Welcome to Foreign Policy’s South Asia Brief.
The highlights this week: Pakistan plays a leading role in brokering a U.S.-Iran cease-fire, South Asia remains very vulnerable to the ongoing energy crisis, and China hosts talks between Pakistan and the Taliban.
Pakistan the Mediator
On Tuesday, the United States and Iran agreed to a two-week cease-fire, averting for now the possibility of large-scale U.S. attack. The tentative truce marked the culmination of a few weeks of frenetic, high-stakes regional facilitation efforts. Pakistan led from the front on these efforts from beginning to end.
Islamabad’s leading role in facilitating a cease-fire surprised many observers. To start, Pakistan has a deep alliance and mutual defense pact with Saudi Arabia, which seemingly ruled it out as a neutral interlocutor. It has no track record of negotiating ends to complex conflicts, and it’s not exactly known for wielding extensive leverage on the global stage.
But from the start, Pakistan’s position in negotiations made a lot of sense. It is a rare country that enjoys warm ties with key players—the main belligerents, of course, but also other countries involved in facilitation efforts, such as China, Egypt, Turkey, and other Gulf states.
Pakistan has an urgent and compelling interest in the end of the conflict because it borders Iran, amplifying the risks of spillover violence. It is also heavily dependent on energy imports from the region, and several million Pakistanis live in the Gulf. Pakistan is already dealing with a tense border with India and waging an overlooked conflict with Afghanistan.
Furthermore, continued war in Iran increases the risk that Saudi Arabia will invoke its mutual defense pact with Pakistan—an accord that has become like an albatross for Islamabad, which wants to avoid getting dragged into the conflict.
So Pakistan had both the capacity to assume the role of facilitator and the will to proactively position itself as one. It wasn’t inclined to wait for a formal invitation from the belligerents that might never have come—instead stepping into a role that other potential mediators might have shied away from.
One of the biggest questions in the last few days was how Pakistan would get buy-in from Iran. It is well-known that U.S. President Donald Trump is enamored with Pakistan and particularly Pakistan Army chief Asim Munir, who played an instrumental role in this diplomacy. But though Pakistan’s ties with Iran are friendly, Islamabad arguably lacked the leverage on its own to get Tehran to agree to a peace process.
Enter China, Pakistan’s powerful ally. Last week, Pakistan’s foreign minister visited Beijing, which resulted in a five-point peace proposal and confirmed China’s commitment to facilitation efforts. And Pakistan got a little eleventh-hour help from its friends—China and Egypt, among others—to get the Iranians to say yes.
Meanwhile, Pakistan still had the full trust of the White House, thanks in part to Pakistani officials’ willingness to resort to unconventional forms of diplomacy over the last year, from excessive flattery of Trump to their pursuit of business opportunities with the president’s inner circle. (These tactics have drawn criticism, including at home.)
Pakistani Prime Minister Shehbaz Sharif has invited U.S. and Iranian officials to Islamabad for talks on Friday to negotiate an end to the war. That would be a very heavy lift, not only in navigating security concerns in Pakistan but in getting two countries dealing with massive trust issues to agree. The cease-fire remains fragile.
But for now, Pakistan can breathe a sigh of relief that the Iran war has taken a pause and revel in having shown the rest of the world its agency as an influential regional actor. Islamabad can also enjoy a measure of vindication: for having defied the skeptics who didn’t think it could pull off such a feat.
What We’re Following
Regional energy crisis. A cease-fire in Iran cannot come fast enough for South Asia, which finds itself very vulnerable to the energy crisis caused by the war. Many of its countries are experiencing a perfect storm: deep dependence on Middle Eastern energy imports, high energy demand from large populations, fragile economies, and insufficient use of alternative fuels.
With summer approaching, an especially high-demand time for electricity, these vulnerabilities were only expected to increase. South Asian countries have taken dramatic steps in recent days: India capitalized on a temporary U.S. sanctions waiver to finalize its first shipment of Iranian oil since 2019, while Bangladesh has sought a U.S. waiver to import Russian oil.
