Financing Terror, Part II: Pakistan as a state sponsor of terrorism

By Claire Mennessier:

Taliban fighters demobilising in Afghanistan. Photo:  Source of image: Isafmedia (some rights reserved)
Taliban fighters demobilising in Afghanistan. Photo: Isafmedia (some rights reserved)

For the last 25 years Pakistan has been involved in the sponsoring of terrorism on a national and international scale. As a result of its role in the development of terrorism in Afghanistan and Indian Kashmir, Pakistan is a good example of a country which is both a supporter and a victim of terrorism.

The early 1980s saw a rise in state sponsorship of terrorism.[i] State sponsoring, where a government lets a terrorist group act with relative impunity, is beneficial to both the sponsor state and the terrorist group. On the one hand, it allows states to carry out a limited risk and low-budget foreign policy while denying any association with the terrorist group by claiming ignorance or incapacity.[ii] On the other hand, terrorist groups that enjoy state support have been found to be more destructive than those without state support, as they are ‘more able and willing to kill large numbers’.[iii] Indeed, sponsor-states provide them with, inter alia, safe havens, funding, arms, training and intelligence. Perpetrators of terrorist acts also enjoy more freedom as the sponsor-state can protect them from direct coercion and legal claims.[iv]

Ironically, state sponsoring of terrorism is less widely denounced than individual acts of terrorism. One reason is that outside governments fear state-sponsored retaliation.[v] Another is that it is a widely misunderstood phenomenon, which stems from the difficulty of reaching a definitional consensus on state sponsoring.[vi] However, under international law, states have to take all reasonable measures to prevent terrorist acts. Lack of due diligence and the state toleration of such acts both create liability. And if the existence of state-sponsored terrorism can be established, then the sponsoring state may be violating Article 2(4) of the UN Charter.[vii]

The United States Department of State routinely lists a number of states which it claims sponsor terrorism.[viii] Its current formal list includes Cuba, Iran, North Korea, Sudan and Syria. This list represents a good example of flawed policy response, as much of the enigma caused by state sponsorship today includes countries that are not even on the list, Pakistan being one of the important potential omissions. These ‘new’ state sponsors present an additional threat as they are often linked to Sunni jihadist groups such as Al Qaeda.[ix]

Political scientists have classified Pakistan as an ‘active’ state sponsor of terrorism, as it seems to deliberately provide critical support to terrorist groups, in the form of money, weapons, training and intelligence.[x] Over the last 25 years, Pakistan’s Inter Services Intelligence Directorate (ISI), the intelligence service of Pakistan and the Pakistani Army, both backed by the Pakistani government, have developed an elaborated nexus of terrorist apparatus and have assisted in their growth.[xi] Both the Taliban and Pakistani terrorist group LeT provide good examples of such terrorist apparatus, as they have arguably worked and flourish under the sponsorship and protection of Pakistan. Nonetheless, Pakistan’s role in the sponsoring of international terrorism needs to be presented in a balanced way, as explained below.

Aided by the United States, Pakistan played an instrumental role in the creation and development of the Taliban on the political scene of Afghanistan in the 1990s.[xii] At the height of the Cold War and the struggle for control of the Middle East and Central Asia, the United States and Pakistan recruited the mujahideen from, inter alia, Pakistan, Afghanistan and Saudi Arabia. The United States also supplied training and weaponry in order to fight the Soviets that had invaded Afghanistan.[xiii] This is how the Taliban became the main laboratory to prepare future Islamic mujahideen and how LeT was created.[xiv]

It has been argued that Pakistan and the ISI had a long strategic and mutually beneficial relationship with Osama bin Laden and his terrorist affiliates.[xv] On the one hand, it would have proven difficult for bin Laden to operate freely within the Pakistani borders and to use Pakistan as a base to conduct international terrorist operations without the ISI. On the other, bin Laden’s relationship with ISI went beyond the Afghan movement, as he provided funding for the Pakistani-sponsored attacks within Kashmir and ultimately in India’s large cities, such as Mumbai in 2008. While former Pakistani President, Pervez Musharaff, promised Pakistan would break its links to the Taliban after 9/11, it is unclear today whether ISI and the Pakistani Army continue to back the Taliban.[xvi]

