Order Code IB94041
CRS Issue Brief for Congress
Received through the CRS Web
Pakistan-U.S. Relations
Updated August 22, 2005
K. Alan Kronstadt
Foreign Affairs, Defense, and Trade Division
Congressional Research Service ˜ The Library of Congress

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. Democracy has fared
U.S. interests in the region. Pakistan is
poorly in Pakistan; the country has endured
identified as a base for terrorist groups and
direct military rule for half of its existence. In
their supporters operating in Kashmir, India,
1999, the elected government was ousted in a
and Afghanistan. Pakistan continues to face
coup led by Army Chief Gen. Pervez
serious problems, including domestic terror-
Musharraf, who later assumed the title of
ism and human rights violations. Since late
president. Supreme Court-ordered elections in
2003, Pakistan’s army has been conducting
2002 seated a new civilian government
unprecedented counterterrorism operations in
(Musharraf ally Shaukat Aziz is prime minis-
traditionally autonomous western tribal areas.
ter), but it remains weak, and Musharraf has
retained his position as army chief. The Unit-
A potential Pakistan-India nuclear arms
ed States strongly urges the restoration of fully
race has been the focus of U.S. nonprolifera-
functioning democracy in Islamabad and
tion efforts in South Asia. Attention to this
expects Pakistan’s 2005 local and 2007 gen-
issue intensified following nuclear tests by
eral elections to be free and fair throughout
both countries in May 1998; the tests triggered
the entire process. Congress has granted
restrictions on U.S. aid to both countries
President Bush authority to waive coup-
(remaining nuclear-related sanctions on Paki-
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
Pakistan is in the midst of two-phase, nominally non-party municipal elections. The
first phase of voting was completed on August 18, when more than 50% of eligible voters
went to the polls in 53 of 110 districts (the second phase is August 25). Early returns show
candidates favored by the ruling Pakistan Muslim League doing well in an early indication
of prospects for national elections slated for 2007. Opposition parties have complained of
widespread vote rigging and the barring of women from casting ballots. Election-related
violence has left at least 11 people dead and more than 100 injured.
In July, one week after major terrorist bombings in London, President Musharraf
ordered a new crackdown on extremist elements in Pakistan. Officials confirmed that three
of the four suspects in the 7/7 London bombings visited Pakistan during the past year and
two may have spent time at a religious school (madrassa) near Lahore. Musharraf later gave
a televised speech to the nation in which he denounced the London bombings as “unIslamic”
and again vowed to combat religious extremism. Up to 800 suspected Islamic extremists
were arrested in nationwide sweeps. Musharraf also demanded that all madrassas in Pakistan
register with the government by year’s end or face closure, and he ordered that all foreign
madrassa students must leave the country. The moves have spurred modestly-sized protests
by Islamist parties.
Islamabad-Kabul relations are again tense in the wake of accusations that Pakistan
continues to allow and perhaps support the activities of Taliban insurgents in border areas.
Heavy fighting in Afghanistan near the Pakistan border continues and Pakistani troops have
clashed with suspected Islamic militants in North Waziristan, where many believe Al Qaeda-
linked fugitives have sought refuge. Prime Minister Aziz visited Kabul in late July, where
he vowed “seamless cooperation” with the Afghan government in fighting terrorism and
Islamic extremism as Afghanistan prepares for parliamentary elections in September.
The Pakistan-India peace initiative continues, most concretely with a cease-fire
agreement holding along the entire shared frontier and increased cross-border and people-to-
people interactions. A series of expert-level talks in August produced agreements on several
security-related confidence-building measures. However, during May-June, substantive
Pakistan-India talks on numerous territorial and water disputes all ended in deadlock, and an
August meeting on commerce produced no progress on India’s request that Pakistan grant
it Most-Favored Nation status. Morever, a summer spike of separatist-related violence in
Kashmir has included numerous gunbattles near the Line of Control that Indian officials say
militants continue to infiltrate. Top Indian leaders complain that the “infrastructure of
terrorism” remains intact on Pakistan-controlled territory and have suggested that continued
violence has the potential to disrupt the bilateral peace process.
On July 26, the first direct trade by road between Pakistan and India in 40 years came
with the import of Indian food products at the Wagah border checkpoint. On August 4, the
Pakistan Supreme Court ruled that a controversial Hasba (or accountability) bill passed by
the Frontier provincial assembly contained several unconstitutional clauses. On August 11,
Pakistan test-fired its first cruise missile, said to be nuclear-capable with a range of more
than 300 miles. On August 14, Pakistan celebrated its 58th independence day. More
information is in CRS Report RS21584, Pakistan: Chronology of Recent Events.
