Focusing on the fallout of this growing U.S.-China rivalry is especially important within the already fraught South Asian security environment, where the U.S. has invested in India to counter-balance China, while Pakistan has developed close ties to China. The speed with which the U.S.-China rivalry is intensifying, and the bipartisan nature of U.S. opposition to China have created an especially precarious situation for Pakistan. It is in Pakistan’s national interest to avoid placing all its eggs in the China basket and to resist potential pressure to side with China in the latter’s strategic rivalry with the United States.
This research note aims to highlight Pakistani perspectives concerning the unfolding U.S.-China rivalry, and to assess what strategic options Pakistan has for navigating the choppy waters of great power competition. U.S.-China tensions can complicate Pakistan’s efforts to maintain ties with both of these countries in a variety of ways, by compelling Pakistan to choose between maintaining increased economic and security cooperation with China and collaborating on these issues with the U.S. and the international community at large. An intensifying competition between the U.S. and China also poses major risks for regional stability in South Asia, including increased possibilities of conflict across contested boundaries, an escalating nuclear arms race, and an adverse impact on stabilization goals in Afghanistan and beyond.
Pakistani policymakers are trying to keep their options open as they await the articulation of the incoming U.S. administration’s approach towards China and the broader region. This uncertainty comes at a difficult time in Pakistan, where the economy remains on tenterhooks for the foreseeable future. Already lackluster national growth has plummeted as a result of the COVID-19 pandemic. Pakistan has also again been placed on a “gray list” of the Financial Action Task Force (FATF) through at least February 2021, raising the specter of further economic challenges.1Fayyaz Hussain, “‘To remain on grey list’: FATF urges Pakistan to complete action plan by Feb 2021”, Dawn, October 24, 2020, https://www.dawn.com/news/1586624.
Optimistic Pakistani policymakers aspire to play a bridging role to help ease tensions between the U.S. and China. Yet, more pragmatic assessments call for proactive management and mitigation of emergent risks created by the broader environment of U.S.-China strategic competition, which is likely to endure over the coming years. Some of the mitigation measures which Pakistan can adopt to lessen its increasing dependence on China include modifying how China-Pakistan Economic Corridor (CPEC) projects are implemented within the country and proactively identifying opportunities for the U.S. and other international investors to supplement Chinese financing.
This brief is informed by a year-long research project reimagining the longstanding but turbulent U.S.-Pakistan relationship, with a view to identifying recommendations to make bilateral ties mutually beneficial and sustainable.2Syed M. Ali and Marvin Weinbaum, “Leveraging a moment of change: Pathways to a sustainable U.S.-Pakistan relationship,” Middle East Institute,March 3, 2020, https://www.mei.edu/events/leveraging-moment-change-pathways-sustainable-us-pakistan-relationship. This ongoing research brought together a core groups of experts in Washington D.C., and, thereafter, in Islamabad, to deliberate on a range of Pakistan-U.S. convergences and divergences. Discussions revolved around the challenge of stabilizing Afghanistan, how the U.S. can better manage its closer ties with India without exacerbating Pakistan’s regional insecurities, and the impact of Pakistan’s growing relationship with China on its own political economy and relations with the United States. Building on this earlier work, this paper focuses on highlighting the strategic implications of the U.S.-China rivalry for Pakistan. It does so by drawing on emerging research; public statements of key American, Chinese, and Pakistan officials; and half a dozen interviews with key interlocutors well versed in Pakistani foreign policy motivations and priorities.3The informants interviewed for this paper included three former Pakistani ambassadors (to China, Japan, and the United States), and prominent foreign policy experts from Pakistan and of Pakistani origin.
How Pakistan views the U.S.-China rivalry
Pakistan’s strategic thinkers are not oblivious to ongoing U.S.-China friction, nor to its potential for impacting Pakistan’s own relationship with both parties. Opinions do vary, however, concerning how the U.S.-China rivalry may influence Islamabad’s relations with Washington, and what this may mean for strategic stability in the South Asian region.
