Order Code IB94041
CRS Issue Brief for Congress
Received through the CRS Web
Pakistan-U.S. Relations
Updated May 26, 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
Pakistan for the infiltration of Islamic mili-
thriving Pakistan is considered vital to U.S.
tants into Indian Kashmir, a charge Islamabad
interests in Asia. Key U.S. concerns regarding
denies. The United States reportedly has
Pakistan include regional terrorism; weapons
received pledges from Islamabad that all
proliferation; the ongoing Kashmir problem
“cross-border terrorism” would cease and that
and Pakistan-India tensions; human rights
any terrorist facilities in Pakistani-controlled
protection; and economic development. A
areas would be closed. Similar pledges have
U.S.-Pakistan relationship marked by periods
been made to India. The United States strong-
of both cooperation and discord was trans-
ly encourages maintenance of a cease-fire
formed by the September 2001 terrorist at-
along the Kashmiri Line of Control and con-
tacks on the United States and the ensuing
tinued substantive dialogue between
enlistment of Pakistan as a pivotal ally in
Islamabad and New Delhi.
U.S.-led counterterrorism efforts. Top U.S.
officials regularly praise Islamabad for its
Pakistan’s macroeconomic indicators
ongoing cooperation, although doubts exist
have turned positive since 2001, but wide-
about Islamabad’s commitment to some core
spread poverty persists, rates of foreign invest-
U.S. interests in the region. Pakistan is
ment remain low, and inflation has been
identified as a base for terrorist groups and
rising. Democracy has fared poorly in Paki-
their supporters operating in Kashmir, India,
stan; the country has endured direct military
and Afghanistan. Pakistan continues to face
rule for half of its existence. In 1999, the
serious problems, including domestic terror-
elected government was ousted in a coup led
ism and human rights violations. Since late
by Army Chief Gen. Pervez Musharraf, who
2003, Pakistan’s army has been conducting
later assumed the title of president. Supreme
unprecedented counterterrorism operations in
Court-ordered elections in 2002 seated a new
traditionally autonomous western tribal areas.
civilian government (Musharraf ally and
Finance Minister Shaukat Aziz became prime
A potential Pakistan-India nuclear arms
minister in August 2004), but it remains weak,
race has been the focus of U.S. nonprolifera-
and Musharraf has retained his position as
tion efforts in South Asia. Attention to this
army chief. The United States strongly urges
issue intensified following nuclear tests by
the Musharraf government to restore fully
both countries in May 1998; the tests triggered
functioning democracy in Islamabad. Con-
restrictions on U.S. aid to both countries
gress has granted President Bush authority to
(remaining nuclear-related sanctions on Paki-
waive coup-related sanctions through FY2006.
stan were waived in October 2001). Pakistan
and India have fought three wars since 1947.
Pakistan is among the world’s leading
Recently, the United States has been troubled
recipients of U.S. aid. Including current
by evidence of “onward” proliferation of
appropriations and requests, Pakistan will
Pakistani nuclear technology to third parties,
receive about $3.4 billion in direct U.S.
including North Korea, Iran, and Libya. Such
assistance for FY2002-FY2006. Almost half
evidence became stark in February 2004.
of this ($1.5 billion) is security-related aid.

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

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MOST RECENT DEVELOPMENTS
In March, Secretary of State Rice met with Prime Minister Aziz and President
Musharraf in Islamabad, where she told the Pakistani people that “the United States will be
a friend for life.” The Bush Administration later announced that the United States would
resume sales of F-16 fighters to Pakistan after a 16-year hiatus (see CRS Report RS22148,
Combat Aircraft Sales to South Asia). In May, the Commander of the U.S. Central
Command, Gen. Abizaid, and Assistant Secretary of State Rocca made separate visits to
Islamabad for consultations with top Pakistani officials. On May 4, the Islamabad
government announced having captured Abu Faraj al-Libbi, a Libyan native wanted in
connection with lethal attempts to assassinate President Musharraf in December 2003. Libbi,
captured in the northwestern city of Mardan, was described by some terrorism analysts as
being the third-most senior Al Qaeda operative, although others disputed this claim.
