Dec 08 - 21, 2008

Deadly terrorist attacks that left over 150 dead and over 250 injured in the India's financial hub of Mumbai last week are likely to have financial implications for the cash-strapped Pakistan, which has just received $3.1 billion as the first tranche of $7.6 billion rescue package from the International Monetary Fund (IMF) and now looks to its friends for more cash support to avert an economic meltdown.

Before the attacks, the two south Asian nations were moving toward improved relations with the encouragement of the United States and in particular the incoming Obama administration. The Mumbai attacks have made the Obama administration's agenda of reconciliation between the two countries more difficult after India has raised accusing fingers at Pakistan. Some analysts believe that Mumbai attacks and India's accusation against Pakistan is likely to complicate things for the country to secure the much needed help from the donors after IMF.

Islamabad has vehemently condemned the attacks and asked both the Indian government and media to restrain from jumping to conclusions and blaming Pakistan for the terrorist attacks. Pakistan's Foreign Minister had just concluded talks in India with his Indian counterpart on terrorism, trade, and the loosening of visa restrictions between the two countries when the attacks occurred. The two countries have also been engaged in talks for trade across Line of Control between Azad Jammu Kashmir and Indian-occupied Jammu & Kashmir through Srinagar-Muzaffarabad and Poonch-Rawalakot routes.

The analysts believe that it is not the market economy but the real issue is about political economy: it is about holding stake in US-led war on terror and isolating Pakistan. Pakistan's Foreign Minister Shah Mehmood Qureshi has asked India to refrain from 'playing politics' in the aftermath of the Mumbai terrorist attacks. "Do not play politics into the issue. It is a collective issue. We are facing a common enemy. We have to join hands to defeat this enemy", he repeatedly told reporters in New Delhi.

The blame game is likely to sour relations between Islamabad and New Delhi diminishing prospects for an increased bilateral cooperation in boosting trade and combating terrorism, to the ultimate disservice of US new strategy under which, the president-elect Barack Obama and head of US central command General David Petraeus are trying to persuade Pakistan to fully concentrate on its western border to destroy al-Qaida and Taliban network and normalize relations with India to secure its eastern border. Pakistan would divert troops to its border with India and away from fighting militants on the Afghan frontier, if tensions erupt in the wake of the attacks on Mumbai, according to the security officials.

While speaking to an Indian audience over a video link from Islamabad last month, President Asif Ali Zardari pledged to make south Asia a nuclear-weapon-free zone and called for visa-free travel and also proposed a "no first nuclear strike" policy with India. Similarly, the talks on trade between the two countries have reached an advanced stage. "Non-state actors wanted to force upon the governments their own agenda but they must not be allowed to succeed," President Zardari reportedly told Indian Prime Minister Manmohan Singh last week on telephone.

"Asif Ali Zardari appears to be acting according to America's playbook for better relations with India. A businessman at heart, Mr. Zardari understands the benefit of strong trade between India and Pakistan. Now on life support from the IMF, Pakistan would profit immensely from the normalization of relations", according to a news analysis published in New York Times. According to the news analysis, reconciliation between India and Pakistan has emerged as a basic tenet in the approaches to foreign policy of President-elect Barack Obama and the new leader of Central Command, General David H. Petraeus. A strategic pivot by Pakistan's military away from a focus on India to an all-out effort against the Taliban and their associates in Al-Qaeda, the thinking goes, would serve to weaken the militants who are fiercely battling American and NATO forces in Afghanistan.

Analysts believe that India's response to the terrorist attacks in Mumbai has implications not only for India but also the whole of South Asia. "The timing of the attack, likely to derail efforts by the incoming Obama Administration to pursue a more constructive approach to the War on Terror, also seems too convenient to be mere coincidence", wrote Maria Misra in The Times online in her article "India cannot pin all the blame on outsiders".

India's response to the terrorist attacks in Mumbai has implications for stability in India, and in the whole of South Asia, Gareth Price said in his article recently published in Guardian. "Blaming Pakistan threatens to undermine relations between India and Pakistan, and to further weaken the position of Pakistan's president, Asif Ali Zardari. On top of the security situation in the tribal areas and a weak economy, worsening relations with India would make his position close to untenable, according to Price.

One of President-elect Obama's top priorities should be Pakistan, Pulitzer Prize winning writer Nicholas Kristoff said in an article published in the New York Times on November 23. He said the Obama administration should cut tariffs on Pakistani agricultural and manufactured products to boost the economy and provide jobs. Kristoff even suggested, "We should also support China on its planned export-processing zone to create manufacturing jobs in Pakistan. He wrote, "While there are no easy solutions for the interlinked catastrophes unfolding in Pakistan and Afghanistan, there are several useful steps that we in the West can take to reduce the risk of the region turning into the next Somalia."

"Experts are particularly worried about Pakistan, which since September has seen its national currency devalued and its hard-currency reserves nearly been wiped out", reported Washington Post last month citing unnamed US government officials and private analysts.

"A rapprochement with India would permit the Pakistani government to devote more military resources to the fight against terrorists", said The Washington Post in its editorial on November 29. "The United States, in what's left of the Bush administration's term and right from the start of the Obama administration's, must continue nudging these two rivals toward cooperation. As the bloodbath in Mumbai so vividly illustrates, terrorism is not only America's enemy, but Pakistan's and India's as well," the Post said.

The analysts believe that Mumbai terror incidents and deterioration in Pakistan-India relations as a result of blame game is likely to weaken the country's emerging role as US frontline ally in war on terror under next Obama administration, which has pledged to extend its support to stabilize the country's ailing economy. How the Mumbai incident can benefit the country, which is already facing an internal turmoil and worst economic crisis, said Dr. Shahid Masood a Pakistani analyst on Geo TV. "Pakistan cannot extinguish the fire (of terrorism) without the help of its neighbor", said Bharat Verma an Indian security expert while talking to him.