Additionally, Pakistan’s sponsoring of terrorism in the Punjab and Kashmir has been part of the country’s long-term foreign policy of securing the independence of Kashmir from India. During the period of British colonial rule, Kashmir had developed its own mode of regional nationalism, which didn’t easily fit into the national vision of India or Pakistan. At the time of India’s independence from Britain in 1947, the Maharaja of Kashmir’s decision to accede to India, which came with the promise for a plebiscite that never occurred, led to the movement for azaadi, or the movement for independence from the Indian State.[xvii] Consequently, the Indian state started pursuing a ‘catch and kill campaign’, through which Kashmiris were governed through force, not law, and were rejected as potential militants. The Indian state response to this complex social and political problem was, and still is, one of violence and repression, creating a culture of impunity.[xviii]

As a result of India’s repressive policies toward the Kashmiris and Pakistan’s aspirations for accession of Kashmir, what began as a national, indigenous, secular movement for independence soon became a Pakistani-sponsored radical Islamist crusade to control Kashmir.[xix] ISI, through its proxy networks such as LeT, Harkat-ul-Mujahideen (HUM) and Harkat-ul-Jihad-al-Islami (HUJI), provided money, carried out training and propaganda, and educated and indoctrinated Kashmiri militant groups within Pakistan and Afghanistan. By training operatives in the latter, ISI could easily deny the Indian charges that Pakistan was sponsoring terrorist attacks.

It has been postulated that ISI is the main body channelling financial and material resources across the borders to jihadist-linked groups, protecting them from government counterterrorism measures and looking the other way as they recruit and raise money.[xx] If this is the case, it would mean that ISI aims to fully control the jihad. As stated by a former HUM militant, ‘the moment the ISI feels that the Jihad body is becoming powerful, it incites trouble in that party or tries to split it. Breaching the bigger groups by throwing money, arms and vehicles by putting new leaders in the driving seats is their style’.[xxi] This sentiment is clearly reminiscent of Pakistan’s political agenda to maintain power against India in the Kashmir Valley.

A potential long-term concern is the increasing number of Islamic religious schools, madrassas, which provide free education, food, housing and clothing.[xxii] When the United States and Saudi Arabia funnelled millions of dollars and weapons into Afghanistan in the fight against Soviet occupiers, the United States and Pakistani dictator Mohammad Zia-ul-Haq promoted madrassas as a way to recruit troops for the anti-Soviet war.[xxiii] Following the withdrawal of the Soviets from Afghanistan in 1989 and the cessation of US aid to the Mujahideen fighters, huge caches of arms remained with the Afghan Northern Alliance and the ISI, which were subsequently used to arm the jihad. With the madrassas considered an important supply line for the jihad, it is understandable how madrassas are seen as a catalyst to the jihadi expansion.[xxiv] Despite promises by Pakistan to control madrassas, their number has grown since 9/11 and few have registered with the government: in 2000, only 4350 of the estimated 40,000 to 50,000 madrassas in Pakistan had registered with the government.[xxv] With many schools now being financed by wealthy Pakistani industrialists and countries such as Saudi Arabia and Iran, the Pakistani state has lost its control on the madrassa institution, rendering it even less controllable. With less state supervision, madrassas are now more prone to the preaching of violent versions of Islam.[xxvi]

Involvement in the financing of terrorism doesn’t come without a cost. One of the costs of ‘outsourcing’ terrorism to militant groups for Pakistan is that it now faces a typical principal-agent problem: the agenda and interests of Pakistan (the principal) and those of the non-state actors (the agent) are not fully aligned anymore. Some terrorist groups have ties to a wide range of jihadists who, in addition to serving Pakistan’s interests in Kashmir, are also engaged in other struggles, some of which are directed against the government of Pakistan. [xxvii] A recent example of this backlash is the Pakistani Taliban attack on the Army Public School in Peshawar, Pakistan, which claimed 140 lives, 132 of them children. This attack showed the Pakistani government’s shortcomings in its fight against terrorism. This was an attack by a group that it inadvertently helped create and underscores the urgent need for a new anti-terror strategy.[xxviii] Pakistan’s leadership has since agreed on a comprehensive anti-terrorism action plan, which includes the establishment of special courts to expedite the trials of terror suspects and a 5000 strong counter-terrorism force.[xxix]

Is Pakistan’s new counter-terrorism strategy too little, too late? Caught between the need to protect itself against an internal enemy and having to partner with militant forces to fight external threats, positive results in the fight against terrorism may be limited – Pakistan’s anti-terror strategy is rife with contradictions.

