After being admitted for more than a week in a Dubai hospital for an as yet undisclosed condition – there is speculation on whether it was a minor heart attack, a ‘mild stroke’, or even nothing at all – President Asif Zardari was discharged and advised rest at his home in Dubai.

There is however no announcement on when he is expected to return to Pakistan. Rumours that he might be suffering from some debilitating problem were dispelled after he spoke on the phone to not just the Prime Minister and some heads of parties that are partners in the ruling coalition, but also a couple of top journalists. Zardari dismissed all talk of his imminent resignation or of having gone into exile and told his interlocutors that he wouldn’t have left his kids behind if he was fleeing from Pakistan. Indeed, his son and chairman of PPP, Bilawal, has already started to hold the reins of the party and has been holding meeting with senior party leaders and coalition partners along with Prime Minister Gilani.

Interestingly, even though top US officials, including Secretary of State Hillary Clinton, have refused to buy into the gossip of Zardari’s resignation, much less his forced ouster, Zardari himself is reportedly quite bitter about the Americans. Not only has he been blaming them for not helping him during the ‘memogate’ scandal (for instance, Admiral Mike Mullen acknowledging the existence of the memo and the US administration doing nothing to rein in Mansoor Ijaz), he has in fact been accusing them of being behind the international conspiracy to destabilise the government. At the same time, he has absolved the military establishment of any extra-constitutional move against the government.

That all is not well as far as the future of the government is concerned was quite apparent from the speech of Prime Minister Yusuf Raza Gilani in Parliament towards the end of the week. Warning lawmakers that if he was thrown out there would not be another election in Pakistan in their lifetime, Gilani declared that the entire ‘memogate’ scandal was a conspiracy against the President and Parliament. The fact that he said this on the eve of the army chief and ISI chief submitting their replies to the Supreme Court notice on the ‘memogate’ affair gave an indication of a looming clash between the civilian government on one side and the military-dominated ‘establishment’ on the other. In fact, most analysts in Pakistan were of the view that Zardari’s return as well as the future course of political developments will depend on the replies of the military officials to the Supreme Court notices. According to them, if the replies filed by the army and ISI chiefs were in line with those of the government, then the danger of any imminent regime change would have receded; on the other hand, if these were in conflict with the position taken by the government then the sense of disquiet in Islamabad about an imminent and major political change will grow alarmingly.

In the event, the replies filed by the government and the military are diagrammatically opposed to each other. The army chief has not upheld the existence of the memo and that it was indeed sent to the US Chairman Joint Chiefs of Staff, but also that it had impacted national security and the morale of the army. In his reply, Gen Ashfaq Kayani has informed the Supreme Court that “there may be a need to fully examine the facts and circumstances leading to conception and issuance of the memo”. The ISI chief described the circumstances of his meeting with one of the main actors in the ‘memogate’ scandal, Mansoor Ijaz, and has said in his reply that he was satisfied with the ‘corroborative evidence’ given to him by Ijaz. While he hasn’t quite said so, this ‘evidence’ implicates the former Pakistani ambassador to US, Hussain Haqqani, as the man on whose instructions the memo was drafted. As opposed to the generals, the civilian government has taken a completely different position and has not only questioned the Supreme Court’s jurisdiction in the matter but also pointed out that the Parliamentary Committee on National Security was already looking into the entire affair and there was no reason for the Court to institute a commission of inquiry in the matter. The government also emphatically stated that no one in the federal government (including the President) had “neither conceptualized nor initiated or in any matter has anything to do with the alleged memo or the allegations or views expressed therein”.

While there is talk of a possible ‘minus one’ formula (i.e. remove Zardari and let rest of system continue), Gilani has made it clear that he won’t become party to any such formula and said that he would rather quit than betray the PPP. On more than one occasion last week he said that he wasn’t interested in hanging on to his office but wanted to see the parliament complete its term. He also said that if he had to be removed from office, it should be done in accordance with the constitution. Defending Zardari’s departure for Dubai for treatment, Gilani said that there was a serious threat to his life if he had been admitted to hospital in Pakistan.

