August Issue 2008

On July 7, 2008, a huge blast at the gates of the Indian Embassy in Kabul killed 41 people in the deadliest suicide car-bombing since the American-led invasion of Afghanistan in 2001 ousted the Taliban. Among the victims of the attack were four Indian citizens: the defence attaché, an officer of the Indian foreign service, who was a political counsellor at the embassy, and two other officials. Six Afghan police officers were also killed. Most of the other victims were Afghan civilians. Around 100 people were wounded. On that very day, the Afghan government made it more than obvious that it suspected Pakistan’s involvement by stating that a “regional intelligence service” was behind the attack.

That veiled accusation was followed by Afghan President Hamid Karzai directly blaming Pakistan’s intelligence agency, the ISI, for carrying out the bomb blast.

But more serious was the allegation levelled by Indian National Security Adviser M.K. Narayanan on Indian television, six days after the Kabul attack. Blaming the ISI, he stated that the Indian government had “pretty good evidence” to back its claim. This was the first time that the Indian government spoke officially about the involvement of the ISI in the suicide attack. “The ISI needs to be destroyed. We’ve made this point, whenever we have had a chance … There might have been some tactical restraint for some time, obviously that restraint is no longer present,” Mr Narayanan added.

Without directly responding to the Indian accusation, Pakistan’s foreign minister, Shah Mahmood Qureshi, said, “We are telling our friends in Afghanistan that the disturbances they are seeing and the increase in violence is not of Pakistan’s creation.” Prime Minister Yousuf Raza Gillani also addressed Afghanistan when he said that the accusations hurled by Kabul were hurting “regional development.”

Interestingly, the US also came up with the statement that Pakistan had supported the Taliban and extremists in Afghanistan, and President Bush went to the extent of saying that the American authorities would look into the Afghan allegations concerning ISI’s involvement in the blast.

Meanwhile, the impact of the Indian accusation was felt immediately when New Delhi cancelled a meeting between the heads of India’s Central Bureau of Investigation (CBI) and Pakistan’s Federal Investigation Authority. The meeting was scheduled for July 15, and CBI chief Vijay Shankar was to travel to Islamabad for it. No official reason was given by India for the abrupt cancellation, but it was widely believed to be related to India’s charge of ISI involvement in the Kabul attack.

But despite the shadow cast over India-Pakistan relations by the Kabul blast, there were several positive developments as well. First, on July 18, Indian and Pakistani officials at the joint secretary level met to finalise new Kashmir-specific Confidence Building Measures (CBMs) across the Line of Control (LoC) and consider ways to improve the existing ones. The timing of these talks was definitely bizarre from the Indian point of view. While on the one hand, it was accusing Pakistan of bombing its embassy, on the other, it was agreeing to more CBMs.

The decisions taken at this meeting were not announced in Islamabad but, instead, made public following the July 21 foreign secretaries’ meeting in New Delhi, which was the fifth round of the composite dialogue between them. The two sides agreed to introduce a triple-entry permit for cross-LoC travel, simplification of the procedures for getting the permit which, at present, takes at least two years, and an increase in the frequency of the two bus services across the LoC — namely the Srinagar-Muzaffarabad and the Poonch-Rawalakot bus services. There is also talk of a cross-LoC trade-and-truck service finally taking off.

These CBMs were originally agreed upon between Indian External Affairs Minister Pranab Mukherjee and Pakistani Foreign Minister Shah Mahmood Qureshi when they met in Islamabad on May 21, and the officials gave a final shape to them.

The Indian charge of ISI involvement in the Kabul embassy attack was not raised in the Islamabad talks but they came up at the New Delhi meeting between the foreign secretaries. In his press conference after the talks, Indian Foreign Secretary Shiv Shankar Menon left no room for doubt. The composite dialogue process was “under strain,” he remarked.

It is interesting that in the midst of this diplomatic downturn, Pakistan’s Defence Minister Ahmed Mukhtar, who described the Indian charge on the Kabul attack as “inappropriate” and “baseless,” in his capacity as the commerce minister, announced several concessions to Indian traders and investors in the 2008-2009 trade policy.

The minister revealed that, provided Indian manufacturers of CNG buses commit to manufacturing such buses in Pakistan, each possible investor would be allowed to import 10 buses by road via Wagah as test consignments. The government has made the import of CNG buses duty-free, announcing the removal of the earlier 15% duty in the 2008-2009 budget.

Besides investment, Pakistan’s new trade policy opens the door for more imports from India than before. Mr Mukhtar said it was important to do this in order to cut down on transport and manufacturing costs that, in turn, would make its own exports more competitive and help narrow its trade deficit. Further, he added that Pakistan was in the process of “gradually” liberalising bilateral trade with India and it was time to get over our “India phobia.”

Under the new trade policy, Pakistan has allowed imports of fuel oil, diesel, machinery such as paddy harvesters, rice driers and mining equipment. These items are included in the 136 additions to Pakistan’s positive list of imports from India. With this, the positive list has risen to 1,938 items. The full list has not yet been made public. India, which had given a list of 484 items for inclusion in the positive list, is reportedly disappointed that only 136 have been accepted, but Indian newspapers have reported that Indian officials generally concede that the new trade policy contains many positive steps for India.

In addition to the expanded list of permitted imports, Pakistan will also allow the import of raw materials and machinery not on the positive list for manufacturing units set up under its DTRE (Duty and Tax Remission for Export) schemes.

Also, cotton yarn and stainless steel will be allowed in by road through the Wagah Border from India. At the moment, these two items are being sent only by train.

India and Pakistan have a bilateral trade of $1 billion, but unofficial trade is estimated at double or triple the amount. By widening the scope for imports from India, the official figure could go up to over $3 billion making India Pakistan’s second biggest trading partner after China.

Additionally, Pakistan is said to have invited at least three Indian companies — Tata, Reliance and Essar — to a meeting of potential investors in the power sector to discuss the development of the Thar Coal Power Project.

These positive and negative signals emanating from New Delhi and Islamabad are not as confusing as they appear to be at first glance. For the first time, India is sending out the message that it will keep its lines of communication open with those in this country that it perceives to be on the same side as itself. The point was underlined by the Indian national security adviser when he stated that New Delhi was in talks with the government of Pakistan and not the ISI. This line of thinking is ostensibly based on the thesis that the ISI is operating as a state within a state, and is thus not the same as the government. Only time will tell if this new Indian thinking is based on sound postulates