Historically, Pakistan has maintained robust relationships with both the U.S. and China based on security, political, and economic interests. Current pillars of Pakistan’s relationship with the U.S. include Pakistan’s ongoing cooperation in Afghanistan, which will be required well past the U.S. military drawdown. While military and economic aid has decreased, America remains the largest export market for Pakistani goods and a choice education destination for the Pakistani elite.4Ali and Weinbaum. Conversely, China has become Pakistan’s largest supplier of arms,5Rahima Sohail, “Pakistan biggest importer of Chinese arms: report,” Express Tribune, October 18, 2018, https://tribune.com.pk/story/1828531/pakistan-biggest-importer-chinese-arms-report. and it has initiated unprecedented economic cooperation via CPEC, with a projected value of $62 billon.6Salman Siddiqui, “CPEC investment pushed from $55 billion to $62 billion,” Express Tribune, April 12, 2017, https://tribune.com.pk/story/1381733/cpec-investment-pushed-55b-62b. Pakistani strategists also count on China for consistent support to contend with asymmetrical rival India and moral support in helping internationalize the issue of Kashmir—assistance the U.S. does not provide.7Shuja Nawaz, interview by Professor Hassan Abbas, Near East South Asia Center for Strategic Studies, August 6, 2020, https://nesa-center.org/us-pakistan-relations-at-another-fork-in-the-road-a-conversation-with-south-asia-scholar-shuja-nawaz/.
This logic suggests Pakistani policymakers should adopt a cautious approach in managing bilateral relations with both strategically vital countries, and not be swayed into picking sides.
Complicating efforts at assessing the impact of U.S.-China competition is a perception among Pakistani foreign policy experts that the current political situation in the United States is currently undergoing significant transition. Many elites advocate for a wait-and-see attitude, arguing that alarmist American rhetoric on China has been driven by domestic political considerations ahead of the November election, rather than a clear indication of U.S. policy going forward. This logic suggests Pakistani policymakers should adopt a cautious approach in managing bilateral relations with both strategically vital countries, and not be swayed into picking sides.8Interview with former Pakistani Ambassador to Japan, Toquir Hossain, July 30, 2020. Indeed, this strategy seems to be the one Pakistani officials have pursued at this early and uncertain stage when heightened tensions coexist with ongoing attempts to reach a workable trade deal between the two economic giants.9Interview with University of Karachi Professor, Moonis Ahmar, August 4, 2020.
Pakistan has ambitions of reclaiming its role as a bridge state—recalling when it facilitated U.S.-China rapprochement during the Nixon era.10Damodar Panda, “The United States and China: Towards A Rapprochement.” Indian Journal of Asian Affairs 10, no. 2 (December 1997), 43-68, http://www.jstor.org/stable/41950411. Some policymakers point to the possibility of Pakistan playing the role of “a neutral actor” to help defuse the tensions between the two great powers and becoming “a melting pot” of converging Chinese and American interests to promote regional prosperity (including in Afghanistan).11Moeed Yosuf, interview by Damon Wilson, Atlantic Council, August 10, 2020, https://www.atlanticcouncil.org/event/navigating-pakistans-national-security-challenges/. In the process, Pakistan would stand to avail simultaneous security and economic benefits associated with preserving mutually beneficial partnerships with the two leading global powers, without needing to become overly dependent on either one of them.
