Pakistan-U.S. Relations

Pakistan-U.S. Relations

Updated July 8, 2021
Pakistan-U.S. Relations
Overview
agriculture, health, energy, and climate change. To date, the
Since 2001, U.S. policy has broadly been to assist the
Biden Administration has shown few signs that a reset is in
creation of a more stable, democratic, and prosperous
store, and President Biden himself has yet to interact with
Pakistan that actively combats religious militancy.
Pakistani Prime Minister Imran Khan.
Congress took keen interest in U.S. relations with Pakistan,
the world’s fifth most populous nation, following the 9/11
Pakistan and Afghanistan
attacks, especially as related to counterterrorism and U.S.
In late 2018, President Trump requested Islamabad’s
foreign assistance. Seen as key in efforts to stabilize
assistance in facilitating U.S. talks with the Afghan Taliban,
neighboring Afghanistan, Pakistan was among the world’s
and the U.S. government credits Islamabad for this role. Yet
leading recipients of U.S. foreign aid after 9/11, but the
Pakistan’s alleged “double game” of simultaneously
level peaked in FY2010 and has steadily declined since,
supporting U.S.-Taliban talks while continuing to provide
reaching a 20-year nadir under the Trump Administration.
sanctuary to Taliban elements has not ended. Pakistani
leaders maintain that they do not wish to see a Taliban
U.S. ties with Pakistan have cooled considerably over the
military victory in Afghanistan; they also seek to prevent
past decade. Washington tends to view Pakistan largely in
the emergence of a pro-Indian government in Afghanistan.
the context of perceived U.S. interests in relations with
India and Afghanistan, and the relationship has not
Figure 1. U.S. Aid Appropriations for and Military
recovered from a nadir reached in 2011, when it was
Reimbursements to Pakistan, FY2001-FY2022
revealed that Al Qaeda founder Osama bin Laden had
(in millions of dol ars)
received years of haven inside Pakistan. A decade later,
Pakistan appears to have lost its status as a foreign policy
priority for Washington. While the United States previously
seemed to balance its relations with Pakistan and its
archrival, India, it now appears to favor ties with India.
The security- and terrorism-oriented framework that
dominated U.S-Pakistan relations since 2001 is being
altered by two significant shifts: increasing enmity between
the United States and China, Pakistan’s key ally, and U.S.

