Al Faida – how Pakistan milks the US and NATO

NATO’s supply route through Pakistan is a gravy train for the military establishment…and the Taliban

Western troops fighting in Afghanistan depend on the Karachi-Khyber-Kabul supply route for  70 to 80 percent of their needs. While its importance to US and NATO forces has received considerable coverage in recent months, there has been less attention given to its importance for Pakistan’s military establishment.

The National Logistics Corporation (or the National Logistics Cell, NLC) is an ostensibly civilian entity staffed by serving and retired military personnel, and owned by the Pakistani army. According to the February 2009 issue of the Herald, a Pakistani monthly, it charges NATO between 200,000 to 250,000 Pakistani rupees per container arriving at Karachi, and pays private truckers between 100,000 to 150,000 for moving them to Afghanistan. In other words it makes a neat 100,000 Pakistani rupees in middleman’s fees. Going by an average exchange rate of 65 Pakistani rupees to a US dollar, the NLC made around $1500 per container.  The number of  containers landing in Karachi daily has varied between 1000 in early 2002, to around 300 earlier this year. Taking the lower figure, the NLC made around $450,000 every day, or over $164 million each year. Between 2002-2008, the NLC made at least $1.15 billion. And the meter is still running.

The Frontier Constabulary, a paramilitary force, collects a minimum of $150 per container in security charges from truckers, which adds up to $115 million over 2002-2008. This money goes directly to the Pakistani military establishment and is in addition to the $10 billion that the Bush administration gave Pakistan over that period. [This analysis is based on the figures in Massoud Ansari’s “My Way, Not the Highway”, in Herald February 2009, and Jawwad Rizvi’s “Rs 90 million go in air daily” in The News January 28-29, 2009 (via PEW). Mr Rizvi adds that the NLC charges between 15,000 to 25,000 Pakistani rupees for “no objection certificates”]

That’s not all. Karachi port authorities made at least $260 per container in assorted port charges, or around $200 million over seven years. The Pakistani government collects a fuel tax of Rs 25 per litre of diesel. According to one estimate the average fuel consumption per container per trip is 1200 litres, which amounts to $460 in taxes per trip. Over seven years fuel tax revenues alone are to the tune of $350 million. So the ‘civilian’ government received at least $550 million in additional revenues from the exercise.

The truckers themselves make around $1900 per container, and made around $1.5 billion over the past seven years. Clearly, they didn’t keep all of this, having to pay off various government officials and militants. Some of the trucking companies could well have owners connected to the military establishment.

That’s not all, either: the ‘militants’ collected an average of $400 per container to let them pass through their territory. Over $300 million went into the their pockets.

That too is not all. For only around 60 percent of the goods were actually delivered to their recipients, the rest being lost, stolen or destroyed en route. A flourishing trade in US and NATO military equipment exists in the markets of Pakistani towns like Peshawar and Quetta. Everything from crates of alcohol to helicopter spares is on the block.

That’s a lot of al-Faida for the Pakistani economy and for the Pakistani military establishment—a rough estimate is around $500 million per year. The political economy around the supply route is likely to have created strong vested interests in ensuring that the gravy train does not stop. Yet the Pakistani military establishment is ready to put these benefits at risk—squeezing the route to exert pressure on the US and NATO in Afghanistan. So where are the clever Indian analysts who argued that transit revenues from the Iran-Pakistan-India pipeline will prevent the Pakistani military from disrupting the natural gas flows to India?