	Overview: Key Current Issues and Developments

A stable, democratic, prosperous Pakistan actively working to counter Islamist militancy is considered vital to U.S. interests. Current top-tier U.S. concerns regarding Pakistan include regional and global terrorism; stability in neighboring Afghanistan; domestic political stability and democratization; nuclear weapons proliferation and security; human rights protection; and economic development. Pakistan remains a vital U.S. ally in U.S.-led anti-terrorism efforts. Pakistan's troubled economic conditions, fluid political setting, and perilous security circumstances present serious challenges to U.S. decision makers. While there, the U.S. Vice President reiterated his and President Obama's view that Pakistan is "absolutely vital" to U.S. interests, and he took the opportunity to correct some key misconceptions held among Pakistanis, including that the United States represents a threat to their sovereignty ("I would respectfully suggest that it's the extremists who violate Pakistan's sovereignty and corrupt its good name"), that America disrespects or is an enemy of Islam, that U.S. policies favor India in ways that could lead to Pakistan's weakening, and that the U.S. will "abandon" Pakistan. The Obama Administration Strategy

A key aspect of the Obama Administration's approach to Pakistan has been development of a more coherent policy to include a tripling annual nonmilitary aid to improve the lives of the Pakistani people, with a particular focus on conflict-affected regions, and on focusing increased U.S. military aid to Islamabad on counterinsurgency goals while conditioning such aid on that government's progress in combating militancy. Because of this, progress toward attainment of U.S. goals in its engagement with Pakistan is likely to remain difficult, and serious mutual distrust persists in the relationship. Pakistan and China have enjoyed a generally close and mutually beneficial relationship over several decades. Designation of Pakistan-Based Terrorists

In 2010, the U.S. government accelerated its official designation of terrorists and terrorist groups, as well as their financial support networks operating in Pakistan. Moreover, as tensions between Pakistan and India remain tense more than two years after the November 2008 terrorist attack on Mumbai, Secretary Gates warned that groups under Al Qaeda's Pakistan "syndicate" are actively seeking to destabilize the entire South Asia region, perhaps through another successful major terrorist attack in India that could provoke all-out war between the region's two largest and nuclear-armed states. Pakistan's mixed record on battling Islamist extremism includes an ongoing apparent tolerance of Afghan Taliban elements operating from its territory. India's presence in Afghanistan exacerbates Pakistani fears of encirclement. Some analysts insist that resolution of outstanding Pakistan-India disputes, especially that over Kashmir, is a prerequisite for gaining Pakistan's full cooperation in efforts to stabilize Afghanistan. Pro-Taliban Militants in the Tribal Agencies

Fighting between Pakistani government security forces and religious militants intensified in 2008. Pakistan, Terrorism, and U.S. Nationals266

		Attempted Times Square Bombing

Long-standing worries that American citizens were being recruited and employed in Islamist terrorism by Pakistan-based elements have become more concrete in recent months. Deteriorated Economic Circumstances

Soaring inflation and unemployment, along with serious food and energy shortages, elicit considerable economic anxiety in Pakistan and weigh heavily on the civilian government. All of these existing problems were hugely exacerbated by devastating flooding in mid-2010. U.S. Foreign Assistance and Congressional Action

Pakistan is today among the world's leading recipients of U.S. aid. Since the 2001 renewal of large U.S. assistance packages, Pakistan by the end of FY2010 had obtained more than $10.7 billion in overt assistance since 2001, including about $6 billion in development and humanitarian aid, and some $4.4 billion for security-related programs. (This does not include reimbursements for militarized counterterrorism efforts.
A stable, democratic, prosperous Pakistan actively combating religious militancy is considered vital to U.S. interests. U.S. concerns regarding Pakistan include regional and global terrorism; efforts to stabilize neighboring Afghanistan; nuclear weapons proliferation; the Kashmir problem and Pakistan-India tensions; democratization and human rights protection; and economic development. Pakistan is praised by U.S. leaders for its ongoing cooperation with U.S.-led counterterrorism and counterinsurgency efforts, although long-held doubts exist about Islamabad's commitment to some core U.S. interests. A mixed record on battling Islamist extremism includes ongoing apparent tolerance of Taliban elements operating from its territory. Pakistan's troubled economic conditions and political setting combine with perilous security circumstances and a history of troubled relations with neighbors to present serious challenges to U.S. decision makers.
Islamist extremism and militancy in Pakistan is a central U.S. foreign policy concern. The development hinders progress toward key U.S. goals, including the defeat of Al Qaeda and other anti-U.S. terrorist groups, Afghan stabilization, and resolution of the historic Pakistan-India rivalry that threatens the entire region's stability and that has a nuclear dimension. Long-standing worries that American citizens have been recruited and employed in Islamist terrorism by Pakistan-based elements have become more acute in the past year, especially following a failed May 2010 bombing attempt in New York City that was linked to the "Pakistani Taliban."
A bilateral Pakistan-India peace process was halted after a November 2008 terrorist attack on Mumbai was traced to a Pakistan-based terrorist group. This process, strongly supported by the United States, remains moribund, and serious mutual animosities persist. Pakistan is wary of India's presence in Afghanistan, where Islamabad seeks a friendly and perhaps malleable neighbor, and has had troubled relations with the Kabul government. A perceived Pakistan-India nuclear arms race has been the focus of U.S. nonproliferation efforts in South Asia.
Pakistan's political setting remains fluid, with a weak ruling coalition struggling to stay in power. While the most recent iteration of direct military rule ended in 2008, Pakistan's military and intelligence institutions are seen to possess inordinate political power. Rampant inflation and unemployment, along with serious food and energy shortages, elicit considerable economic anxiety in Pakistan. These pressures were hugely exacerbated by unprecedented devastation resulting from mid-2010 flooding. The U.S. government and international financial institutions are among those strongly urging Islamabad to more quickly institute economic reform.
The Obama Administration continues to pursue close and mutually beneficial relations with Islamabad. As part of its strategy for stabilizing Afghanistan, the Administration's Pakistan policy includes a tripling of nonmilitary aid to improve the lives of the Pakistani people, as well as the conditioning of U.S. military aid to Islamabad on that government's progress in combating militancy and in further fostering democratic institutions. A Special Representative was appointed to coordinate U.S. government efforts with both Pakistan and Afghanistan. Pakistan is among the world's leading recipients of U.S. aid and by the end of FY2010 had obtained about $10.7 billion in overt assistance since 2001, including more than $6 billion in development and humanitarian aid. Pakistan also has received more than $8 billion in military reimbursements for its support of and engagement in counterterrorism and counterinsurgency efforts against Islamist militants. This report reviews key current issues and developments in Pakistan and in U.S.-Pakistan relations. It will be updated periodically.