Order Code IB94041
CRS Issue Brief for Congress
Received through the CRS Web
Pakistan-U.S. Relations
Updated December 14, 2004
K. Alan Kronstadt
Foreign Affairs, Defense, and Trade Division
Congressional Research Service ˜ The Library of Congress

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CONTENTS
SUMMARY
MOST RECENT DEVELOPMENTS
BACKGROUND AND ANALYSIS
Historical Background
Pakistan-India Rivalry
The China Factor
Pakistan’s Political Setting
Pakistan-U.S. Relations and Key Country Issues
Security
International Terrorism
Domestic Terrorism
Pakistan-U.S. Security Cooperation
Nuclear Weapons and Missile Proliferation
U.S. Nonproliferation Efforts
The Kashmir Issue
Islamization and Anti-American Sentiment
Democratization and Human Rights
Democracy and Governance
Human Rights Problems
Narcotics
Economic Issues
Overview
Trade and Investment
U.S. Aid and Congressional Action
U.S. Assistance
Proliferation-Related Legislation
Coup-Related Legislation
Trade-Related Legislation
Other Legislation
9/11 Commission Recommendations

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Pakistan-U.S. Relations
SUMMARY
A stable, democratic, economically thriv-
Pakistan for the infiltration of Islamic mili-
ing Pakistan is vital to U.S. interests in Asia.
tants into Indian Kashmir, a charge Islamabad
Key U.S. concerns regarding Pakistan include
denies. The United States reportedly has
regional terrorism; weapons proliferation; the
received pledges from Islamabad that all
ongoing Kashmir problem and Pakistan-India
“cross-border terrorism” would cease and that
tensions; human rights protection; and economic
any terrorist facilities in Pakistani-controlled
development. A U.S.-Pakistan relationship
areas would be closed. Similar pledges have
marked by periods of both cooperation and
been made to India. The United States strong-
discord was transformed by the September 2001
ly encourages maintenance of a cease-fire
terrorist attacks on the United States and the
along the Kashmiri Line of Control and con-
ensuing enlistment of Pakistan as a pivotal ally
tinued substantive dialogue between
in U.S.-led counterterrorism efforts. Top U.S.
Islamabad and New Delhi.
officials regularly praise Islamabad for its
ongoing cooperation, although doubts exist
Pakistan’s macroeconomic indicators
about Islamabad’s commitment to some core
have turned positive since 2001, but wide-
U.S. interests in the region. Pakistan is
spread poverty persists. Democracy has fared
identified as a base for terrorist groups and their
poorly in Pakistan; the country has endured
supporters operating in Kashmir, India, and
military rule for half of its existence. In 1999,
Afghanistan. Pakistan continues to face serious
the elected government was ousted in an
problems, including domestic terrorism and
extra-constitutional coup led by Army Chief
human rights violations. For the past year,
Gen. Pervez Musharraf, who later assumed the
Pakistan’s army has conducted unprecedented
title of President. National elections in 2002
counterterrorism operations in the traditionally
resulted in no majority party emerging, though
autonomous Federally Administered Tribal
significant gains for Islamist parties were
Areas.
notable. A new civilian government is seated
(Musharraf ally and Finance Minister Shaukat
A potential Pakistan-India nuclear arms
Aziz became prime minister in August 2004),
race has been the focus of U.S. nonproliferati-
but the civilian government remains weak.
on efforts in South Asia. Attention to this
The United States strongly urges the
issue intensified following nuclear tests by
Musharraf government to restore fully func-
both countries in May 1998; the tests triggered
tioning democracy in Islamabad. Congress
restrictions on U.S. aid to both countries
has granted the President authority to waive
(remaining nuclear-related sanctions on Paki-
coup-related sanctions through FY2006.
stan were waived in October 2001). Pakistan
and India have fought three wars since 1947.
Pakistan received nearly $2 billion in
Recently, the United States has been troubled
U.S. assistance for FY2002-FY2004. Presi-
by evidence of “onward” proliferation of
dent Bush called for establishment of a five-
Pakistani nuclear technology to third parties,
year, $3 billion aid package for Pakistan to
including North Korea, Iran, and Libya. Such
begin in FY2005. See also CRS Report
evidence became stark in February 2004.
RL32259, Terrorism in South Asia; and CRS

Report RL32615, Pakistan’s Domestic Politi-
Separatist violence in Kashmir has con-
cal Developments.
tinued unabated since 1989. India blames
Congressional Research Service ˜ The Library of Congress

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MOST RECENT DEVELOPMENTS
Efforts to combat Islamic militants near the Afghanistan-Pakistan border continue to
bring mixed results. On November 12, the five most-wanted Pashtun tribal militant leaders
in South Waziristan reportedly “surrendered” to government authorities by promising to
remain peaceful and provide no shelter to foreign militants. President Musharraf made a
brief visit to Washington in early December, where President Bush praised him for working
to combat terrorism, saying that the Pakistani army “has been incredibly active and very
brave in southern Waziristan.” Despite some apparent successes, serious concerns remain.
No “high-value targets” are known to have been killed or captured and the militants swept
out of Waziristan are believed to have found refuge in other areas where Pakistani troops are
not active. Musharraf asserts that the trail of Osama bin Laden and his top lieutenants has
gone cold. Pakistan also continues to struggle with indigenous extremism, terrorism, and
militancy that Musharraf claims has “really polluted society in Pakistan.” Positive news did
come on November 17, when Pakistani authorities announced the death of one wanted
terrorist suspect in Karachi and the arrest of another east of Lahore. Yet another lethal bomb
attack, this one in Quetta on December 10, killed 11 people. The attack was blamed on
Baluchi nationalists and again illuminated the problem posed by indigenous terrorism in
Pakistan’s urban centers.
In December Congress passed major legislation with relevance for U.S.-Pakistan
relations. The Intelligence Reform and Terrorism Prevention Act of 2004 calls for U.S. aid
to Pakistan sustained at a minimum of FY2005 levels and extends the President’s authority
to waive coup-related sanctions through FY2006. It further requires the President to report
to Congress within 180 days of enactment a description of a long-term U.S. strategy to
engage with and support Pakistan. The Foreign Operations FY2005 appropriations bill
(enacted as P.L. 108-447) approves the President’s aid request for Pakistan and allows that
up to $200 million in FY2005 Economic Support Funds may be used for the modification
of direct loans and guarantees for Pakistan.
The 20-month-old Pakistan-India peace initiative continues. On November 11, India’s
prime minister announced a reduction of Indian troop deployments in Kashmir as a result of
“an improvement in the security situation in the state.” On November 24, PM Shaukat Aziz
met with Indian PM Singh in New Delhi, the first visit to India by a Pakistani prime minister
in more than ten years. Both sides called the talks “friendly” and “constructive,” but Pakistan
offered no new formulations on the Kashmir issue and the Indian PM reiterated that the issue
can have no “territorial solutions.” Aziz also met with senior Kashmiri separatist leaders.
Talks on opening bus service between Muzaffarabad and Srinagar in Kashmir apparently
remained deadlocked on the issue of travel documents for passengers.