Nonetheless, Pakistan’s Prime Minister Imran Khan recently made the blunt assertion that Pakistan’s future and its economic development are now intertwined with China.12Ayaz Gul, “Pakistan attempts to balance ties with China, US,” Voice of America, August 27, 2020, https://www.voanews.com/south-central-asia/pakistan-attempts-balance-ties-china-us. Given that Prime Minister Khan’s government is in power for another three years and that cooperation with China seems to enjoy the full backing of the powerful military establishment,13Stephanie Findlay, “Pakistan army muscles in on Belt and Road project,” Financial Times, August 27, 2020, https://www.ft.com/content/f675981c-83b7-40e4-9b0b-1a4c52963e6f. this statement could suggest which way his government would lean if it came under increased pressure to pick a side. Given the tenuous nature of the current bilateral U.S.-Pakistan relationship, such pressure is best avoided. Khan did manage to lessen initially acrimonious relations with the Trump administration, expressing the desire to transcend the historically transactional nature of the bilateral relationship between the two countries to forge instead a more “dignified” friendship.14Prime Minister Imran Khan, interview by Nancy Lindborg, United States Institute of Peace, July 23, 2019, https://www.usip.org/sites/default/files/20190723_USIP_One_Year_In_A_Conversation_With_Imran_Khan_Transcript.pdf. Yet, the complex realities of China-U.S. strategic competition will pose several challenges to Pakistan’s desire to maintain close ties with both China and the incoming Biden administration.
Alongside Pakistan’s deepening military and defense relationship with China, there is growing Pakistani economic dependence on China via CPEC, which has become a major component of China’s ambitious Belt and Road Initiative (BRI). Prime Minster Khan recently called CPEC “a manifestation of Pakistan-China friendship,” vowing, “the government will complete it at any cost…”15Staff Reporter, “CPEC to be completed at all costs, says Imran,” Dawn, July 4, 2020, https://www.dawn.com/news/1566867. The Chinese Foreign Office spokesperson similarly termed CPEC “an important pilot project of BRI cooperation and a flagship for bilateral cooperation.”16“Foreign Ministry Spokesperson Zhao Lijian’s Regular Press Conference on September 7, 2020,” Embassy of the People’s Republic of China in the United States, September 7, 2020, http://www.china-embassy.org/eng/fyrth/t1812840.htm#:~:text=Foreign%20Ministry%20Spokesperson%20Zhao%20Lijian’s,the%20United%20States%20of%20America. U.S. views of CPEC have shifted over the years, with Washington initially open to CPEC as a means of helping to stabilize Pakistan at a time when U.S. financial support was on the decline. The current U.S. administration has instead taken a negative view of CPEC. Ambassador Alice Wells, former Acting Assistant Secretary of State for South and Central Asia, repeatedly criticized CPEC and its future impacts, saying that its “lack of transparency can increase CPEC costs and foster corruption resulting in an even heavier debt burden for Pakistan.”17Ambassador Alice Wells, interview by Michael Kugelman, the Wilson Center, November 21, 2019, https://www.state.gov/a-conversation-with-ambassador-alice-wells-on-the-china-pakistan-economic-corridor/. China has rebutted these claims by arguing that debt incurred from CPEC projects stands at $4.9 billion, which is less than one-tenth of Pakistan’s total debt.18IANS, “CPEC loans less than one-tenth of Pak’s total debt: China responds to US,” Business Standard, November 26, 2019, https://www.business-standard.com/article/international/cpec-loans-less-than-one-tenth-of-pak-s-total-debt-china-responds-to-us-119112600583_1.html.
There seems to be little appetite within the United States to out-compete China in terms of infrastructure financing in Pakistan, as well as a reluctance to foot the bill for unsustainable lending practices. It is reasonable for Washington to express concern about Pakistan’s economy, given its lackluster growth, limited resolve to increase its tax revenues, and challenges boosting exports. For Pakistan, however—as is the case for so many lesser-developed states around the world—the possible threat of BRI projects providing leverage for Chinese strategic ends is easily pushed aside by the desperate need for foreign investment.
The provision of the three-year $6 billion IMF loan last year (and another $1.4 billion to combat COVID-19) has to some extent helped lessen Pakistan’s need to rely exclusively on China.19Shahbaz Rana, “Pakistan wins $1.4 billion IMF emergency loan,” Express Tribune, April 7, 2020, https://tribune.com.pk/story/2199875/pakistan-wins-1-4b-imf-emergency-loan. Yet, Pakistan’s placement on the FATF “gray list” for the past two years—and the possibility of it being downgraded to the “black list”—remains a major threat to the economic security of the country. Leaving aside debates about the accuracy or motivations of FATF rankings, it is likely that any financial sanctions brought on by potential downgrading would invariably compel Pakistan to depend more heavily on China.
