Asia
Dynamics of Afghanistan-Pakistan relations
Afghanistan-Pakistan relations are characterized by a complex interplay of historical grievances, geopolitical controversies, security dilemmas, economic dependencies, and ethnic identities. Unless and until, understanding these layers, it could be hard for all those interested in fostering peace and cooperation in this volatile region, which is much more essential for people of both the neighboring countries facing similar security, economic and political issues.
No one can neglect the fact that the historical narrative of Afghanistan and Pakistan is linked in a very complicated manner, characterized by a series of complex interactions and interferences that have frequently involved accusations, blame-shifting, and concealed motives. Beginning from the British colonial period, various events have played pivotal roles in shaping these dynamics. Prior to the British Empire’s involvement in the region laid the groundwork for future geopolitical tensions and alliances, almost all parts and parcels of both the neighboring countries remained part of one or several empires and intruded rulers, which is now considered bone of contention between the two. Following this era, the Soviet invasion of Afghanistan marked a critical turning point, as it not only altered local power structures but also drew international attention and intervention into the whole region. This was further complicated by the subsequent involvement of the United States lead allies, which aimed at countering Soviet influence, commenced during the Cold War.
What went wrong in the past five decades
Focusing on the past five decades, Pakistan has consistently altered its approach to each new Afghan government that has emerged following various political transitions and takeovers. This pattern of behavior is often viewed as a strategic maneuver, deeply rooted in Pakistan’s desire for what it terms “strategic depth.” This concept refers to the idea that an unstable Afghanistan serves Pakistan’s geopolitical ambitions by providing a buffer zone against perceived threats, particularly from India. Visibly, the instability in Afghanistan allows Pakistan to exert influence over its neighbor while simultaneously pursuing its own national interests but internally it causes stock of issues and hurdles to its powerful military establishment.
Pakistan’s well discussed “strategic depth”, that was planned or originated in the early years following its independence, aimed to counterbalance India’s regional influence. The Soviet invasion of Afghanistan in 1979 marked a significant turning point that reinforced this outlook, when Pakistan emerged as a pivotal player in supporting Afghan’s armed resistance by (Afghan Mujahideen calling them freedom fighters, scattered in various armed groups, thereby deepening its involvement in Afghan affairs and solidifying its role in the geopolitical dynamics of South Asia.
The biggest issue is the use of proxy’s forces on the part of Pakistan’s policy toward Afghanistan
The usage of proxies policy represents a significant miscalculation on the part of Pakistan’s policy makers responsible for ups and downs in neighboring Afghanistan. No doubt to mention that this perspective complicates Pakistan’s foreign policy and undermines the possibility of establishing a stable and cooperative relationship with Afghanistan, ultimately jeopardizing Pakistan’s security as well. By framing its approach to Afghanistan apparently through the lens of rivalry with India, Pakistan risks intensifying tensions and conflicts that could further destabilize both nations. Such a strategy fails to acknowledge the intricate socio-political dynamics within Afghanistan and neglects the opportunities for collaboration that could yield mutual benefits for both countries.
Problematic domestic and isolated foreign policies
No one can neglect that the problematic domestic and isolated foreign policies of Taliban-led Afghan government, has further fuelled hardships for Pakistan as, “no other than Pakistan is considered responsible for its (Taliban)re-empowering.” By patronizing Tehrik Taliban Afghanistan also called Emirate Islami Afghanistan, Pakistan’s powerful junta had ignored the fact that TTA founder Mullah Muhammad Omar Akhund has been declared as their unanimous supreme leader by like minded islamists from both the countries. Afghan Taliban in accordance with the guidelines of Mullah Omar are reluctant to honor Pakistan’s demand of either extraditing banned TTP militants or taking action against them. Pakistan is also ignoring another fact that TT established by Mullah Omar Akhund is trying for Islamic State of Khurasan, which is also a threat to geographical limits of several regional countries.
Calling them as Taliban are not new but they are creation or production of US patronized Afghan War. Majority of them were part of different Jihadic groups. Amongst the Jihadis, Haqqannis headed by late Maulvi Jalal Ud Din Haqqani, Hizb-e-Islami Afghanistan faction headed by Maulvi Younas Khalis and several others like Ustad Yasar of Prof. Abdul Rab Rasool Sayaf led Ittehad Islami were the first one who had announced joining of TTA soon after its inception.
