Failure in Chicago: No U.S.-Pakistan Deal on NATO Supply Lines

As the North Atlantic Treaty Organization (NATO) summit in Chicago concluded, the much hoped-for deal between the United States and Pakistan to reopen NATO supply routes through Pakistan did not materialize. In fact, hardened stances on display in Chicago on both sides chipped away at optimism that a deal may be in the offing anytime soon.

The elusive deal to open the Pakistani Ground Lines of Communication (GLOCs) appears in the end to have stumbled on a pricing issue, but it was likely a misreading by both parties of the other’s negotiating red lines and competing external and internal pressures that led to the showdown becoming the spectacle that took center stage in Chicago. Both sides will likely now re-gauge and approach the negotiating table afresh. Securing an agreement on the GLOCs is important enough to both Pakistan and the U.S. that the setback is unlikely to kill negotiating efforts altogether.  It is possible that negotiations can now be conducted in a more level-headed manner free of the artificial deadline and inflated international expectations that the Chicago summit imposed on them. The advantages to both sides of reopening the GLOCs are so great that a deal is likely at some point.  The experience of the closure and the negotiations, however, has laid bare the changed relationship between the U.S. and Pakistan. The idea that the two states are real partners in a common struggle has been replaced by a naked process of horse-trading. The shift to an openly transactional relationship between Islamabad and Washington may be the most important outcome of this process.

The Last Minute Deal That Wasn’t

While a GLOCs deal between the U.S. and Pakistan started to flounder before the summit even began, in the days leading up to Chicago both sides broadcast optimism that a deal would be reached by, and even announced during, the NATO conference.

On May 15, following months of prevarication, haggling, and domestic politicking, Pakistan’s government announced that it had approved, in principle, the reopening of the NATO supply route.[1] Pakistan had shut the route nearly six months ago following a border clash on November 26, 2011 in which 24 Pakistani soldiers were killed by NATO aircraft after Pakistani and NATO soldiers ended up trading fire. The very same day as that announcement was made, Pakistan’s President Asif Ali Zardari received an invitation to attend the NATO summit in Chicago—an invitation that NATO Secretary General Anders Fogh Rasmussen had earlier hinted might have been withheld altogether if Pakistan did not agree to open the NATO GLOCs.[2] According to U.S. officials, the invitation was extended because the U.S. and Pakistanis had more or less reached a deal on the GLOCs.[3] The Pakistanis, however, stated that receiving the invitation to the NATO summit was the key step in reaching an agreement.[4]

In the days leading up to the announcement, Pakistan sent signals that it might be willing to forgo one of the main preconditions that had proven to be the main stumbling block in reaching a deal: an unconditional, high-level apology from the U.S. government for the November 2011 border incident.

The U.S. has refused to compromise on the issue of apologizing. A Pentagon inquiry into the incident in December concluded that both sides were partially to blame for the miscommunications that led to the tragic engagement. The Pakistanis rejected the report out of hand and demanded a full apology for the deadly clash. The Obama administration reportedly quibbled internally for months on whether or not to apologize to Pakistan; advocates of an apology thought it would be the easiest way to smooth relations and ensure a quick reopening of the supply routes. The administration came close to doing so several times but ultimately decided that an apology would be an unjustified admission of total guilt, make the U.S. look weak in front of Pakistan and potentially hand too much ammunition in the midst of an election year to President Obama’s rival for the presidency, Governor Mitt Romney.[5] The resolve hardened further in the face of a series of attacks that took place throughout Afghanistan on April 15, 2012 that the U.S. believes were conducted by militants backed by elements of the Pakistani state.[6]

In May, Pakistan appeared to be moving on from the point. Pakistan’s Foreign Minister Hina Rabbani Khar characterized the situation by saying that Pakistan had “made its point” by closing the border for six months and was now ready to “move on.”[7] Signaling by the Pakistani government and apparent leaks to the Pakistani press gave the impression that the government was, for reasons of “national interest,” coming to Chicago prepared to cut and announce a deal that would not include a full U.S. apology.[8] Such a concession would carry a hefty price, however.

