TODAY, we are at the threshold of a new geopolitical and geo-economic world order; in which the methods of commerce are going to be too instrumental in influencing the behavior of both allies and adversaries. Indeed, geo-economics may not surpass or replace military methods, but it will be instrumental in coercing the strategic competitor. India has been struggling to intimidate Pakistan militarily, but always-unsuccessful due to latter’s professional defence forces. During the recent crisis, its military brinksmanship cost it two fighter jets. Therefore, it from now onward it prefers using geo-economics tactics to damage Pakistan economically. The infrastructure of globalization—the financial sector supply chains, the energy sector, and the global trading regime—has increased interconnection and interdependence. However, this increasing connections between countries have not buried the tensions between them. Geo-economic, defined as the geostrategic use of economic power introduces a factor in the global politics that economically advantageous states use their economic power to further their political and strategic position vis-à-vis other states.
Notably, the word “geo-economics” was first coined by Edward Luttwak, who claimed in 1990 that, although the competition between great powers had taken on an economic form, its purpose had remained political: “The world is not governed by the logic of commerce but rather the logic of conflict which is adversarial and zero-sum.” Admittedly, the economic competition between countries is not new. Currently, the competition among the great powers is about the infrastructure of the global economy so that they can sustain their economic hegemony. Realistically, in the nuclear era, war is no longer a viable option for the pursuit of geopolitical objectives and therefore economic—rather than military—leverage is more consequential in the pursuit of a national interest or influencing the behavior of a nuclear-armed state. Both the Great and Regional powers are employing their economic leverage to achieve their long-term geopolitical goals internationally and regionally. The geo-economic instruments are an effective coercive tactic alongside military measures to pursue political objectives. The United States has been using the global economic and financial system to pursue political objectives. For instance, it imposed financial sanctions against Russia, China, Iran and Pakistan. Similarly, Russia uses its gas exports to put pressure on its neighbors. India withdrew Pakistan’s status as Most Favored Nation and also stopped tomato supply to put pressure on Pakistan during the recent crisis. Thus, the use of geo-economic instruments such as the sanctions, custom controls, economic blockades/embargoes, asset freeze and aid suspension are a useful strategic coercion option. India has failed to coerce Pakistan militarily and, therefore, it is using hybrid warfare techniques to malign and harm Pakistan. It is making alliances and devising new trade routes to Afghanistan to undercut Pakistani trade and hatching conspiracies against China-Pakistan Economic Corridor. It has been propagating that Pakistan is providing financial support to the militants for conducting terrorist activities.
India is using FATF that ‘set standards and promote effective implementation of legal, regulatory and operational measures for combating money laundering, terrorist financing and other related threats to the integrity of the international financial system,’ to wreck Pakistan’s economy. Unfortunately, from June 2018, Pakistan is on FATF grey list of countries whose domestic laws are considered weak to tackle the challenges of money laundering and terrorism financing. India was very much instrumental in placing Pakistan on the greylist. On March 12, Federal Minister for Finance Asad Umar pointed out that India has been lobbying against Pakistan and they started receiving messages that it was asking other members to put Pakistan on the blacklist. He said, “India had submitted its unilateral report and abused the FATF process for political purposes.” If Pakistan fails to satisfy FAFT members, it will be placed on the blacklist. The FATF blacklist means the country concerned is “non-cooperative” in the global fight against money laundering and terrorist financing. The Federal Secretary of the Finance Division warned that Pakistan might face economic sanctions over non-implementation of FATF recommendations. Therefore, it is imperative to implement FATF recommendations. Besides, Pakistan also engages like-minded states to quash India’s attempt to get Pakistan blacklisted by FATF. To conclude, Pakistan is capable of thwarting India’s strategic coercion. However, it is vulnerable to its geo-economic tactics.