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India is an Extremely Important U.S. Ally. How Does Pakistan Affect the U.S.-India Relationship?

ArmchairTechInvestor, July 25, 2018, by Brad Peery

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This is the first of three ArmchairTechInvestor posts examining U.S.-Indian involvement. Pakistan is an important part of that relationship. Particularly important is China, particularly their One Belt, One Road Initiative.

• Pakistan has a very close relationship with China and:
o Provides terrorist safe havens for attacks in Afghanistan and India, including on U.S. interests;
o The Pakistan military is unlikely to have a lasting effect on restraining terrorists;
o It will maintain its terrorist ties and restrict its cooperation with the U.S.; and
o It will continue its strong ties to China, including the building of a harbor as part of the One Belt, One Road Initiative.

• One of the six major trading routes for China’s One Belt, One Road (OBOR) Initiative goes from southwestern China through Pakistan. An important element of the Pakistan route is the building of Gwandar Port. China runs this port and it could be an important naval base for an expanding Chinese military. However, there are many more implications of the $62 billion China-Pakistan OBOR plan. Not included in that plan are $12 billion of Chinese commmercial power plant financings and $3 billion of Chinese bank emergency financing to support Pakistan’s foreign-exchange reserves. These two elements plus $10 billion of infrastructure funding takes total Chinese financing to $25 billion, all for power and transportation infrastructure projects.
• China’s One Belt, One Road OBOR Initiative, the China-Pakistan Economic Corridor, has put Pakistan in a precarious financial position.
o The largest part of the Initiative is to build power plants and Pakistan has fallen behind in making payments for the plants.
o According to the Wall Street Journal, a new Pakistani government could seek an International Monetary Fund (IMF) bailout of about $10 billion before the end of 2018.
• An IMF bailout of Pakistan could have serious implications:
o The IMF would undoubtedly require restrictions on spending and borrowing, including the Pakistan OBOR Initiative;
o The IMF is funded by western countries, with the U.S. being the largest contributor. This could put the U.S. in a strong oversight position of Chinese plans in Pakistan. U.S. officials have called this “debt-trap diplomacy” by China to the detriment of their about 70 country partners on the OBOR land and maritime trade routes.
• An additional option for Pakistan could be a Chinese bank bailout of the country, but a lack of financial opportunities for the infrastructure projects could make this difficult to achieve.
*China Denies Infrastructure Plan Causing Debt Crisis in Pakistan, Wall Street Journal, by Jeremy Page and Saeed Shah, July 25, 2018
**China’s Global Building Spree Hits Trouble in Pakistan, Wall Street Journal, by Jeremy Page and Saeed Shah, July 23, 2018

In South Asia, development of Hambantota port in Sri Lanka and Gwadar port in Pakistan have been fueling tensions in the Indian Ocean region. Subsequently, the strategic importance of the Andaman & Nicobar Islands will increase for India’s security and maintenance of peace and stability in the region.

U.S. Involvement
To strengthen the Asia region, the U.S. is trying to develop a relationship between India and Japan to fight China’s aggressive actions in the South China Seas. The U.S. is also trying to involve India in Afghanistan as a participant in bringing stability to Afghanistan, and fighting Pakistan’s terrorist support.
*U.S. India Agree to Bolster Security, Wall Street Journal, by Niharika Mandhana, October 25, 2017

With regard to terrorism, the U.S. has sanctioned Mohammad Yusuf Shah, the head of Hizb-ul-Mujahideen, a terrorist group that India is fighting in the Kashmir, where India is also facing Pakistan.

In early 2018, the U.S. was downgrading its relationship with Pakistan and increasing its support for Afghanistan. Mr. Modi highlighted that India has played an important role in rebuilding Afghanistan.