Despite Pakistan’s growing financial dependence on China, it has not been without agency when dealing with its powerful patron. The very idea of developing a deep seaport at Gwadar was, indeed, Pakistan’s idea rather than a Chinese initiative to further its “string of pearls” doctrine of establishing a strong maritime presence across the Indian Ocean.20Daniel Markey, China’s Western Horizon: Beijing and the New Geopolitics of Eurasia, (New York: Oxford University Press, 2020). While Pakistan’s ongoing cooperation with China provides it opportunities to boost its economic prospects and strategic position in line with a rising superpower, it has also posed new challenges for Pakistan’s relations with neighboring countries, in addition to placing strain on its bilateral relationship with the United States.
How the U.S.-China rivalry is impacting South Asia’s regional stability
The U.S.-China rivalry is not only creating opportunities and complications within Pakistan itself but also influencing Pakistan’s relations with other key regional players. The growing synergy between India and the U.S. in the Indo-Pacific region to curb Chinese influence has not gone unnoticed in Islamabad, nor is this collaboration without consequence for Pakistan. A deepening U.S.-China rivalry could exacerbate the protracted India-Pakistan conflict by increasing advanced arms and intelligence capabilities on both sides, while at the same time undermining prospects for U.S. and Chinese cooperation on managing ensuing crises.
The revocation of the autonomous status of Kashmir and Ladakh by Indian Prime Minister Narendra Modi in August 2019 has heightened tensions among India, China, and Pakistan along contested borders within the Himalayan ranges.21Tom O’Connor, “India and Pakistan Clash on Border As China Conflict Looms Heavy,” Newsweek, September 18, 2020, https://www.newsweek.com/india-pakistan-clashes-china-conflict-looms-1533005. China’s ongoing border standoff with India in eastern Ladakh provides Pakistan an opportunity to push back against India alongside China through more assertive posturing along the contested lines of control, without resorting to the use of cross-border militancy to support the Kashmir insurgency.22Shuja Nawaz. This opportunity, however, has heightened Indian concerns over a two-front threat in which it could face fighting along its borders with China and Pakistan simultaneously. While an unlikely scenario, these intensified threat perceptions could further destabilize already fraught Indo-Pakistan relations.
U.S. political strategists have pointed out opportunities for Washington to accelerate and deepen its collaboration with New Delhi in the context of India’s ongoing border dispute with China.23Michele Flournoy, “China’s Border Clash With India Is a Clarion Call,” Financial Times, June 22, 2020, https://www.ft.com/content/3757b62e-8882-4b53-8fd0-75a9bad2bc3e. Yet, while India’s determination to check Chinese power may be hardening, its capacity to do so seems to be faltering. India’s economic woes, compulsion to divert military resources to its land borders with China, and deepening dependence on Russia are among the factors limiting prospects for synergy with America’s Indo-Pacific approach.24Sameer Lalwani, “Revelations and Opportunities: What the United States Can Learn from the Sino-Indian Crisis,” War on the Rocks, July 10, 2020, https://warontherocks.com/2020/07/revelations-and-opportunities-what-the-united-states-can-learn-from-the-sino-indian-crisis/.
Were Washington’s Indo-Pacific strategy, which is primarily based on maritime cooperation, to expand to help India address continental challenges posed by China, the implications could be serious for Pakistan. Though an abrupt shift remains unlikely at this time, announcements made on the heels of the October U.S.-India 2+2 Dialogue concerning American plans to share geospatial intelligence and sophisticated missile technology with India have caused alarm in Pakistan.25Adnan Amir, “Pakistan alarmed by U.S.-India information sharing pact,” Nikkie Asia, November 2, 2020, https://asia.nikkei.com/Politics/International-relations/Pakistan-alarmed-by-US-India-information-sharing-pact. Earlier, Pakistan’s Foreign Office had explicitly expressed concern over a multibillion dollar military deal inked during President Trump’s visit to India in February 2020.26Editorial team, ‘Indo-US arms deal’ Dawn, February 29, 2020, https://www.dawn.com/news/1537331.