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BACKGROUND AND ANALYSIS
Historical Background
The long and checkered Pakistan-U.S. relationship has its roots in the Cold War and
South Asia regional politics of the 1950s. U.S. concerns about Soviet expansionism and
Pakistan’s desire for security assistance against a perceived threat from India prompted the
two countries to negotiate a mutual defense assistance agreement in 1954. By 1955, Pakistan
had further aligned itself with the West by joining two regional defense pacts, the South East
Asia Treaty Organization and the Central Treaty Organization (or “Baghdad Pact”). As a
result of these alliances, Islamabad received nearly $2 billion in U.S. assistance from 1953
to 1961, one-quarter of this in military aid.
Differing expectations of the security
relationship have long bedeviled bilateral
PAKISTAN IN BRIEF
Population: 162 million; growth rate: 2.03%
ties. During and immediately after the
(2005 est.)
Indo-Pakistani wars of 1965 and 1971, the
Area: 803,940 sq. km. (slightly less than twice the
United States suspended military assistance
size of California)
to both sides, resulting in a cooling of the
Capital: Islamabad
Pakistan-U.S. relationship and a perception
Ethnic Groups: Punjabi, Sindhi, Pashtun
(Pathan), Baloch, Muhajir (immigrants from
among some in Pakistan that the United
India at the time of partition and their
States was not a reliable ally. In the
descendants)
mid-1970s, new strains arose over
Languages: Punjabi 58%, Sindhi 12%, Pashtu
Pakistan’s efforts to respond to India’s 1974
8%, Urdu 8%, other 14%; English widely
used
underground nuclear test by seeking its own
Religions: Muslim 97% (Sunni 77%, Shia 20%),
nuclear weapons capability. U.S. aid was
Christian, Hindu, and other 3%
suspended by the Carter Administration in
Life Expectancy at Birth: female 63.6 years;
1979 in response to Pakistan’s covert
male 61.7 years (2004 est.)
construction of a uranium enrichment
Literacy: female 31%; male 60% (2003 est.)
Gross Domestic Product (at PPP): $347 billion;
facility. However, following the Soviet
per capita: $2,200; growth rate 6.1% (2004)
invasion of Afghanistan later that year,
Inflation: 7.4% (2004)
Pakistan again was viewed as a frontline
U.S. Trade: exports to U.S. $2.87 billion; imports
ally in the effort to block Soviet
from U.S. $1.81 billion (2004)
Sources: CIA World Factbook; U.S. Commerce Department
expansionism. In 1981, the Reagan
Administration offered a five-year, $3.2
billion aid package to 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.
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
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assistance and continuing support for nongovernmental organizations. Among the notable
results of the aid cutoff was the nondelivery of F-16 fighter aircraft purchased 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 up to 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 in Kashmir. The latest 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. During most of 2002, one
million Pakistani and Indian soldiers were mobilized at the 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, and led to a January
2004 summit meeting and a joint agreement to re-engage 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.
Regular dialogue continues in 2005, although talks on territorial disputes remain deadlocked
and Pakistani officials assert that meaningful progress on substantive issues is not occurring.
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
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, the Chinese prime minister 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.
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Pakistan’s Political Setting
The history of democracy in Pakistan is a troubled one, marked by ongoing tripartite
power struggles among presidents, prime ministers, and army chiefs. Military regimes have
ruled Pakistan for more than half of its 58 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,
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.
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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 January 2002 speech, 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), 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, are themselves believed to 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 told a congressional panel 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. Since early 2003, U.S. military commanders
overseeing Operation Enduring Freedom have complained that renegade Al Qaeda and
Taliban fighters remain able to attack coalition troops in Afghanistan, then escape across the
Pakistani frontier. They have expressed dismay at the slow pace of progress in capturing
wanted fugitives in Pakistan and urge Islamabad to do more to secure its rugged western
border area. U.S. government officials have voiced similar worries, even expressing concern
that elements of Pakistan’s intelligence agency might be assisting members of the Taliban.
In mid-2003, tensions between the Kabul and Islamabad governments reached alarming
levels, with some top Afghan officials accusing Pakistan of manipulating Islamic militancy
in the region to destabilize Afghanistan. In an unprecedented show of force, President
Musharraf moved some 25,000 Pakistani troops into the traditionally autonomous tribal
areas. The first half of 2004 saw an escalation of Pakistani Army operations, many in
coordination with U.S. and Afghan forces just across the international frontier (U.S. forces
have no official authorization to cross the border into Pakistan). Combat between Pakistani
troops and militants in South Waziristan reportedly has left 306 Islamic militants (one-third
of them foreigners), 250 Pakistani soldiers, and an unknown number of civilians dead. The
battles, which continue sporadically to date, have exacerbated already volatile anti-Musharraf
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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. Yet concern about
infiltrations sharpened in the spring of 2005, with U.S. military officials in Afghanistan
indicating that insurgents opposed to the Kabul government continue to cross into
Afghanistan to attack U.S.-led forces before returning to Pakistan. In summer 2005, Afghan
leaders accused Islamabad of actively supporting insurgents and providing their leadership
with safe haven. Pakistan adamantly denied the charges, but tensions are again high as U.S.-
led troops conduct operations in Afghanistan near the Pakistani border and Pakistani forces
engage in sporadic gunbattles with Islamic militants in western tribal regions.
