Case 99-3

US, Japan v. Pakistan (1999–2001: Coup, restore democracy) See also Case 79-2: US v. Pakistan (1979– : Nuclear Missile Proliferation)
May 1, 2008

Chronology of Key Events

12 October 1999

Prime Minister Nawaz Sharif is ousted by General Pervez Musharraf in a bloodless coup. Over the course of the next few days, General Musharraf declares state of emergency, suspends parliament and the constitution and pronounces himself the country’s chief executive. US Department of State condemns the coup and calls for “the earliest possible restoration of democracy in Pakistan.” (New York Times, 13 October 1999, A1, A10; Washington Post, 15 October 1999, A1)
14 October 1999 IMF Managing Director Michel Camdessus states that it was “not certain” that the Fund could offer assistance to Pakistan in the wake of the coup. IMF officials say the release of next tranche of a 1997 $1.6 billion loan worth $280 million could be affected. (New York Times, 14 October 1999, A12; Wall Street Journal, 14 October 1999, A22)
15 October 1999 In light of the recent coup, Clinton administration invokes Section 508 of Foreign Operations Appropriations Act that requires US aid be cut off to any country whose democratically elected head of government is deposed by military coup or decree. Move is largely symbolic because Pakistan is already prohibited from receiving US assistance under nuclear sanctions. (Inside US Trade, 15 October 1999; International Trade Reporter, 13 October 1999; CRS 2002a, 3; Washington Post, 15 October 1999, A24; 16 October 1999, A21) (See also Case 79-2 US v. Pakistan [1979–: Nuclear Missile Proliferation])
15 October 1999 UK freezes around $33 million in direct government assistance to Pakistan in response to the coup. (Washington Post, 16 October 1999, A21; New York Times, 17 October 1999, 6)
17 October 1999 European Union condemns military coup and threatens to suspend all assistance except for humanitarian aid channeled through private agencies unless Pakistan announces a clear timetable for the restoration of democracy by mid-November. EU also postpones signature of the EU-Pakistan Cooperation Agreement that is based on commitment to human rights and democracy. (New York Times, 17 October 1999, 6; European Report, 16 October 1999)
18 October 1999 Commonwealth suspends Pakistan from participating in their meetings. The Commonwealth Ministerial Action Group unanimously condemns the coup and calls for a timetable for restoration of democracy. Final decision on its membership is to be taken at the summit in Durban, South Africa, next month. (Financial Times, 19 October 1999, 6; Washington Post, 20 October 1999, A24; Reuters, 21 October 1999)
26–27 October 1999 During visit in Islamabad, Japanese State Foreign Secretary Ichita Yamamoto announces that official development aid will only be resumed once Pakistan gives a date for elections and signs the Comprehensive Test Ban Treaty. Japan cut off between $300 million to $500 million in annual aid and loans in response to the 1998 nuclear tests. (Dow Jones, 27 October 1999; Reuters, 27 October 1999; Japan Economic Newswire, 27 October 1999)
5 November 1999 France releases submarine and Mirage fighters held since the coup to Pakistan. French foreign ministry states that aircrafts and submarine already belong to Pakistan and therefore France cannot legally prevent their delivery. (Financial Times, 5 November 1999, 6)
13 November 1999 Leaders of the Commonwealth suspend Pakistan’s membership. Commonwealth gives Pakistani military two years to reinstate civilian rule or face expulsion from the group. (Washington Post, 13 November 1999, A24)
15 November 1999 EU Council of Foreign Ministers again calls on Pakistan to announce a binding timetable for restoration of democracy, but does not suspend development assistance. (Council conclusions on Pakistan, 15 November; Bulletin of the European Union, November 1999)
25 March 2000 President Clinton makes a 6-hour stopover in Pakistan during a weeklong visit of the region. General Musharraf makes no new concessions on Kashmir, signing of the CTBT or restoration of democracy in two-hour meeting with President Clinton. However, Musharraf agrees to put pressure on the Taliban regime in Afghanistan over Osama bin Laden. (Washington Post, 26 March 2000, A1; New York Times, 26 March 2000, A1) (See also Case 99-1 US/UN v. Afghanistan (Taliban) [1999–2002: Extradition of Osama Bin Laden])
6 April 2000 Former Prime Minister Nawaz Sharif is sentenced to life in prison on charges of terrorism and hijacking. International community expresses concerns over fairness of the trial and the severity of the sentence. (Financial Times, 7 April 2000, 14)
30 November 2000 IMF approves a $596 million loan to Pakistan to help it avoid defaulting on its $36 billion foreign debt. The money is to be disbursed over next 10 months. (New York Times, 1 December 2000, A7)
20 June 2001 General Musharraf dismisses Pakistan’s president and appoints himself head of state. Musharraf announces he will abide by the Supreme Court ruling that democracy needs to be restored by October 2002. Move comes during visit of Pakistani foreign minister Abdul Sattar to Washington to persuade US to remove economic sanctions. State Department spokesperson states that Musharraf’s action “severely undermines Pakistan’s constitutional order and casts Pakistan as a country ruled by decree rather than democracy.” (New York Times, 21 June 2000, A3; Washington Post, 21 June 2000, A1)
14 August 2001 Elections for local councils staggered over several months end. General Musharraf schedules federal and parliamentary elections for early October 2002, but does not indicate when he will hand over presidency to a civilian. (Dow Jones, 13 August 2001; Associated Press, 14 August 2001; Wall Street Journal, 15 August 2001, A1)
