Order Code IB94041
CRS Issue Brief for Congress
Received through the CRS Web
Pakistan-U.S. Relations
Updated January 28, 2005
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, and rates of foreign
identified as a base for terrorist groups and their
investment remain low. Democracy has fared
supporters operating in Kashmir, India, and
poorly in Pakistan; the country has endured
Afghanistan. Pakistan continues to face serious
military rule for half of its existence. In 1999,
problems, including domestic terrorism and
the elected government was ousted in an
human rights violations. For more than one
extra-constitutional coup led by Army Chief
year, Pakistan’s army has conducted unprece-
Gen. Pervez Musharraf, who later assumed the
dented counterterrorism operations in the tradi-
title of President. Parliamentary elections in
tionally autonomous Federally Administered
2002 resulted in no majority party emerging,
Tribal Areas.
though significant gains for Islamist parties
were notable. A new civilian government is
A potential Pakistan-India nuclear arms
seated (Musharraf ally and Finance Minister
race has been the focus of U.S. nonprolifera-
Shaukat Aziz became prime minister in Au-
tion efforts in South Asia. Attention to this
gust 2004), but it remains weak, and Musharr-
issue intensified following nuclear tests by
af has retained his position as army chief. The
both countries in May 1998; the tests triggered
United States strongly urges the Musharraf
restrictions on U.S. aid to both countries
government to restore fully functioning de-
(remaining nuclear-related sanctions on Paki-
mocracy in Islamabad. Congress has granted
stan were waived in October 2001). Pakistan
President Bush authority to waive coup-
and India have fought three wars since 1947.
related sanctions through FY2006.
Recently, the United States has been troubled
by evidence of “onward” proliferation of
Including current appropriations, Paki-
Pakistani nuclear technology to third parties,
stan will receive about $2.64 billion in direct
including North Korea, Iran, and Libya. Such
U.S. assistance for FY2002-FY2005. Almost
evidence became stark in February 2004.
half of this ($1.13 billion) is security-related

aid. See also CRS Report RL32259, Terror-
Separatist violence in Kashmir has con-
ism in South Asia; and CRS Report RL32615,
tinued unabated since 1989. India blames
Pakistan’s Domestic Political Developments.
Congressional Research Service ˜ The Library of Congress

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MOST RECENT DEVELOPMENTS
The Intelligence Reform and Terrorism Prevention Act of 2004 (P.L. 108-458) and the
Foreign Operations FY2005 appropriations bill (P.L. 108-447), enacted at the close of the
108th Congress, contain Pakistan-specific language and reporting requirements. In the 109th
Congress, the Targeting Terrorists More Effectively Act of 2005 (S. 12, introduced January
24), identifies “a number of critical issues that threaten to disrupt” U.S.-Pakistan relations,
calls for “dramatically increasing” USAID funding for Pakistan-related projects, would
require the President to report to Congress a long-term strategy for U.S. engagement with
Pakistan, would set nuclear proliferation-related conditions on assistance to Pakistan, and
would earmark $797 million in economic and military assistance to Pakistan for FY2006.
Pakistan’s domestic stability suffered during January. On January 8, unidentified
gunmen injured a prominent Shiite cleric in the northern Gilgit district, sparking sectarian
violence and rioting that left 15 people dead. Shia protestors demonstrated publically for
several days after. On January 11, well-armed tribesmen attacked the economically vital Sui
gas facility in Baluchistan after local police accused an army officer of raping a female doctor
working there. The next day, tribesmen kidnaped 12 employees of Pakistan’s main water
and power utility near facility. Thousands of army troops were dispatched to the region to
take control of the facility, and Pakistan’s interior minister said “punitive action” would be
taken if tribesmen did not halt attacks on “national assets” (the hostages were freed by
security forces two days later). During the five-day battle, tribesmen fired nearly 500 rocket
and mortar rounds while trying to take control of the facility, killing eight people, including
three Pakistani soldiers, and injuring another 35. On January 24, as federal officials held
talks with Baluchi nationalists in an effort to resolve a stand-off with armed tribesmen, two
bombs exploded in Quetta, the provincial capital, injuring five people.
The 21-month-old Pakistan-India peace initiative continues, most notably with expert-
and foreign secretary-level talks in Pakistan in December. Both sides called the series of
talks “cordial and constructive,” but only agreements to meet again in the future resulted.
New pessimism about progress arose in January, when talks between Pakistani and Indian
officials failed to resolve an ongoing dispute over a dam that India is constructing in
Baglihar, Kashmir. A Pakistani official said the failure would have a negative impact on the
bilateral dialogue process and, on January 18, the World Bank announced that it had been
asked by the Pakistani government to appoint a “neutral expert” to help resolve the dispute
under the 1960 Indus Waters Treaty. New Delhi called the request “unjustified” and said that
dam construction will continue. On the same day, the Indian army accused Pakistani troops
of firing a dozen mortar shells over the Kashmiri Line of Control (LOC) in violation of a 14-
month-old cease-fire agreement. Pakistan denied the accusation and later made its own
claim that Indian small arms fire across the LOC was a cease-fire violation.
