The international donors conference took place in Afghanistan; however the focus was on Pakistan, with China pledging to offer trade concessions to Islamabad in order to support Pakistan’s economy, while the US and the European Union were unwilling to commit to this on account of the global economic recession.

China supported Pakistan’s desire to extend a gas pipeline from Iran to India, while also pledging to build two new nuclear power plants (Chasma Nuclear Power Plants III and IV) in the Punjab region, which is something that western states oppose. Washington preferred not to announce its opposition to this publicly, and is trying to dissuade China from proceeding with this plan, saying that this would breach Beijing’s adherence to the Nuclear non-Proliferation Treaty [NPT], and also because US President Barack Obama is working towards freeing the world from nuclear weapons. China responded by saying that it has an agreement with Pakistan dating back to 2004 – before Beijing signed the NPT – and also reminded Washington that it sold nuclear material to New Delhi last year. Washington fears the presence of nuclear material in Pakistan, where the Taliban and other extremist groups are launching attacks within Pakistan and against Afghanistan. US Secretary of State Hillary Clinton was dispatched to Islamabad – before she arrived in Kabul to participate in the Kabul conference – to prepare for the withdrawal of troops from Afghanistan. Following her meeting with Pakistani Foreign Minister Shah Mehmood Qureshi, Clinton said that US – Pakistani relations were gradually improving. Qureshi responded by praising Washington and its understanding of the difficult position that Pakistan is in.

The US – Pakistani rapprochement that has been imposed by the war in Afghanistan is causing tensions in the US – Indian relationship; something that pleases Qureshi. Qureshi has also accused Indian Minister for External Affairs, S.M. Krishna, who recently visited Pakistan, of being responsible for the lack of improvement in Pakistani – Indian relations.

Pakistan’s main focus remains on Afghanistan, the backyard over which it now competes with India. During her visit to Pakistan, Clinton tried to work to restore trust between Pakistani and Afghanistan, believing that it will be impossible to establish short-term stability in Afghanistan, and long-term stability in Pakistan, if cooperation and coordination between the two countries do not improve.

Washington believes it would be best if both countries were brought together by a vision of a common future, for if the two countries move towards peace this would reduce the threat against the US and the rest of the world. This is because until now element within Pakistani intelligence are still supporting the Taliban. This intelligence team believes that the only way to combat the Indian activity is through engaging armed militant groups, like the Haqqani network, which is led by Jalaluddin Haqqani, and his son Siraj Haqqani. This group represents an investment for Pakistani intelligence that will pay off in the near future, when western troops withdraw from Afghanistan.

In order to reassure Pakistani and alleviate its concerns, Islamabad and Kabul signed a trade agreement [Afghan – Pakistan Transit Trade Agreement] – in the presence of US Secretary of State Hilary Clinton – to open the borders between both countries in order to increase trade. This agreement allows goods to cross from Afghanistan to India via Pakistan, as well as granting Pakistan trade outlets in central Asia via Afghanistan. Washington considers this agreement evidence of improving relations [between Pakistan and India], and it allows Afghanistan to transfer goods to East Lahore, on the condition that Pakistani goods are transferred to Afghanistan in return. This is in the interests of Pakistan which has a lot to trade with Afghanistan; however this agreement does not allow Indian goods to be exported to Afghanistan. Before Islamabad agrees to this, it wants New Delhi to facilitate the transfer of Pakistani goods to Nepal and Bhutan via India.

Even if security is never restored under the government of Afghan President Hamid Karzai – who is calling for the US to sit down face-to-face with the Taliban, and involve them in power in order to end the war – trade at least has witnessed a revival. Karzai has concluded trade agreements with Iran, India, and central Asian states. All these countries offered concessions to allow Afghan goods to reach their markets. Karzai is aiming to reduce Afghanistan’s reliance upon Pakistan, which is Kabul’s foremost trading partner and outlet for exporting and importing goods. The US believes that Afghanistan and Pakistan’s signing of the new trade agreement to be the cornerstone of the war against the Taliban. The US had previously given Pakistan a deadline of November 2009 to sign the agreement, but Islamabad postponed this under the pretext of consulting its private sector.

Both Pakistan and Afghanistan believe that this agreement, which calls for current trade routes to be expanded and new routes to be established, will reduce smuggling and illegal trade across the border. However Islamabad’s refusal to facilitate the passage of Indian goods into Afghanistan means that smuggling will continue, due to Afghanistan’s demand for Indian goods. There are other problems as well, and Pakistani merchants and traders have complained that the Afghan government has adopted discriminatory policies and are demanding that trade between both countries takes place on equal terms and that Kabul facilitate trade in the same manner as Islamabad. Pakistani traders claimed that the Afghan government is imposing an 18 percent import tax on Pakistani good, while exempting Indian goods from any tax.

Furthermore, Islamabad is complaining that the Afghan cross-border trade is the main source of smuggling into Pakistan, where the value of smuggled goods ranges from 4 billion to 5 billion dollars, thus causing a loss of 5.2 billion dollars.

This success of the trade agreement did not prevent Hillary Clinton and her aides from stressing that Washington and Islamabad have a common enemy, namely terrorists, who have already destroyed much in Pakistan, and now pose a serious threat to the US and the rest of the world.

During her talks with Pakistani officials, Clinton focused upon something that she described as a constant worry, namely terrorists in Pakistani launching an attack against Americans. She said that she believed that Pakistanis have the same fear, and she informed them that if such an attack were to take place against Americans, this would have a hugely negative and devastating effect on relations between Pakistan and the US.

Clinton also made reference to the Haqqani network. Until now, Pakistan has refused to attack northern Waziristan in order to pursue this group that some Pakistani intelligence officers consider to be a future investment in Afghanistan. However Washington believes that this group represents one of the greatest threat to US and NATO troops in Afghanistan, and Clinton hinted at the possibility of the US intensifying its drone attacks in pursuit of this organization.

Following her visit to Islamabad, Clinton said that she felt that building a bridge of trust between Washington and Islamabad was an ongoing process, and she acknowledged that the Pakistani army had sustained losses in confronting armed groups. Clinton’s aides said that armed terrorist groups pose a threat to Pakistan, Afghanistan, and beyond, and that Clinton expects greater cooperation with Pakistani to combat these groups, because there can be no distinctions between groups that undertake large-scale terrorist operations, particularly in Pakistan. Clinton’s aides also said that the US will continue to pressure Pakistani to launch military operations to combat these groups.