Secret Pakistani arms sales to the U.S. helped to facilitate a controversial bailout from the International Monetary Fund earlier this year, according to two sources with knowledge of the arrangement, with confirmation from internal Pakistani and American government documents. The arms sales were made for the purpose of supplying the Ukrainian military — marking Pakistani involvement in a conflict it had faced U.S. pressure to take sides on.
The revelation is a window into the kind of behind-the-scenes maneuvering between financial and political elites that rarely is exposed to the public, even as the public pays the price. Harsh structural policy reforms demanded by the IMF as terms for its recent bailout kicked off an ongoing round of protests in the country. Major strikes have taken place throughout Pakistan in recent weeks in response to the measures.
The protests are the latest chapter in a year-and-a-half-long political crisis roiling the country. In April 2022, the Pakistani military, with the encouragement of the U.S., helped organize a no-confidence vote to remove Prime Minister Imran Khan. Ahead of the ouster, State Department diplomats privately expressed anger to their Pakistani counterparts over what they called Pakistan’s “aggressively neutral” stance on the Ukraine war under Khan. They warned of dire consequences if Khan remained in power and promised “all would be forgiven” if he were removed.
“Pakistani democracy may ultimately be a casualty of Ukraine’s counteroffensive.”
Since Khan’s ouster, Pakistan has emerged as a useful supporter of the U.S. and its allies in the war, assistance that has now been repaid with an IMF loan. The emergency loan allowed the new Pakistani government to put off a looming economic catastrophe and indefinitely postpone elections — time it used to launch a nationwide crackdown on civil society and jail Khan.
“Pakistani democracy may ultimately be a casualty of Ukraine’s counteroffensive,” Arif Rafiq, a nonresident scholar at the Middle East Institute and specialist on Pakistan, told The Intercept.
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Pakistan is known as a production hub for the types of basic munitions needed for grinding warfare. As Ukraine grappled with chronic shortages of munitions and hardware, the presence of Pakistani-produced shells and other ordinances by the Ukrainian military has surfaced in open-source news reports about the conflict, though neither the U.S. nor the Pakistanis have acknowledged the arrangement.
Records detailing the arms transactions were leaked to The Intercept earlier this year by a source within the Pakistani military. The documents describe munitions sales agreed to between the U.S. and Pakistan from the summer of 2022 to the spring of 2023. Some of the documents were authenticated by matching the signature of an American brigadier general with his signature on publicly available mortgage records in the United States; by matching the Pakistani documents with corresponding American documents; and by reviewing publicly available but previously unreported Pakistani disclosures of arms sales to the U.S. posted by the State Bank of Pakistan.
The weapons deals were brokered, according to the documents, by Global Military Products, a subsidiary of Global Ordnance, a controversial arms dealer whose entanglements with less-than-reputable figures in Ukraine were the subject of a recent New York Times article.
Documents outlining the money trail and talks with U.S. officials include American and Pakistani contracts, licensing, and requisition documents related to U.S.-brokered deals to buy Pakistani military weapons for Ukraine.
The economic capital and political goodwill from the arms sales played a key role in helping secure the bailout from the IMF, with the State Department agreeing to take the IMF into confidence regarding the undisclosed weapons deal, according to sources with knowledge of the arrangement, and confirmed by a related document.
To win the loan, Pakistan had been told by the IMF it had to meet certain financing and refinancing targets related to its debt and foreign investment — targets that the country was struggling to meet. The weapons sales came to the rescue, with the funds garnered from the sale of munitions for Ukraine going a long way to cover the gap.
Securing the loan eased economic pressure, enabling the military government to delay elections — a potential reckoning in the long aftermath of Khan’s removal — and deepen the crackdown against Khan’s supporters and other dissenters. The U.S. remained largely silent about the extraordinary scale of the human rights violations that pushed the future of Pakistan’s embattled democracy into doubt.
“The premise is that we have to save Ukraine, we have to save this frontier of democracy on the eastern perimeter of Europe,” said Rafiq. “And then this brown Asian country has to pay the price. So they can be a dictatorship, their people can be denied the freedoms that every other celebrity in this country is saying we need to support Ukraine for — the ability to choose our leaders, ability to have civic freedoms, the rule of law, all these sorts of things that may differentiate many European countries and consolidated democracies from Russia.”
Bombs for Bailouts
On May 23, 2023, according to The Intercept’s investigation, Pakistani Ambassador to the U.S. Masood Khan sat down with Assistant Secretary of State Donald Lu at the State Department in Washington, D.C., for a meeting about how Pakistani arms sales to Ukraine could shore up its financial position in the eyes of the IMF. The goal of the sit-down, held on a Tuesday, was to hash out details of the arrangement ahead of an upcoming meeting in Islamabad the following Friday between U.S. Ambassador to Pakistan Donald Blome and then-Finance Minister Ishaq Dar.
Lu told Khan at the May 23 meeting that the U.S. had cleared payment for the Pakistani munitions production and would tell the IMF confidentially about the program. Lu acknowledged the Pakistanis believed the arms contributions to be worth $900 million, which would help to cover a remaining gap in the financing required by the IMF, pegged at roughly $2 billion. What precise figure the U.S. would relay to the IMF remained to be negotiated, he told Khan.
Courtesy: The Intercept