On December 30, Musharraf formally announced to the Pakistani people his decision
to retain the position of army chief beyond the 2004 deadline, saying it was made in the
interest of national harmony and with the approval of “the majority.” Opposition parties,
decried the widely expected decision as unconstitutional and nondemocratic, and vowed to
launch a national “agitation” in protest. Modestly sized public protests were held in January.
On December 15, PM Aziz visited Beijing, where Pakistan and China signed seven accords
meant to boost bilateral trade and anti-terrorism cooperation. On February 1, the first session
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of the U.S. Pakistan Defense Policy Group in more than one year is set to meet in Islamabad.
More information is in CRS Report RS21584, Pakistan: Chronology of Recent Events.
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.
Differing expectations of the security relationship
have long bedeviled bilateral ties. During and
PAKISTAN IN BRIEF
Population: 159 million; growth rate:
immediately after the Indo-Pakistani wars of 1965 and
1.98% (2004 est.)
1971, the United States suspended military assistance
Area: 803,940 sq. km. (slightly less than
to both sides, resulting in a cooling of the Pakistan-
twice the size of California)
U.S. relationship and a perception among some in
Capital: Islamabad
Pakistan that the United States was not a reliable ally.
Ethnic Groups: Punjabi, Sindhi, Pashtun
(Pathan), Baloch, Muhajir (immigrants
In the mid-1970s, new strains arose over Pakistan’s
from India at the time of partition and
efforts to respond to India’s 1974 underground test of
their descendants)
a nuclear device by seeking its own nuclear weapons
Languages: Punjabi 58%, Sindhi 12%,
capability. Limited U.S. aid was resumed in 1975, but
Pashtu 8%, Urdu (official) 8%, other
was suspended again in 1979 by the Carter
14%; English widely used
Religions: Muslim 97% (Sunni 77%, Shia
Administration in response to Pakistan’s covert
20%), Christian, Hindu, and other 3%
construction of a uranium enrichment facility.
Life Expectancy at Birth: female 63.6
Following the Soviet invasion of Afghanistan in late
years; male 61.7 years (2004 est.)
1979, Pakistan was again viewed as a frontline ally in
Literacy: female 31%; male 60% (2003)
Gross Domestic Product (at PPP): $340
the effort to block Soviet expansionism. In 1981, the
billion; per capita: $2,210; growth
Reagan Administration negotiated a five-year, $3.2
rate 6.2% (2004 est.)
billion aid package with Islamabad. Pakistan became
Inflation: 3.9% (2002)
a key transit country for arms supplies to the Afghan
U.S. Trade: exports to U.S. $2.9 billion;
resistance, as well as a camp for some three million
imports from U.S. $1.86 billion (2004 est.)
Sources: CIA World Factbook; U.S. Commerce Dept.
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 1988, Pakistan’s nuclear activities again
came under intensive U.S. scrutiny and, in 1990, President Bush again suspended aid to
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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 food assistance and
continuing support for nongovernmental organizations. Among the serious results of the aid
cutoff was the nondelivery of 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.” During 2004, numerous mid-level meetings, re-establishment of
embassy staff and consulates, increased people-to-people contacts, and a cease-fire at the
border and LOC 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”
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continued to cause serious concerns in New Delhi. In December 2004, the Pakistani prime
minister visited Beijing, where Pakistan and China signed seven accords meant to boost
bilateral economic and anti-terrorism cooperation, and trade. The Chinese government has
assisted Islamabad in constructing a major new port at Gwadar, near the border with Iran.
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 presidential and judicial powers, 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. Musharraf continues to hold the dual offices of president and army chief.
(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
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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.
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.
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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
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,
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and assists with numerous programs designed to improve the quality of Pakistan’s internal
police forces through the provision of equipment and training.
Pakistan-U.S. Security Cooperation. In June 2004, President Bush declared
Pakistan to be a major non-NATO ally of the United States; to date, the value of this
designation has appeared 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 — have
been 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 and discussed how the U.S. military can
assist Pakistan in improving its counterterrorism capabilities. U.S. elections postponed the
2004 session, which is now set for February 2005 in Islamabad. (See also CRS Report
RL32259, Terrorism in South Asia.)
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
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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
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.
The 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 RL32745, Pakistan’s Nuclear Proliferation Activities and
the Recommendations of the 9/11 Commission.)