President Bush said Libbi was “a direct threat to America” and called his capture “a critical
victory in the war on terror.” On May 14, press reports claimed that a U.S. Predator drone
had fired a missile on Pakistani territory, killing suspected Al Qaeda explosives expert
Haithem al-Yemeni. Pakistan denied the report.
On May 9, a Newsweek magazine report alleging that a Koran had been desecrated at
the U.S. facility at Guantanamo Bay allegedly spurred four days of violent anti-U.S. protests
in both Afghanistan and Pakistan, although senior U.S. and Afghan officials later disputed
the connection. A State Department spokesman called any such desecration “abhorrent” and
said the allegations would be investigated. Newsweek apologized and retracted the story, but
Pakistan’s National Assembly passed a resolution condemning the alleged desecration and
the Islamabad government reiterated its demand for an investigation into the allegations. On
May 19, two U.S. citizens of Pakistani origin claimed that they had been detained in Pakistan
for nine months, beaten by Pakistani agents, and interrogated by F.B.I. agents before being
released without charges. New York-based Human Rights Watch later accused the U.S.
government of “turning a blind eye” to the alleged torture and illegal detention.
Pakistan’s domestic security and political stability have appeared weakened in 2005.
Beginning in January, well-armed tribesmen in the sparsely populated, but resource-rich
Baluchistan province have been causing serious disruptions by targeting power,
transportation, and communication lines, and engaging in sporadic battles with government
forces there. March conflict caused thousands of civilians to flee their homes and at least 40
people were killed and scores injured when a bomb exploded at a religious shrine in a remote
part of Baluchistan. On the political front, rallies centered around the April return to Lahore
of opposition figure Asif Zardari caused authorities to arrest many thousands of People’s
Party activists. Islamist parties have staged major street protests against the Musharraf
government; on April 1, police arrested up to 2,000 protestors in both Lahore and Karachi.
Moreover, in March, ruling party parliamentarians allied with Islamists to reject legislation
which sought to strengthen national laws against “honor killings” and PM Aziz’s cabinet
called for a restoration of a religious column on Pakistani passports. In April, police in the
eastern city of Gujranwala clashed with Islamist protestors opposed to women’s participation
in a foot race there. In May, police in Lahore used force to disperse a group of human rights
activists who had staged another “mixed marathon,” and police in Islamabad and Lahore
used batons to break up gatherings of journalists marking World Press Freedom Day, injuring
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nine and detaining 30 more. Opposition parties and human rights groups claim that these
developments belie Islamabad’s claims to be pursuing a policy of “enlightened moderation.”
On May 10, after consulting with the Pakistani and Indian governments, the World
Bank named a Swiss engineer to serve as Neutral Expert to address the dispute over a dam
India is constructing on the Chenab River in Baghliar. On May 11, an emergency
supplemental appropriations bill became P.L. 109-13. The bill allows that up to $1.22 billion
in Pentagon funds be used to reimburse Pakistan and other key cooperating nations for their
support of U.S. military operations. On May 18, the House passed H.Res. 272, recognizing
the historic steps India and Pakistan have taken toward achieving bilateral peace. More
information is in CRS Report RS21584, Pakistan: Chronology of Recent Events.
BACKGROUND AND ANALYSIS
Historical Background
The long and checkered Pakistan-U.S.