For You, My Friend, Best Price

In the end, the deal appears to have faltered on a pricing issue. After the Pakistani government received its late invitation to the Chicago summit, Pakistani negotiators told their American counterparts that they planned on charging NATO a new fee of $5,000 per vehicle that uses the NATO supply route through Pakistan. This revenue, Pakistan says, would go towards repairing road infrastructure pummeled by a decade of steadily increasing and duty-free NATO traffic to Afghanistan.[9] While Pakistan’s roads have taken a beating over the years, it is surely also the case that the Pakistanis have figured out what the U.S. is willing to pay to bring in supplies through alternative routes, and want a larger piece of the pie. Pakistani officials justified the figure by saying it would still only cost the U.S. half as much as transporting supplies through the Northern Distribution Network (NDN), the series of routes starting in Europe and traversing Russia and Central Asia that the U.S. uses to deliver supplies to Afghanistan.[10]

While the U.S. had in principle conceded to paying more than the $250 per vehicle it currently did, it balked at the proposed figure. Six months ago it was running trucks through the GLOCs essentially free of cost.[11] Secretary of Defense Leon Panetta said the U.S. would not agree to such terms “considering the financial challenges that [the U.S.] is facing.”[12] Another U.S. official said that the fees proposed were unacceptable, “not just to the United States but to our NATO allies.”[13] The U.S. would not reconcile to the idea of paying for a “30-fold increase” in the cost of sending supplies along the Pakistani GLOCs.[14]

With Pakistan not appearing to budge on the issue, the Obama administration made very public its indignation during the conference. The White House announced that President Obama had no plans to meet Pakistani Zardari one-on-one. President Obama’s address to the summit “snubbed” Pakistan by pointedly excluding mention of Pakistan while singling out for praise the Central Asian states that provided the U.S. access to Afghanistan through the NDN.[15] The message was clear: The U.S. was not going to capitulate on the world stage to additional Pakistani rent-seeking. President Zardari, for his part, responded to U.S. attempts to pressure and discomfit Pakistan at the summit by raising familiar refrains, including Pakistani opposition to U.S. drone strikes inside Pakistan and the need for a full U.S. apology for the November 2011 border tragedy.[16] Even though President Zardari and President Obama did end up meeting yesterday (albeit briefly) on the sidelines of the summit, the imminent announcement of a U.S.-Pakistan deal was a non-starter.[17]

Misread Red Lines

In the end, it appears that the U.S. and Pakistan were unable to come to an agreement in time because both miscalculated the vitality of various internal and external pressures in shaping their counterpart’s negotiating position, and the suffering each seemed prepared to endure in order not to cede ground in the midst of an election year in both countries.

Pakistan is keen to see the GLOCs opened and an end to its growing international isolation. The country is facing a balance of payments and power crisis and needs to finance its debt and deficit any way it can.[18] The U.S. has sworn-off reimbursements of over $1 billion (the Pakistanis say they are owed in excess of $2.5 billion) to Pakistan for counter-terrorism assistance under the Coalition Support Fund (CSF) program until supplies start flowing again.[19] This fact has not stopped the Pakistani government from building in $1.1 billion from CSF payments into its 2012-13 annual budget, but it does mean that a failure to eventually secure repayment will equal a massive deficit hole in the fiscal budget in a year when the government is facing re-election.[20]

Moreover, the blockade has wreaked havoc on Pakistan’s trucking industry, a large portion of which is wedded to the NATO supply chain.[21] It has gummed up ports in Karachi as containers are off-loaded with nowhere to go. Thousands of trucks and fuel tankers that cannot make the journey north clog Karachi’s busy streets.[22] Truckers, unable to earn a living, sit idle waiting to hear whether they can finally get back on the road.[23] Pakistan’s government and, more importantly, its army, have wanted to reopen supply lines for some time in order to clear backlogs, resume remuneration, and to allow U.S.-Pakistan ties to heal.[24] Pakistan has, in fact, been covertly sending forward some NATO goods to Afghanistan disguised as Afghan Transit Trade, but there are limits to the volume of goods that can be transported if the shipments are to remain secret.[25]

