U.S. helped Pakistan cancel elections with a controversial IMF bailout--funded by a secret Ukraine weapons program

"Pakistani democracy may ultimately be a casualty of Ukraine’s counteroffensive."

Last month, Murtaza Hussain and I reported that a secret Pakistani cable included direct evidence that the State Department had encouraged the removal of the country’s prime minister, Imran Khan, in a vote of no confidence, over what they called his “aggressive neutrality” in the war between Ukraine and Russia. That vote was held and he was subsequently removed, replaced by a military-backed government that has launched an increasingly brutal crackdown – including the jailing of Khan himself, many of his deputies, and thousands of rank-and-file party members. 

What we can now report is that following his removal, Pakistan began secretly producing munitions for Ukraine and the U.S. helped Pakistan obtain an emergency loan from the IMF using the weapons production as, essentially, collateral for that loan. The IMF bailout also required Pakistan to remove subsidies on energy commodities, and there have since been strikes and protests around the country against soaring gas and electricity prices. 

The documents our story is based on come from after Imran Khan’s tenure, which ought to put to rest the question of whether he was the source for our last one. He wasn’t, as we’ve said repeatedly, but the Pakistani government seems intent on prosecuting him for it anyway. 

The story is here and below.

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My periodic reminder: My book The Squad: AOC and the Hope of a Political Revolution, is out on December 5 but available for pre-order now. It got a nice Kirkus Review you can read here. 

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.

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.

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.”

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.

At the meeting on Friday, Dar brought up the IMF question with Blome, according to a report in Pakistan Today, which said that “the meeting highlighted the significance of addressing the stalled IMF deal and finding effective solutions to Pakistan’s economic challenges.”

A spokesperson at the Pakistani Embassy in Washington declined to comment, referring questions to the State Department. A spokesperson for the State Department denied the U.S. played any role in helping procure the loan. “Negotiations over the IMF review were a matter for discussion between Pakistan and IMF officials,” the spokesperson said. “The United States was not party to those discussions, though we continue to encourage Pakistan to engage constructively with the IMF on its reform program.”

An IMF spokesperson denied the institution was pressured but did not comment on whether it was taken into confidence about the weapons program. “We categorically deny the allegation that there was any external pressure on the IMF in one way or another while discussing support to Pakistan,” said IMF spokesperson Randa Elnagar. (Global Ordnance, the firm involved in the arms deal, did not respond to a request for comment.)

“My understanding, based on conversations with folks in the administration, has been that we supported the IMF loan package given the desperate economic situation in Pakistan.”

The State Department’s denial was contradicted by Maryland Democratic Sen. Chris Van Hollen, a leading voice in Washington on foreign affairs. Earlier this month, Van Hollen told a group of Pakistani journalists, “The United States has been very instrumental in making sure that the IMF came forward with its emergency economic relief.” Van Hollen, whose parents were both stationed in Pakistan as State Department officials, was born in Karachi and is known to be the closest observer of Pakistan in Congress.

In an interview with The Intercept at the Capitol on Tuesday, Van Hollen said that his knowledge of the U.S. role in facilitating the IMF loan came directly from the Biden administration. “My understanding, based on conversations with folks in the administration, has been that we supported the IMF loan package given the desperate economic situation in Pakistan,” he said. 

FULL STORY HERE