military withdrawal from Afghanistan. The Biden
Source: CRS calculations based on U.S. government data.
Administration’s early focus on the Quadrilateral Security
Dialogue, or “Quad” (which brings together the United
Domestic Politics
States, India, Japan, and Australia) and on countering
Elections to seat Pakistan’s 15th National Assembly (NA,
China—combined with an end to the 20-year U.S. military
the lower house of its bicameral legislature) and the
presence in Afghanistan—leaves Pakistani leaders anxious
country’s four provincial assemblies took place in mid-
that their country’s salience to Washington will be both
2018, the country’s second-ever democratic transfer of
diminished and colored by perceptions that Islamabad has
power. The relatively young Pakistan Tehreek-e-Insaf (PTI
fallen into Beijing’s geopolitical “camp.” Still, the United
or Movement for Justice) party swept a large plurality of
States conveys that it works “closely with Pakistan on a
NA seats, and party founder and leader Imran Khan became
wide array of issues ranging from Afghanistan stabilization
prime minister. Many analysts contended that Pakistan’s
efforts to counterterrorism to energy to trade and
security services covertly manipulated the country’s
investment,” and notes that the United States has been one
domestic politics to favor Khan. The PTI-led government
of the largest sources of foreign direct investment in
has been criticized for unsteadiness and an inability to defy
Pakistan and remains Pakistan’s largest export market.
Pakistan’s military or to resolve the country’s fiscal crisis.
Pakistani leaders and many independent analysts have
Economy and Fiscal Crisis
argued for a “reset” of bilateral ties with the Biden
Pakistan remains a poor country with high rates of inflation
Administration to replace a long-dominant security
and unemployment, and sometimes acute food, water, and
orientation with more comprehensive relations. This is
energy shortages. The economy’s growth has been steady in
conceived as a focus on “geoeconomics” in which Pakistan
recent years (with a small contraction in 2020), but is well
would pursue regional integration toward the collective
below that needed to keep pace with population growth.
goal of sustainable development. Islamabad presents itself
Economic growth is expected to rebound above 2% in the
as a prospective economic partner based on development
2021/22 fiscal year, but is likely to be constrained by
and investment, with engagement in key sectors such as IT,
government efforts to consolidate the fiscal account.
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Pakistan-U.S. Relations
Corruption and one of the world’s lowest tax-to-GDP ratios
rapprochement since, the potential for further conflict
are major obstacles to Pakistan’s economic development.
remains high, according to U.S. intelligence assessments.
The United States is Pakistan’s largest export destination,
Domestic Militancy and Terrorism Financing
while China is Pakistan’s largest import partner. Trade with
Pakistan remains a haven for numerous Islamist extremist
the United States reached a record $6.8 billion in 2020, but
and terrorist groups, many designated as Foreign Terrorist
overall foreign investment remains weak. Pakistan can be
Organizations under U.S. law. Pakistani governments have
an attractive market due to favorable demographics, English
tolerated and even supported some of these as proxies in
language skills, low labor costs, and natural resources, but
Islamabad’s historical tensions and conflicts with its
trade and investment barriers, as well as security concerns,
neighbors, according to U.S. government reporting. The
limit the ability of U.S. companies to enter the market.
United States continues to urge Pakistan to take “decisive
and irreversible action” against “externally-focused militant
For several years Pakistan has teetered on the edge of debt
groups and UN-designated terrorist organizations operating
and balance of payments crises. China, Saudi Arabia, and
from its territory.” Incidents of domestic terrorism are much
the United Arab Emirates have each provided multi-billion-
decreased since the Pakistan Army launched major
dollar loans, but in mid-2019 the government arranged a
operations in 2014. However, externally-oriented terrorist
three-year, $6 billion bailout from the International
groups such as Lashkar-e-Taiba and JeM continue to
Monetary Fund (IMF), adding to the $5.8 billion Pakistan
operate, by some accounts supported by state elements.
already owed to that body. This was Pakistan’s 13th such
Analysts also warn of a local resurgence of the Pakistani
loan in 30 years. Pakistani officials continue to seek
Taliban (aka the Tehrik-i-Taliban Pakistan), as well as new
adjustments to what they call the IMF’s “tough conditions”
recruitment by Al Qaeda and Islamic State networks.
on structural reform and expansion of the tax base.
Terrorist financing networks in Pakistan have come under
China and CPEC
scrutiny. In mid-2018, the Paris-based Financial Action
Pakistan and China have enjoyed what both call an “all-
Task Force (FATF) returned Pakistan to its “Gray List” of
weather friendship” for more than four decades. Beijing is
countries found to have “strategic deficiencies” in
Pakistan’s primary international benefactor and arms
countering money laundering and terrorist financing, where
supplier, and Chinese investments, companies, and workers
it had been from 2012 to 2015. The status blemishes the
are increasingly present in Pakistan. China built a major
country’s international financial standing. In June 2021,
new port at Gwadar, Pakistan, and is working to connect
FATF assessed that Pakistan had met 26 of 27 “action item”
that to western China. These and other infrastructure and
conditions while leaving the country’s status unchanged.
energy initiatives are part of the China-Pakistan Economic
Corridor (CPEC) launched in 2014 and entailing more than
Human Rights Issues
$30 billion worth of Chinese investment in Pakistan to date.
Pakistan is the site of of numerous reported human rights
This makes Pakistan the “flagship” of Beijing’s expansive
abuses, some of them perpetrated and/or sanctioned by the
Belt and Road Initiative. CPEC came under criticism from
state. According to the State Department, the most serious
the Trump Administration as being opaque, cost inefficient,
of these problems have been extrajudicial and targeted
and reliant on Chinese labor, and for burdening Pakistan
killings, disappearances, torture, lack of rule of law, and
with enormous debt.
sectarian violence. Watchdog groups often rank Pakistan
among the world’s most dangerous countries for both
Pakistan-India Relations
women and journalists. The State Department contends that
Pakistan’s decades-long conflict and rivalry with India
Pakistan’s constitution and other laws and policies
continues, with attendant international fears about the
officially restrict religious freedom and, in practice, the
possibility of war between two nuclear-armed powers.
government enforces many of these restrictions. In 2018,
Pakistan and India have fought four wars since 1948, three
the State Department downgraded Pakistan to the status of
of them over Kashmir, the most recent in 1999. Bilateral
“Country of Particular Concern” under the 1998
engagement was largely cut off following an early 2019
International Religious Freedom Act.
terrorist attack in Pulwama, Kashmir, that India blamed on
Jaish-e-Mohammed (JeM), a Pakistan-based terrorist group,
U.S. Foreign Assistance and Security Aid
and a subsequent Indian airstrike on a suspected militant
Suspension
camp inside Pakistan. Islamabad then strenuously objected
Since 2007 Congress has imposed conditions on all
to “unilateral” administrative changes Delhi made in
nonhumanitarian aid transfers, as well as military
Indian-held Kashmir in August 2019. Pakistan continues to
reimbursements, to Pakistan. After 2011, Congress acted to
highlight India’s alleged repression of the Kashmir Valley’s
both broaden and increase the stringency of such
Muslim-majority, while India continues to blame Pakistan
conditions, mostly as related to Pakistan’s efforts to counter
for supporting cross-border anti-India militancy.
militancy and extremism. From 2008 to 2016, U.S.
Presidents exercised authorities to waive these conditions in
In early 2021, the Pakistani and Indian militaries issued a
the interests of national security, even as annual aid and
surprise Joint Statement reaffirming a mutual commitment
reimbursement levels steadily declined from an FY2010
to the cease-fire agreement at the Kashmir Line of Control
peak total of about $4.5 billion. The Biden Administration’s
originally made in 2003, and agreeing “to address each
FY2022 budget request for assistance to Pakistan totals
other’s core issues and concerns which have propensity to
about $89 million, including $66 million for economic,
disturb peace and lead to violence.” Despite limited signs of
development, and pandemic-related aid.
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Pakistan-U.S. Relations

IF11270
K. Alan Kronstadt, Specialist in South Asian Affairs

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https://crsreports.congress.gov | IF11270 · VERSION 3 · UPDATED