Earlier in the week, Nawaz Sharif issued a statement that the nation couldn’t afford another martial law and called upon the people and political parties to join hands to pre-empt any such possibility. The statement followed a telephone conversation between Nawaz Sharif and Prime Minister Gilani in which the latter is reported to have cautioned against the ‘collective political damage’ that agitational politics of the former could bring upon the system. In this backdrop Nawaz Sharif denied any plans for en masse resignations from the assemblies on the grounds that there shouldn’t be any clash between institutions of state and decided not to put up a candidate against the son of Prime Minister Gilani who was contesting by-elections on the National Assembly seat from Multan vacated by Shah Mehmood Qureshi after he joined Imran Khan’s Pakistan Tehrik-e-Insaaf.

The gesture towards Gilani and the unambiguous stand against any possible unconstitutional regime change has however not stopped either Nawaz Sharif or the PPP from normal political activity aimed at expanding their support base at the expense of the other. Nawaz Sharif toured Sindh last week and addressed a respectably large rally in PPPs bastion, Larkana, where he promised to bring Benazir Bhutto’s killers to justice. He is also trying to rope in big names from Sindh to become a major political player in the province. Returning the favour in Punjab, Prime Minister Gilani announced his intention to approach parliament for creating a new province in South Punjab and the party, along with the PMLQ, is planning to move another resolution to this effect in Punjab assembly. By the end of the week, it seemed that the PMLN hard-liners who wanted to see the back of the PPP at any cost had got a leg up after Leader of Opposition Chaudhry Nisar announced that the party was going to raise the issue of Zardari’s illness in the House and challenge his continuation as President on health grounds.

Even as the PPP and PMLN try to outmanoeuvre each other, the ranks of the PTI continue to be bolstered by the entry of ‘electable’ politicians and people with impeccable pro-establishment credentials, most of them not politicians but retired officials. Apart from receiving the endorsement of the former Air Chief Asghar Khan, Imran Khan saw a number of top generals who have served in senior positions in the ISI and were close associates of Gen Pervez Musharraf join the PTI last week. The grapevine is that the former Ambassador to US and UK Maleeha Lodhi is also going to join Imran Khan and will be given a senior position in the party. But the entry of all these people has caused a lot of heartburn among the workers and supporters of PTI who have been with the party even when it was a complete non-entity. Last week, clashes broke out in the party’s Islamabad office to protest against the joining of a classic turncoat politician from Khyber Pakhtunkhwa, Pervez Khattak. Already the party’s spokesman Omar Cheema has been replaced by one such new entrant and there are reports that the General Secretary Arif Alvi too might be eased out.

Imran Khan has tried to justify the entry of old and tried politicians on the grounds that while the party’s doors are open for everyone, tickets for elections will be given according to a set criteria and no one charged with financial corruption will get a ticket. The new found pragmatism of Imran Khan has also been highlighted by the change in his attitude towards the Americans who he is trying hard to convince that he isn’t a supporter of the Taliban. He is also reported to have offered to play a role in bringing the Taliban on the dialogue table. The Americans also see him as a possible partner in Pakistan, one who can deliver. Besides the Americans, Imran Khan has also been hobnobbing with radical Islamist groups like Jamaat Islami and international terrorist groups like Jamaatud Dawa. Last week he held a meeting with leaders of the two groups together.

The judiciary meanwhile continues to tighten the screws on the government. Last week, the Supreme Court issued notices to top functionaries of the state, including the President and Prime Minister, seeking reports on the implementation of the NRO verdict. Essentially, the Supreme Court is increasing the pressure on the government to reopen the money laundering cases against President Zardari in the Swiss courts. Alongside the NRO case, the ‘memogate’ case saw an interesting turn after a British journalist of Pakistani origin highlighted a neglected portion of the Blackberry messages (BBM) shared between Mansoor Ijaz and Hussain Haqqani in which Ijaz talks of the ISI chief visiting some Arab countries to seek clearance for carrying out a coup in Pakistan. Analysts have pointed out that if the BBM records have been used as evidence against Haqqani, then they should also be used against the ISI chief who it appears was conspiring against the lawful government. Even as this new controversy gathers traction, Haqqani has filed his reply in the ‘memogate’ case. He has also filed a petition challenging the court ruling instituting a commission of inquiry to investigate the case and has sought dismissal of the petition filed by Nawaz Sharif on grounds that it was not maintainable. After the Supreme Court registrar rejected the petition, Haqqani filed another petition challenging the registrar’s decision.

