US-Pakistan Diplomatic Crisis Deepens With Mutually Imposed Financial Penalties

Diplomatic tensions between the US and Pakistan are expected to reach an all-time high after a US Congressional Panel decided to freeze $700 million in aid to the Pakistani government, while Pakistan has threatened to charge “millions of dollars” in taxes to NATO trucks and tankers within the country.

The new US restrictions on aid to Pakistan was part of a $662 billion defence bill agreed by both House and Senate negotiators on Monday night, and is expected to be passed later this week.

Diplomatic tensions between the US and Pakistan are expected to reach an all-time high after a US Congressional Panel decided to freeze $700 million in aid to the Pakistani government, while Pakistan has threatened to charge “millions of dollars” in taxes to NATO trucks and tankers within the country.

The new US restrictions on aid to Pakistan was part of a $662 billion defence bill agreed by both House and Senate negotiators on Monday night, and is expected to be passed later this week.

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According to Howard McKeon, the Republican chair of the House armed services committee, the US was seeking “assurances that Pakistan is countering improvised explosive devices in their country that are targeting our coalition forces,” and thus could not commit to providing more financial aid to the country.

The Pakistani government though have warned that the US’s move could cause relations between the two countries to descend to a record low, particularly after NATO air strikes killed 24 Pakistani soldiers in a friendly fire incident on two Pakistani border outposts on November 26.

[quote]”I don’t think this is a wise move,” said Salim Saifullah, the chairman of Pakistan’s Senate foreign relations committee, in an interview with Reuters. “It could hurt ties. There should instead be efforts to increase cooperation.”[/quote]

“I don’t see any good coming out of this,” he added.

Pakistan, who has described the airstrikes as a “deliberate attack”, responded to the deaths by temporarily sealing its Afghan borders to NATO trucks and tankers. A Pakistani parliamentary committee has also recommended imposing a tax on oil supplies to NATO just as one is imposed on every litre sold to Pakistanis.

“Pakistan will now impose tax on NATO supplies in light of the international conventions and practices, which will give the national exchequer billions of rupees of income,” said an official of the defence ministry, who chose to stay anonymous, in an interview with the Express Tribune.

On Sunday, Pakistani Prime Minister Yousuf Raza Gilani told the BBC that his country was likely to continue blocking its border to NATO convoys for several more weeks.

[quote]”I must say that the aerial attacks on our army border posts on November 26, 2011, constituted a huge setback to the prospects of much needed cooperation between all important stakeholders,” said Gilani, as quoted by Reuters.[/quote]

A former Pakistani general and security analyst added the US’s decision to freeze aid to the country could prompt the Pakistani government into hardening its stance against Washington.

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[quote]”I think the Pakistan side will understand the type of signal that is coming, which shows it’s not only a question of aid,” said Talat Masood.[/quote]

“The whole attitude of the U.S. and the relationship will be affected by these measures because they know Pakistan will not be in a position to control the smuggling.”