Even as Prime Minister Narendra Modi prepares to review the Most Favoured Nation status for Pakistan following rising hostilities after the attack in Uri, India’s options may be limited on economic sanctions. For economic sanctions to have an impact on Pakistan, support from the international community, specifically the U.S. and the European Union (EU) is crucial. India has received no positive signals from these quarters, officials involved in discussions at the highest level in government told The Hindu .
“If the U.S. could bar say American banks from dealing with entities in Pakistan…as it had in the case of Iran… that would be a blow, but there have been no such developments,” an official said.
Pakistan’s economy draws its sustenance from international aid . India is not in the category of countries that provide it such aid. India’s options for scaling down or snapping direct economic ties between the neighbours are also ruled out as this trade takes place via other countries.
For instance, even if India seeks that curbs be placed on one such third-party route, such as Dubai, the trade will simply shift in to the unofficial mode, defeating the purpose. In 2015-16, less than 2 per cent of India’s total merchandise trade is estimated to have been with Pakistan.
When asked about the government’s view after Prime Minister Modi took stock on Monday of the Indus Waters Treaty, the official said India’s standing internationally could take a beating if the country is seen reducing the availability of water to Pakistan from the rivers covered under the Treaty. The official also said any such measure would be contrary to the approach spelt out by Prime Minister Modi when he sought to reach out to the people of Pakistan directly, by asking them to join hands in tackling poverty.
Russian example The recent E.U. and U.S. sanctions against Russia over its annexation of Crimea included preventing Russian state banks from raising long-term loans in the E.U., and bans on export of dual-use military equipment for use in Russia.
India's non-military options
Diplomatic | Economic |
Ask for other countries to pressure Pakistan — Russia, China unlikely to; US and Europe are encouraging direct talks instead; Iran wants to join CPEC. | Withdraw MFN status to Pakistan, appeal to WTO to take action against Pakistan for not reciporcating — will draw WTO action on India if it revokes. |
Increase engagement at the UN on cross-border terror. | Cancel bilateral trade at Wagah and LoC — miniscule at present, will hurst Kashmiri apple traders. |
Downgrade missions by recalling High Commissioner, other officials. | Press for economic sanctions against Pakistani entities (banks/businesses) dealing with other countries like UAE, Saudi Arabia, EU, US etc. |
Regional isolation of Pakistan — postponement of SAARC summit, increase BBIN, BIMSTEC, SASEC engagement, ties with Afghanistan. | Push UN 1267 Committee on Taliban to sanction Pakistan for allowing Hafiz Saeed and Zaki Ur Rahman Lakhvi to access funds — China likely to veto |
Review Indust Water Treaty — discussed by PM, no review but other measures discussed. |
