American Bid to Put Pakistan on FATF Watch-List Fails in Paris
The FATF statement released after the meeting that ended on February 23, 2018 identified the following nations as being on its watch list: Ethiopia, Iraq, Serbia, Sri Lanka, Syria, Trinidad and Tobago, Tunisia, Vanuatu and Yemen.
FATF Decision Delayed:
It appears that the American bid failed at this month's FATF meeting. Pakistan's Chinese allies and Muslim friends among the Gulf Arabs and Turkey prevailed at the February 18-23 meeting in Paris, France. If US persists and Pakistan is placed on the FATF "grey list" at the June meeting, how will it impact Pakistan economy and the geopolitics of the region? Will it be good or bad for American interests in Afghanistan and Pakistan? Will it help or hurt China?
Effect on Pakistan:
Pakistan's economy will be hurt if it goes on the FATF watch-list. It could increase support for radicals and strengthen the hands of anti-American extremists.
Being on the list will draw more scrutiny for all banking transactions involving Pakistani entities. This additional scrutiny may drive away some businesses and investors and hurt Pakistan's economy.
Risk-averse international banks, some of whom have already faced heavy fines by US regulators for transactions elsewhere, may decide to shy away from working with Pakistani banks. This will hurt Pakistan's international trade and worsen its current account deficits. It will increase the likelihood of debt default.
China, currently the biggest foreign investor in Pakistan, will continue to invest in the country. FATF decisions will have little impact on the execution of China-Pakistan Economic Corridor (CPEC).
Impact on the United States:
There's a history of the US ratcheting up pressure on Pakistan to do its bidding. The Obama administration in years 2012-15 helped put Pakistan on the FATF watch-list. President Obama also exerted other forms of pressure on Pakistan without results. Obama's tactics ended up further alienating Pakistanis and made Pakistan less cooperative with the United States. In 2011, Pakistan cut off US-NATO supply land routes through its territory to Afghanistan.
If history repeats itself and Pakistan does go back on the FATF watch-list under US pressure, the outcome this time is not likely to be any different than it was the last time. It will serve to further alienate Pakistan, and it will strengthen the hands of the hardliners. It will make any resolution of the difficult Afghan problem even more difficult.
China will likely be the biggest beneficiary of the US effort to put Pakistan on the FATF watch list. The Chinese will have the biggest slice of Pakistan's rapidly growing middle class consumer market. Chinese investors, traders and businessmen will have little competition from the West in the world's sixth most populous nation. Geopolitically, the US influence will dramatically diminish in the region. America's hopes of a favorable outcome in Afghanistan will not materialize.
American bid to put Pakistan on FATF terror financing watch-list failed in Paris. However, the Trump Administration's continuing efforts to do so may succeed at the June meeting. If that were to happen, it will turn out to be pyrrhic victory. Pakistan will be hurt in the short term but the US policy of all sticks and no carrots will prove to be counterproductive in the long run. Washington will lose whatever little political capital and influence it still has left in Pakistan. America's Afghan problem will become even more intractable without Pakistan's help. China will be the biggest beneficiary of America's folly.
Will Pakistan Yield to Trump's Pressure?
Checkered History of Pakistan-Afghan Ties
Pakistan Rising or Falling? Reality vs Perception
Steve Coll's Directorate S
CPEC Myths and Facts
CPEC Transforming Least Developed Regions of Pakistan
Pakistan-China-Russia vs India-Japan-US
Riaz Haq's Youtube Channel