Gas station lines are long, public transport is curtailed, and businesses have shortened their hours. In a region with many fragile economies, the growth implications were already troubling. Even India, the region’s strongest economy, isn’t immune: In recent days, Moody’s lowered its projection of India’s GDP growth in the current fiscal year from 6.8 percent to 6 percent.
The potential health impacts of an ongoing energy crisis are also troubling. Limited electricity could increase extreme heat-induced illness and death; insufficient cooling facilities could lead to food spoilage; and in a worst-case scenario, hospitals and other medical facilities could suffer fuel shortages that compromise their ability to provide care.
Afghanistan-Pakistan talks. China has quietly been hosting talks between Pakistani officials and the Taliban in Xinjiang’s capital of Urumqi, following weeks of fighting between the sides. The root of the conflict is Pakistan’s contention that the Taliban are harboring the Tehrik-i-Taliban Pakistan (TTP), which has increased attacks in Pakistan in recent years.
Pakistan has carried out airstrikes on TTP and Taliban targets, and the Taliban have retaliated with attacks on Pakistani border forces. Little information has been released about the talks, but reports indicate that they began last Wednesday. China said the talks are advancing, while the Taliban indicated they have been “useful.” Pakistan, however, has hardly said anything at all.
On Wednesday, China said the two sides have agreed not to escalate and to “explore a comprehensive solution” to the conflict. Beijing is a logical mediator, with skin in the game—the TTP has attacked its interests in Pakistan—and leverage as one of Islamabad’s top allies and donors. (China has also signaled its desire to deploy capital in Afghanistan.)
The question is if China has the capacity to compel the Taliban, who have historically refused to turn against their militant allies, to curb the TTP. Pakistan’s decision to strike Afghanistan after several rounds of talks brokered by Qatar and Turkey suggests it is skeptical that diplomacy can change the Taliban’s behavior.
Pakistan to repay $3.5 billion loan. Pakistan will repay a $3.5 billion loan from the United Arab Emirates this month—a surprising development, since its loans from the UAE have been rolled over since 2018. The timing is also problematic: Per the terms of Pakistan’s current International Monetary Fund aid package, it needs $18 billion in foreign reserves by June.
Pakistan’s central bank reserves currently stand at $16.4 billion, meaning it will lose nearly 20 percent of its reserve holdings once the loan is repaid. It’s striking that Islamabad would make this move at such a precarious economic moment. But the UAE had reportedly given Pakistan annual extensions on the loan until earlier this year, when they shifted to monthly ones.
Pakistan also apparently considered the loan’s 6.5 percent interest rate too high, and the UAE rejected a request to lower it. Pakistani officials deny that there are geopolitical dimensions to this development, though relations with the UAE have sputtered a bit in recent months.
FP’s Most Read This Week
- Why Trump’s Speech Was So Worryingby Howard W. French
- Five Scenarios for a U.S. Ground War on Iranby Arash Reisinezhad
- Tehran Is Setting a Trap for Trumpby Ravi Agrawal
Under the Radar
This week, Nepal’s Central Investigation Bureau (CIB) acknowledged the veracity of a recent Kathmandu Post report alleging that mountain climbing companies, rescue units, and hospitals had colluded in a bizarre insurance scam targeting climbers on Mount Everest.
Foreign trekkers were tricked into thinking they were seriously ill, resulting in rescue efforts and hospital visits meant to produce large payouts for those involved in the scheme. The $20 million scam is no small matter in a country that depends heavily on a lucrative tourism industry—and especially mountain climbing activities.
The CIB said the scandal had “gravely damaged and degraded” Nepal’s global reputation. However, the bureau has pushed back against some of the most serious allegations—including that mountain guides made climbers ill by adding baking soda to their food.
The Nepal Mountaineering Association issued a statement this week calling for both stronger government action to prevent scams and more credible reporting about these schemes. To its credit, Nepal—led by a new reformist government taking an aggressive approach against corruption—has moved quickly.
The Ministry of Culture, Tourism, and Civil Aviation this week announced a series of reform plans, including stricter licensing requirements for climbing guides and agencies, along with a technology-based rescue management system that integrates trekker registrations and insurance validations.
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