On November 16, the Pentagon notified Congress of three possible Foreign Military
Sales to Pakistan worth up to $1.2 billion. The deals involve eight P-3C aircraft, six Phalanx
guns, and 2,000 TOW missiles. On November 22, Asif Zardari, the husband of former PM
Benazir Bhutto who had been imprisoned for eight years without conviction, was released
on bail. On November 30, acting President Soomro signed into law a bill allowing President
Musharraf to remain as Army Chief until 2007. More information is in CRS Report
RS21584, Pakistan: Chronology of Recent Events.
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BACKGROUND AND ANALYSIS
Historical Background
The long and checkered Pakistan-U.S. relationship has its roots in the Cold War and
South Asia regional politics of the 1950s. U.S. concerns about Soviet expansionism and
Pakistan’s desire for security assistance against a perceived threat from India prompted the
two countries to negotiate a mutual defense assistance agreement in 1954. By 1955, Pakistan
had further aligned itself with the West by joining two regional defense pacts, the South East
Asia Treaty Organization and the Central Treaty Organization. As a result of these alliances,
Islamabad received nearly $2 billion in U.S. assistance from 1953 to 1961, including $508
million in military aid.
PAKISTAN IN BRIEF
Differing expectations of the security relationship
Population: 159 million; growth rate:
have long bedeviled bilateral ties. During and
1.98% (2004 est.)
immediately after the Indo-Pakistani wars of 1965 and
Area: 803,940 sq. km. (slightly less than
1971, the United States suspended military assistance to
twice the size of California)
Capital: Islamabad
both sides, resulting in a cooling of the Pakistan-U.S.
Ethnic Groups: Punjabi, Sindhi, Pashtun
relationship and a perception among some in Pakistan
(Pathan), Baloch, Muhajir (immigrants
that the United States was not a reliable ally. In the
from India at the time of partition and
mid-1970s, new strains arose over Pakistan’s efforts to
their descendants)
respond to India’s 1974 underground test of a nuclear
Languages: Punjabi 58%, Sindhi 12%,
Pashtu 8%, Urdu (official) 8%, other
device by seeking its own nuclear weapons capability.
14%; English widely used
Limited U.S. aid was resumed in 1975, but was
Religions: Muslim 97% (Sunni 77%, Shia
suspended again in 1979 by the Carter Administration in
20%), Christian, Hindu, and other 3%
response to Pakistan’s covert construction of a uranium
Life Expectancy at Birth: female 63.6
enrichment facility. Following the Soviet invasion of
years; male 61.7 years (2004 est.)
Literacy: female 31%; male 60% (2003
Afghanistan in December 1979, Pakistan was again
est.)
viewed as a frontline ally in the effort to block Soviet
Gross Domestic Product (at PPP): $333
expansionism. In September 1981, the Reagan
billion; per capita: $2,080; growth
Administration negotiated a five-year, $3.2 billion aid
rate 5.8% (2003)
package with Islamabad. Pakistan became a key transit
Inflation: 3.9% (2002)
U.S. Trade: exports to U.S. $2.53 billion;
country for arms supplies to the Afghan resistance, as
imports from U.S. $840 million (2003)
well as a camp for some three million Afghan refugees,
many of whom have yet to return home.
Despite the renewal of U.S. aid and close security ties, many in Congress remained
troubled by Pakistan’s nuclear weapons program. Concern was based in part on evidence
of U.S. export control violations that suggested a crash Pakistani program to acquire a
nuclear capability. In 1985, Section 620E(e) (the Pressler amendment) was added to the
Foreign Assistance Act, requiring the President to certify to Congress that Pakistan does not
possess a nuclear explosive device during the fiscal year for which aid is to be provided.
With the Soviet withdrawal from Afghanistan beginning in May 1988, Pakistan’s nuclear
activities again came under intensive U.S. scrutiny and, in October 1990, President Bush
again suspended aid to Pakistan. Under the provisions of the Pressler amendment, most
economic and all military aid to Pakistan was stopped and deliveries of major military
equipment suspended. In 1992, Congress partially relaxed the scope of the aid cutoff to
allow for P.L. 480 food assistance and continuing support for nongovernmental
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organizations. One of the most serious results of the aid cutoff for Pakistan was the
nondelivery of some 71 F-16 fighter aircraft ordered by Pakistan in 1989. In December
1998, the United States agreed to pay Pakistan $324.6 million from the U.S. Treasury’s
Judgment Fund, as well as to provide Pakistan with $140 million in goods as compensation.
Pakistan-India Rivalry
Three full-scale wars — in 1947-48, 1965, and 1971 — and a constant state of military
preparedness on both sides of their mutual border have marked the half-century of bitter
rivalry between India and Pakistan. The acrimonious nature of the partition of British India
into two successor states in 1947 and the unresolved issue of Kashmiri sovereignty have been
major sources of tension. Both Pakistan and India have built large defense establishments
at significant cost to economic and social development. The Kashmir problem is rooted in
claims by both countries to the former princely state, divided since 1948 by a military Line
of Control (LOC) into the Indian state of Jammu and Kashmir and Pakistan-held Azad (Free)
Kashmir. India blames Pakistan for supporting a violent separatist rebellion in the
Muslim-dominated Kashmir Valley that has taken between 40,000 and 90,000 lives since
1989. Pakistan admits only to lending moral and political support to the rebellion, and it
criticizes India for alleged human rights abuses against Kashmiris. The most recent major
armed clash with India was in May-June 1999, when separatist militants backed by Pakistan
Army troops crossed the LOC near Kargil and were repulsed after six weeks of heavy
fighting that killed more than 1,000 combatants. During most of 2002, nearly one million
Pakistani and Indian soldiers were mobilized at their shared border after India blamed
Pakistan for supporting terrorist groups that had undertaken deadly attacks in India, including
a December 2001 assault on the Indian Parliament complex. Yet an April 2003 peace
initiative has brought major improvement in the bilateral relationship, including a January
2004 summit meeting that produced a joint agreement to launch a “composite dialogue” to
bring about “peaceful settlement of all bilateral issues, including Jammu and Kashmir, to the
satisfaction of both sides.” In 2004, numerous mid-level meetings, re-establishment of
embassy staff and consulates, and a general cease-fire at the border and LOC have brought
modest, but still meaningful, progress toward normalized relations.
The China Factor
Pakistan and China have enjoyed a generally close and mutually beneficial relationship
over recent decades. India and China, on the other hand, are seen to have a strategic rivalry
in the region — the two large nations fought a brief border war in 1962 and significant
border disputes between them remain unresolved. Pakistan served as a link between Beijing
and Washington in 1971, as well as a bridge to the Muslim world for China during the 1980s.
China’s continuing role as a major arms supplier for Pakistan began in the 1960s, and
included helping to build a number of arms factories in Pakistan, as well as supplying
complete weapons systems. After the 1990 imposition of U.S. sanctions on Pakistan, the
Islamabad-Beijing arms relationship was further strengthened (see CRS Report RL31555,
China and Proliferation of Weapons of Mass Destruction and Missiles). Although relations
between India and China warmed significantly in 2003, India’s Ambassador to the United
States said in April 2004 that the Islamabad-Beijing nuclear and missile proliferation “nexus”
continued to cause serious concerns in New Delhi.