Pakistan’s strategic planners are likely to continue enhancing the country’s conventional and (offensive and defensive) nuclear capabilities given the inability to use proxies due to internal repercussions and the threat of international sanctions (via FATF).27Interview with Center for Global Policy founding director Kamran Bokhari, July 30, 2020. While deterrence stability has thus far held despite several recent low-level conflicts between India and Pakistan, the threat of an escalating nuclear arms race in the region remains an issue of concern. The U.S. has worked with Pakistan to bolster its command-and-control structures, and the latest Nuclear Security Index acknowledged Pakistan’s resolve in this respect, ranking Pakistan the “most improved” country, particularly in terms of its security and control measures. However, South Asia’s nuclear arms race is being influenced by what has been termed a “strategic chain,” whereby Pakistan responds strategically to India, India responds both to Pakistan and China, and China in turn responds to both India and the U.S.28Robert Einhorn and W.P.S. Sidhu, “The Strategic Chain Linking Pakistan, India, China, and the United States,” Foreign Policy at Brookings, Paper 14, March 2017, https://www.brookings.edu/wp-content/uploads/2017/03/acnpi_201703_strategic_chain.pdf. In addition to an escalating nuclear arms race in South Asia, U.S.-China tensions pose the added risk that Washington and Beijing could fail to cooperate as third-party crisis managers within South Asia if another conflict between India and Pakistan were to intensify.
Any drastic shift by Pakistan away from U.S.-aligned Gulf states like the UAE, Saudi Arabia, and Bahrain to a China-backed alignment involving Iran, Turkey, and Malaysia would be an overreach and not in keeping with Pakistan’s strategic interests.
The U.S.-China rivalry is also impacting Pakistan’s relations in the Middle East. Pakistan has seen some recent friction with traditional U.S. ally Saudi Arabia due to its reluctance to support Pakistan’s stance on Kashmir.29Marwa Rashid and Asif Shahzad, “Pakistani army chief visits Saudi Arabia to revive ties strained over Kashmir,” Reuters, August 17, 2020, https://www.reuters.com/article/us-pakistan-saudi-arabia/pakistani-army-chief-visits-saudi-arabia-to-revive-ties-strained-over-kashmir-idUSKCN25D10H. China even stepped in to provide Pakistan another $1 billion loan to repay the Saudis, yet a complete rupture between Pakistan and Saudi Arabia seems unlikely at this time, even as Saudi Arabia and other Gulf states develop closer economic ties to India.30India is an important market for investments and a significant importer of oil from the Gulf states, especially from the UAE and Saudi Arabia. There are a sizeable number of Indians working in both of these countries. Due to these economic ties, both Saudi Arabia and the UAE have avoided criticizing India over its growing intolerance towards Indian Muslims. The UAE even awarded PM Modi its highest civil award in 2019. Any drastic shift by Pakistan away from U.S.-aligned Gulf states like the UAE, Saudi Arabia, and Bahrain to a China-backed alignment involving Iran, Turkey, and Malaysia would be an overreach and not in keeping with Pakistan’s strategic interests. The latter group of countries, while all Muslim-majority, diverge in their views on numerous issues, including their relations with China.31The Malaysian government has persecuted opponents for alleged corrupt deals with China. Malaysia is also taking an increasingly hardened stance towards China’s territorial claims in the South China Sea. Rather than choosing sides, Pakistan will be better served by keeping its options open, and continually negotiating regional sensitivities, as it aims to link CPEC with the broader BRI project and attract diversified investment.32Interview with Professor Hassan Abbas, Near East South Asia Center for Strategic Studies, August 4, 2020.