Saudi Arabia
• Trump has developed strong relationships with Saudi Arabia, and its Arab partner countries to confront Iranian and Russian expansion in the Middle East.
• The U.S. relationship with Saudi Arabia and its Arab partner countries could be very helpful to India:
o Terrorism is an issue for India, particularly because of the animosity between India and Pakistan along the Indian border.

China’s OBOR Initiatives-Pakistan-India Issues
China’s OBOR Initiatives are challenging India’s territorial claims in Kashmir. The China-Pakistan Economic Corridor goes through territory in Kashmir that Pakistan controls and India claims. India believes that China has abandoned its neutral stance and sided with Pakistan. “China’s failure to address Indian concerns was the initial cause of New Delhi’s reluctance to join the One Belt, One Road Initiative. China’s unilateral implementation of its vision for the OBOR Initiative over Indian objections has increased bilateral tensions.

India has additional concerns in the Indian Ocean. “China has invested in port facilities in states surrounding India including Pakistan, Myanmar and Sri Lanka. Investment in these ports has given rise to the “string of pearls” theory, which speculates that China will leverage these facilities for military use. When viewed on a map, these maritime investments represent the encirclement of India at sea. China docked attack submarines at a Chinese-constructed port in Sri Lanka. This indicates a militarization of these OBOR-related investments in India’s island neighbor. Naval encirclement is a significant security concern as India depends upon sea transport for about 90 percent of its international trade.

Pakistan-India Issues
India has a population greater than China. China and India are unfriendly toward each other. India and Pakistan are also territorial rivals, with Pakistan being backed by China, and conducting terrorist raids on India. The U.S. is confronting Pakistan because of the fact that Pakistan is financing terrorism in Afghanistan, and harboring terrorists. India can provide a partnership with the U.S. that will confront both Pakistan and China, and provide a joint relationship as a foil to China’s territorial ambitions, particularly in the Indian Ocean.

With regard to the Iran relationship, India has renewed its financial relationship with Iran following the signing of the Iran Nuclear Agreement. It has a port project called Chabahar. India sees the project as a possible deterrence to the development of Pakistan’s port of Gwadar, which is now fully run by China. India, Afghanistan and Iran signed a trilateral trade treaty for developing the Chabahar port project and beyond. Also, Iran has invited China and Pakistan to participate in the Chabahar Port project. India’s objectives in developing the port project appear to be severely compromised. Pakistan and China seem likely to be involved in the project.

India has a strong relationship with Russia. In October, 2017, they held a joint military exercise with Russia that included India’s army, navy and air force. This was the first such military drill with Russia.

Russia has managed to maintain security partnerships with both India and Pakistan. At about the same time India and Russia held their military drills, Russia announced that Pakistan held negotiations with Russia on the purchase of S-35 warplanes. This is part of a broader Russian strategy in South Asia that showcases Russia’s increasing power in the international community. It also highlights Russia’s interest in directly competing with the United States and China for influence in the Asia-Pacific region.

The relationships of Russia and Pakistan are based upon joint efforts to combat international terrorism in Asia. To convince the Indian government of Moscow’s commitment to cracking down on facilitators of terrorism, Russian President Vladimir Putin supported India’s counter-terrorism raid in Kashmir after the 2016 Uri attacks, and openly praised India’s counter-terrorism policies during his meeting with President Modi in June, 2017.

Russian Mediation in Kashmir
An additional Russian objective is to serve as a mediator to both India and Pakistan to address their issues in Kashmir. This seems to be of more interest to Pakistan than to India. However, from Russia’s standpoint, they have stayed unbiased in dealing with differences between India and Pakistan.

Russia has even sponsored peace talks in Afghanistan to solve their terrorist problems. Moscow has given Pakistan a prominent diplomatic profile in the peace talks it has hosted on the Afghanistan crisis. This has served to convince Pakistan that it is impartial in its relationships with both India and Pakistan. This contrasts with the U.S. approach of supporting Afghanistan, and criticizing Pakistan for supporting terrorists, and allowing them to have a safe haven in Pakistan.

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