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Pakistan’s Political Setting
The history of democracy in Pakistan is a troubled one, marked by ongoing tripartite
power struggles among presidents, prime ministers, and army chiefs. Military regimes have
ruled Pakistan for more than half of its 57 years of existence, interspersed with periods of
generally weak civilian governance. From 1988 to 1999, Pakistan had democratically elected
governments, and the army appeared to have moved from its traditional role of “kingmaker”
to one of power broker or referee. Benazir Bhutto (leader of the Pakistan People’s Party) and
Nawaz Sharif (leader of the Pakistan Muslim League) each served twice as prime minister
during this period. The Bhutto government was dismissed for corruption and nepotism in
1996, and Nawaz Sharif won a landslide victory in February 1997 elections, which were
judged generally free and fair by international observers. Sharif, who moved quickly to
consolidate his power by curtailing the powers of the President and the judiciary, emerged
as one of Pakistan’s strongest elected leaders since independence. Critics accused him of
further consolidating his power by intimidating the opposition and the press. In October
1999, in response to Sharif’s attempt to remove him, Army Chief Gen. Pervez Musharraf
overthrew the government, dismissed the National Assembly, and appointed himself “Chief
Executive.” He declared a state of emergency, suspended the constitution and, by special
decree, ensured that his actions could not be challenged by any court. In April 2002,
Musharraf assumed the title of President. National elections were held in October of that
year, as ordered by the Supreme Court. (See section on “Democracy and Governance”
below. See also CRS Report RL32615, Pakistan’s Domestic Political Developments.)
Pakistan-U.S. Relations and Key Country Issues
U.S. policy interests in Pakistan encompass a wide range of issues, including
counterterrorism, nuclear weapons and missile proliferation, South Asian regional stability,
democratization and human rights, economic reform and market opening, and efforts to
counter narcotics trafficking. These concerns have been affected by several key
developments over the years, including proliferation- and democracy-related sanctions; a
Pakistan-India conflict over Kashmir and a continuing bilateral nuclear standoff; and, most
recently, the September 2001 terrorist attacks against the United States. In the wake of those
attacks, President Musharraf — under strong U.S. diplomatic pressure — offered President
Bush Pakistan’s “unstinted cooperation in the fight against terrorism.” Pakistan became a
vital ally in the U.S.-led anti-terrorism coalition. In a U.S. effort to shore up the Musharraf
government, sanctions relating to Pakistan’s 1998 nuclear tests and 1999 military coup
quickly were waived. In October 2001, large amounts of U.S. aid began flowing into
Pakistan. Direct assistance programs include aid for health, education, food, democracy
promotion, child labor elimination, counter-narcotics, border security and law enforcement,
as well as trade preference benefits. The United States also supports grant, loan, and debt
rescheduling programs for Pakistan by the various major international financial institutions.
In June 2004, President Bush designated Pakistan as a major non-NATO ally of the United
States under Section 517 of the Foreign Assistance Act of 1961, a move that may be more
symbolic than practical. Revelations that Pakistan has been a source of onward nuclear
proliferation to North Korea, Iran, and Libya may complicate future Pakistan-U.S. relations.
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Security
International Terrorism. After the September 2001 terrorist attacks on the United
States, Pakistan pledged and has provided support for the U.S.-led anti-terror coalition.
According to the U.S. Departments of State and Defense, Pakistan has afforded the United
States unprecedented levels of cooperation by allowing the U.S. military to use bases within
the country, helping to identify and detain extremists, and tightening the border between
Pakistan and Afghanistan. Top U.S. officials regularly praise Pakistani anti-terrorism efforts.
In the spring of 2002, U.S. military and law enforcement personnel began engaging in direct,
low-profile efforts to assist Pakistani security forces in tracking and apprehending fugitive
Al Qaeda and Taliban fighters on Pakistani territory. Pakistani authorities have remanded
to U.S. custody some 500 such fugitives to date. In a landmark speech in January 2002,
President Musharraf vowed to end Pakistan’s use as a base for terrorism of any kind, and he
banned numerous militant groups, including Lashkar-e-Taiba and Jaish-e-Muhammad, both
blamed for terrorist violence in Kashmir and India and designated as terrorist organizations
under U.S. law. In the wake of the speech, thousands of Muslim extremists were arrested
and detained, though many of these have since been released.
Pivotal Al Qaeda-related arrests in Pakistan have included Abu Zubaydah (March
2002), Ramzi bin al-Shibh (September 2002), and Khalid Mohammed (March 2003), along
with several key captures in the summer of 2004. Yet Al Qaeda and Taliban fugitives still
are numerous in Pakistan and appear to have re-established their organizations in Pakistani
cities such as Karachi, Peshawar, and Quetta, as well as in the mountainous tribal regions
along the Afghan border. Al Qaeda founder Osama bin Laden and his lieutenant, Egyptian
Islamic radical leader Ayman al-Zawahiri, may themselves be in Pakistan. Meanwhile,
numerous banned indigenous groups have continued to operate under new names: Lashkar-
e-Taiba became Jamaat al-Dawat; Jaish-e-Mohammed was re-dubbed Khudam-ul Islam.
Musharraf repeatedly has vowed to end the activities of religious extremists in Pakistan and
to permanently prevent banned groups from resurfacing there. His policies likely spurred
two lethal but failed attempts to assassinate him in December 2003. Nonetheless, some
analysts call Musharraf’s efforts cosmetic, ineffective, and the result of international pressure
rather than a genuine recognition of the threat posed.
Infiltration Into Afghanistan. Beginning in early 2003, U.S. military commanders
overseeing Operation Enduring Freedom complained that renegade Al Qaeda and Taliban
fighters were able to attack coalition troops in Afghanistan, then escape across the Pakistani
frontier. They expressed dismay at the slow pace of progress in capturing wanted fugitives
in Pakistan and urged Islamabad to do more to secure its rugged western border area.
Numerous U.S. government officials voiced similar worries, even expressing concern that
elements of Pakistan’s intelligence agency might be assisting members of the Taliban. In
mid-2003, tensions between the Kabul and Islamabad governments reached alarming levels,
with some top Afghan officials accusing Pakistan of manipulating Islamic militancy in the
region to destabilize Afghanistan. In an unprecedented show of force, President Musharraf
moved some 25,000 Pakistani troops into the traditionally autonomous tribal areas. The first
half of 2004 saw an escalation of Pakistani Army operations, many in coordination with U.S.
and Afghan forces just across the international frontier (U.S. forces have no official
authorization to cross the border into Pakistan). Major battles between Pakistani troops and
militants in South Waziristan during the spring and summer of 2004 reportedly have left 246
Islamic militants (two-fifths of them foreigners), 170 Pakistani soldiers, and an unknown
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number of civilians dead. The battles, which continue sporadically to date, have exacerbated
already volatile anti-Musharraf and anti-American sentiments held by many Pakistani
Pashtuns. Afghan President Karzai has continued to express concern that militants trained
on Pakistani territory cross into Afghanistan to mount anti-government attacks there. In
August, President Musharraf hosted Karzai in Islamabad and assured the Afghan president
that Pakistan would not allow extremists to use its territory to disrupt October’s Afghan
elections. In November, Karzai hosted Musharraf in Kabul, where the Pakistani president
vowed full cooperation with Afghanistan and efforts to combat terrorism.