Pakistan is suffering from his persistently unsuccessful policies toward its neighbor Afghanistan
No one having the intention to oppose or under mind Pakistan’s harsh criticisms concerning the presence of Tehreek-e-Taliban Pakistan (TTP) sanctuaries on Afghan soil, but no one can neglect the fact that both countries they have suffered significant harm as a result of Pakistan’s persistently unsuccessful Afghan policies. Instead pursuing failed or flop policies, Pakistan is in possession of stock of opportunities, entering into friendly and trustworthy relations with Afghanistan. Moreover, they could strengthen their ties through economic collaboration, including the negotiations of trade agreements, joint infrastructure development projects, and partnerships in the long-awaited mega energy projects in the region. From a geopolitical perspective, Pakistan and Afghanistan have the opportunity to collaborate on initiatives aimed at promoting regional connectivity and engage in diplomatic endeavors to foster peace and stability within the region.
The conflicting narratives from both sides, especially Pakistani leaders’ remarks only serve to fuel mistrust and escalate tensions between Afghanistan and Pakistan. Instead of working towards resolving their differences and addressing common security challenges, each side continues to point fingers at the other. This vicious cycle of blame and counter-blame not only undermines efforts towards regional peace but also creates an environment conducive to the growth and spread of extremist groups. It’s generally believed in Afghanistan that Pakistan’s assertions are driven by this country’s long-term policy of strategic depth of having an unstable and unsecured Afghanistan in its western border, rather than a genuine concern for security. They think that Pakistan uses the threat of TTP presence in Afghanistan as a pretext to justify its continued involvement in Afghan affairs or to divert attention from internal issues. Others suggest that Pakistan is seeking international support and sympathy by portraying itself as a victim of terrorism.
Meanwhile, Pakistani Taliban (TTP) cannot be defeated through military means
The assertion that the Pakistan establishment is behind the turmoil in Afghanistan is a complex issue with multiple factors at play and holds merit based on historical context, strategic interests, support for insurgent groups, geopolitical considerations, and implications for regional stability.
Regardless of the motives behind Pakistan’s assertions, it is clear that the current strategy of relying on military action alone will not address the security challenges facing Pakistan. The TTP is an adaptive adversary that cannot be defeated through military means alone. A more realistic and comprehensive approach is needed, one that addresses the root causes of extremism and terrorism in Pakistan and Afghanistan, such as poverty eradication, depreciation, lack of education, and political instability.
Pakistan’s interests in Afghanistan are diverse, covering economic, security, stability, and regional influence considerations. However, significant challenges arise when Pakistan engages in proxy conflicts against successive Afghan governments regardless of their prior friendly relations. This long standing policy of supporting armed opposition groups against ruling authorities has persisted for decades, harming trust and posing a dual threat to both countries. From the last couple of years, the exchanges between Pakistani officials and Taliban representatives highlights a complex web of accusations regarding terrorism and security in South Asia. Both sides appear to be deflecting responsibility while emphasizing the other’s role in perpetuating regional instability. Instead, results oriented dialogues may be encouraged for building up consensus on both sides for addressing common issues of security, extremism, poverty and backwardness.
The issue of IS and controversy surrounding Bagram Airfield to the US drones is a big challenge
Across the border in Afghanistan, the reports of Pakistan’s recent engagement with Afghan warlords, the allegations of harboring ISKP terrorists on its soil against Afghanistan, and the controversy surrounding the provision of air bases to U.S. drones are issues that promote anti Pakistan sentiment and raise concerns for Afghanistan. It is crucial for Pakistan to promptly and effectively address these matters. In their pursuit of military and political strategies, Pakistani policymakers intentionally create an imaginary emotional narrative that positions Pakistan as a nation sandwiched between two antagonistic neighbors, which serves to rationalize their actions on both domestic and international fronts. This approach not only marks a shift from previous alliances but also underscores the intricate nature of regional politics, where allegiances can swiftly alter in response to immediate strategic requirements.
The implications of this evolving policy are profound for both Afghanistan and Pakistan. For Afghanistan, continued instability may hinder economic development and exacerbate humanitarian crises. For Pakistan, while it may gain short-term advantages through manipulation of Afghan politics, its long-term consequences could include increased militancy within its borders and strained relations with international partners who advocate for stability in the region.
Financial Times writer Ryan Avent has written that a fresh, rapid surge in China’s trade surplus could signal a new wave of the “China shock”.
Economists define the “China shock” as a spike in Chinese exports to global markets that intensifies competition for manufacturers in advanced economies and curtails employment in certain sectors.
The term gained widespread currency after China joined the World Trade Organization in 2001, accelerating the inflow of inexpensive Chinese goods into the US and other nations.
The US was the country hit hardest by the initial shockwave. Between 1999 and 2011, more than 2 million jobs were lost because domestic producers were unable to withstand the competition.
