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Pakistan in the crossfire of Iran Saudi Sea-Saw

While in Pakistan, over the weekend, Saudi deputy crown prince and defence minister Prince Muhammad Bin Salman was emphasizing the counter terrorism aspect of upcoming 34-country military alliance, and simultaneously elsewhere, Saudi foreign minister was cautioning Iran that Saudi measures could go well beyond severance of diplomatic relations and trade embargoes should Tehran continue supporting terrorist elements. Pakistan’s assurances to visiting Saudi minster during last week remained measured, unflinching support for territorial integrity of Saudi Arabia and well short of any military commitment against any third country—more specifically Iran without naming it.
Since the Iranian revolution in 1979, both Saudi Arabia and Iran have locked themselves in a race for influence within the Islamic world, involving: alliance building, sectarian focused influence paddling, social well-being projects, disaster mitigation programmes, conflict resolution strategies, religious education etc. Resulting into both desired and undesired fallouts. Most negative impact has been sectarian polarization amongst Muslim societies, hence weakening the Muslim State structures, be they Shiite or Sunni majority countries. Such state-society polarizations were hardly known before mid-1970s when Islam was taken as a single identity and a unifying rallying force—say against Israel.
Iran has intensely focused on sectarian element and has mobilized significant non-government influence in contiguous Shiites belts running through the Sunni-majority countries of Asia through enabling and empowering of Shiite groups and have brought them up to the level of sustainable and resilient political pressure groups. Contours of this influence enhancement are clearly discernable in the Middle Eastern Shiite population belt.
Likewise, since Soviet occupation of Afghanistan in 1979, Saudis have also invested heavily amongst their school of thought through seminaries spread in the Sunni areas of influence. Moreover, they focused on alliance building amongst the Gulf monarchies with anti-Iran bias.
The difference in the strategies has been that while Iran focused on Shiite communities which were not already politically empowered, Saudis were investing in the societies and governments where Sunni regimes were already in power. Now while those communities which received Iranian support are bursting at seams for political empowerment, at the cost of Sunni status quo political order, while those supported by Saudi Arabia—sub sects of Sunni school of thought— are either struggling to retain the Sunni status quo political order or claim their pound of flesh out of the same pie—hence becoming pariah like al-Qaida or Daish. Some Sunni regimes have already lost power to Shiite dispensations—say Iraq—others managed to survive from the brink—say Bahrain.
Frustrated by the Iran-P+5 nuclear deal brightening the prospects of mainstreaming of Iran and likely reversion of America to early 1970s two pillars (Saudi Arabia and Iran) Gulf policy, Saudis may be mixing up chaff with grain. They need to reconcile that now for quite some time worst is behind Iran. For over a quarter of century, Saudis were in a diplomatic slumber while American and Iranian diplomats were busy hobnobbing in low profile meeting in un-important capitals around the world charting the parameters of neo-Gulf and neo-Middle East that would evolve through 2050.
The new mapping offers respectable place for Saudi Arabia. Saudi grace could be salvaged by pragmatically adjusting to this reality and avoiding knee jerks. The way contemporary wars and conflicts have shaped up indicates that no present day military might—through alliances of the willing and or the unwilling— has the capacity to initiate the conflict and bring it a predetermined happy ending of initiator’s liking. Similarly, employment of repressive tools may trigger self-destruct mechanisms through public resistance. Saudi’s need to guard against these jeopardies both singly and doubly.
Since the breakout of Arab spring, Saudi Arabia has been investing heavily to hedge against the approaching chaos which was more of socio-economic making than of sectarian hue. There has been phenomenal investment by Saudi Arabia in its social security reforms and purchase of military hardware. Both these approaches have inherent limitations in terms of protecting the regimes of the type that Saudi Arabia has. Military hardware is useful as long as it is not put to use—by setting up sustainable deterrence. And socio-economic score card is helpful as long as it is perceived as government’s voluntary effort by the recipient people.
On both these counts, Saudis may not be on a gainful track. Their misadventure in Yemen has already exposed the extent and limits of their military might, another open ended conflict has been added to the region. Likewise, gauging the vulnerability of the House of Saud, restive sub-regions within Saudi Arabia may be vying to suck in more and more royal funding on one pretext or the other’, and still remain estranged, especially on sectarian grounds.