PAKISTAN IN BRIEF
relationship has its roots in the Cold War
Population: 159 million; growth rate: 1.98%
and South Asia regional politics of the
(2004)
1950s. U.S. concerns about Soviet
Area: 803,940 sq. km. (slightly less than twice the
size of California)
expansionism and Pakistan’s desire for
Capital: Islamabad
security assistance against a perceived
Ethnic Groups: Punjabi, Sindhi, Pashtun (Pathan),
threat from India prompted the two
Baloch, Muhajir (immigrants from India at the
countries to negotiate a mutual defense
time of partition and their descendants)
assistance agreement in 1954. By 1955,
Languages: Punjabi 58%, Sindhi 12%, Pashtu 8%,
Urdu 8%, other 14%; English widely used
Pakistan had further aligned itself with the
Religions: Muslim 97% (Sunni 77%, Shia 20%),
West by joining two regional defense pacts,
Christian, Hindu, and other 3%
the South East Asia Treaty Organization
Life Expectancy at Birth: female 63.6 years; male
and the Central Treaty Organization. As a
61.7 years (2004 est.)
result of these alliances, Islamabad received
Literacy: female 31%; male 60% (2003)
Gross Domestic Product (at PPP): $340 billion;
nearly $2 billion in U.S. assistance from
per capita: $2,210; growth rate 6.2% (2004.)
1953 to 1961, $508 million of this in
Inflation: 7.4% (2004)
military aid.
U.S. Trade: exports to U.S. $2.87 billion; imports
from U.S. $1.81 billion (2004)
Sources: CIA World Factbook; U.S. Commerce Dept.
Differing expectations of the security
relationship have long bedeviled bilateral
ties. During and immediately after the
Indo-Pakistani wars of 1965 and 1971, the United States suspended military assistance to
both sides, resulting in a cooling of the Pakistan-U.S. relationship and a perception among
some in Pakistan that the United States was not a reliable ally. In the mid-1970s, new strains
arose over Pakistan’s efforts to respond to India’s 1974 underground nuclear test by seeking
its own nuclear weapons capability. Limited U.S. aid was resumed in 1975 but was
suspended in 1979 by the Carter Administration in response to Pakistan’s covert construction
of a uranium enrichment facility. Following the Soviet invasion of Afghanistan in 1979,
Pakistan was again viewed as a frontline ally in the effort to block Soviet expansionism. In
1981, the Reagan Administration offered a five-year, $3.2 billion aid package with
Islamabad. Pakistan became a key transit country for arms supplies to the Afghan resistance,
as well as a camp for some three million Afghan refugees, most of whom have yet to return.
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Despite the renewal of U.S. aid and close security ties, many in Congress remained
troubled by Pakistan’s nuclear weapons program. 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, Pakistan’s
nuclear activities again came under intensive U.S. scrutiny and, in 1990, President Bush
again suspended aid to Pakistan. Under the provisions of the Pressler amendment, most
bilateral economic and all military aid ended and deliveries of major military equipment
ceased. In 1992, Congress partially relaxed the scope of the aid cutoff to allow for food
assistance and continuing support for nongovernmental organizations. Among the notable
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 compensate Pakistan with $324.6
million in cash payment and $140 million in goods, including surplus wheat.
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 Pakistan and India. 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 countries 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 rebels 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, some 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. 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
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was further strengthened (see CRS Report RL31555, China and Proliferation of Weapons
of Mass Destruction and Missiles). India’s ambassador to the United States said in 2004 that
the Islamabad-Beijing nuclear and missile “proliferation nexus” 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 cooperation. In
April 2005, Chinese PM Wen Jiabao visited Islamabad, where Pakistan and China signed 22
more such pacts. 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 moved quickly to bolster his
power by curtailing those of the president and judiciary, and he emerged as one of Pakistan’s
strongest-ever elected leaders. 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.” In April 2002, Musharraf
assumed the title of president. National elections were held in October of that year, as
ordered by the Supreme Court. At present, Musharraf continues to hold the dual offices of
president and army chief. (See “Democracy and Governance” section 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 efforts to counter narcotics
trafficking. These concerns have been affected by several key developments, including
proliferation- and democracy-related sanctions; Pakistan-India conflict over Kashmir and a
continuing bilateral nuclear standoff; and 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. U.S.