Regional players are watching developments at Pakistan’s Gwadar seaport closely. While there is no credible evidence of Gwadar being turned into a naval or dual-use port as of yet, Pakistan’s decision to transfer management of the Gwadar seaport from Singapore to China in 2013 and its joint naval drills with China in the Arabian Sea have fueled suspicions in the region.33Ayaz Gul, “China’s Warships Hold Joint Naval Drill With Pakistan,” Voice of America, January 8, 2020, https://www.voanews.com/east-asia-pacific/chinas-warships-hold-joint-naval-drill-pakistan. Pakistan is unlikely to support such an outcome, however, as a Chinese naval presence in Gwadar could inflame tensions between Pakistan and several Gulf states, which host a significant U.S. military and naval presence. The January 2019 announcement that Saudi Arabia would fund a $10 billion oil refinery project in Gwadar likely offers some reassurance to the U.S. given its close ties to the Saudis.34Kaswar Klasra, “Saudi investment in Gwadar oil refinery to boost China-Pakistan Corridor project,” Al Arabiya, January 23, 2019, https://english.alarabiya.net/en/business/energy/2019/01/23/Saudi-investment-in-Gwadar-oil-refinery-to-boost-China-Pakistan-Corridor-project.
A reported China-Iran draft trade deal adds an unexpected layer of complexity in terms of balancing Pakistan’s already precarious regional relations. The potential $400 billion Iran-China deal could greatly overshadow Indo-Iranian cooperation at the deep seaport of Chabahar.35Farnaz Fassihi and Steven Lee Myers, “Defying US, China and Iran near trade and military partnership,” New York Times, July 11, 2020, https://www.nytimes.com/2020/07/11/world/asia/china-iran-trade-military-deal.html. Despite the hype generated by preliminary media reports about the ambitious deal, the economic feasibility of working with a heavily sanctioned state like Iran remains in doubt, and Iran has its own fears of economic exploitation by China. For its part, Pakistan is cautiously welcoming an increased Chinese presence in Iran, seeing it as a way to extend its economic reach. While a potential Chinese attempt to replicate CPEC in Iran may not serve to supplant India entirely, such moves could offer Pakistan the opportunity to be involved in trade routes to Afghanistan via Iran as well, especially if the Biden administration softens the current U.S. approach based on “maximum pressure.”
Notably Afghanistan is one area in which intensified U.S.-China competition seems unlikely to complicate Pakistan’s regional relations. Pakistan’s role in Afghanistan has largely been determined by its own threat perceptions vis-a-vis India, and these strategic interests within Afghanistan have been relatively insulated from the broader U.S.-China competition. Indeed, the future stability of Afghanistan is an issue that the U.S. and China are likely to agree on despite their broader competition. China has shown little interest in helping stabilize Afghanistan through military means, and evidence has emerged of China having reached some understanding with the Taliban to safeguard its own economic interests in the country.36Vanda Felbab-Brown, “A bridge too far: The unfulfilled promise of Chinese cooperation in Afghanistan,” Brookings,June 2020, https://www.brookings.edu/wp-content/uploads/2020/06/FP_20200615_china_afghanistan_felbab_brown.pdf. Yet, U.S.-Chinese competition need not further complicate the situation in Afghanistan, especially since China is not keen on seeing an upsurge of Al-Qaeda or the Islamic State within its close proximity.
Conversely, China, like Pakistan, has much to gain from some semblance of order taking shape in Afghanistan. Gwadar’s proximity to southern areas of Afghanistan has made it possible for Afghan traders to import goods via the Gwadar port under a newly inked expanded trade pact, which includes the opening of another trade gate in Badini, Balochistan.37Behram Balouch, “In a first, ship with fertiliser for Afghanistan berths at Gwadar Port,” Dawn, May 30, 2020, https://www.dawn.com/news/1560347/. Such developments provide an encouraging precedent for the economic stabilization of Afghanistan, using existing CPEC infrastructure. Pakistan would welcome this approach, particularly should the U.S. and other states invest in related projects in the interest of Afghan connectivity and stability, potentially alongside Chinese investments.
