An interview with Michael Kugelman, Deputy Director South Asia, Wilson Center

PM Imran Khan is all set to meet United States President Donald Trump today at the White House. This will be the first summit level engagement between the two countries since the two leaders assumed their respective offices, and perhaps will set the tone for U.S-Pakistan relations over the next five years if Donald Trump gets re-elected in 2020. Will the meeting comprise of platitudes, or will the two countries make headways in committing to work together for geopolitical stability and economic cooperation? What will be on the agenda of the two unlikely heads of states?

To get a deeper and a more ground level insight into what the mood is in DC and what Pakistan watchers are hoping this meeting would accomplish, BR Research had a chat with Michael Kugelman for his take on these and other related affairs including the FATF. Michael is a distinguished voice on South Asia and Pak-Afghan affairs and the strategic interests of the U.S in the region. He is currently the Deputy Director of the Asia Program and Senior Associate for South Asia at the Wilson Center. He regularly contributes to the New York Times, Foreign Policy, Foreign Affairs, and other prominent publications covering topics ranging from U.S. policy in South Asia to terrorism to water, energy, and food security in the region. Edited excerpts from the conversation follow:

BR Research: Let’s first talk about your impressions on the current Pakistani government. We know that PM Khan has inherited a crumbling economy for which his government has introduced a tough budget. We are also into our 13th IMF bail-out programme. What political risks is this government exposed to by going to the IMF, and do you think this programme will solve Pakistan’s perennial economic issues.

Michael Kugelman: It is certainly a risky move for Imran Khan’s government to accept an IMF programme and carry it out, though it is clearly a necessity. Remember that, for quite a few months, the government resisted going to the IMF. It tried to resort to other, more populist measures such as crowd sourcing funds from the Diaspora and vowing to recover plundered wealth. It also obtained assistance from friendly nations. But clearly these were not sustainable; they were mere band-aids.

One of the main reasons why PM Khan and his government resisted going to the IMF sooner is that they all knew that it could make the government and the PTI party very politically vulnerable. This government has certainly gone further than any other previous Pakistani government in recent times in casting itself as the party that can engage in large scale social spending and welfare. On the campaign trail, Khan talked about introducing an Islamic welfare system to Pakistan, which rallied a lot of support for him. Of course, if you go to the IMF, you are doing the very opposite. Austerity is almost entirely opposite to welfare spending. The IMF has imposed conditions that will be focused on cutting down on spending, and driving up revenues. It is definitely risky for the government.

We now have two concerns. One, Pakistan has rarely if ever successfully completed an IMF programme. Second, even if Pakistan was to successfully carry out some or all of the programme, would that really solve all of the economic problems that Pakistan suffers from? I really don’t think so. Will the broader structural challenges embedded in the economy—including a dependence on low-value-added uncompetitive exports and expensive hydrocarbon imports, and worsening natural resource shortages —be addressed?

The IMF programme is risky for many reasons, but even if it works, unfortunately, one still wonders if it will help address some, if not all, of the economic challenges the country faces.

BRR: As an outside analyst looking in, what is your impression of Imran Khan as a leader? Do you see his political capital diminishing in the face of worsening economic fundamentals and increasing burden on the poor and middle classes—or do you think he can eventually emerge as the victor.

MK: It will certainly be a painful period for many Pakistanis. One thing that really strikes me about Imran Khan is his public messaging, which is very impressive. He frequently goes in front of the nation to announce new policies and to try to prepare the nation for what’s to come.

In a recent address to the nation, he announced that there would be an austerity budget and tried to ease public concern. He needs to continue that. I think what is important for the messaging from this government in the coming weeks—as the IMF programme is wheeled out—is to communicate to the people that this is a temporary sacrifice that the nation needs to make in order to stabilize the economy, that it will last a year or so, and that achieving this austerity will eventually allow the government to return to the social welfare projects that it originally promised to the people.

Now, in reality, is this true? Can a short period of austerity enable a return to welfare spending? I don’t know. But to me, that is how the PM should pitch this austerity policy to keep hopes up with his voter base despite challenging times.