The U.S., believing (probably correctly) that Pakistan was in the weaker negotiating position and in greater financial need of a deal that the U.S., may have hoped that inviting Pakistan to the NATO summit would successfully ease the Pakistanis down the last steps of a long negotiating process on opening the GLOCs. The U.S. may have failed, however, to sufficiently appreciate the virulence of the anti-U.S. narrative in Pakistan and the importance Pakistanis place on receiving a full apology for the November 2011 raid. The issue of achieving a form of parity in relations between the U.S. and Pakistan has acquired almost canonic importance in the Pakistani political conversation. Although a Pakistani parliamentary resolution passed in April 2012 outlining recommendations for how the government should review relations with the U.S. was non-binding, so central is the issue in the Pakistani discourse that the government has voluntarily (and incorrectly) declared itself to be bound by its provisions.[26] The politically-embattled government has already faced charges of treason and threats of protests from opposition politicians for softening its stance towards the U.S.[27] The ruling coalition may have thought that the only way it would be able to sell a deal in Pakistan that did not include a U.S. apology or a renunciation of drone strikes, without torpedoing its own chances for reelection, would be to get the U.S. to agree to a particularly plum deal.[28] Hence, perhaps, the $5,000 per truck demand. When the U.S. looked unwilling to concede, President Zardari appeared happy to, for the moment, salvage some political capital by re-raising issues such as the U.S. apology and drone strikes that could be positively spun in the Pakistani domestic media.[29]

Attendance of the summit was extremely important for Pakistan. Having boycotted the last Afghanistan conference in Bonn in protest of the November 2011 border clash, the government needed to make sure its voice was not absent once again when the big decisions about the future of Afghanistan were being made. Pakistan’s credibility as a key player in the Afghan endgame, both before the international community and its Afghan proxies, depended on it. As such, signaling that it was ready to conclude a deal on the GLOCs, and fast, may have been less than genuine. The U.S. may have been aware of this fact, but if it was, it chose to invite Pakistan nonetheless. The U.S. may have hoped that it could use the public forum to pressure and shame the Pakistanis into an agreement.[30] It also likely believed in the importance of Pakistan’s input for an effective Afghan transition and that Pakistan’s attendance would enhance rather than detract from the summit. The impasse over a supply line deal seems to have stolen some of the thunder from the rest of the conference, however.

The Pakistanis, for their part, appear to have been guilty of an overwhelming (and likely misplaced) belief in the strength of their own negotiating position vis-à-vis the U.S. and NATO. The effect of the Pakistani GLOCs closure following the November 2011 incident was initially limited due to U.S. contingency planning, stockpiling inside Afghanistan, and the gradual shift in the balance of its supply chain network to the (more expensive) NDN running through Russia and Central Asia and its (even more expensive) air routes.[31] According to the Pentagon, Pakistani GLOCs accounted for only 30 percent of total supplies reaching Afghanistan before the closure.[32] With the coming of spring and the beginning of a new fighting season, however, the draw on supplies has become heavier.[33] While U.S. commanders say that the Pakistani border closure has not affected military operations in Afghanistan, U.S. officials privately concede that being forced to bring more supplies through the NDN and by air is proving to be extremely expensive.[34] At a time when much of the U.S. and Europe is facing austerity at home, and the U.S. is pushing its NATO partners to foot more of the bill in Afghanistan, the increased expense is unwelcome. The U.S. and NATO are also looking ahead to the upcoming retrograde, when thousands of troops and equipment will be withdrawn from Afghanistan.[35] Doing so at a cost that does not overwhelm or delay the effort is a high priority.[36] The Pakistani GLOCs are especially important given that NDN partner countries currently only permit goods to travel into and not out of Afghanistan.[37]

Armed with this information, the Pakistanis seemed confident that they could use the platform of the NATO summit to browbeat the U.S. into accepting a massive tariff on GLOC traffic on the argument that it would still be vastly cheaper as compared to traffic through the NDN. They miscalculated Washington’s determination not to be “price-gouged” by Pakistan, however.[38] U.S. commanders have repeatedly stated that the GLOC closure has not negatively impacted operations in Afghanistan and the U.S. and NATO are willing to explore new and inventive ways of transporting needed supplies to the theater if necessary.[39] The ‘election year’ issue is just as important in the U.S. as it is in Pakistan: President Obama is wary that capitulating to Pakistani demands perceived as unreasonable would give Governor Romney ample ammunition to use against him. Lastly, given growing U.S. frustrations with Pakistan since 2011, the U.S. appears willing to absorb a significant level of discomfort and cost in order not to be held hostage by Pakistan’s stranglehold on the GLOCs.