Avent argued that the effects of the initial wave are still felt across the American economy because China failed to carry out the rebalancing that the world expected.
The share of net exports in China’s gross domestic product contracted during the 2007-2019 period, allowing Western nations to focus on national security and other matters.
Avent reported that the trade surplus is now escalating rapidly once again, posing a threat to the economies of wealthy nations.
The writer pointed to the stagnation of domestic demand following the collapse of the real estate market six years ago as one cause of this surplus. Another prominent factor is the Beijing government’s channelling of massive resources into manufacturing in pursuit of self-sufficiency.
Attention was also drawn to the role of the depreciating yuan. An appreciation of the currency could require China to alter its foreign exchange interventions, reduce purchases of foreign currency and assets, and sell those assets off. That scenario could trigger currency depreciation and rising interest rates in other countries.
The Wall Street Journal also reported in the spring of 2024 on economists’ concerns regarding a potential second wave.
Experts predicted that global markets would once again be flooded with inexpensive goods, stating that China was manufacturing far beyond domestic demand to overcome its economic troubles.
Moreover, it was stressed that China is now competing in high-technology fields such as automobiles, computer chips, and complex machinery manufacturing.
Meanwhile, Vasiliy Kashin, Director of the Centre for Comprehensive European and International Studies at the Higher School of Economics (HSE) University in Moscow, told the Russian media outlet RBC that the US has imposed sanctions on the Chinese economy since the first shock period, adding that these measures would very likely tighten in the event of a fresh export wave.
According to assessments reported by the Financial Times, this new process could also shake China’s own economy. Alongside rising output, entry-level manufacturing plants across the country are turning toward automation and reducing personnel.
This trend could trigger a painful departure from labour-intensive production, leaving millions unemployed. Manufacturing activities in China that previously capitalised on cheap labour are shifting to other Southeast Asian countries.
The Beijing administration rejected allegations that its industrialisation steps pose risks to other countries. As reported by the Xinhua news agency, China’s Ministry of Commerce stressed that claims of a “China shock 2.0” are groundless. The ministry stated:
“The US and other Western countries have circulated the so-called ‘China shock 2.0’ narrative, asserting that China’s industrial development has shaken Western monopolies and narrowed growth space for Global South countries. This claim is unsupported by concrete data and is entirely unfounded.”
Iran is operating a covert, barter-like trade mechanism to bypass sanctions on its oil sales and procure billions of dollars in goods from China, including military hardware.
Speaking to the Reuters news agency, two senior Iranian officials and three sources closely monitoring the matter said the Tehran administration receives credits for goods imported from China instead of cash in exchange for the oil it sells to the country.
The sources, who spoke on condition of anonymity, emphasised that this method of swapping oil revenues for Chinese goods provides an immediate financial lifeline to the Tehran government at a time when the US has intensified economic and military pressure over its nuclear programme.
China, the world’s largest crude importer, continues to access discounted Iranian oil through this arrangement while shielding its banks and exporting companies from the risk of international penalties.
Although the Washington administration has imposed sanctions on several small-scale Chinese entities facilitating the transport of Iranian oil, it avoids sweeping measures that could shake the global economy.
The US has stepped up its pressure as it seeks to reopen the Strait of Hormuz amid the ongoing war between the two countries.
US Treasury Secretary Scott Bessent said last month that countries failing to cut commercial ties with Tehran would risk exclusion from the dollar system.
It remains unclear how the barter mechanism has been affected by the US naval blockade imposed on Iran as part of the six-month-old war.
However, since the reimposition of the blockade on 14 July, no shipments of Iranian oil passing through the Strait of Hormuz to China have been recorded.
Beijing and Tehran, which describe Western unilateral sanctions as illegal, refrain from disclosing publicly how they sustain their trade.
Sources state that Tehran introduced this system to obtain pharmaceuticals, vehicles, and communications equipment. Chinese manufacturers are said to have no direct contact with Iran, and there is no indication that they are violating sanctions.
On the other hand, the mechanism was utilised at least once last year under contracts supplying Iran with millions of dollars’ worth of air defence equipment. The sources provided no details regarding the shipments in question, and the transactions were not independently verified.
The United Nations conventional arms embargo returned alongside other sanctions in September 2025 following the collapse of the 2015 nuclear agreement between Iran and world powers.
Tehran had withdrawn from the terms of the agreement, while Beijing and Tehran described the European nations’ automatic reimposition of sanctions as legally flawed.
Responding to questions from Reuters, the Chinese Ministry of Foreign Affairs stated that it had no knowledge of the trade structure in question.