Infiltration Into Kashmir. Islamabad has been under continuous pressure from the
United States and other governments to terminate the infiltration of insurgents across the
Kashmiri Line of Control. Such pressure reportedly elicited a promise from President
Musharraf to U.S. Deputy Secretary of State Armitage that all such movements would cease.
During a May 2003 visit to Islamabad, Deputy Secretary Armitage reportedly received
another pledge from the Pakistani president, this time an assurance that any existing terrorist
camps in Pakistani Kashmir would be closed. Musharraf has assured India that he will not
permit any territory under Pakistan’s control to be used to support terrorism, and he insists
that his government is doing everything possible to stop infiltration and shut down militant
base camps in Pakistani-controlled territory. Critics contend, however, that Islamabad has
provided active support for the insurgents in Kashmir as a means to both maintain
strategically the domestic backing of Islamists who view the Kashmir issue as fundamental
to the Pakistani national idea, and to disrupt tactically the state government in Indian
Kashmir in seeking to erode New Delhi’s legitimacy there. Positive indications growing
from the latest Pakistan-India peace initiative include a cease-fire at the LOC that has held
since November 2003, and summer 2004 statements from Indian officials indicating that
rates of militant infiltration were down significantly. However, in October 2004, India’s
external affairs minister said that the India-Pakistan peace process is “critically dependent”
on Pakistan fulfilling its pledges to end all activities by terrorist groups on its soil.
Domestic Terrorism. Pakistan is known to be a base for numerous indigenous
terrorist organizations and the country continues to suffer from anti-Shia, anti-Christian, and
anti-Western terrorism at home. In January 2002, reporter Daniel Pearl was kidnaped in
Karachi and later found murdered. Spring 2002 car bomb attacks on Western targets,
including the U.S. consulate in Karachi, killed 29 people, among them 11 French military
technicians. A March 2002 grenade attack on a Protestant church in Islamabad killed five,
including a U.S. Embassy employee and her daughter. These attacks were viewed as
expressions of militants’ anger with the Musharraf regime for its cooperation with the United
States. The incidents were linked to Al Qaeda, as well as to indigenous militant groups.
During 2003 and into 2004, the worst domestic terrorism was directed against Pakistan’s
Shia minority. Indications are that the indigenous Lashkar-i-Jhangvi Sunni militant group
was responsible for the most deadly incidents. Two bloody attempts to kill Musharraf in
December 2003 and failed efforts to assassinate other top Pakistani officials in June and July
2004 may have been linked to Al Qaeda and illuminated the danger presented by the
determined extremists. The United States has played a direct role in training the security
detail of the Pakistani president, helped to fund a new 650-officer Diplomatic Security Unit,
and assists with numerous programs designed to improve the quality of Pakistan’s internal
police forces through the provision of equipment and training.
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Pakistan-U.S. Security Cooperation. In June 2004, President Bush declared
Pakistan to be a major non-NATO ally of the United States, a move that may be more
symbolic than practical. The close U.S.- Pakistan security ties of the cold war era — which
had come to near halt after the 1990 aid cutoff — appear to be in the process of restoration
as a result of Pakistan’s role in U.S.-led anti-terrorism campaign. In July 2002, the United
States began allowing commercial sales that enabled Pakistan to refurbish at least part of its
fleet of American-made F-16 fighter aircraft. Since July 2003, major U.S. military grants
and proposed sales to Pakistan have included six C-130 military transport aircraft ($75
million grant); six Aerostat surveillance radars ($155 million sale); 12 radars and 40 Bell
helicopters are meant to enhance Pakistan’s ability to support Operation Enduring Freedom
and to secure its borders ($300 million sale); military radio systems meant to improve
Pakistani communication capabilities and to increase interoperability between Pakistani and
U.S.-led counterterrorist forces ($78 million sale); and, in November 2004, the proposed sale
of eight P-3C aircraft, six Phalanx guns, and 2,000 TOW missiles worth up to $1.2 billion.
The United States also has undertaken to train and equip new Pakistan Army Air Assault
units that can move quickly to find and target terrorist elements. The Pentagon reports
Foreign Military Sales agreements with Pakistan worth $27 million in FY2002 and $167
million in FY2003. Islamabad continues to seek increased arms imports, especially in an
effort to bolster its air forces. Pakistani officials are eager to purchase major U.S. weapons
platforms, including F-16s fighters and Harpoon anti-ship missiles. A revived high-level
U.S.-Pakistan Defense Consultative Group (DCG) — moribund since 1997 — met in
September 2002 for high-level discussions on military cooperation, security assistance, and
anti-terrorism. A September 2003 meeting set a schedule for joint military exercises and
training, discussed how the U.S. military can assist Pakistan in improving its
counterterrorism capabilities. (See also CRS Report RL32259, Terrorism in South Asia; and
CRS Report RL31624, Pakistan-U.S. Anti-Terrorism Cooperation.)
Nuclear Weapons and Missile Proliferation. U.S. policy analysts consider the
apparent arms race between India and Pakistan as posing perhaps the most likely prospect
for the future use of nuclear weapons. In May 1998, India conducted unannounced nuclear
tests, breaking a 24-year, self-imposed moratorium on such testing. Despite U.S. and world
efforts to dissuade it, Pakistan quickly followed. The tests created a global storm of
criticism, and represented a serious setback to two decades of U.S. nuclear nonproliferation
efforts in South Asia. Pakistan currently is believed to have enough fissile material, mainly
enriched uranium, for 55-90 nuclear weapons; India, with a program focused on plutonium,
may be capable of building a similar number. Both countries have aircraft capable of
delivering nuclear bombs. Pakistan’s military has inducted short- and medium-range
ballistic missiles (allegedly acquired from China and North Korea), while India possesses
short- and intermediate-range missiles. All are assumed to be capable of delivering nuclear
warheads over significant distances. In 2000, Pakistan placed its nuclear forces under the
control of a National Command Authority led by the president.
Press reports in late 2002 suggested that Pakistan assisted Pyongyang’s covert nuclear
weapons program by providing North Korea with uranium enrichment materials and
technologies beginning in the mid-1990s and as recently as July 2002. Islamabad rejected
such reports as “baseless” and Secretary of State Powell was assured that no such transfers
are occurring. If such assistance is confirmed by President Bush, all non-humanitarian U.S.
aid to Pakistan may be suspended, although the President has the authority to waive any
sanctions that he determines would jeopardize U.S. national security. In March 2003, the
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Administration determined that the relevant facts “do not warrant imposition of sanctions
under applicable U.S. laws.” Press reports during 2003 suggested that both Iran and Libya
benefitted from Pakistani nuclear assistance. Islamabad denied any nuclear cooperation with
Tehran or Tripoli, although it conceded in December 2003 that certain senior scientists were
under investigation for possible independent proliferation activities.
That investigation led to the February 2004 “public humiliation” of metallurgist Abdul
Qadeer Khan, known as the founder of Pakistan’s nuclear weapons program and national
hero, when he confessed to involvement in a proliferation network. Khan and at least seven
associates are said to have sold crucial nuclear weapons technology and uranium-enrichment
materials to North Korea, Iran, and Libya. President Musharraf, citing Khan’s contributions
to his nation, issued a pardon that has since been called conditional. The United States has
been assured that the Islamabad government had no knowledge of such activities and
indicated that the decision to pardon is an internal Pakistani matter. Musharraf has promised
President Bush that he will share all information learned about the Khan’s proliferation
network. To date, Musharraf refuses to allow any direct access to Khan by U.S. or U.N.
investigators. (See CRS Report RL32115, Missile Proliferation and the Strategic Balance
in South Asia; and CRS Report RL31900, Weapons of Mass Destruction: Trade Between
North Korea and Pakistan.)
