backing Pakistan unconditionally in the FATF would not only earn it the ire of the mercurial Donald Trump, but would also sully its image internationally. At the same time, this does not mean there will be any change in China’s policies on issues like declaring Jaish chief Masood Azhar an international terrorist.

Moreover, we should also clearly recognise that Trump’s actions are primarily in response to Pakistan’s support for the Haqqani Network in Afghanistan. They are not highly or significantly focused on Pakistan-sponsored terrorism on Indian soil. That battle that will have to be fought primarily by us.

The writer is a former High Commissioner to Pakistan