Obama’s Pakistan Policy in Disarray After Opposition to $7.5bn Aid Conditions

by Jeremy Page and Zahid Hussain in Islamabad

President Obama's Pakistan policy was in disarray yesterday after Islamabad raised objections to the stringent terms attached to his new $7.5 billion aid package.

Officials of the two countries were locked in last-minute negotiations on how to salvage the Kerry-Lugar Bill, which triples US civilian aid to Pakistan. It seeks to broaden the campaign against Islamic militancy by fighting poverty in regions along the Afghan border and tries to ensure that military aid is not misspent. Military chiefs, the political opposition and even members of the ruling coalition have protested over conditions laid down in the Bill that they say constitute a humiliating violation of Pakistani sovereignty.

Mr Obama has until Friday to sign the Bill, which was passed by Congress on September 30 and presented to him on October 5. Under the US Constitution, it becomes law automatically if he does not sign or veto it within ten days. But the Pakistani parliament is debating a resolution opposing some aspects of the Bill, which, although non-binding, would make it politically difficult for President Zardari to accept the US aid.

Even Mr Zardari, who initially championed the package, has been forced to join the protests and send his Foreign Minister, Shah Mehmood Qureshi, to Washington to convey the widespread anger across Pakistan.

Mr Qureshi began a series of meetings with US officials and legislators yesterday to try to find a compromise that would pacify the Bill's critics without killing the entire aid package. "We are not raising objections on the entire Bill, but on some of the clauses which hurt our national sentiments," a senior Pakistani Foreign Ministry official told The Times.

He said that Mr Qureshi would meet Richard Holbrooke, the US special envoy for Pakistan and Afghanistan, James Jones, the National Security Adviser, and Hillary Clinton, the Secretary of State. He would also meet Senators John Kerry and Richard Lugar, who sponsored the Bill.

Mr Qureshi would raise concerns about four conditions that have caused most offence, the Pakistani official said. They oblige the US Government to ensure that the Pakistani Army is under the civilian Government's control, is not interfering in domestic politics, but is tackling Islamic militants and is not shielding Pakistanis involved in nuclear proliferation. "We just want that some measures are taken to alleviate the concerns of the military," the official said.

The Pakistani military took the unusual step last week of issuing a statement expressing its concern about the Bill, just before the parliamentary debate. It was most offended by the explicit condition that Pakistani civilian leaders should have oversight of military appointments.

"I hope the whole thing is scrapped," one senior military officer told The Times. "At the very least we want it amended."

US officials say that they are surprised by the level of opposition in Pakistan, and admit that the wording of the Bill was mistaken.

They also warn that amending the Bill, or drafting a new one, could take months, if not years, at a time when Pakistan is desperately short of funds.

They are now discussing a compromise under which Mr Obama makes a public statement addressing Pakistan's concerns as he signs the Bill into law. Another option is for Congress to address Pakistan's concerns in the Bill's official "legislative history".

Even if such a compromise is found, there is still a raging dispute over whether the funds should be spent through Pakistani or international non-governmental organisations. Mr Holbrooke and Pakistani leaders want USAid, America's international aid agency, to distribute more money through Pakistani NGOs, as called for in the Bill.

But C. Stuart Callison, a senior USAid economist, accused Mr Holbrooke in a leaked memo to the State Department of micromanaging the aid by personally approving every funding decision.

"This approval process has been difficult, time-consuming and extremely frustrating for an already overburdened mission staff and the disapprovals already received are shockingly counterproductive to priority counter-insurgency and economic development objectives," he wrote.

"Based on past experience in Pakistan, very few Pakistani firms and NGOs can currently satisfy the stringent financial management audit requirements for USAid project funding."

Wasted money

• An estimated $1.8 billion in US military aid went to Pakistan in 2008, a report by Harvard University said - but corruption in the Pakistani Government meant that only $300 million reached the army

• Other reports in 2008 claimed that up to 70 per cent of US military aid to Pakistan had been misspent

• The US State Department said terror attacks more than doubled in Pakistan from 2007 to 2008, to about 1,800