There have been some signals from recent developments in Pakistan when it comes to putting economy at the center of external affairs. Pakistan’s friends and foes have been following the rules of ‘economic statecraft’, a concept which Princeton’s Prof. David A. Baldwin defines as using economic means to meet foreign policy goals. Pakistan may also be on path to pursue economic diplomacy to suit its interests.
Nowhere is the challenge of securing economic interests for Pakistan greater than in the Middle East. And it appears that the state may have cracked the code of dealing with mercurial rivals. When Pakistan signed a long-term LNG deal late last month with Qatar, not only did the country get a good deal (at a discounted rate that was publicly disclosed), it also managed to not offend Qatari rivals in the region.
In a one-sided relationship, there is still economic juice left for Pakistan’s erstwhile Gulf allies to squeeze. Apparently feeling miffed about Pakistan’s repeated demands that GCC powers censure India over Kashmir annexation, first the Saudis took back $2 billion dollars and then the Emiratis banned work visas for Pakistanis (among dozen other countries). This created an impression of a breakdown in relationship.
However, recent developments indicate that Pakistan’s persistence is paying off. Both those countries’ governments have reportedly rolled over their remaining forex deposits in Pakistan, amid concerns that they might lose Pakistan for good if they continued to engage in a punitive manner. Some of this has to do with these powers’ dwindling options in the wake of Trump’s defeat and likely revival of Iran deal. As GCC powers defend their economic interests with India, Pakistan is also free to fend for its own.
Meanwhile, following the military leadership’s decision to “extend hand of peace in all directions,” there has been a breakthrough Indo-Pak pact on border ceasefire. Good to see a verbal ceasefire, too, after years of high-pitch exchanges. This is pragmatic for Pakistan, especially from the economic standpoint. The Indo-Pak trade embargo, which had become serious during a volatile 2019, is unsustainable. Prospects of mass anti-Covid immunization in South Asia also depend on improved bilateral relationship.
Whether the Biden administration played a role or not in bringing India and Pakistan together over a hot-button issue, the lessening of hostilities was needed in both directions. For Pakistan to go the whole hog in helping the Afghan peace process that hangs in the balance, it needs to worry a little less about India’s potential security role in post-war Afghanistan. And India itself has been mending fences with China and others, in a bid to focus on internal economic and political issues.
It remains to be seen whether Islamabad is able to sell its vision of economic partnership to the new administration in DC, around areas of climate change, connectivity and regional peace. Facing a tight withdrawal deadline form Afghanistan, the Biden administration isn’t wielding a stick, at least not in public. Sooner or later a US withdrawal is likely, and Pakistan will get a bigger role once that happens. Learn from history: use such an opportunity to build deeper economic relationship than remain security centric.
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