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,
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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 status that may be more symbolic than
practical. Revelations that Pakistan has been a source of 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-terrorism 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 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. 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 approximately 500 such fugitives to date.
Pivotal Al Qaeda-related arrests in Pakistan have included Abu Zubaydah (March
2002), Ramzi bin al-Shibh (September 2002), and Khalid Sheik Mohammed (March 2003),
several key captures in the summer of 2004, and Abu Faraj al-Libbi (May 2005). Yet Al
Qaeda and Taliban fugitives remain in Pakistan and may have reestablished their
organizations in Pakistani cities such as Karachi 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 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. In March 2005,
Defense Intelligence Director Jacoby stated that, “Pakistan must maintain and expand
[military] operations [in its tribal areas] in order to permanently disrupt insurgent and
terrorist activity,” adding that “international and indigenous terrorists pose a high threat to
senior Pakistani government officials, military officers, and U.S. interests.” (See also CRS
Report RL32259, Terrorism in South Asia.)
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. U.S.
government officials voiced similar worries, even expressing concern that elements of
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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 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. In August
2004, 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,
which were held without major disturbances. In November, Musharraf visited Kabul, where
he vowed full cooperation with Afghanistan and efforts to combat terrorism. Still, concern
about infiltrations continues: in May 2005, U.S. military officials in Afghanistan indicated
that insurgents opposed to the Kabul government continue to cross into Afghanistan to attack
U.S.-led forces before returning to Pakistan.
Infiltration into Kashmir. Islamabad has been under continuous U.S. and
international pressure to terminate the infiltration of insurgents across the Kashmiri Line of
Control (LOC). Such pressure reportedly elicited a promise from President Musharraf to
then-U.S. Deputy Secretary of State Armitage that all such movements would cease. During
a 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 both to 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 statements from Indian officials during 2004 indicating that rates
of militant infiltration were down significantly. However, in April 2005, the Indian prime
minister asserted that “the threat to the peace process from extremist forces and terrorist
organizations has not been eliminated.”
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, widely viewed as
expressions of militants’ anger with the Musharraf regime for its cooperation with the United
States, were linked to Al Qaeda, as well as to indigenous militant groups. During 2003-
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2004, the worst domestic terrorism was directed against Pakistan’s Shia minority.
Indications are that the indigenous Lashkar-e-Jhangvi Sunni terrorist group was responsible
for the most deadly incidents. Two attempts to kill Musharraf in December 2003 and failed
efforts to assassinate other top Pakistani officials in mid-2004 may have been linked to Al
Qaeda and illuminated the danger presented by the determined extremists.
Pakistan-U.S. Security Cooperation. In June 2004, President Bush designated
Pakistan as a major non-NATO ally of the United States. The close U.S.- Pakistan security
ties of the cold war era — which had come to a 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 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. In March 2005,
the United States announced that it would resume sales of F-16 fighters to Pakistan after a
16-year hiatus. Since mid-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 transport helicopters ($300
million sale); military radio systems ($78 million sale); a November 2004 proposed sale of
eight P-3C aircraft, six Phalanx guns, and 2,000 TOW missiles (worth up to $1.2 billion);
and, in May 2005, the proposed sale of 300 Sidewinder air-to-air missiles and 60 Harpoon
anti-ship missiles (worth $226 million). The Pentagon reports Foreign Military Sales
agreements with Pakistan worth $27 million in FY2002, $167 million in FY2003, and $176
million in FY2004. The United States has undertaken to train and equip new Pakistan Army
Air Assault units that can move quickly to find and target terrorist elements. Islamabad
continues to seek increased arms imports, especially in an effort to bolster its air forces. A
revived high-level U.S.-Pakistan Defense Consultative Group (DCG) — moribund since
1997 — met in 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 met in
February 2005 in Islamabad. There has been a direct U.S. role in training the security detail
of the Pakistani president, help to fund a 650-officer Diplomatic Security Unit, and assistance
with numerous programs designed to improve the quality of Pakistan’s internal police forces
through the provision of equipment and training. (See also CRS Report RS22148, Combat
Aircraft Sales to 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 by states. 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.