11 September 2001 Terrorist attacks in New York and Washington kill more than 3,000 people die in the attack. US officials and investigators quickly identify Osama bin Laden as mastermind behind the attacks. (Washington Post, 14 September 2001, A9; New York Times, 21 September 2001, A1, B3)
22 September 2001 President Bush waives all remaining nuclear related sanctions as well as prohibitions on Export-Import Bank credits in recognition of Pakistan’s cooperation with the US-led war against terrorism and imminent military action in Afghanistan. Coup-related restrictions on economic and military aid as well as sanctions imposed against specific Pakistani entities over missile related concerns remain in place. US and Pakistan sign an agreement on the rescheduling of $379 million of Pakistani arrears. Pakistan is also in negotiations with IMF for a $2.5 billion to $3 billion three-year IMF program. (Financial Times, 24 September 2001, 4; Wall Street Journal, 24 September 2001, A26; CRS 2003, 13; Presidential Determination No. 2001-28, 22 September 2001)
28 September 2001 President Bush determines that the release of $50 million in emergency aid to Pakistan is “important to the security interests of the United States.” (Presidential Determination No. 2001-31, 28 September 2001; Washington Post, 2 October 2001, A12)
1 October 2001 Canadian Minister of Foreign Affairs John Manley announces that in recognition of Pakistan’s support in the war on terrorism Canada will restore economic aid to Pakistan suspended after the 1998 nuclear tests. Canada will also convert up to $447 million in outstanding loans to be uses for development programs. (Canadian Department of Foreign Affairs and International Trade, News Release, 1 October 2001)
16 October 2001 Following Senate approval, US House of Representatives approves legislation allowing the president to waive restrictions on US aid to Pakistan imposed after the coup for two years, if he determines it to be important for US counterterrorism efforts. (International Trade Reporter, 11 October 2001, 1607; 18 October 2001, 1651; PL 107-57; CRS 2003, 13)
26 October 2001 Japan lifts its sanctions against Pakistan in recognition of its support for the US-led war on terrorism. Previously Japan had conditioned the resumption of its aid program on signing of the CTBT and restoration of democracy. (Yomiuri Shimbun, 27 October 2002; BBC Monitoring, 29 October 2002; CRS 2002b, 10)
11 November 2001 After meeting with General Musharraf in New York, President Bush announces a $1 billion US aid package for Pakistan in exchange for its support in the war in Afghanistan. However, administration rejects Pakistan’s request for the release of F-16 fighters. Musharraf sought the release of F-16 fighters despite the agreement reached with President Clinton as “the most visible sign” of Pakistan’s status as a US ally. (Washington Post, 11 November 2001, A1; New York Times, 10 November 2001, A1; 13 November 2001, B4)
11 December 2001 European Commission includes Pakistan under special Generalized System of Preferences program (GSP) for countries combating drugs for the period 2002–2004. Inclusion in the special GSP eliminates all existing duties on Pakistan’s textiles exports. EU also increase Pakistan’s quota for textile and apparel exports by 15 percent. (International Trade Reporter, 18 October 2001, 1651; Financial Times, 11 December 2001, 6; Bulletin of the European Union, December 2001)
14 December 2001 Paris Club of official creditors agrees to restructure Pakistan’s $12.5 billion sovereign debt, extending its maturity and granting a generous grace period during which no principal has to be repaid. (Financial Times, 30 October 2001, 1; 14 December 2001, 4)
13 February 2002 President Bush meets General Musharraf in Washington. Bush praises Pakistan’s contributions to the war on terrorism and offers to work with Congress on providing Pakistan about $1 billion in debt relief in FY 2003. Administration also increases market access for Pakistani textile exports worth about $142 million. Offers fall short of Pakistan’s requests. (White House Fact Sheet, 13 February 2002; Financial Times, 14 February 2002, 4)
30 April 2002 In referendum that many observers claim was marked by “excessive fraud and coercion”, General Musharraf’s term as president is extended for another five years. Government announces Musharraf was endorsed by 98 percent of voters. (New York Times, 1 May 2002, A7; Financial Times, 2 May 2002, 6; CRS 2003, 3)
21 August 2002 Ahead of national elections scheduled for October, General Musharraf amends the constitution to grant the military a formal role in the governing of the country and to increase the powers of the president. (Washington Post, 22 August 2002, A10; New York Times, 22 August 2002, A1)
10 October 2002 Pakistan holds first elections for 342-seat National Assembly since 1997. Pro-Musharraf alliance wins plurality of National Assembly seats but no party wins majority. Opposition and EU observers call elections “flawed.” In November new National Assembly chooses Musharraf supporter Mir Zafarullah Jamali to serve as Pakistan’s Prime Minister. (Washington Post, 11 October 2002, A28; Financial Times, 15 October 2002; CRS 2003, 3, 4)
24 March 2003 Despite recent threats to do more, Bush administration imposes largely symbolic sanctions in response to Pakistan’s alleged assistance to North Korea’s nuclear program and waives all coup-related sanctions against Islamabad for FY 2003. (Presidential Determination No. 2003-16, 14 March 2003; Washington Post, 31 March 2003, A4; Financial Times, 1 April 2003, 6; CRS 2003, 15)
24 June 2003 During meeting with President Musharraf in Camp Davis, President Bush announces a five-year $3 billion aid package for Pakistan. Aid will be conditioned on Pakistan’s continued cooperation with the war on terrorism, commitment to nuclear non-proliferation and progress toward democracy. US and Pakistan also sign a Trade and Investment Framework Agreement. (New York Times, 25 June 2003, A10; Washington Post, 25 June 2003, A1; USIS, 26 June 2003)

