Sharif’s big chance to reset Pakistan’s lose-lose diplomacy
New Pakistani Leader Needs To Maximize And Balance Relations With US And China To Save The Economy From Collapse
Pakistan’s recent political transition from ousted premier Imran Khan to new Prime Minister Shehbaz Sharif was not completely unexpected. But how the new leader opts to reset Pakistan’s foreign relations, if at all, is still a wildcard.
Khan’s incendiary claim that the United States conspired to oust him from power, either because he visited Moscow on the eve of Russia’s invasion of Ukraine, or because he refused Washington’s request for Pakistan military base access after the fall of Kabul, both exploded underlying tensions and opened the opportunity for a new chapter of improved ties.
Khan’s accusation received a quick rebuke from the Biden administration. Relations were already under heavy strain amid perceptions in Washington that the Inter-Services Intelligence (ISI) spy agency clandestinely supported and facilitated the Taliban’s lightning takeover in Afghanistan amid America’s sudden and ultimately ignominious withdrawal.
Elements in the US Senate have called for imposing sanctions on Pakistani officials believed to be involved in orchestrating the Taliban’s seizure of power. That punitive drive, however, has lost certain steam amid other new pressing geostrategic challenges, not least Russia’s invasion of Ukraine and bubbling tensions with China.
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Still, any early move by Sharif to engage the US will no doubt fuel the fires of Khan’s camp, which has already held anti-US rallies replete with American flag-burning. On March 27, days before the fateful vote of no-confidence in parliament, Khan claimed at a street rally in Islamabad that the opposition’s move against him was tacitly supported by Washington.
Thus Khan’s camp is expected in the days and weeks ahead to portray Sharif as Washington’s puppet at noisy and theatrical anti-US street demonstrations, in a bid to press for fresh elections and nip Sharif’s tenure in the bud. Sharif indicated his intention to improve relations with Washington in his inaugural address.
Sharif’s supporters, for their part, believe that Khan fabricated the US conspiracy narrative to win public sympathy at a time his political fortunes were waning. Not only had Khan lost the support of the powerful military over contested top-level appointments, he was presiding over a fast-sinking economy that analysts believe could be on the verge of a default.
Significantly, the military establishment has distanced itself from Khan’s anti-US narrative. At a press conference held on April 14, the head of the Inter-Services Public Relations (ISPR), the Pakistan military’s media wing, affirmed that there was no foreign conspiracy behind Khan’s ouster.
At the same time, Chief of Army Staff General Qamar Javed Bajwa apparently has no appetite for whipping up anti-US sentiment. On April 2, days before Khan’s ouster, the military leader said Pakistan has “long and excellent” ties with the US.
Bajwa also said that despite Pakistan’s recent purchase of Chinese weapon systems, “the best equipment” that Pakistan has “is made-in-US.” Bajwa also reminded his audience gathered in Islamabad on April 2 that Pakistan’s military has been mostly “trained” by the US.
According to an ex-senator of the Pakistan People’s Party, who requested anonymity, Bajwa’s comments were a clear indication of the military establishment’s desire to reset ties with the US and “indicate to Washington that Pakistan’s military establishment had nothing to do with Khan’s visit to Moscow.”
Significantly, Bajwa referred to Russia’s war in Ukraine as “unfortunate” and that it should not be condoned. He was also keen to remind his April 2 audience that the US, not China, remains Pakistan’s largest export market.
Thus resetting Pakistan’s ties with the US is important for the economy. The new Sharif government inherits a collapsing economy with the second-highest inflation rate in the region.
Meanwhile, Pakistan’s foreign exchange reserves now stand at a paltry US$11.3 billion, with most of the funds serving as a so-called “grace deposit” from China, the UAE, Saudi Arabia and Qatar with the condition of no actual use.
Pakistan thus needs new and large financial injections to avoid the kind of economic meltdown now unfolding in neighboring Sri Lanka.
Crucially, Khan’s ouster could restore relations with the International Monetary Fund (IMF), which recently halted its lending program because of the Khan government’s failure, or inability, to execute the IMF’s recommended reform measures including cuts to fuel and power subsidies.
Khan’s allegation of a US conspiracy reportedly also caused the IMF to pause its Pakistan program earlier this month. In an early indication of the new administration’s willingness to work with the IMF, one of its first moves in power was to increase electricity prices. Reports indicate that oil prices are also set to rise in line with rising global market rates.
Pakistani authorities have also assured the US that Islamabad does not intend to build on Khan’s Moscow visit or buy Russian oil and gas, according to diplomatic sources who spoke with Asia Times on condition of anonymity.
“Pakistan most certainly does not have India’s economic and political clout to resist US pressure to walk away from Russia,” added the diplomat, noting Pakistan’s reliance on US markets for its exports.
Pakistan also needs China’s support to avoid an economic and financial collapse. Unlike Khan, who sought to review the US$60 billion China-Pakistan Economic Corridor (CPEC) almost immediately after coming to power in 2018, Sharif stated his intention to prioritize the infrastructure-building program in his first address as national leader.
The scheme’s proponents see a revival of stalled CPEC projects as critical to moving the economy from “stagnant mode” to “growth mode.”
Critics have pointed to the lending terms of CPEC projects, including take-or-pay contracts for newly built power plants that require Islamabad to pay for power even if it isn’t delivered, as contributing to Pakistan’s financial stress. China has so far declined to restructure outstanding CPEC loans despite the Khan government’s repeated requests.
Given ongoing and escalating China-US tensions, Sharif’s government will need to carefully balance its diplomacy to maximize economic benefits from both superpowers.
As an Islamabad-based CPEC official said on the condition of anonymity, “There is no doubt that CPEC is crucial for Pakistan. Ties with China are super-important. But to balance both the IMF and Beijing, the new government is seeking to project its policies in ways to avoid bloc politics. This is complicated but necessary at the moment.”
Sharif’s immediate foreign policy objective will be to reverse Khan’s desperate lurch towards anti-US messaging through engagement and openly distancing from Russia on one hand while carefully balancing ties with Washington and Beijing on the other.