Saudi Arabia has not been able to carry along even some GCC countries on some important issues including recent breaking off of diplomatic ties with Iran and its approach towards brotherhood. Current Saudi effort for regional leadership is also faulty as it has not been able to dispel the impression that it is not focused on anti-Iran sentiment; the idea of counter terrorism alliance could have sold out well but again two limiting factors are blocking the way, instead of putting it, at least, notionally under OIC command, Saudis decided to head it themselves and then let the impression go around that it could be a Sunni alliance against the Shiite. No right minded Sunni strategist could out rightly support such a sectarian direction of any international counter terrorism effort.
There is certainly sufficient strategic space a Muslim counter terrorism narrative and Muslim counter terrorism military effort through broad based coalition effort. Such an effort is required because it is the Muslim countries that have suffered the most due to terrorism and what is being done by the international counter terrorism effort. While doing so the architects of coalition should keep in mind that the US led international effort counter terrorism effort failed because it stereotyped Muslims as terrorists. Any Muslim effort must not make a similar mistake.
Tense atmosphere between Saudi Arabia and Iran has put Pakistan in the tight corner. Strategic relevance always has a price, Pakistan cannot proclaim neutrality and walk away from the situation. Thanks to Pakistan’s nap of four decades allowing both Saudi Arabia and Iran a free hand to invest heavily and raise their militant sectarian proxies to the level that it is now these proxies whose behaviour is a major consideration while taking major policy decisions viz-a-viz Iran and Saudi Arabia.
Nevertheless, Pakistan could sell the idea being a part of upcoming alliance at home as long as it focuses on international counter terrorism effort, terrorism is discreetly defined and its membership is expanded to include all OIC members.
Even though all indicators point that ongoing tensions between Saudi Arabia and Iran have peaked off; both sides are poised to continue struggling with the debris of over-reaction, however. Fault lines continue to haunt the two sides and relationship is likely to remain on tenterhooks, ready for fresh estrangement bouts on trivialities.
The silver lining is that, at strategic level, good sense prevails, there is firm understanding that if conflict draws beyond certain redlines, only third parties would benefit, to the peril of both. Saudi’s need to guard against their new fond liking for interventionist war fighting through coalition making, recent American experiences are quite instructive. And Iranians need to understand that tactical gains through sub-state level interventions do not necessarily add-up linearly or exponentially to the strategic gains of the states pulling the strings of their proxies abroad.

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Dynamics of FATF listing

Pakistan Focus Analysis. Indo-US anti-Pakistan nexus is so very obvious, both have in-chorus expressed their joy on Pakistan’s placement on grey list. Indian Express has reported that “India, US are one in saying Pakistan deserved to be demoted to anti-terror funding group's 'grey list’”. "India welcomes the decision of the Financial Action Task Force (FATF) to place Pakistan in its Compliance Document (grey list) for ICRG [International Cooperation review Group] monitoring," said India's ministry of external affairs. And; "outstanding counterterrorism deficiencies consistently raised by the Financial Action Task Force and [Pakistan] needs to take actions, including on the raising and moving of funds of UN-designated terrorist groups, a top US official said to news agency PTI”. Decision is politically motivated and is part of American strategy to pressurise Pakistan to settle some other scores. Pakistan has been placed among the jurisdictions (states) with strategic deficiencies: Ethiopia, Serbia, Sri Lanka, Syria, Trinidad and Tobago, Tunisia and Yemen. FATF has called upon these states to complete implementation of the action plans expeditiously and within the proposed timeframes, vowing to closely monitor the implementation. It was also agreed in February Plenary that an Action Plan would be negotiated between Pakistan and FATF members by June. This has been done. The FATF has formally placed Pakistan on the grey list due to ‘strategic deficiencies’ in its anti-money laundering and terrorism financing regime. The decision came despite Pakistan had demonstrated reasonable progress in three out of four major areas of FATF concerns. Pakistan’s team led by Finance Minister apprised the plenary about measures that Pakistan had taken to stop money laundering and strangling the terror financing. In prevailing World Order, nothing works better than American pressures. During February plenary, the US and the UK went out of their way to by-pass the standard FATF procedures and jointly