Goals of Sender Country

United States

Assistant Secretary of State Karl F. Inderfurth
“…[U]ntil we see a restoration of a civilian democratic government in Pakistan, we have made it clear we would not be in a position to carry on business as usual with Pakistani authorities.” (Testimony by Assistant Secretary Karl F. Inderfurth, Senate Foreign Relations Committee, 14 October 1999)

President George W. Bush
“Pakistan’s efforts against terror are benefiting the entire world and linking Pakistan more closely with the world. The United States wants to help build these linkages. I’ve authorized a lifting of sanctions, and over $1 billion in U.S. support. I will also back debt relief for Pakistan…. I’m pleased that the President is committed to restore democracy in Pakistan. Pakistan is a strong ally; President Musharraf is a strong leader, and the world is deeply appreciative for his leadership.” (President Bush, Remarks during Press Availability, New York, 10 November 2001)

Japan

Japanese embassy political counselor, Masami Kinefuchi
“Japan will review resumption of its official development assistance if Pakistan shows a concrete process on return to democracy, like a timeframe, and a decision to sign the CTBT.” (Reuters, 27 October 1999)

Response of Target Country

Senior Pakistani military official
“There is no doubt in our minds that the world will never accept military rule, but we are in for the long haul…. We have decided we must cleanse a political system that allows corrupt people to decide the destiny of our people.” (Washington Post, 15 October 1999, A24)

General Pervez Musharraf
“I will go according to the needs and requirements of Pakistan…. That will be supreme in my mind, and not international demands.” (New York Times, 2 November 1999, A10)

Pakistani Foreign Minister Abdul Sattar
“U.S. sanctions against Pakistan single out one country and are not consistent with friendly relations…. The U.S. government and the U.S. Congress should adopt a more general, evenhanded, balanced approach to Pakistan.” (Dow Jones, 16 June 2000)