U.S. Nonproliferation Efforts. In May 1998, following the South Asian nuclear
tests, President Clinton imposed full restrictions on all non-humanitarian aid to both Pakistan
and India as mandated under Section 102 of the Arms Export Control Act. In some respects,
Pakistan was less affected by the sanctions than was India, as most U.S. assistance to
Pakistan had been cut off in 1990. At the same time, Pakistan’s smaller and more fragile
economy was more vulnerable to the negative effects of aid restrictions. However, Congress
and the President acted almost immediately to lift certain aid restrictions and, after October
2001, all remaining nuclear-related sanctions on Pakistan (and India) were removed. In April
2004, the U.S. Assistant Secretary of State for Proliferation urged Pakistan and India to join
the Nuclear Nonproliferation Treaty (NPT) as non-nuclear weapon states, saying that the
United States does not accept either country as a nuclear weapon state under the NPT.
During the latter years of the Clinton administration, the United States set forth
nonproliferation “benchmarks” for India and Pakistan, including halting further nuclear
testing and signing and ratifying the Comprehensive Test Ban Treaty (CTBT); halting fissile
material production and pursuing Fissile Material Control Treaty negotiations; refraining
from deploying nuclear weapons and testing ballistic missiles; and restricting any and all
exportation of nuclear materials or technologies. The results of U.S. efforts were mixed, at
best, and neither Pakistan nor India are signatories to the CTBT or NPT. The Bush
Administration makes no reference to the benchmark framework. Senator Richard Lugar,
Chairman of the Senate Foreign Relations Committee, has called upon the United States to
promote nuclear confidence-building measures in South Asia, including “assistance on
export controls, border security, and the protection, control, and accounting of nuclear
stockpiles and arsenals.” U.S. and Pakistani officials have held talks on improving security
and installing new safeguards on Pakistan’s nuclear weapons and nuclear power plants, but
Pakistani officials insist that Pakistan will not accept any demand for access to or inspections
of its nuclear and strategic assets, materials, and facilities. Concerns about onward
proliferation and fears that Pakistan could become destabilized by the U.S.-led
counterterrorism efforts in Afghanistan have heightened U.S. attention to weapons
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proliferation in South Asia. (See CRS Report RL31559, Proliferation Control Regimes;
CRS Report RS20995, India and Pakistan: Current U.S. Economic Sanctions; and CRS
Report RL31589, Nuclear Threat Reduction Measures for India and Pakistan.)
The Kashmir Issue. Bilateral relations between Pakistan and India remain
deadlocked on the issue of Kashmiri sovereignty, and a separatist rebellion has been
underway in the region since 1989. Tensions between Pakistan and India remained
extremely high in the wake of the Kargil conflict of 1999, when an incursion by Pakistani
soldiers led to a bloody six-week-long battle. Throughout 2000 and 2001, cross-border firing
and shelling caused scores of both military and civilian deaths. In May 2001, the Indian
government announced that it was ending a unilateral cease-fire in Kashmir but that PM
Vajpayee would invite President Musharraf to India for talks. A July summit meeting in
Agra failed to produce a joint communique, reportedly as a result of pressure from hardliners
on both sides. Major stumbling blocks were India’s refusal to acknowledge the “centrality
of Kashmir” to future talks and Pakistan’s objection to references to “cross-border
terrorism.” Secretary of State Powell visited South Asia in an effort to ease escalating
tensions over Kashmir, but an October 2001 bombing at the Jammu and Kashmir state
assembly building was followed by a December assault on the Indian Parliament in New
Delhi. Both incidents were blamed on Pakistan-based terrorist groups. The Indian
government responded by mobilizing some 700,000 troops along the Pakistan-India frontier
and threatened war unless Islamabad ended all cross-border infiltration of Islamic militants.
Under significant international diplomatic pressure and the threat of India’s use of possibly
massive force, President Musharraf in January 2002 vowed to end the presence of terrorist
entities on Pakistani soil and he outlawed five militant groups, including Lashkar-e-Taiba
and Jaish-e-Mohammed.
Despite the Pakistani pledge, infiltrations into Indian-held Kashmir continued, and a
May 2002 terrorist attack on an Indian army base at Kaluchak killed 34, most of them women
and children. This event again brought Pakistan and India to the brink of full-scale war, and
caused Islamabad to recall army troops from both patrol operations along the Pakistan-
Afghanistan border as well as from international peacekeeping operations. Intensive
international diplomatic missions to South Asia reduced tensions during the summer of 2002
and appear to have prevented the outbreak of war. Numerous top U.S. officials were
involved in this effort and continued strenuously to urge the two countries to renew bilateral
dialogue. A “hand of friendship” offer to Pakistan by the India’s PM in April 2003 led to the
restoration of full diplomatic relations in July, but surging separatist violence that summer
contributed to an exchange of sharp rhetoric between Pakistani and Indian leaders at the
United Nations in September, casting doubt on the peace effort. However, an October
confidence-building initiative got Pakistan and India back on track toward improved
relations, and a November cease-fire was initiated after a proposal by Pakistani PM Jamali.
In December, President Musharraf suggested that Pakistan might be willing to “set aside” its
long-standing demand for a plebiscite in Kashmir, a proposal welcomed by the United States,
but called a “disastrous shift” in policy by Pakistani opposition parties.
Although militant infiltration did not end, the Indian government acknowledged that it
was significantly decreased and, combined with other confidence-building measures,
relations were sufficiently improved that the Indian PM attended a three-day summit meeting
of the South Asian Association for Regional Cooperation (SAARC) in Islamabad in January
2004, where Pakistan and India issued a joint “Islamabad Declaration” calling for a
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“composite dialogue” to begin in February 2004 to bring about “peaceful settlement of all
bilateral issues, including Jammu and Kashmir, to the satisfaction of both sides.” Many
Kashmiris reject any effort at settlement that excludes them. Pakistan-based and Kashmiri
militant groups expressed a determination to continue fighting against Indian forces in
Kashmir despite the agreement. A spate of deadly attacks in the summer of 2004
underscored that the issue remains dangerous and unresolved.
Islamization and Anti-American Sentiment
An unexpected outcome of the 2002 elections saw the Muttahida Majlis-e-Amal (MMA
or United Action Front), a coalition of six Islamic parties, win 68 seats in the National
Assembly — about 20% of the total. It also controls the provincial assembly in the North
West Frontier Province (NWFP) and leads a coalition in the Baluchistan assembly. These
western provinces are Pashtun-majority regions that border Afghanistan where important
U.S.-led counterterrorism operations are ongoing. The result led to concerns that a shift in
Pakistani policies might be in the offing, perhaps even a “Talibanization” of western border
regions. In June 2003, the NWFP assembly passed a Shariat bill in the provincial assembly.