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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
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 Khan’s proliferation network.
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; CRS
Report RL32745, Pakistan’s Nuclear Proliferation Activities and the Recommendations of
the 9/11 Commission; and CRS Report RS21237, India and Pakistan Nuclear Weapons.)
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 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. However, 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
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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
proliferation in South Asia. (See CRS Report RL31559, Proliferation Control Regimes;
CRS Report RL31589, Nuclear Threat Reduction Measures for India and Pakistan, and CRS
Report RS20995, India and Pakistan: Current U.S. Economic Sanctions.)
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 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 Indian 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, casting doubt on the peace effort. However, an October 2003 confidence-
building initiative got Pakistan and India back on track toward improved relations, and a
November cease-fire was initiated after a proposal by then-Pakistani PM Jamali. President
Musharraf also 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.
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Although militant infiltration did not end, New Delhi 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.
There Pakistan and India issued a joint “Islamabad Declaration” calling for a “composite
dialogue” to bring about “peaceful settlement of all bilateral issues, including Jammu and
Kashmir, to the satisfaction of both sides.” A major confidence-building development came
in April 2005, when a new bus service was launched linking Muzaffarabad in Pakistani
Kashmir and Srinagar in Indian Kashmir, and a summit meeting produced an agreement to
address the Kashmir issue “in a forward looking manner for a final settlement.” Still, many
Kashmiris reject any effort at settlement that excludes them. Pakistan-based and Kashmiri
militant groups express a determination to continue fighting against Indian forces in Kashmir
despite the Pakistan-India dialogue. Deadly attacks by separatist militants continue and
underscore 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 Pakistanis
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 were eroded by ensuing
developments, including President Musharraf’s imposition of major constitutional changes.
International and Pakistani human rights groups continue to issue reports critical of
Islamabad’s military-dominated government. In 2005, and for the sixth straight year, the
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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 marked by evidence of fraud and coercion. In
August 2002, the Musharraf government announced sweeping changes to the Pakistani
constitution. These changes provide the office of President 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.” 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 a 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.
Other 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, in the final month of 2004 Musharraf chose to 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 Country Report on Human
Rights Practices 2004 determined that the Pakistani government’s record on human rights
again “remained poor; although there were some improvements in a few areas, serious
problems remained.” Along with concerns about anti-democratic practices, the report lists
“severe” 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
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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
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. A 2005 report from the U.S. Commission on International Religious
Freedom claimed that, “The response of the government of Pakistan to persistent and
religiously motivated violence in Pakistan continues to be inadequate” and again
recommended that Pakistan be designated a Country of Particular Concern. 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 then distributed mainly to Europe 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,
down from an estimated 155 tons produced in 1995. However, opium production 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.” Elements of Pakistan’s major
intelligence agency are suspected of involvement in drug trafficking; in March 2003, a
former U.S. Ambassador to Pakistan told a House International Relations Committee panel
that their role in the heroin trade from 1997 to 2003 was “substantial.” Reports indicate that
profits from drug sales are financing the activities of Islamic extremists in Pakistan,
Afghanistan, and Kashmir. U.S. counter-narcotics programs aim to reduce the flow of
opiates though Pakistan, eliminate Pakistan as a source of such opiates, and reduce the
demand for illegal drugs within the country. 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. Since 2002,
the State Department’s Bureau of International Narcotics and Law Enforcement Affairs
(INL) has supported Pakistan’s Border Security Project by training border forces, providing
vehicles and surveillance and communications equipment, transferring helicopters and fixed-
wing aircraft to the Interior Ministry’s Air Wing, and road-building in western tribal areas.