Attitude of Other Countries

European Union
“The EU is gravely concerned by developments in Pakistan, and condemns the recent actions of the Pakistan military…. “The immediate restoration of democracy and the rule of law is essential. …The EU believes strongly that Pakistan needs stable and democratic government. It also requires such a government to sustain its economic reform programme, and in the absence of the conditions for such a programme future IFI lending should be withheld.” (European Union declaration in Tampere, 16 October 1999, Bulletin of the European Union, October 1999)

Commonwealth

The Durban Communiqué
“Heads of Government condemned the unconstitutional overthrow of the democratically elected Government of Pakistan on 12 October 1999. They believed that no legitimacy should be accorded to the military regime and called for the restoration on civilian democratic rule without delay.” (The Durban Communiqué, 12–15 November 1999, www.thecommonwealth.org)

Canada

Foreign Affairs Minister Lloyd Axworthy
“Canada deplores this action by Pakistan’s military…. The unconstitutional overthrow of Pakistan’s democratically elected government is unacceptable, and we call on General Musharraf to immediately restore democracy.” (Office of the Minister of Foreign Affairs, News Release, 13 October 1999)

Economic Impact

Observed Economic Statistics

“International Monetary Fund officials said that Pakistan could lose key loans if democracy isn’t restored. Before, the coup, the IMF and Pakistan were trying to resolve differences over sales tax and private power policies to enable the release of $280 million, part of a $1.6 billion loan approved in 1997. Other foreign aid hinges on the IMF assistance. Pakistan, an impoverished country of 140 million people, reached agreement with international banks this year to reschedule $877 million in commercial loans and struck a deal with Western governments to roll over $3.3 billion in credits under the umbrella of the Paris Club. But none of the agreements have been ratified, and they could fall apart in the absence of an elected government….” (Wall Street Journal, 14 October 1999, A22)

“Pakistan’s military rulers must act quickly to shore up their international finances or face a serious drain of funds at a time when reserves are worth less than two months of imports…. With reserves of only around $1.5bn, Pakistan cannot afford to lose aid inflows or to see the unraveling of existing rescheduling arrangements of more than $4bn, which are dependent on an IMF programme being in place. Altogether Pakistan has $32bn of foreign debt. It has been running a debt service to exports ratio of 40 per cent before the reschedulings were agreed.” (Financial Times, 14 October 1999, 6)

According to Asian Development Bank, Pakistani external debt reached 58 percent of gross national income in 1999. (Asian Development Bank, Pakistan Key Indicators of Asian and Pacific Countries)

In 1999, development aid accounted for 8 percent of Pakistan’s gross capital formation and 5.7 percent of central government expenditures. (World Bank, World Development Indicators)

Pakistan: US assistance, 1991–2001 (millions of US dollars)
Year
Military aid
Economic aid
Total
1991
101.2
101.2
1992
18.8
18.8
1993
52.7
52.7
1994
49.6
49.6
1995
17.1
17.1
1996
16.5
16.5
1997
42.3
42.3
1998
18.0
18.0
1999
110.8
61.8
172.7
2000
3.8
3.8
2001
90.4
90.4
Source: USAID, Overseas Loans and Grants, Obligations and Loans Authorizations, available online at http://qesdb.cdie.org/gbk/index.html

 

Pakistan: Net official development aid, 1991–2001 (millions of dollars)
Donor
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
Canada
39.4
22.0
10.1
4.6
3.3
9.7
18.0
16.1
12.1
13.1
13.9
Japan
127.4
173.3
188.5
271.0
241.0
282.2
92.2
491.5
169.7
280.4
211.4
United Kingdom
40.5
33.0
31.3
36.5
53.1
61.4
42.5
46.4
39.5
23.7
27.4
United States
114.0
39.0
54.0
–53.0
–82.0
–101.0
–76.0
–40.7
75.0
88.5
775.6
DAC donors
471.5
469.4
490.3
508.5
360.1
338.6
78.6
534.8
435.2
475.1
1,110.1
EC
25.0
30.6
22.8
18.7
12.6
28.4
21.8
19.2
19.8
33.1
50.0
Total multilateral
820.8
602.7
561.9
1,110.8
528.5
609.4
529.9
522.0
297.2
226.7
813.5
Other donors
78.8
–58.1
–46.8
–13.7
–64.7
–63.9
–12.2
–3.7
0.7
1.0
14.6
EC + EU members
185.8
220.3
236.7
274.0
184.6
151.4
47.7
69.5
182.7
108.4
142.2
Total donors
1,371.1
1,014.1
1,005.4
1,605.6
823.8
884.1
596.3
1,053.0
733.1
702.8
1,938.2
Source: OECD, Geographical Distribution of Financial Flows to Aid Recipients.