These laws seek to replicate in Pakistan the harsh enforcement of Islamic law seen in
Afghanistan under the Taliban. As such, the development alarmed Pakistan’s more secular
moderates, and President Musharraf has decried any attempts to “Talibanize” regions of
Pakistan. Islamists are notable for their virulent expressions of anti-American sentiment;
they have at times called for “jihad” against what they view as the existential threat to
Pakistani sovereignty that alliance with Washington entails. Anti-American sentiment is not
limited to Islamic groups, however. A March 2004 public opinion survey by the Pew Center
found that only 6% of Pakistan’s believe the United States is sincere in its efforts to combat
terrorism; half believe that the United States is seeking to “dominate the world.” The survey
also found nearly two-thirds of Pakistanis expressing a favorable view of Al Qaeda founder
Osama bin Laden. Most analysts contend that two December 2003 attempts to assassinate
President Musharraf were carried out by Islamic militants angered by Pakistan’s post-
September 2001 policy shift. In January 2004 testimony before the Senate Foreign Relations
Committee, one senior expert opined that “Pakistan is probably the most anti-American
country in the world right now, ranging from the radical Islamists on one side to the liberals
and Westernized elites on the other side.”
Democratization and Human Rights
Democracy and Governance. There had been hopes that national elections in
October 2002 would reverse Pakistan’s historic trend toward unstable governance and
military interference in democratic institutions. Such hopes have been eroded by ensuing
developments, including President Musharraf’s imposition of major constitutional changes.
An October 2003 report from New York-based Human Rights Watch claimed that four years
of military rule had “led to serious human rights abuses.” In 2004, and for the eleventh
straight year, the nonpartisan Freedom House rated Pakistan as “not free” in the areas of
political rights and civil liberties. While praising Pakistan’s electoral exercises as moves in
the right direction, the United States has expressed concern that seemingly nondemocratic
developments may make the realization of true democracy in Pakistan more elusive.
Gen. Musharraf’s April 2002 assumption of the title of President ostensibly was
legitimized by a controversial referendum that many observers claimed was marked by
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“excessive fraud and coercion.” In August 2002, the Musharraf government announced
sweeping changes to the Pakistani constitution under a “Legal Framework Order” (LFO).
These changes provide the office of President and the armed forces powers not previously
available in the country’s constitutional history, including provisions for presidential
dissolution of the National Assembly. The United States expressed concerns that the
changes “could make it more difficult to build strong, democratic institutions in Pakistan.”
The October 2002 elections nominally fulfilled President Musharraf’s promise to restore the
National Assembly that was dissolved in the wake of his extra-constitutional seizure of
power. The pro-military Pakistan Muslim League-Quaid-e-Azam (PML-Q) won a plurality
of seats, while a coalition of Islamist parties made a surprisingly strong showing. Musharraf
supporter M.Z. Jamali became Pakistan’s new prime minister. The civilian government was
hamstrung for more than one year by fractious debate over the legitimacy of the LFO and
Musharraf’s continued status as army chief and president. A surprise December 2003
agreement between Musharraf and the Islamist opposition ended the deadlock by bringing
the constitutional changes before Parliament and by eliciting a promise from Musharraf to
resign his military commission before 2005. Non-Islamist opposition parties unified under
the Alliance for the Restoration of Democracy (ARD) accused the MMA of betrayal and
insisted that the new arrangement merely institutionalized military rule in Pakistan,
especially after the April 2004 establishment of a new National Security Council.
Further apparent reversals for Pakistani democratization came in 2004: in April, ARD
leader Javed Hashmi was sentenced to 23 years in prison for sedition, mutiny, and forgery;
in May, Shabaz Sharif, a former Punjab Chief Minister and brother of deposed PM Nawaz
Sharif, attempted to return to Pakistan from exile, but immediately was deported to Saudi
Arabia; and in June, PM Jamali was pushed to resign for what numerous analysts called his
insufficient deference to President Musharraf. Musharraf “shuffled” prime ministers to seat
his close ally, Finance Minister Shaukat Aziz. Aziz is seen to be an able financial manager
and technocrat favored by Musharraf and the military, but he has no political base in
Pakistan. Moreover, the latter months of 2004 have seen Musharraf signal that he may
continue his role as army chief beyond the stated deadline. There are concerns that
Pakistan’s civilian democratic institutions have been weakened by these developments. (See
also CRS Report RL32615, Pakistan’s Domestic Political Developments.)
Human Rights Problems. The U.S. State Department, in its Pakistan Country
Report on Human Rights Practices 2003, determined that the Islamabad government’s record
on human rights “remained poor; although there were some improvements in a few areas,
serious problems remained.” Along with concerns about ongoing anti-democratic practices,
the report lists “acute” corruption, extrajudicial killings, lack of judicial independence,
political violence, terrorism, and “extremely poor” prison conditions among the serious
problems. Police have abused and raped citizens with apparent impunity. Improvement in
a few areas was noted, however, particularly with press freedoms and the punishment of
some security officials who were found guilty of abuses. The Human Rights Commission
of Pakistan, Amnesty International, and Human Rights Watch have issued reports critical of
Pakistan’s lack of political freedoms and of the country’s perceived abuses of the rights of
women and minorities. Discrimination against women is widespread, and traditional
constraints — cultural, legal, and spousal — have kept women in a subordinate position in
society. “Honor killings” continue to occur throughout the country. The adult literacy rate
for men in Pakistan is 60%, while only one-third of women can read and write. The State
Department’s International Religious Freedom Report 2004 singled out Pakistan for “state
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hostility toward minority or non-approved religions” for the sixth consecutive year,
indicating that the Pakistani government continued to impose limits on freedom of religion,
to fail in many respects to protect the rights of religious minorities, and to fail at times to
intervene in cases of sectarian violence. In June 2004, a State Department report on
trafficking in persons placed Pakistan on the “Tier 2 Watch List” as a “source, transit, and
destination country for trafficked persons,” indicating that, despite significant efforts, “the
government of Pakistan does not fully comply with the minimum standards for the
elimination of trafficking.”
Narcotics
Pakistan is a major transit country for opiates that are grown and processed in
Afghanistan and western Pakistan, then distributed throughout the world by Pakistan-based
traffickers. The U.S. Department of State indicates that Pakistan’s cooperation on drug
control with the United States “remains excellent.” The Islamabad government has made
impressive strides in eradicating opium poppy cultivation; estimated production in 2001 was
only 5 metric tons, less than one-thirtieth of the estimated 155 tons produced in 1995.
However, opium production has spiked in post-Taliban Afghanistan (which is now said to
supply more than 80% of the world’s heroin) and, in September 2004, President Bush again
identified Pakistan as being among the world’s “major illicit drug producing or drug-transit
countries.” Pakistan’s powerful Inter-Services Intelligence agency (ISI) is suspected of
involvement in drug trafficking; in March 2003, a former U.S. Ambassador to Pakistan told
a House International Relations Committee panel that the role of the ISI in the heroin trade
from 1997-2003 was “substantial.” Reports indicate that profits from drug sales are
financing the activities of Islamic extremists in Pakistan, Afghanistan, and Kashmir.