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
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(public debt is equal to more than 70% of GDP). Greater political stability has 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 have hampered progress.
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
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 ranging from 5.5% to 7.2% 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. Inflationary
pressures grew at least partly due to increased oil prices in 2004, resulting in an annual rate
of 7.4%, but are expected to ease in 2005 and 2006. 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 bank, was Pakistan’s largest-ever privatization move.
Rewards for 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 a September 2004 country brief, the World Bank noted that Pakistan had turned
a deteriorating macroeconomic situation into a rapidly improving one, but also called poverty
a remaining serious concern. In January 2005, a top International Monetary Fund official
congratulated Pakistan for its “successful implementation” of reforms that led to “impressive
turnarounds” in macroeconomic trends. In February, the World Bank president praised
Pakistan’s “terrific” economic progress, but emphasized that Pakistan “has a long way to go
in terms of achieving its human development goals.” In April, an Asian Development Bank
report noted improvement in the Pakistani economy in 2004-2005, but identified rising
inflation, a large trade deficit, and a balance of payments deficit as majors areas of concern.
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 $2.87 billion (up 14% over 2003). More than half of this value came from the
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purchase of cotton apparel and household goods. U.S. exports to Pakistan during 2004 were
worth $1.8 billion, more than twice the 2003 value, led by a tripling in sales of machinery
and transport equipment. Pakistan currently is the 49th largest export market for U.S. goods.
According to the 2005 report of the U.S. Trade Representative (USTR), Pakistan has made
progress in reducing import tariff schedules, though a number of trade barriers remain. Some
items are banned from importation on religious, environmental, security, or health grounds.
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 $143 million in 2004 due to copyright piracy and has criticized
Islamabad for “fundamental failure” to address a problem — Pakistan is a world leader in
the pirating of music CDs — that has kept Pakistan on the USTR’s “Special 301” Watch List
for 16 consecutive years (in 2004, continuing violations caused the USTR to move Pakistan
to the Priority Watch List). 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. The Heritage
Foundation’s 2005 Index of Economic Freedom again rated Pakistan’s economy as being
“mostly unfree,” identifying a worsened circumstance in 2004 characterized 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
to 2004 was nearly $15 billion. Total non-food aid in FY2004 was $387 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, split evenly between
military and economic aid, began in FY2005. The Foreign Operations FY2005
Appropriations bill (P.L. 108-447) established a new base program of $300 million for
military assistance for Pakistan; half of the FY2005 funding came from a May 2005
emergency supplemental appropriations bill (P.L. 109-13). P.L. 108-447 also allows that up
to $200 million in FY2005 Economic Support Funds may be used for the modification of
direct loans and guarantees for Pakistan (Congress made identical provisions in two previous
foreign operations appropriations bills and Pakistan has used that $400 million in ESF to
reduce its concessional debt to the United States by $1.48 billion, leaving a balance of some
$1.3 billion). When additional funds for development assistance, law enforcement, and other
programs are included, the aid allocation for FY2005 is about $692 million (see Table 1).
Congress also has appropriated 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. A November 2003 emergency supplemental
appropriations act (P.L. 108-106) made available another $1.15 billion for continuing
reimbursements. A May 2005 supplemental appropriation (P.L. 109-13) provided another
$1.22 billion for such purposes. A report of the House Armed Services Committee (H.Rept.
109-89) said the Secretary of Defense expects to disburse that entire amount to Pakistan in
FY2005. Pentagon documents indicate that Pakistan received coalition support funding of
$1.32 billion for the period January 2003-September 2004, an amount roughly equal to one-
third of Pakistan’s total defense expenditures during that period.
