If economic sanctions have to be used as an instrument of diplomacy in the campaign against terrorism, to get General Pervez Musharrafs regime to truly wage a comprehensive battle against jehadi terrorist groups at home, then such sanctions will have to be imposed multilaterally. The Pakistan economy was pulled back from the brink of crisis last year thanks to a lifeline extended by the International Monetary Fund, the World Bank and many donor countries from the Organisation of Economic Cooperation and Development. While some Islamic nations, especially Saudi Arabia, and Pakistans strategic ally, China, have extended unquestioned economic assistance to Pakistan, with few strings attached, the West has ostensibly secured a promise of good behaviour in exchange for its aid and support to the Pakistan economy.
It is because of Pakistans critical dependence on Western, Japanese and Chinese economic assistance that it has taken actions against terrorist groups within Pakistan limited to satisfying their concerns. Indeed, in the recent past even this commitment has been openly questioned and the repeated statements emanating from Washington DC and London that words must be followed by deeds indicate growing exasperation even in the West with General Musharrafs reluctant campaign against terrorism.
As an exasperated India began stepping up its campaign against Pakistan-based terrorism in this country, in response to an escalation of cross-border terrorist activity in the months of March and April 2002, several analysts have revived arguments in favour of imposing economic sanctions against Pakistan. Among the many actions contemplated the most frequently cited ones are the abrogation of the Indus Water Treaty and withdrawal of the Most Favoured Nation status to Pakistan. The MFN obligation is a basic requirement of the membership of the World Trade Organisation which Pakistan has refused to extend to India, while India continues to adhere to its WTO obligation.
Neither of these actions can amount to much since the abrogation of the Indus Water Treaty will have no immediate effect unless India builds dams to withhold the water within Indian territory and terminating MFN is unlikely to impact on Pakistan given the low share of its trade with India in its overall trade.
More to the point, as the IIE study showed, the only real success stories for economic sanctions have been multilateral ones, like the campaign against Apartheid South Africa.. As long as multilateral financial institutions and G-7 governments continue to provide economic assistance to Pakistan, offer preferential market access and encourage foreign investment, limited action by India is unlikely to impose unaffordable cost on the Musharraf regime.
Will multilateral sanctions work Yes, they can. Unlike an Iraq or a North Korea, Pakistans level of integration into the world economy and the social basis of its market oriented economy are such that Pakistan cannot afford to remain isolated from the global financial system or the world market. If the OECD countries, especially the G-7, and the multilateral financial institutions cut off the financial and trade lifelines to Pakistan, its economy would be seriously hurt. Admittedly, Saudi Arabia and China may yet assist an internationally sanctioned Pakistan, but even they would find it difficult to conduct normal relations if world opinion is convinced that General Musharraf is not doing enough to wage a war against terrorism.
In that lies the key to Indias strategic options. Indias current problem with Pakistan is not a bilateral dispute about territory or about the status of Jammu and Kashmir, howsoever much Pakistan may claim. In so projecting the problem, General Musharraf has tried to isolate the campaign against terrorism from action against anti-India jehadi groups operating from Pakistan, including Pakistan-occupied Kashmir. Growing evidence of the movement of Afghanistani jehadi groups, including Al Qaeda and Taliban, into PoK and J&K show that the battle against jehadi terrorism in the region requires comprehensive international action and cannot be waged as a military campaign by India.
Both military and other security operations against terrorist groups operating out of Pakistan, as well as effective economic sanctions aimed at exerting pressure on the Musharraf regime to act, have to be multilateral and international in scope and cannot be effective if they are only unilaterally undertaken by India. This is more so for economic sanctions than military action.
Forcing General Musharraf to act against all jehadi terrorists based in Pakistan has to be a global campaign, involving even China. The problem is not Indias alone and Pakistans nuclear blackmail is not just against India. It is an affront to the global campaign against terrorism. If the world views the problem as merely a bilateral dispute between India and Pakistan and as the unfinished agenda of the sub-continents partition then it will willy-nilly be acquiescing in the Talibanisation of Kashmir. It is the same forces of terror which held unchallenged control of Afghanistan territory for over a decade, and have been forced out by the US-led campaign against terrorism, that are now regrouping in PoK and J&K.
This development does not serve the interests of a modern, democratic Pakistan as much as it does not serve Indias interests nor, indeed, that of the rest of the modern, civilised world. Hence the current stand-off between India and Pakistan is not a bilateral dispute, but is central to the global campaign against terrorism. Indian and world leaders, as well as liberal Pakistanis, must appreciate this to be able to find a lasting solution to the current tension in the sub-continent.