Pakistan’s counter-narcotics efforts are hampered by lack of full government commitment;
scarcity of funds; poor infrastructure; government wariness of provoking unrest in tribal
areas; and “acute” corruption. The State Department’s Bureau of International Narcotics and
Law Enforcement Affairs (INL) oversaw Pakistani projects with more than $90 million in
FY2002, including $73 million in emergency supplemental appropriations for border security
efforts that continued in FY2003. INL was budgeted $6 million for FY2003, rising to $36.5
million estimated for FY2004 and $40 million allocated for FY2005.
Economic Issues
Overview. Pakistan is a poor country with great extremes in the distribution of wealth.
Per capita GDP is about $2,080 when accounting for purchasing power parity. The long-
term economic outlook for Pakistan is much improved in recent years, but remains clouded
in a country highly dependent on foreign lending and the importation of basic commodities
(public debt is equal to more than 70% of GDP). Greater political stability in recent years
brightened the outlook by providing President Musharraf with a base for the further pursuit
of economic reform, but a hamstrung National Assembly and tensions with India hampered
progress (developments in late 2003 and early 2004 helped to resolve these latter issues).
In the short-run, substantial fiscal deficits and the still urgent dependency on external aid
donations counterbalance a major overhaul of the tax collection system and what have been
notable gains in the Karachi Stock Exchange, the world’s best performer in 2002 and up 65%
in 2003. Output from both the industrial and service sectors grew in 2002, but the
agricultural sector’s performance slowed growth overall (in part due to severe drought).
Agricultural labor accounts for nearly half of the country’s work force. Pakistan’s real GDP
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for the fiscal year ending June 2004 grew by more than 6%, driven by a strong manufacturing
sector. This rate was up from 5.1% during the previous year and 3.6% in FY2001/FY2002.
An industrial sector recovery and the end of a three-year drought have most foreseeing solid
growth ahead, with predictions nearing 6% for FY2004/FY2005.
The Pakistani government stabilized the country’s external debt at about $33 billion by
June 2003. The country’s total liquid reserves topped $12 billion by mid-2004, an all-time
high and an increase of more than 400% since October 1999. Foreign remittances for
FY2003 exceeded $4.2 billion, nearly quadrupling the amount in 2001. Inflation, generally
steady at around 3%, likely will rise slightly in 2004. Defense spending and interest on
public debt together consume 70% of total revenues, thus squeezing out development
expenditure. Pakistan’s resources and comparatively well-developed entrepreneurial skills
may hold promise for more rapid economic growth and development in coming years. This
is particularly true for Pakistan’s textile industry, which accounts for 60% of Pakistan’s
exports. Analysts point to the pressing need to further broaden the country’s tax base in
order to provide increased revenue for investment in improved infrastructure, health, and
education, all prerequisites for economic development.
Attempts at economic reform historically have floundered due to political instability.
The Musharraf government has had notable successes in effecting macroeconomic reform,
although efforts to reduce poverty have made little headway. The January 2004 sale of Habib
Bank, the country’s second-largest, was Pakistan’s largest-ever privatization move. Rewards
for its participation in the post-September 2001 anti-terror coalition eased somewhat
Pakistan’s severe national debt situation, with many countries, including the United States,
boosting bilateral assistance efforts and large amounts of external aid flowing into the
country. In March 2004, the Asian Development Bank confirmed a strong economic
recovery for Pakistan during the latter half of 2003, led by “substantial improvement” in the
country’s two main commodity producing sectors, agriculture and large-scale manufacturing.
July 2004 reports from the International Monetary Fund found macroeconomic performance
continuing to be “very strong,” with reform efforts “firmly on track,” but also noted that the
reform process is not advancing equally across all financial sectors.
Trade and Investment. The United States is by far Pakistan’s leading export market,
accounting for nearly one-quarter of total exports. Pakistan’s primary exports are cotton,
textiles and apparel, rice, and leather products. During 2003, total U.S. imports from
Pakistan were worth about $2.53 billion. Three-quarters of this value came from the
purchase cotton apparel, cotton cloth, and related articles. U.S. exports to Pakistan during
2003 were worth $840 million, an increase of 21% over 2002. The leading U.S. export to
Pakistan was raw cotton. The State Bank of Pakistan reports a steady increase in foreign
investment in the country since 2001, with a total of $922 million for the year ending June
2004. More than one-quarter of this amount came from the United States. According to the
most recent report of the U.S. Trade Representative, Pakistan has made progress in reducing
import tariff schedules, though a number of trade barriers remain. Some items are either
restricted or banned from importation for reasons related to religion, national security, luxury
consumption, or protection of local industries. The U.S. pharmaceutical industry believes
that Pakistan maintains discriminatory practices that impede U.S. manufacturer profitability,
and some U.S. companies have complained about Pakistani violations of intellectual property
rights. The International Intellectual Property Alliance estimated trade losses of $126 million
in 2003 due to copyright piracy and criticized Islamabad for “ignoring” a problem —
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Pakistan is a world leader in the pirating of CDs — that has kept Pakistan on the U.S. Trade
Representative’s “Special 301” watch list for 14 consecutive years. The Heritage
Foundation’s 2004 Index of Economic Freedom rated Pakistan as being “mostly unfree,”
highlighting an especially restrictive set of trade policies, weak property ownership
protections, and a high level of black market activity. Heritage also noted an increase in
Islamabad’s domination of the banking system and influence over credit allocation, but noted
improved government monetary policies.
U.S. Aid and Congressional Action
U.S. Assistance. Total U.S. economic and military assistance to Pakistan from 1947-
2003 was just above $14 billion. Actual U.S. assistance to Pakistan in FY2002 was just
above $1 billion, up substantially over the $3.5 million for FY2001 (excluding food aid). For
FY2003, Congress allocated about $295 million for Pakistan in the Consolidated
Appropriations Resolution, 2003 (P.L. 108-7). In April 2003, the Emergency Wartime
Supplemental Appropriations Act, 2003 (P.L. 108-11) allocated $200 million in additional
security-related assistance to Pakistan. The current estimate for total FY2004 aid stands at
$385 million. In June 2003, President Bush vowed to work with Congress on establishing
a five-year, $3 billion aid package for Pakistan. Annual installments of $600 million each
are meant to begin in FY2005 and be evenly split between military and economic aid. When
additional funds for development assistance, law enforcement, and other programs are
included, the aid allocation for FY2005 is $700 million (see Table 1, below). In December
2004, Congress passed the Foreign Operations FY2005 Appropriations bill (H.R. 4818).
The bill establishes a new base program of $300 million for military assistance for Pakistan,
and authorizes Pakistan to use up to $200 million in Economic Support Funds (ESF) to
further reduce its concessional debt to the United States (P.L. 108-106 provided that up to
$200 million in FY2004 ESF could be used for the same purposes. In July 2004, this amount
was used to reduce Pakistan’s concessional debt to the United States by $495 million, leaving
a balance of some $1.3 billion.) Congress also has appropriated significant funds to
reimburse Pakistan for its support of U.S.-led counterterrorism operations. In April 2003,
the Emergency Wartime Supplemental Appropriations Act, 2003 (P.L. 108-11) provided that
$1.4 billion in additional defense spending may be used for payments to reimburse Pakistan
and other cooperating nations for their support of U.S. military operations. In November
2003, a presidential request for emergency FY2004 supplemental funding became P.L. 108-
106. This law made available $1.15 billion for continuing reimbursements. Pentagon
documents indicate that Pakistan received coalition support funding of $1.32 billion for the
period from January 2003 to September 2004, an amount roughly equal to one-third of
Pakistan’s total defense expenditures during that period.