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, 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 the spring and summer of 2005, top Indian leaders have
renewed complaints that Islamabad has taken insufficient action to eradicate the remaining
“infrastructure of terrorism” on Pakistani-controlled territory.
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-
2004, the worst domestic terrorism was directed against Pakistan’s Shia minority. Sectarian
violence again peaked in May 2005, with deadly suicide bomb attacks killing more than two
dozen people. 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 religious extremists.
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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 came 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. 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. 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. (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.
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.
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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
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
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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. 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 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 in Agra, India failed to produce a joint statement, reportedly
due to 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 force,
President Musharraf in January 2002 vowed to end the presence of terrorist entities on
Pakistani soil, and he outlawed five militant groups, including those most often named in
attacks in India, 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 prime minister 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 Prime
Minister 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.
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 prime minister attended a January 2004 summit
meeting of the South Asian Association for Regional Cooperation (SAARC) in Islamabad.
There Pakistan and India issued a joint “Islamabad Declaration” calling for a renewed
“composite dialogue” to bring about “peaceful settlement of all bilateral issues, including
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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 settlement process that excludes them.
Pakistan-based and Kashmiri militant groups express determination to continue fighting in
Kashmir despite the Pakistan-India dialogue. Deadly attacks by separatist militants are
ongoing and demonstrate 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.
In June 2005, the same provincial assembly passed a “Hasba” (accountability) bill that many
fear will create a parallel Islamic legal body and be harmful to human rights. These laws
may seek to replicate in Pakistan the harsh enforcement of Islamic law seen in Afghanistan
under the Taliban. As such, the developments alarm 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. 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. Anti-American sentiment is not limited to Islamic groups,
however. A March 2004 Pew Center survey found only 6% of Pakistanis believing the
United States sincere in its efforts to combat terrorism and nearly two-thirds expressing a
favorable view of Osama bin Laden. 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.” Support for this claim came from a
June 2005 Pew Center poll which found only 22% of Pakistanis expressing a favorable view
of the American people, the lowest percentage for any country surveyed.
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
often-cited 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,
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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 that bolster the president’s powers, 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 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; 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 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. The United States has indicated that it expects Pakistan’s
2005 local and 2007 general elections to be free and fair throughout the entire process. In
June 2005, Secretary of State Rice told an interviewer that “Pakistan has to make inroads on
democracy.” In July 2005, the Senate Appropriations Committee expressed concern with
“the slow pace of the democratic development of Pakistan” (S.Rept. 109-96; 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
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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 has singled out Pakistan for “state hostility
toward minority or non-approved religions” for six consecutive years, 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 2005,
a State Department report on trafficking in persons said that “Pakistan does not fully comply
with the minimum standards for the elimination of trafficking; however, it is making
significant efforts to do so,” and it removed Pakistan from the “Tier 2Watch List.”
Narcotics
Pakistan is a major transit country for opiates that are grown and processed in
Afghanistan then distributed worldwide 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 some 90% 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 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,
but the national economy appears to be gathering positive momentum kin recent years. Per
capita GDP is $665 (about $2,210 when accounting for purchasing power parity). The long-
term economic outlook for Pakistan is much improved since 2001, but remains clouded in
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a country highly dependent on foreign lending and the importation of basic commodities
(public debt is equal to more than 70% of GDP). 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 and 40% in 2004. Output
from both the industrial and service sectors grew in 2002, but the agricultural sector
contracted that year (in part due to severe drought), slowing overall growth. 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% 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 6-8% for FY2004/FY2005.
Pakistan stabilized its external debt at about $33 billion by mid-2003, but it has risen
to nearly $38 billion in 2005. Still, such debt is only about one-third of GDP, down from
more than one-half in 2000. 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 in 2003 exceeded $4 billion, nearly quadrupling the amount in 2001. Inflationary
pressures have grown, at least partly due to increased oil prices in 2004, resulting in a year-
on-year wholesale rate of 9.4% in July 2005, but may ease in 2006. Defense spending and
interest on public debt together consume two-thirds 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 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. In August, the
World Bank president committed to boost overall lending to Pakistan by 50% for 2006-2009,
saying, “One can talk a great deal about [economic] progress, and I think there’s been a great
deal of progress. One can talk at equal length about the problems that remain to be tackled.”
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
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worth $2.87 billion (up 14% over 2003). More than half of this value came from the
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. 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 this 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 (ESF) 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 appropriation (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. The Pentagon indicates 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
$691.6
$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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