Claire Mennessier holds an MA in International Studies & Diplomacy from SOAS and an MA in International Relations from Griffith University (Australia). Her research interests include terrorism and counterterrorism, and more specifically the strategic dimension of terrorism and state approaches to terrorism and political violence.

This article is part of a Strife series on financing terror. Over the next couple of weeks Strife will feature other articles that focus on different ways of financing terrorism. Next, Samuel Smith will address the frightening trend of kidnapping for ransom as a source of finance for terror groups through a case study of the Abu Sayyaf Group in the Philippines and Southeast Asia.


[i] Daniel L. Byman and Sarah E. Kreps, “Agents of destruction? Applying principal-agent analysis to state-sponsored terrorism,” International Studies Perspectives 11 (2010): 1-18.

[ii] Lieutenant Colonel J. P. Terry, “Countering State-Sponsored Terrorism: A Law-Policy Analysis,” Naval Law Review 159 (1986).

[iii] Daniel L. Byman, Deadly Connections: States that Sponsor Terrorism (Cambridge, UK: Cambridge University press, 2005).

[iv] Terry, n. 2.

[v] Scott S. Evans, “The Lockerbie Incident Cases: Libyan-Sponsored Terrorism, Judicial Review and the Political Question Doctrine”, Maryland Journal of International Law 18(1): 21-76.

[vi] Kerry A. Gurovitsch, “Legal Obstacles to Combating International State-Sponsored Terrorism”, Houston Journal of International Law 10 (1987): 159-180.

[vii] John A. Cohan, “Formulation of a State’s Response to Terrorism and State-Sponsored Terrorism”, Pace International Review 14 (2002): 77-119.

[viii] Daniel L. Byman, “The Changing Nature of State Sponsorship of Terrorism”, Saban Center Analysis Paper (2008).

[ix] Byman, n.8.

[x] Arjun Subramaniam, “Challenges of Protecting India from Terrorism”, Terrorism and Political Violence 24(2012): 396-414.

[xi] Byman, n.8.

[xii] Larry P. Goodson, Afghanistan’s Endless War: State Failure, Regional Politics, and the Rise of the Taliban (Settle: University of Washington Press, 2001), 111-118.

[xiii] Washingtonsblog, December 30, 2014, “Sleeping With the Devil: How U.S. and Saudi Backing of Al Qaeda Led to 9/11”, September 5, 2012,

[xiv] Poonam Mann, “Fighting Terrorism: India and Central Asia”, Strategic Analysis 24(11) (2008).

[xv] Bruce Riedel, “Pakistan and Terror: The Eye of the Storm”, The Annals of American Academy 618 (2008): 32-45.

[xvi] Riedel, n.15.

[xvii] Helen Duschinski, “Reproducing Regimes of Impunity”, Cultural Studies 24(1) (2010), 110-132.

[xviii] Haley Duschinski and Bruce Hoffman, “Everyday violence, institutional denial and struggles for justice in Kashmir”, Institute of Race Relations 52(4) (2011), 44-70.

[xix] Jessica Stern, “Pakistan’s Jihad Culture”, Foreign Affairs 79(6) (2000): 115-126.

[xx] Mann, n.14.

[xxi] Ghulam Hasnain, “Ready for Jehad”, Outlook 40(37) (2000): 34.

[xxii] Stern, n.19.

[xxiii] Anita Demkiv, “Pakistan’s Fata, Transnational Terrorism and the Global Development Model”, Journal of Global Change and Governance 2(1) (2009).

[xxiv] Stern, n.19.

[xxv] Stern, n.19.

[xxvi] Ashok K. Behuria, “Fighting the Taliban: Pakistan at war with itself”, Australian Journal of International Affairs 61(4) (2007), 529-543.

[xxvii] Byman and Kreps, n.1.

[xxviii] Zachary Laub, ‘Behind Pakistan’s Taliban War”, Council on Foreign Relations, December 17, 2014.

[xxix] RT, “Pakistan agrees on new terrorism plan, pledges to ‘eradicate Taliban’”, December 25, 2014.



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