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
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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
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 were 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. A July 2001 summit meeting
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 mobilized 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
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2004, where Pakistan and India issued a joint “Islamabad Declaration” calling for a
“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 moderates, and
President Musharraf has decried any attempts to “Talibanize” regions of Pakistan. Islamists
are notable for 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” and nearly two-thirds expressed 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, a senior U.S. 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 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 hostility toward
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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 $2,210 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
for the fiscal year ending June 2004 grew by more than 6%, driven by a strong manufacturing
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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 the total. Pakistan’s primary exports are cotton, textiles
and apparel, rice, and leather products. During 2004, total U.S. imports from Pakistan were
worth an estimated $2.9 billion (up 15% over 2003). More than half of this value came from
the purchase cotton apparel and household goods. U.S. exports to Pakistan during 2004 were
worth an estimated $1.86 billion, more than doubling the 2003 value, led by a tripling in
sales of machinery and transport equipment. 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. The International Intellectual Property Alliance estimated trade
losses of $135 million in 2003 due to copyright piracy and criticized Islamabad for
“ignoring” a problem — Pakistan is a world leader in the pirating of music CDs — that has
kept Pakistan on the U.S. Trade Representative’s “Special 301” watch list for 14 consecutive
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years. The Heritage Foundation’s 2005 Index of Economic Freedom again rated Pakistan as
being “mostly unfree,” identifying a worsened circumstance in 2004 highlighted by 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 government barriers to
capital flows and foreign investment, along with new evidence that Islamabad was directly
controlling or subsidizing prices on both goods and services.
U.S. Aid and Congressional Action
U.S. Assistance. Total U.S. economic and military assistance to Pakistan from 1947-
2004 was nearly $15 billion. Actual U.S. assistance to Pakistan in FY2002 was just above $1
billion, up substantially over the $3.5 million for FY2001 (amounts exclude 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 have begun in FY2005 and will
be split evenly 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). The Foreign Operations FY2005 Appropriations bill (P.L.
108-447) established a new base program of $300 million for military assistance for Pakistan,
allows that up to $200 million in FY2005 Economic Support Funds may be used for the
modification of direct loans and guarantees for Pakistan (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) and requires the Secretary of State to report to Congress within 90 days of
enactment on education reform in Pakistan (see CRS Report RS22009, Education Reform in
Pakistan). Congress also has appropriated significant funds to reimburse Pakistan for its support
of U.S.-led counterterrorism operations. 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. The November 2003 emergency supplemental
appropriations act (P.L. 108-106) made available another $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 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.
(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 October 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 such
restrictions. P.L. 107-57 (October 2001) waived coup-related sanctions on Pakistan through
FY2002 and granted presidential authority to waive them through FY2003 (the President
exercised this authority in March 2003). The November 2003 emergency supplemental
appropriations act (P.L. 108-106) extended the President’s waiver authority through FY2004
(this was exercised in March 2004). The Intelligence Reform and Terrorism Prevention Act
of 2004 (P.L. 108-458) extended the President’s waiver authority through FY2006 (H.R.
1403, which sought to remove the President’s waiver authority, did not see floor action).
Trade-Related Legislation. The Miscellaneous and Technical Corrections Act of
2004 (P.L.108-429) authorized 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 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.
Other Legislation. In the 108th Congress, the House-passed Foreign Relations
Authorization Act, FY2004-2005 would have required the President to report to Congress on
Pakistani actions related to terrorism and WMD proliferation. The Senate did not take action
on this bill. The House-passed version of the Intelligence Authorization Act, FY2005
contained reporting requirements, but this section was removed in the Senate. In the 109th
Congress, the Targeting Terrorists More Effectively Act of 2005 (S. 12, introduced January
24), identifies “a number of critical issues that threaten to disrupt” U.S.-Pakistan relations, calls
for “dramatically increasing” USAID funding for Pakistan-related projects, would require the
President to report to Congress a long-term strategy for U.S. engagement with Pakistan, would
* (...continued)
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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set nuclear proliferation-related conditions on assistance to Pakistan, and would earmark $797
million in economic and military assistance to Pakistan for FY2006.
9/11 Commission Recommendations. The 9/11 Commission Report identified
the government of President Musharraf as the best hope for stability in Pakistan and
Afghanistan, and it recommended 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.” In passing the
Intelligence Reform and Terrorism Prevention Act of 2004 (P.L. 108-458), Congress
endorsed this recommendation by calling for U.S. aid to Pakistan to be sustained at a
minimum of FY2005 levels and requiring 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 Assistance
PKO:
Peacekeeping Operations
ESF:
Economic Support Fund
P.L.480 Title I:
Trade and Development Assistance
FMF:
Foreign Military Financing
food aid (loans)
IMET:
International Military Education and Training
P.L.480 Title II:
Emergency and Private Assistance food
INCLE:
International Narcotics Control and Law
aid (grants)
Enforcement (includes border security)
Section
416(b):
The Agricultural Act of 1949, as
amended (surplus 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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