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Proliferation-Related Legislation. Through a series of legislative measures,
Congress incrementally lifted sanctions on Pakistan resulting from its nuclear weapons
proliferation activities.1 After the September 2001 terrorist attacks on the United States,
policymakers searched for new means of providing assistance to Pakistan. President Bush’s
issuance of a final determination that month removed remaining sanctions on Pakistan (and
India) resulting from the 1998 nuclear tests, finding that restrictions were not in U.S. national
security interests. Some Members of the 108th Congress urged reinstatement of proliferation-
related sanctions in response to evidence of Pakistani assistance to third-party nuclear
weapons programs. However, the Nuclear Black-Market Elimination Act (H.R. 4965) did
not see floor action. Pending legislation in the 109th Congress includes H.R. 1553, which
would prohibit the provision of military equipment to Pakistan unless the President can
certify 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.
Coup-Related Legislation. Pakistan’s October 1999 military 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 November
2003 emergency supplemental appropriations act (P.L. 108-106) extended the President’s
waiver authority through FY2004. The National Intelligence Reform 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 in the 108th Congress).
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 Finance Committee believes would be of particular
benefit to Pakistan. Pending legislation in the 109th Congress includes H.R. 1230, which
would extend trade benefits to certain tents imported into the United States from certain
Middle Eastern countries, including Pakistan.
Other Legislation. In the 108th Congress, conference managers making foreign
operations appropriations directed the Secretary of State to report to Congress by March 14,
2005 on Pakistan’s education reform strategy and the U.S. strategy to provide relevant
assistance (H.Rept. 108-792; see CRS Report RS22009, Education Reform in Pakistan).
Also 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
1 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. 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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terrorism and WMD proliferation. The Senate did not take action on this bill. The House-
passed version of the Intelligence Authorization Act, FY2005 contained similar reporting
requirements, but this section was removed in the Senate. In the 109th Congress, S. 12
identifies a number of “critical issues” in U.S.-Pakistan relations, calls for “dramatically
increasing” USAID funding for Pakistan-related projects, and would set nuclear
proliferation-related conditions on assistance to Pakistan.
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 National
Intelligence Reform Act of 2004 (P.L. 108-458), Congress broadly 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 by June 17, 2005, a description of
a long-term U.S. strategy to engage with and support Pakistan.
Table 1. U.S. Assistance to Pakistan, FY2001-FY2006
(in millions of dollars)
Program or
FY2001
FY2002
FY2003
FY2004
FY2005
FY2006
Account
Actual
Actual
Actual
Actual
Estimate
Request
CSH
-.-
5.0
15.6
25.6
21.0
20.5
DA
-.-
10.0
34.5
49.4
29.0
29.0
ERMA
-.-
25.0
-.-
-.-
-.-
-.-
ESF
-.-
624.5
188.0a
200.0a
297.6a
300.0
FMF
-.-
75.0
224.5
74.6
298.8b
300.0
IMET
-.-
0.9
1.0
1.4
2.0
2.0
INCLE
3.5
90.5c
31.0
31.5
36.2b
40.0
NADR
-.-
10.1
-.-
4.9
7.0
6.7
PKO
-.-
220.0
-.-
-.-
-.-
-.-
Subtotal
$3.5
$1,061.0
$494.6
$387.4
$691.6
$698.2
P.L.480 Title Id
0.5
10.0
9.0
6.0
-.-
-.-
P.L.480 Title IId
1.9
5.1
9.7
8.4
-.-
-.-
Section 416(b)d
85.1
75.7
-.-
9.6
-.-
-.-
Total
$91.0
$1,151.8
$513.3
$411.4
$537.6
$698.2
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, the FY2004 allocation to cancel
$495 million, and a portion of the FY2005 allocation to cancel further concessional debt to the U.S. government.
b. Includes Emergency Supplemental Appropriations Act, 2005 (P.L. 109-13) funding of $150 million in FMF and $4
million in additional counter-drug funding for Pakistan.
c. Included $73 million for border security projects that continued in FY2003.
d. Food aid amounts do not include what can be significant transportation costs.
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