The way forward
Although Pakistan has historic and now-growing ties with China, it remains heavily dependent on U.S. military hardware and on the U.S. export market. A more robust economic relationship with the U.S., which goes beyond the carrot and stick approach of providing aid and exerting pressure, could certainly help broaden Pakistan’s policy options. Yet, in the absence of the existing political will within the U.S. to significantly expand bilateral relations with Pakistan, the onus will rest on Pakistani policymakers to identify feasible opportunities for bilateral cooperation with the U.S. in tandem with a tightening embrace with China.
In order to preserve continued space for U.S. cooperation, Pakistani policymakers must create more distance from China instead of blindly endorsing its position on Hong Kong or staying mute on the evident Chinese repression of Uighur Muslims.38“The persecution of Uyghurs is a crime against humanity,” The Economist, October 15, 2020, https://www.economist.com/leaders/2020/10/17/the-persecution-of-the-uyghurs-is-a-crime-against-humanity. While realpolitik considerations may compel Pakistan to mute its criticism of China, it must avoid the folly of becoming a spokesperson for Chinese actions. Yet, this is what Pakistan’s Permanent Representative to the UN did by making a joint statement on behalf of 55 countries at the General Assembly’s Third Committee on Social, Cultural and Humanitarian Issues claiming that “the Hong Kong special administrative region is an inalienable part of China, and Hong Kong affairs are China’s internal affairs that brook no interference by foreign forces.”39Anwar Iqbal, “Pakistan leads 55-nation group supporting China on Hong Kong,” The Dawn, October 8, 2020, https://www.dawn.com/news/1583884. Such actions not only undermine Pakistan’s goodwill amongst western democracies, but also make its apparent indignation concerning Indian atrocities in Kashmir ring hollow.
Pakistan can also implement specific measures to demonstrate that Chinese loans and investments in Pakistan via CPEC are not meant to facilitate China’s strategic depth. Pakistan’s ruling party had promised greater scrutiny of CPEC projects but reversed course soon after coming to power.40Madiha Afzal, “At all costs: How Pakistan and China control the narrative on the China-Pakistan Economic Corridor,” Brookings, June 2020, https://www.brookings.edu/research/at-all-costs-how-pakistan-and-china-control-the-narrative-on-the-china-pakistan-economic-corridor/. Appointing a non-military Chairman of the CPEC Authority (currently headed by a retired three-star general) would help assuage such fears, as would increasing transparency. This, in turn, could alleviate some of the regional grievances exacerbated by CPEC.
South Asia remains one of the least integrated regions in the world.41World Bank, “Why #OneSouthAsia?” The World Bank, https://www.worldbank.org/en/programs/south-asia-regional-integration/overview. The U.S. and multilateral institutions such as the World Bank and Asian Development Bank (ADB) have also recognized the value of reviving the “old silk route.” These imperatives provide the rationale for Pakistan’s overall approach to CPEC to be guided not by strategic but economic imperatives, especially the goal of enhancing regional connectivity. Although Pakistan and China’s existing acrimony with India continues to impede the goal of broader regional integration, limited opportunities for increasing connectivity with other SAARC countries do exist. Using CPEC infrastructure to bolster Afghanistan’s trade with other countries—as with the transit trade now flowing through the Gwadar port—can help insulate CPEC from external criticism. India, too, was similarly able to avert U.S. sanctions for its cooperation with Iran on the Chabahar Port because this port was seen to help bolster Afghanistan’s economy.