The unending political crises have of course had a serious impact on governance and consequently the economy. With foreign assistance drying up and foreign exchange reserves starting to fall, the fiscal deficit is projected to cross the 7% mark this fiscal. Exports too have been falling, partly as a result of the energy crisis. Exporters have complained losing orders of around $ 800 million because of their inability to meet delivery schedules. Exacerbating the foreign exchange crisis is the refusal of the IMF to grant a letter of comfort, without which all multilateral funding has come to a standstill. With its back against the wall, the government took a few tentative steps to reform the energy sector. Apart from removing all subsidy to agriculture tube-wells, the government has also imposed a twin tariff regime, charging a higher tariff during peak hours.

The mystery of whether or not Pakistani authorities are engaged in some sort of a peace dialogue with Islamist militants deepened last week after claims and counterclaims made by the militant commanders and officials of the government. The Tehrik-e-Taliban Pakistan (TTP) commander in Bajaur agency, Maulvi Faqir Mohammed, admitted that talks were taking place and claimed that the government had not only released around 150 militants as a sort of confidence building measure but also stopped military operations in the area. Faqir said that, if successful, the Bajaur model would be replicated elsewhere in the troubled areas of Khyber Pakhtunkhwa and FATA. These claims were however summarily rejected by other militant commanders and by top government officials in the region. The main TTP spokesman said that there could be no talks with the government until it implemented Shariah all over the country. Another top TTP commander told some journalists that the entire South Waziristan agency was under their control and reiterated the condition of Shariah for any dialogue with the government. And while Interior Minister Rehman Malik put preconditions of his own, insisting that the Taliban would have to lay down their weapons before any peace talks, Prime Minister Gilani when asked about the talks made a cryptic remark that the government was following the 3D policy (dialogue, development and deterrence) and that it was a continuous process!

Notwithstanding all the talk about dialogue, clashes between the government forces and the Islamist rebels were reported from almost all over the Pashtun belt. Some of these clashes were mere skirmishes, others were more serious, especially in areas where the army is conducting operations. Meanwhile, the Taliban cells have been using IEDs in Karachi targeting law enforcement agencies. Three such attacks were reported last week and in one of these three policemen were killed when an IED blew up their vehicle. Militants also targeted NATO oil tankers, blowing up over 50 in two attacks in Balochistan.

Foreign Relations / Foreign Policy

Amidst reports that US assistance to Pakistan in the form of Coalition Support Funds has completely dried up and no money has been reimbursed to Pakistan under this head in the current year, the US Congress has approved a bill freezing nearly $ 700 million in military aid to Pakistan until Pakistan takes specific steps to check the spread of materials that are used in manufacturing IEDs. Although the State Department has downplayed this legislation and said that the administration is working with Pakistan on the issue, it is quite clear that US lawmakers are running out of patience with the double-games being played by the Pakistanis. An indication of this came in a letter to the New York Times by senior Congressman Dana Rohrabacher who called Pakistan a ‘radical Islamic terrorist state’ and advocated closer relations with India.

While the US aid appears to be drying up, Pakistan's hopes that its all-weather friend China will step in to fill its coffers was shaken somewhat by two news items last week. A Chinese bank that was part funding the Neelum-Jhelum power project in Pakistan occupied Kashmir has suddenly started showing reluctance to advance the money. What is more, the Chinese have demanded 100% of the major contracts for the Diamer-Bhasha dam project in PoK in return for giving $3-4 billion for the project. In addition, the Chinese have refused to give the money in US dollars and have asked Pakistan to accept the loan in Chinese currency.

A top US think-tank, Council on Foreign Relations, has flagged as very likely the possibility of a conflict between US and Pakistan in 2012. This assessment comes even as the two-day conference of Pakistan's ambassadors in some of the most sensitive and important countries came up with a set of recommendations on the future basis of relations with the US and Pakistan's role in the War on Terror. The details of the recommendations that will be presented to the Parliamentary Committee on National Security to evolve a consensus view on Pakistan's foreign policy that will be then put before a joint session of Parliament, have not been made public. Pakistan media reports suggest that the envoys role in the reworking of US-Pakistan relations was only cosmetic and their suggestions were mostly ignored. Needless to say, the Pakistan army’s ‘tough approach’ carried the day.