The NDN is more expensive because supplies have much further to go and cross through many more countries, each of which exacts its own cost. The Pakistani route, by contrast, is shorter and more cost and time efficient—most of the additional fee the Pakistanis are levying is political rent-seeking rather than cost-based remuneration. Pentagon figures put the increased cost of using the NDN at $87 million a month.[40] That means the NDN would cost just over $1 billion per year more if all Pakistani GLOC traffic were translated north to the NDN. Even accounting for a massive increase in fuel costs next year, cutting Pakistan out of the supply chain entirely would likely not exceed $2.5 billion in extra cost.[41] Withheld CSF payments since July 2010 cover a good portion of the increased expenses as it is. In the end, the U.S. has displayed its willingness to accept the increased cost of the NDN in exchange for not being browbeaten into being beholden to Pakistan’s more volatile and less reliable transport network.

A More Honest Horse-Trade

While a GLOCs agreement did not materialize in Chicago, hope is not lost for an agreement. After the summit both sides reiterated the importance of reaching a deal and their willingness to continue to work towards one. The U.S. and Pakistan made heavy use of the rhetoric that Pakistan’s invitation to Chicago was unconditional and not about the supply lines at all.[42] U.S. and NATO officials played down the notion that a deal was ever expected to be announced by the end of the summit.[43] They also expressed optimism, however, that a deal was within reach.[44] The brief Zardari-Obama meeting on the sidelines of the summit allowed the conference to end on a constructive note. President Obama, speaking after the summit, said the U.S. and Pakistan faced “real challenges” but both had made “diligent progress” towards an agreement.[45] Pakistani officials, for their part, waxed eloquent for their domestic audiences on President Zardari’s performance in upholding the Pakistani demand for respect of its sovereignty and the need for a proper U.S. apology.[46] Pakistani officials also expressed confidence that a deal was possible: President Zardari said he had ordered his negotiators to move towards conclusion of a deal with the U.S.[47] Foreign Minister Khar, furthermore, reiterated earlier statements reflecting the need to find an agreement on the GLOCs given the importance of staving off international isolation and the futility of punishing all of its NATO partners for a U.S.-Pakistan dispute.[48]

A deal on the GLOCs is important to both Pakistan and the U.S. and so unlikely to be dropped entirely. Now that both parties have a better understanding of the others’ negotiating positions, and have been unchained from the artificial deadline that the Chicago summit seemed to impose on them, they may be able negotiate on a more level and realistic basis.

In fact, what the negotiations thus far have laid uncomfortably bare is neither side is really approaching the U.S.-Pakistan relationship from the standpoint of a “strategic partnership” any longer. The GLOCs deal is now purely a matter for horse-trading. In form and function, the GLOCs deal and the negotiations surrounding it provide an avenue for both nations to switch to a more transactional relationship. The U.S. has made future aid to Pakistan contingent upon the resumption of the supply route. The invitation to the NATO summit and the cold shoulder President Zardari received while there were undisguised carrot and stick measures by the U.S. to goad Pakistan into cooperating. The Pakistanis, for their part, are clearly (if expensively) pricing out the cost of their continued cooperation with the U.S. and NATO. The Pakistanis opened with $5,000. According to administration officials, while the U.S. has conceded paying for use of the Pakistani GLOCs, it is unwilling to offer any more than $500 per truck and continues to rule out offering a full apology.[49] The gap means much talking is yet to be done.

Conclusion

The U.S. and Pakistan know they need each other, not only for cooperation over the future of Afghanistan, but also when it comes to continuing to fight against international terrorist groups such as al Qaeda and maintaining regional stability in South Asia. What neither seems to believe any longer, however, is that cooperation is worth any price (or worth providing free of cost). What the cost of that relationship should be and what it is worth to each of them is now simply a matter for both sides to bargain their way to the intersection of each other’s supply and demand curves.

The GLOCs negotiation is not so much a standoff as it is a process of figuring out for certain what an acceptable cost for doing business is, once both sides have taken adequate stock of their positions and figured out what their future responsibilities both domestically and in the region will be. Given the gulf that remains on the GLOCs deal’s pricing issues, neither side should expect negotiations to be wrapped up quickly. Both the U.S. and Pakistan have demonstrated the capacity and willingness to endure some of the consequences of holding maximalist negotiating positions. What is clear is that both sides stand to suffer if a deal is not concluded sooner rather than later, though both continue to disagree on who is likely to suffer more. There, for the moment, lies the impasse.