BRR: As per the official FATF word, Pakistan has missed two deadlines under the FATF action plan to adequately convince the members that it has taken measures needed to curb terror financing and money laundering through its borders. The outgoing FATF chief said that Pakistan “lacked in almost every respect”. The FATF plenary will soon mull over a decision to blacklist Pakistan. What are the chances of that happening?

MK: I think it is very unlikely that Pakistan will end up on the blacklist. The main reason being that Pakistan has taken measures to crackdown against terrorism and terrorist financing. Over the past few months, we have seen Pakistan’s efforts to arrest dozens of militants and shut down militant facilities. For Pakistan’s critics, particularly here in Washington and also in New Delhi, it is just window dressing. They believe that the recent moves to arrest these militants will just temporarily take them off the streets and when pressures subside, they will be released and facilities will be reopened.

Even if we acknowledge that these are cosmetic measures, I think that would be enough for the FATF to be convinced that something is being done. It is true that in the Orlando meetings several weeks ago, there was a lot of unhappiness on the progress that Pakistan was making with its action plan. But I still think that Pakistan would really have to be perceived as practically doing nothing to end up on the blacklist.

BRR: It has been suggested that India and folks in Washington may have lobbied with the FATF members to blacklist Pakistan in the May FATF plenary in Orlando. Do you think they could succeed with these efforts in the upcoming meeting?

MK: Certainly, I do think there is some truth to the idea. I would not be surprised if the U.S. and India have been trying to use the FATF as a pressure point to get other members to work with them, and make it more difficult for Pakistan to qualify coming off the grey list, raising the possibility of ending up on the blacklist.

That said, China has now assumed the presidency of FATF. China of course has shown that it can be convinced to vote against Pakistan’s interests in global forums, and yes, China did not stand in the way of Pakistan getting grey-listed last year either. But having China in that leadership role in the FATF will definitely be beneficial to Pakistan.

Also, let’s remember that FATF is a large, multilateral organization that is not dominated by the U.S. and India. They can’t alone dictate FATF’s decision-making process. And as we’ve learned in recent weeks, Pakistan has friends within FATF that are prepared to push back against efforts by the likes of Washington and New Delhi.

BRR: Do you think it will be entirely devastating for Pakistan to be on the blacklist? Some argue that Pakistan is not as financially or economically integrated with the rest of the world and its stronger relations with China and Gulf nations are likely to remain unaffected by the blacklisting.

MK: I know that many of Pakistan’s critics believe that Pakistan is an isolated country, but it is not, and certainly not on an economic level. In particular, Pakistan is part of the massive Belt and Road project under CPEC, which features heavy investments in Pakistan. There is no way one can consider Pakistan isolated. I do think that since the security situation has improved over the last 4-5 years, Pakistan has had upsurges in foreign investor interest—including from the U.S.

I would argue that this is the very reason why it would be devastating for Pakistan to end up on the blacklist, at a moment when the country has all these opportunities. But yes, the blacklist wouldn’t be catastrophic. There are plenty of investors, whether the Saudis or the Chinese or others close to Pakistan, that wouldn’t be deterred by a FATF decision that blacklists Pakistan. That said, I do think that given the negative perceptions of being on the blacklist, it would certainly make it difficult for Pakistan to become more integrated and to further develop economic and diplomatic ties with the world.

BRR: What would take Pakistan to come out of the grey list unscathed?

MK: I would go to the terminology that you often times hear in Washington in terms of what the Americans look for from the Pakistanis to crack on terrorism, and that term is “irreversible” steps. That essentially means not just arresting militants and temporarily shutting down facilities but actually arresting top militant leaders, keeping them behind bars, conducting investigations, taking legal measures and actually putting them on trial. It also means fully dismantling their financial, communication, and educational networks. In other words, a wholesale elimination of their entire ecosystems. Would Pakistan be able to do this? I just don’t see it happening.

BRR: PM Khan’s visit to meet Donald Trump is much talked about here in Pakistan. What is President Trump’s agenda for the meeting, and which major areas do you think will be brought up between the two?

MK: I think the agenda on the U.S side will be a lot smaller than the agenda on the Pakistani side. The White House released a statement in which it listed a variety of economic and security related issues to be discussed. PM Imran Khan will likely want to talk about the important role that Pakistan can play in the region, and the potential cooperation between the two nations on trade and investment. For President Trump, the focus will be quite narrowly defined. He will largely want to talk about Afghanistan.