Beijing stated that it opposes unilateral sanctions lacking United Nations Security Council authorisation and having no basis in international law.
Iran’s diplomatic missions in New York and Geneva remained silent on the inquiries. A US official speaking on behalf of the White House stated only that they are working with international partners, including the EU, to prevent Tehran from achieving its nuclear goals.
According to data analytics company Kpler, China purchased more than 80% of the crude oil exported by Iran in 2025. This share equates to an average of 1.4 million barrels per day.
Although the two countries signed a 25-year strategic partnership agreement in 2021 covering energy and infrastructure, the operational details of their cooperation remain largely confidential.
The model in question constitutes only one of the networks through which Iran procures goods and services from China without passing through international banking channels.
A Western official and two other individuals tracking the matter said that a buyer acting on behalf of state-owned Chinese oil company Zhuhai Zhenrong deposited hundreds of millions of dollars each month until this year into ChuXin, a shadow financial entity based in China.
These deposits reportedly represent payment for oil purchased from a Hong Kong-based company linked to the National Iranian Oil Company (NIOC).
Approximately 70% of the oil revenues routed through ChuXin is allocated to infrastructure projects in Iran. The remainder is transferred to the accounts of a special purpose vehicle (SPV) established to disburse payments to companies supplying goods to Iran.
Sources close to Iran’s decision-making apparatus confirm the existence of this financial mechanism.
Fund management is shared between a firm acting on behalf of the Chinese Ministry of Commerce and another entity linked to the Central Bank of Iran. When the Central Bank of Iran authorises importers, money transfers are directed to supplier firms. While the name ChuXin does not appear in official records, one source noted that the structure exists solely on balance sheets.
Andrea Ghiselli, an international politics specialist at the University of Exeter, stated that Beijing uses these indirect networks to demonstrate that it will not bow to US secondary sanction threats.
Highlighting that Chinese leaders aim to protect their own banks and firms from being pushed out of the global financial system, Ghiselli said: “They want to create deniability.”
China’s Ministry of Finance will lead a total capital injection of $54 billion into state-owned insurance companies and banks as part of a coordinated push to reinforce the capital structure across the country’s financial system, according to details disclosed by the institutions in statements on Sunday.
China Life Insurance (Group) Co, the country’s largest life insurer, will receive 35 billion yuan ($5.2 billion) in capital support, whilst China Taiping Insurance Group will receive 7 billion yuan.
In a separate announcement, People’s Insurance Company (Group) of China (PICC) said it plans to raise up to 15 billion yuan via a private placement of A-shares to the Ministry of Finance. The company stated that the proceeds will be used to replenish its capital.
The initiative could fortify the financial position of state insurers, which have been called upon to support the equity market with medium- and long-term funds. At the same time, it could position these institutions to help regulatory authorities manage smaller and higher-risk insurance companies.
Financial sector stability
China’s insurance industry has been contending with shrinking profitability caused by prolonged low interest rates. Solvency ratios across numerous small and medium-sized insurers have also deteriorated.
China Export and Credit Insurance Corp stated that the Ministry of Finance will inject 10 billion yuan to boost the company’s core capital. China Reinsurance (Group) announced that it will execute a capital increase of 3 billion yuan.
“The capital injection represents an important step for enhancing the financial sector’s capacity to serve the real economy and promoting high-quality development across the financial and insurance industries,” China Life said in a statement. The insurer added that the capital support will improve the group’s resilience to risks.
Taiping also noted that the funds provided will strengthen the company’s solvency and other core metrics.
Banks benefit from recapitalisation plan
Separately, three state banks announced on Sunday that they will receive capital support totalling 290 billion yuan.
The recapitalisation framework was first announced during the annual parliamentary meetings in March this year. The move broadens a funding mechanism deployed last year to strengthen the capital structures of several other major state-owned lenders.
Agricultural Bank of China and Industrial and Commercial Bank of China (ICBC), two of the country’s largest state-owned lenders, announced plans to raise up to 160 billion yuan and 100 billion yuan, respectively, through private placements of A-shares to the Ministry of Finance, China National Tobacco Corp, and affiliated entities.
Both lenders confirmed that all net proceeds will be deployed to replenish their Core Tier 1 capital. The measure is expected to help sustain credit expansion at a juncture when Beijing is increasingly relying on state lenders to support economic growth.
Weak credit demand remains a persistent headwind for the world’s second-largest economy, while continuing to erode profitability across the banking sector.
Export-Import Bank of China, one of the country’s three policy banks, stated that the Ministry of Finance will inject 30 billion yuan of capital into the institution, thereby bolstering its capital base.
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