Proliferation-Related Legislation. Through a series of legislative measures,
Congress incrementally lifted sanctions on Pakistan and India resulting from their nuclear
weapons proliferation activities.* After the September 2001 terrorist attacks on the United
* The Agricultural Export Relief Act of 1998 (P.L. 105-194) allowed U.S. wheat sales to Pakistan
after July 1998. The India-Pakistan Relief Act of 1998 (in P.L. 105-277) authorized a one-year
sanctions waiver exercised by President Clinton in November 1998. The Department of Defense
Appropriations Act, 2000 (P.L. 106-79) gave the President permanent authority after October 1999
(continued...)
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States, policymakers searched for new means of providing assistance to Pakistan. President
Bush’s September 2001 issuance of a final determination removed remaining sanctions on
Pakistan (and India) resulting from the 1998 nuclear tests, finding that restrictions were not
in the national security interests of the United States. Some Members of the 108th Congress
urged reinstatement of proliferation-related sanctions in response to evidence of Pakistani
assistance to the North Korean, Iranian, and Libyan nuclear weapons programs. The Nuclear
Black-Market Elimination Act (H.R. 4965) would have authorized the President to impose
three-year-minimum sanctions on any “foreign person or entity” that is determined to have
been involved in the illicit transfer of nuclear materials or technologies. Title III of the act
would have required the President to determine that Pakistan has verifiably halted all
proliferation activities and is fully sharing with the United States all information relevant to
the A.Q. Khan proliferation network. The act did not see floor action.
Coup-Related Legislation. Pakistan’s 1999 coup triggered U.S. aid restrictions
under Section 508 of the annual Foreign Assistance Appropriations Act. New geopolitical
circumstances after September 2001 saw Congress take action on aid restrictions on Pakistan.
P.L. 107-57 (October 2001) waived coup-related sanctions on Pakistan through FY2002 and
granted presidential authority to waive them through FY2003. President Bush exercised this
authority in March 2003. P.L. 108-106 (November 2003) extended the President’s waiver
authority through FY2004; this was exercised in March 2004. In the 108th Congress H.R.
1403, which sought to remove the President’s waiver authority, did not see floor action. The
Intelligence Reform and Terrorism Prevention Act of 2004 (S. 2845, passed by Congress in
December 2004) extends the President’s waiver authority through FY2006.
Trade-Related Legislation. Bills in the 108th Congress sought to extend certain
trade benefits to eligible countries of the greater Middle East, including Pakistan, and to
extend trade benefits to certain tents imported into the United States from eligible countries,
including Pakistan. These bills did not see floor action. In December 2004, the
Miscellaneous and Technical Corrections Act of 2004 (H.R. 1047) became P.L.108-429.
The act authorizes the President to designate certain hand-made or hand-woven carpets as
eligible articles for duty-free treatment under the Generalized System of Preferences, a move
that the Senate Committee on Finance believes would be of particular benefit to Pakistan.
Other Legislation. In July 2003, the House passed the Foreign Relations
Authorization Act, FY2004-2005 (H.R. 1950). Section 709 of the act would require the
President to report to Congress on actions taken by Islamabad to close terrorist camps in
Pakistan-controlled areas, prohibit the infiltration of militants at the Kashmiri Line of
Control, and cease the transfer of WMD or related technologies to any third parties. In
December 2004, Congress passed the Intelligence Authorization Act, FY2005 (H.R. 4548).
Section 304 of the act requires the Director of Central Intelligence to report to the Congress
on Pakistani efforts to curb WMD proliferation and to fight terrorism.
* (...continued)
to waive nuclear-test-related sanctions applied against Pakistan and India. On October 27, 1999,
President Clinton waived economic sanctions on India (Pakistan remained under sanctions as a result
of the October 1999 coup). The Foreign Operations Export Financing and Related Appropriations
Agencies Act, 2001 (P.L. 106-429; Section 597) provided an exception under which Pakistan could
be provided U.S. foreign assistance funding for basic education programs. (See also CRS Report
RS20995, India and Pakistan: Current U.S. Economic Sanctions.)
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9/11 Commission Recommendations. The 9/11 Commission Report identifies
the government of President Musharraf as the best hope for stability in Pakistan and
Afghanistan, and it recommends that the United States make a long-term commitment to
provide comprehensive support for Islamabad so long as Pakistan itself is committed to
combating extremism and to a policy of “enlightened moderation.” Legislation in the 108th
Congress seeks to implement this and other Commission recommendations. The Intelligence
Reform and Terrorism Prevention Act of 2004 (S. 2845, passed by Congress in December
2004) calls for U.S. aid to Pakistan to be sustained at a minimum of FY2005 levels with
particular attention given to improving Pakistan’s education system. It further requires the
President to report to Congress within 180 days of enactment a description of a long-term
U.S. strategy to engage with and support Pakistan.
Table 1. U.S. Assistance to Pakistan, FY2001-FY2005
(in millions of dollars)
Program or
FY2001
FY2002
FY2003
FY2004
FY2005
Account
Actual
Actual
Actual
Estimate
Allocation
CSH
-.-
5.0
15.6
25.6
21.1
DA
-.-
10.0
34.5
42.4
29.0
ERMA
-.-
25.0
-.-
-.-
-.-
ESF
-.-
624.5
188.0a
200.0a
300.0
FMF
-.-
75.0
224.5
74.6
300.0
IMET
-.-
0.9
1.0
1.3
2.0
INCLE
3.5
90.5b
31.0
36.5
40.0
NADR
-.-
10.1
-.-
4.2
8.0
PKO
-.-
220.0
-.-
-.-
-.-
Subtotal
$3.5
$1,061.0
$494.6
$384.6
$700.1
P.L.480 Title Ic
0.5
10.0
9.0
6.0
-.-
P.L.480 Title IIc
1.9
5.1
9.7
8.4
-.-
Section 416(b)c
85.1
75.7
-.-
9.6
-.-
Total
$91.0
$1,151.8
$513.3
$408.6
$700.1
Sources: U.S. Departments of State and Agriculture; U.S. Agency for International Development.
Abbreviations:
CSH:
Child Survival and Health
NADR:
Nonproliferation, Anti-Terrorism,
DA:
Development Assistance
Demining, and Related
ERMA:
Emergency Refugee and Migration
PKO:
Peacekeeping Operations
Assistance
P.L.480 Title I:
Trade and Development Assistance
ESF:
Economic Support Fund
food aid (loans)
FMF:
Foreign Military Financing
P.L.480 Title II: Emergency and Private Assistance
IMET:
International Military Education and
food aid (grants)
Training
Section 416(b):
The Agricultural Act of 1949, as
INCLE:
International Narcotics Control and Law
amended (surplus agricultural
Enforcement (includes border security)
commodity donations)
Notes:
a. Congress authorized Pakistan to use the FY2003 ESF allocation to cancel $988 million and the FY2004 ESF
allocation to cancel $495 million in concessional debt to the U.S. government.
b. Included $73 million for border security projects that continued in FY2003.
c. Food aid amounts do not include what can be significant transportation costs.
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