 

Calculated Economic Impact (annual cost to target country)
Suspension of US, Japanese bilateral aid; negligible since aid was already suspended after 1998 nuclear test
Negligible
Total
Negligible
Relative Magnitudes
Gross indicators of Pakistani economy
  Pakistan GNP (1999)
$59 billion
  Pakistan population (1999)
135 million
Annual effect of sanctions related to gross indicators  
  Percentage of GDP
  Per capita
Pakistan trade with US, Japan as percentage of total trade  
  Exports (1999)
26
  Imports (1999)
14
Ratio of US, Japan GNP (1999: $13,700 billion) to Pakistani GNP
232
Sources: World Bank, World Development Indicators; IMF, Direction of Trade Flows Yearbook.

Assessment

Pamela Constable
“Abroad, the coup was greeted with stern disapproval by Western European leaders and, under pressure from India, Pakistan was suspended indefinitely from the council of the Commonwealth nations. Yet, Washington’s response was one of guarded tolerance. Having already imposed economic sanctions on Pakistan after its nuclear tests in 1998, the United States made no further move to punish it after the coup. In part, this was a reflection of the longstanding strategic ties between the two countries, especially their military and intelligence communities; and in part, it was a recognition of Musharraf’s domestic popularity and potential as a bulwark against the growing influence of Islamic fundamentalism.” (Constable 2001, 21)

Aqil Shah
“…the September 11 attacks put Pakistan squarely on the front line of the U.S. led war on terror in Afghanistan. General Musharraf quickly allied himself closely with the antiterrorist coalition that the United States was building, thereby securing international acceptance for his bloodless October 1999 putsch against the democratically elected government of Prime Minister Nawaz Sharif. Much to Musharraf’s delight, even token international pressure for a return to civilian rule rapidly faded.” (Shah 2002, 67)

Author's Summary

Overall assessment
Policy result, scaled from 1 (failed) to 4 (success)
1
Sanctions contribution, scaled from 1 (negative) to 4 (significant)
2
Success score (policy result times sanctions contribution) scaled from 1 (outright failure) to 16 (significant success)
2
Political and economic variables  
Companion policies J (covert), Q (quasi-military), R (regular military)
International cooperation with sender, scaled from 1 (none) to 4 (significant)
2
International assistance to target: A (if present)
Cooperating international organizations
EU, Commonwealth
Sanction period (years)
2
Economic health and political stability of target, scaled from 1 (distressed) to 3 (strong)
1
Presanction relations between sender and target, scaled from 1 (antagonistic) to 3 (cordial)
2
Regime type of target, scaled from 1 (authoritarian) to 3 (democratic)
1
Type of sanction X (export), M (import), F (financial)
F
Cost to sender, scaled from 1 (net gain) to 4 (major loss)
1

Comments

Economic sanctions were not successful in reinstating a civilian government in Pakistan. Economic leverage over Pakistan was limited because the country already received only limited aid as result of its nuclear weapons program and the fear that further pressure would lead to the collapse of the economically and politically weak state. After September 11, 2001, terrorism and the war in Afghanistan overwrote concerns over democracy and human rights.

Bibliography

CRS (Congressional Research Service). 2002a. India and Pakistan: Current U.S. Economic Sanctions. RS20995. By Dianne E. Rennack. Updated 11 February.

CRS (Congressional Research Service). 2002b. India-US Relations. IB93097. By K. Alan Kronstadt. Updated 7 November.

CRS (Congressional Research Service). 2003. Pakistan-US Relations. IB94041. By K. Alan Kronstadt. Updated 6 May.

Constable, Pamela. 2001. Pakistan’s Predicament. Journal of Democracy 12, no.1 (January): 15–29.

Shah, Aqil. 2002. Democracy on Hold in Pakistan. Journal of Democracy 13, no. 1 (January): 67–75.