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April 10, 2015

Espresso-01A Friday rundown of Pakistan’s top policy headlines on JI’s radar this week

Pak-Iran Developments

While this week’s visit to Islamabad by Iranian Foreign Minister Javad Zarif was ostensibly geared towards clearing the air on the issue of Pakistan’s role in Yemen, addressing the broader context of Pak-Iran bilateral relations was also on the agenda. On Tuesday, militants belonging to Jaishul-Adl– the supposed successor to Jundullah – crossed the border of Balochistan into Iran, killing eight border personnel, and prompting Tehran to lodge a strong protest with Pakistani diplomats stationed in the country.

Last October, 30 Iranian security force personnel crossed the border into Pakistan to crack down on anti-Iranian members of Jundullah. For policymakers in Islamabad, patrolling and security along the already porous Western border should be a real concern, and Foreign Minister Zarif’s visit to the GHQ is an indication that the two countries may be eyeing closer security and intelligence cooperation in the coming months. There have been repeated instances of mortar shelling and ceasefire violations along the Pak-Afghan and Indo-Pak border respectively this year; conflict with a third neighbour is not a foreign policy prospect that Islamabad can afford, especially as it clamps down on home-grown militancy in the provinces.

Another issue of strategic interest is the pending Iran-Pakistan gas pipeline project, which has yet to take off the ground owing to the persistent threat of US sanctions. However, Iran’s slow but steady international rehabilitation, coupled with the prospects of a P5+1 nuclear deal by June 30, makes a convincing case for resuming joint efforts towards the development of the pipeline.Reportedly, China has already offered to build the $2 billion pipeline, and a deal may be signed when President Xi Jinping visits Islamabad later this month. Pakistan’s crippling energy crisis has amplified the need for pursuing more feasible options of regional energy trade.

US Arms Sale

The United States this week approved Pakistan’s long-standing demand for new helicopters, hellfire ground attack missiles and coastal reconnaissance vessels that will provide improved precision in strikes against militant hideouts in the Tribal Areas. The approval, for sales worth $ 1 billion in equipment, will mark the largest sale of military arms by the United States to Pakistan since the two countries concluded a $5.2 billion deal for upgrading Pakistan’s F-16 fleet in 2006.

The recent deal is also being viewed within the larger strategic context of the Russian arms market opening up for Rawalpindi as well as Pakistan’s increasing reliance on China to fulfil its high-end military requirements. In a major breakthrough, Pakistan recently received Russian approval for the purchase of Mi-35 gunship helicopters for its Special Services Group and is said to be testing the latest Chinese WZ-10 attack helicopters for a possible purchase.

Once a prime customer for the US arms market, Pakistan has faced difficulties procuring advanced American military equipment due to the Pressler amendment, which rolled back US arms sales after the early 1990s. The newest AH-1Z Viper attack helicopters will add strength to Pakistan’s fight against terrorists holed up in the mountainous terrain of Khyber Agency and the battle-proven hellfire missiles will improve targeting and precision strike capabilities of the Pakistan Air Force.

Forex Reserves

Following the sixth review meeting of the External Fund Facility of the IMF last week, Pakistan agreed to strengthen its foreign reserves position over the remainder of the ongoing fiscal year. Given the current level of reserves accounting for recent injections from the Coalition Support Fund and expected flows from multilateral agencies including World Bank, Asian Development Bank and IMF itself, the US$15 billion target seems achievable so far.

However, the external account position stands to gain most from the global oil price slump. Crude oil prices have come down by approximately 60 percent since June 2014,and baseline projections of the average annual price have been lowered from US$88 per barrel to US$68. Moreover, in the advent of lifting of sanctions from Iran following its nuclear deal with the US and EU, there could be a further increase in the global supply of oil. The Iranian leadership has already notified that it will not become a signatory unless economic sanctions are lifted the same day as the agreement comes into force.

Given the significant share of oil imports in Pakistan’s current account balance – close to 5 percent of GDP– global oil market developments provide an opportunity to accumulate foreign exchange reserves that can help avert balance of payment crises witnessed before. According to IMF projections, a reduction of US$2.8 billion can be anticipated in Pakistan’s overall import bill for FY2014-15 on account of the recent drop in oil prices. The accumulation of reserves will in turn not only reduce vulnerability to international price shocks but will also plug a persistent hole in Pakistan’s external account position. More importantly, a reserve build-up based on market dynamics can prevent Pakistan from being unnecessarily dragged into geo-political conflicts that carry the risk of alienating potential partners in its immediate neighbourhood.

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Evacuees from Yemen arrive at Karachi chanting ‘Pakistan Zindabad’ slogans. Pakistan’s humanitarian efforts were highly appreciated when a Pakistan Navy ship helped evacuate nationals of a number of other countries, including neighbouring India, from war-stricken Yemen. 

Image Courtesy: Dawn News

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Incidents of religious extremism in Pakistan reported by the local media

April 10

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Pakistani short-film ‘BaatCheet’ has been short-listed to be featured at the 68th Cannes Film Festival in France this year. The film is written, produced and directed by Rayika Choudri and has already won three gold awards at the Documentary & Short International Movie Awards 2015 in Indonesia.

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