While it is not feasible for the U.S. to match or exceed Chinese financing in Pakistan, Pakistan can aim to expand bilateral trade via the U.S. Generalized System of Preferences (GSP) program.42Approximately 3,500 different products from Pakistan are presently eligible to enter the United States duty-free under the GSP program, which is set to expire on December 31, 2020, when it will need to be taken up in Congress for renewal. This could entail addressing compliance-related issues to boost exports of specific in-demand commodities like mangoes, for example.43PPI, “Pakistan’s mangoes struggle to find market in US,” Express Tribune, July 7, 2017, https://tribune.com.pk/story/1452041/pakistans-mangoes-struggle-find-market-us. Pakistan can also create an enabling regulatory environment to facilitate international and U.S.-based firms to invest in Pakistani infrastructure where they have competitive advantages, especially in the context of “greening” Pakistan’s otherwise expanding reliance on coal-dependent energy projects.44Erica Downs, “The China-Pakistan economic Corridor Power Projects: Insights into Environmental and Debt Sustainability,” Center on Global Energy Policy, Columbia University, October 2019, https://energypolicy.columbia.edu/sites/default/files/pictures/China-Pakistan_CGEP_Report_100219-2.pdf. Should Pakistan create a more attractive environment for investment, U.S. private sector firms could share technical know-how and equipment to support greener energy projects, providing much-needed economic ballast to the bilateral relationship.45Ali and Weinbaum. Former Pakistani Ambassador to the U.S. and current Ambassador-at-Large for Foreign Investments Ali Jehangir Siddiqui noted that Pakistan is open to the idea of expanding and diversifying its energy portfolio, given ongoing work on a broad array of collaborations within this sector.46Interview with Ambassador Ali Jehangir Siddiqui, August 6, 2020. Ambassador Siddiqui cited collaborations with energy firms from Saudi Arabia, the UAE, Austria, and the United States.
The U.S. should therefore seek to avoid alienating Pakistan despite its relationship with China and look for means of continued, mutually beneficial cooperation. Failing this, fears of Pakistan’s dependence on China and its potential to facilitate Chinese power projection in the Gulf could become a self-fulfilling prophecy.
There is a risk that China may resist Pakistani attempts to broaden the scope of CPEC-aligned infrastructure and energy projects. However, Pakistan’s ability to resist such pressures will in large part depend on external willingness, especially that of the U.S., to constructively engage with it. The U.S. remains Pakistan’s largest trading partner, and its relationship with the U.S. sends encouraging signals to European countries to invest in Pakistan as well. Conversely, diminishing ties with the U.S. would worsen Pakistan’s international standing and, in turn, compel it to depend more heavily on China, as has already occurred over the past decade.47Ali and Weinbaum. The U.S. should therefore seek to avoid alienating Pakistan despite its relationship with China and look for means of continued, mutually beneficial cooperation. Failing this, fears of Pakistan’s dependence on China and its potential to facilitate Chinese power projection in the Gulf could become a self-fulfilling prophecy.
Future scenarios that could compel Pakistan to choose between the U.S. and China, or at least make it increasingly challenging to maintain close ties with both countries, include Pakistan’s inclusion in FATF’s black-list. This would give Pakistan no choice but to become more dependent on China as other sources of financial support would no longer be available.48Being placed on the black-list would potentially prevent Pakistan from receiving financial assistance from the World Bank, the International Monetary Fund (IMF), the Asian Development Bank (ADB), and other international organizations. Such a level of dependence could, for example, impact Pakistan’s ability to resist pressure to convert Gwadar into a dual-use port. Pakistan being kept on the FATF gray-list over the long term may yield a less drastic, but an ultimately similar, China pivot. Removal from FATF’s gray-list could enable Pakistan to more easily attract foreign investments to balance, or even supplement, its CPEC projects.
The U.S. should also seek to ensure that its own attempts to enhance its strategic cooperation with India do not compound Pakistan’s regional insecurities and further push it towards China. It is now vital that the U.S. avoid viewing its relationship with Pakistan primarily through a competitive China lens (similar to its myopic focus on Afghanistan) to avert dangerously straining the bilateral relationship.49Syed Mohammad Ali, “Need for a better balancing act,” Express Tribune, July 2, 2020, https://tribune.com.pk/story/2252990/need-for-a-better-balancing-act. Such a limited, competitive viewpoint would not only risk alienating Pakistan, it would worsen strategic stability in South Asia, increase the risk of regional conflict escalation, and complicate the goal of stabilizing Afghanistan. Thus far, Pakistan has not been a main arena of contention in the U.S.-China rivalry. It need not become so, especially if Pakistan and the U.S. take mutually beneficial steps to improve their own bilateral relationship.
Syed Mohammad Ali teaches courses on human security and security issues in South Asia at Georgetown and Johns Hopkins universities.