arm twist the FATF for nominating Pakistan for the grey list in June, regardless of its February-June period effort and progress; they were also joined by France and Germany. Pakistan has undertaken to work towards effective implementation of the Action Plan, while staying in the grey list. A similar situation took place in 2011 when Pakistan was included in the grey list and was taken out in 2015 after it successfully implemented the Action Plan. There were tall claims that Pakistan was unlikely to be placed on the grey list of the global financial watchdog as the country had made enough progress to meet international anti-money laundering and terror financing standards, such euphoric environment had been created before and during the previous FATF plenary meeting as well. There is a need to float realistic expectations before such international events. FATF identifies jurisdictions with strategic AML/CFT deficiencies in its two public documents: FATF Public Statement (call for action)– commonly known as black list—and Improving Global AML/CFT Compliance— nick named as grey list. It is an on-going process; these lists are updated three times a year. Interestingly, FATF does not use grey list/blacklist terminologies. The ICRG of the APG had identified four key areas of concerns: deficiencies in the supervision of Anti-Money Laundering (AML) and Counter Terrorism Financing regimes; cross-border illicit movement of currency by terrorist groups; progress on terrorism financing investigation and prosecution; and implementation of the United Nations Security Council resolutions 1267 and 1373, for curbing terror financing. ICRG report has shown that Pakistan did show progress on three out of four major areas of concerns. Cross-border smuggling of cash was the only major area where Pakistan admitted deficiencies. Maximum number of conditions – nine to be precise – take into account the concerns of the UNSC resolutions, followed by eight commitments to address concerns regarding terrorism financing prosecution, four are about curbing currency movement across the border and five recommendations relate to improvement in the supervision mechanisms of banks and companies. Pakistan has undertaken to demonstrate that authorities are identifying cash couriers and enforcing controls on illicit movement of currency and understanding the risk of cash couriers being used for terrorism financing. Remember Ayan Ali case? And who protected her? Carrier is enjoying quality life abroad. Pakistan has made a “high-level political commitment to work with the FATF and APG to strengthen its Anti-money Laundering (AML)/Countering Financing of Terrorism (CFT) regime and to address its strategic counter-terrorist financing-related deficiencies,” according to FATF announcement. The FATF said Pakistan will also be demonstrating that remedial actions and sanctions are applied in cases of AML/CFT violations, and that these actions have an effect on AML/CFT compliance by financial institutions. “It will be demonstrating that competent authorities are cooperating and taking action to identify and take enforcement action against illegal money or value transfer services.” During the intervening period Pakistan government did strenuous hard work to plug the gaps. Ambitious laws were enacted. Finance ministry improved institutional mechanisms for handling anti-money laundering and countering financing terrorism issues. Coordination between the State Bank, Banking institutions and law enforcement agencies had also been strengthened to curb money laundering and terror financing. Pakistan has recently addressed issues raised by the FATF through a tax amnesty scheme, while Securities and Exchange Commission has issued Anti-Money Laundering and Countering Financing of Terrorism Regulations (2018). National Security Committee has also reaffirmed its commitment to cooperate with the FATF. Through its Action Plan, Pakistan has demonstrated to the world that it was ready to go an extra mile to curb money laundering. Pakistan will have to deliver on the first goal by January next year and complete all the 26 actions by September 2019,” it is indeed a tight schedule. One wonders whether Pakistan has requisite mechanisms in place to implement and steer such an ambitious plan. An expert assessment has it that though Pakistan’s inclusion in the grey list may hurt its image in the international landscape, its economic impact will not be as severe as being portrayed. This is because when Pakistan was part of the grey list/blacklist (2008-2015), it successfully approached multilateral bodies, floated international bonds and had international trades. Hopefully Pakistan will be able to come out or grey list in September 2019, however it must follow consistent economic policies to remain out of such trouble spots. Caretaker government would do a great service by forming a national commission to identify and punish all those responsible for letting the things reverse back after Pakistan’s previous journey to blacklist was over.

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