Apparently the envoys counselled against pushing relations with the US to breakpoint and wanted the government to take steps to normalise ties with the US. Calling for a foreign policy that was based on strategy and not dictated by emotionalism, the ambassadors recommended reopening the NATO supply routes. But the military brass took a completely opposite stand. The ISI chief said that the US did not recognise or understand the ground realities in Afghanistan and claimed that US frustration in the region was behind the attack on the two Pakistani posts in Mohmand agency last month. According to the reports, the ISI chief and the Chairman Joint Chiefs of Staff Committee of the Pakistan military were quite clear that instead of the US forcing compliance on Pakistan, it would have to comply with Pakistan’s demands if it wanted to achieve peace in Afghanistan. It was not just the Pakistan army that took a mindlessly hawkish posture, but also foreign minister Hina Rabbani Khar who declared that Pakistan would retaliate next time there was any sort of attack by the NATO troops.

From the media reports, the conference decided to renegotiate the supply and logistics agreements signed during the Musharraf era with the Americans. The US would be asked to drastically reduce the CIA ‘footprint’ in Pakistan and also offer a formal apology for the Mohmand attack along with firm guarantees that such acts will not be repeated. The conference recommended codifying all agreements with the US and wanted a withdrawal of the blanket overflight and landing rights granted to the NATO and US forces and a complete reworking of the agreement on drone strikes. Serious concern was expressed over US plans to makes bases in Afghanistan post 2014 and this was seen as the lack of seriousness on the part of the US for a negotiated settlement with the Taliban who would never accept these bases on Afghan soil.

The disconnect between the approach of the foreign office on the one hand and the political leadership and the army on the other was also reflected in the statements of the foreign offices spokesman and the briefing given to the federal cabinet by the DGMO as well as the decisions taken by the military top brass on beefing up border security along the Pak-Afghan border. While the foreign office tried to dispel the growing impression that US-Pakistan relations had reached breakpoint, the belligerence of the military was reflected in the reports that air defence weapons had been deployed along the borders with instructions to shoot down any object entering Pakistan's airspace, including drones. Prime Minister Gilani went a step further and hinted that Pakistan could consider denying the US overflight rights. After a meeting with the Pakistan army chief, Prime Minister Gilani issued a statement warning of a ‘detrimental response’ in the event of another cross border attack by the NATO forces.

Although the US appears to have suspended drone attacks so as to not push things over the edge with Pakistan, there are some reports that the Pakistanis have only decided to act against any intrusion that doesn't conform to agreed protocols between the ISAF and Pakistan military. In other words, as long as the drones stick to the agreed protocols they won’t be shot down. Meanwhile, the US has vacated the Shamsi airbase and Pakistani forces have taken over control of the same.

The Americans have taken Pakistan's belligerent rhetoric in their stride. They have responded to the placing of air defences on the Afghan border quite nonchalantly, maintaining that these pose no threat to them. Meanwhile, mixed signals have been coming from the US side, with the civilians taking a soft approach while the military seems to have adopted a much tougher line. The US ambassador to Islamabad is reported to have presented a set of undisclosed proposals to the Pakistani foreign minister laying out measures that can put the relationship back on track. The US Defence Secretary Leon Panetta during a visit to Afghanistan took a soft line on Pakistan and said that the war in Afghanistan could not be won without winning over Pakistan’s support. While Panetta did not show much concern over the closure of the supply routes since the ISAF was fairly well-stocked, he did hope that the closure of these routes would not be permanent. Within the US military too there was a bit of good-cop-bad-cop routine played out by the ISAF commander Gen john Allen who took a soft line on Pakistan, and the US Chairman Joint Chiefs of Staff Gen Mike Dempsey who played a bit of a ‘bad cop’. Allen broke the ice with the Pakistan army chief by making a phone call to him, expressing regret for the Mohmand incident and assuring him that the Pakistan army would be taken on board the enquiry into the incident. But in an interview Allen also said that there was no way that the US could give any guarantee that such an incident (or accident) wouldn’t happen in the future. Gen Dempsey on the other hand said that the US would have to end Pakistan's influence in Afghanistan and also work to shut down the terror safe havens inside Pakistan. He did not seem overly worried by the closure of the supply routes but said that what concerned him was what such a blockade said about the US-Pakistan relationship.

Relations with India

The government of Pakistan has notified the appointment of members of the judicial commission that will visit India in connection with the 26/11 terror attacks to record statements of witnesses in the trial of the sole surviving Pakistani terrorist Ajmal Kasab.