As you know, the U.S. is undergoing talks with the Taliban. For the United States, its top goal in South Asia right now is to get a deal with the Taliban to allow it to pull troops from Afghanistan. The U.S. government does see Pakistan important in accomplishing that primary goal. The U.S. has looked to Pakistan to help bring the Taliban to the table, which Pakistan has done. Now the U.S. is really looking for—which I imagine will be the focus of this meeting between Trump and Khan—Pakistan’s support in convincing the Taliban to agree to a ceasefire and to negotiate with the Afghan government. The Taliban has repeatedly refused to do that until there’s a troop withdrawal deal with the U.S.

On the other hand, the U.S. does not want to agree to a troop withdrawal deal until the Taliban has agreed to a ceasefire and to talk with the Afghan government. This is a big ask to make of Pakistan. The Taliban has a lot of leverage and it does not need to listen to anyone, even to the Pakistanis who have provided them with support over the years.

I imagine the FATF issue will figure in the discussion as well. PM Khan will want to bring attention to the measures that Pakistan has taken, along the lines of cracking down on terrorists and their facilities. He will want to make a pitch for Pakistan to be removed from the grey list and not be put on the blacklist. Khan may also call for security assistance to be restored, and if he doesn’t do that, the senior military officials of Pakistan that will be here for the visit will want to make that pitch. As you know, U.S. security assistance to Pakistan was suspended in early 2018. There will be a desire to have that resumed. Though I don’t believe the U.S. will be receptive to that, at least not yet.

Imran Khan will come with a long list of agenda points, but I imagine President Trump will want to have a laser-like focus on the issue of Afghanistan. It is Afghanistan that will probably set the tone for this meeting with Trump.

BRR: After the Pulwama Attack, President Trump tweeted that he would be open to mediating between Pakistan and India. Do you think that is on the agenda table at all on the U.S. side?

MK: I really don’t think so. PM Imran Khan may bring up the issue of Kashmir and ask President Trump to help mediate. We have certainly heard Trump administration officials express these desires to mediate some of the most intractable disputes in the world, not just India-Pakistan. The truth is, the U.S. will not want to assert that role, and the main reason is that the U.S. values its relationship with India. It knows that India does not want significant external mediation to try to ease tensions between India and Pakistan.

For India, the idea of external mediation with Pakistan would invariably have to get to the Kashmir issue, and it is clear that India believes Kashmir to be an internal concern and does not believe there is anything to discuss there. The U.S. position on its role in the India-Pakistan dispute will essentially remain the way it has been for quite some time—and that is to not preemptively try to mediate but more so to take on the role of a conflict manager during an actual crisis. That happened during the Pulwama incident.

I will say that there is a very notable shift that has occurred in term of the U.S. policy toward the India-Pakistan dispute. In the past, the Americans have tried to project a neutral stance, and not side with either country but instead try to get both sides to talk. However, during the Pulwama crisis, the U.S. government actually came out in support of India. John Bolton, the U.S. National Security Adviser, in a phone call with the Indian National Security Advisor said that the U.S. supported India’s right of self-defense, referring to India’s decision to respond to the Pulwama attack with the air strike in Balakot.

That suggested that the U.S. may be willing to put itself out there and support India more publicly in some of these crises. Though at the same time, I don’t think it will ever want to support India in terms of escalatory actions. At the end of the day, the core U.S. interest in South Asia is stability, so these interests are not served at all when you have an escalating India-Pakistan dispute.

BRR: Folks here and abroad have drawn several parallels between the personalities of Khan and President Trump. Do you think the two leaders will get along well—given that Trump seems to get along with other world leaders who share similar ideological and personal traits with him?

MK: It is an interesting question. I know that Imran Khan’s hardcore supporters become incensed when you draw attention to some possible similarities between him and Trump. I won’t go there right now, but certainly these are two leaders who have strong personalities, and they have cast themselves as unconventional and different from politicians and leaders that preceded them. I imagine the meeting will be a warm one and the two will get along just fine, but then again these are two unpredictable fellows, so who knows what might happen. What I’m really looking forward to seeing is if they have a joint press conference after their meeting and how they would handle the questions. I would enjoy watching that exchange, if it happens.