ISLAMABAD Relations between the United States and its ally Pakistan are stuck at their lowest in years after a NATO cross-border air attack that killed 24 Pakistani soldiers last November.
The incident prompted Pakistan to reassess ties with the U.S., and its parliament is due to debate and vote on recommendations for new terms of engagement between Islamabad and Washington. Those recommendations may lead to the reopening of cross-border supply routes to NATO forces in Afghanistan, which Pakistan shut after the attack.
The U.S. is putting pressure on Pakistan to go after militant groups on its soil, which take advantage of the porous border with Afghanistan to attack NATO and Afghan troops there. Pakistan's cooperation is considered critical to U.S.-led efforts to stabilise Afghanistan as NATO combat troops prepare to leave the country by the end of 2014.
In December, U.S. lawmakers agreed to freeze $700 million in aid to Pakistan until it gives assurances it is helping fight the spread of homemade bombs in the region.
Pakistan's Supreme Court charged Prime Minister Yusuf Raza Gilani in February with contempt for his failure to re-open corruption cases against President Asif Ali Zardari, deepening Pakistan's political crisis. Gilani has said were he to be convicted, he would lose office. He could also face jail time.
To lose its prime minister would be deeply embarrassing for Pakistan's government, but is not likely to cause a collapse, or threaten the position of the president, who heads the ruling party and has immunity from prosecution as head of state.
The court is due to reconvene on April 12 to continue hearing the case.
RATINGS (Unchanged from March unless stated):
Here is a summary of key risks to watch in Pakistan:
POLITICAL VIOLENCE, GOVERNMENT WEAKNESS
During Pakistan's parliamentary review of its ties with Washington, the head of U.S. Central Command General James Mattis and the commander of NATO forces in Afghanistan, General John Allen, met with Pakistan's army chief General Ashfaq Kayani on March 28 at the military's headquarters in Pakistan.
It was the first high-level military visit since the November attack, and could signal a thaw in bilateral relations.
Their talks, announced by the Pakistani military, took place a day after U.S. President Barack Obama met Gilani in Seoul, where he expressed hope that Pakistan's review of ties with Washington would respect U.S. security needs.
The Pakistan military, which has governed the country for more than half of its history, is often seen as the real driving force behind Pakistan's foreign and security policies.
Many political leaders are viewed as incompetent and corrupt, and have offered little guidance. Zardari's government is weak, dependent on unreliable coalition partners, and has limited control over the military.
It has failed to tackle corruption or implement economic reforms. Serious problems in formulating and implementing policy will continue to deter investment.
The government also faces growing political opposition.
Politician and former cricket star Imran Khan is riding a wave of dissatisfaction with the government, and has held several large rallies across Pakistan, boosting his standing as a political force.
What to watch:
- Attacks on politicians, and alliances forming between Islamist parties to challenge the government.
-- Any move by the military to more openly influence political developments.
- Gilani's court case is likely to drag on, and could paralyse government decision making.
WORSENING RELATIONS WITH AMERICA
An American investigation into the November border incident found that both U.S. and Pakistani forces were at fault, putting further strain on already deeply damaged ties. Pakistani officials said the attack was "deliberate".
Washington has long pushed for action, military or otherwise, against the Haqqani militant network, one of NATO's deadliest foes in Afghanistan and thought to largely operate from North Waziristan.
Islamabad has repeatedly said its forces are overstretched and it cannot afford to provoke a general tribal uprising.
Reflecting American frustration with Pakistan, and the suspicion that there are links between Pakistan's powerful spy agency and militant groups, there have been many proposals to make U.S. aid conditional on more cooperation in fighting militants.
In February, a leaked NATO report suggested that, according to Taliban detainees questioned, the influence of Pakistan's spy agency over the Taliban was undiminished.
What to watch:
- A further attack on Pakistan by NATO forces in Afghanistan. Another raid could conceivably break the alliance completely, putting the war effort in Afghanistan at risk.
- More aid cuts. December's move could presage greater cuts as calls grow in the United States to penalise Islamabad for failing to act against militant groups and, at worst, helping them.
- Any further accusations from Washington, how Islamabad responds, and the tone of the rhetoric from both sides. The United States wants Pakistan to bring the Haqqani network into peace negotiations, but is wary of exerting too much pressure on Pakistan and forcing a break in ties.
As well as bomb attacks in February which killed dozens in the northwest of the country, violence continues to affect parts of the southern port city of Karachi, Pakistan's key financial hub.
Violence in the city has spiked recently, after the assassination of two local politicians. Past violence has often led to the closure of the stock market.
More than 1,600 people were killed in the city in 2011, over half of them in political and sectarian violence, and Pakistan's paramilitary forces are often deployed in the southern port city to try to stabilise violent districts.
The violence and instability are a huge deterrent to foreign investment. Investors are particularly sensitive to attacks in Karachi, home to key financial markets and the central bank.
What to watch:
- Further attacks by militants. The assaults on high-profile military facilities have shown the continued ability of Taliban fighters to attack even protected targets.
- Whether talks with the Taliban materialise officially.
Relations between Afghanistan and Pakistan are strained, with cross-border attacks reported by both sides.
Tension between the neighbours has been heightened by whispering from some Afghan lawmakers that Pakistan's spy agency, the Inter-services Intelligence (ISI), was behind recent assassinations in Afghanistan, something Pakistan vehemently denied.
Pakistan is a critical regional stakeholder, and in late February it urged the Afghan Taliban to enter direct peace talks with the Afghan government, a sign that Islamabad may be increasing its support for reconciliation across the border. It hosted three-way talks also involving Afghanistan and Iran in February.
What to watch:
- Power struggles within the Taliban. Al Qaeda, the Afghan Taliban and Pakistani militants have held a series of meetings aimed at containing what could soon be open warfare between the two most powerful Pakistani Taliban leaders, militant sources said in early January.
- Drone attacks. Any drone attack that results in high civilian deaths could further damage the U.S.-Pakistan relationship.
- Relations with India. Zardari is due to meet Indian Prime Minister Manmohan Singh in April, during what will be the first visit to India by a Pakistani head of state since 2005.
(Editing by Daniel Magnowski)