ISLAMABAD, Pakistan—Saudi Arabia has backed down under pressure from the U.S. and allowed Pakistan to be placed on an international terror-financing watch list, officials from countries involved in the decision said Friday, dealing a blow to the country’s struggling economy.
The Financial Action Task Force’s decision to put Pakistan on a list of countries with lax controls over terror financing and money laundering is part of a push by the Trump administration to punish Islamabad over what it sees as inaction against terrorists operating on its soil. Last month, Washington announced it was withholding $2 billion in security assistance.
Pakistan says it has carried out successful counterterrorism operations, leaving no militant safe havens on its territory, and that it believes the U.S. move is political and will undermine its ability to take further action.
Its inclusion on the list will make the country’s borrowing more expensive, require great scrutiny to international banking transactions and red tape for exporters. It could also damage the prospect for foreign direct investment, just as Pakistan is seeking to remake its international image as a “normal” country and a destination for business.
At the meeting of the secretive body in Paris, Saudi Arabia joined China and Turkey on Tuesday to vote down the U.S-led proposal to put Pakistan on the watch list, in a rare disagreement with the Trump administration. Saudi Arabia was representing the Gulf Co-operation Council block of six Persian Gulf nations.
In an unusual move, Washington pushed a second vote on the issue, after leaning on Saudi Arabia. In the final vote, Saudi Arabia didn’t support Pakistan, according to officials from countries in the task force. That meant Islamabad no longer had the required number of countries on its side to block a nomination.
“For the first time we’re holding Pakistan accountable for its actions. We’ve seen modest progress in terms of Pakistan’s actual acknowledgment of these concerns, but the president is not satisfied with progress when it comes to Pakistan,” White House spokesman Raj Shah said Thursday.
There was no immediate comment from Saudi Arabia, but the country is a close partner for Pakistan as well as the U.S. This month, Pakistan said it would send up to 1,600 soldiers to Saudi Arabia for training and advising.
Pakistan said it believed that lobbying from archrival India also worked against it at the task force meeting, which ends Friday.
“I think Pakistan put up a very strong case. We were confident,” said Rana Afzal Khan, Pakistan’s deputy finance minister. “This is Indian-sponsored.” There was no immediate comment from New Delhi.
Washington denied earlier this week that it was acting in conjunction with India. The U.S. proposal was co-sponsored by the U.K., and also joined by Germany and France, according to Pakistan.
Although the task force decided to add Pakistan to the list, the process of implementing the decision means Islamabad won’t be officially named until the summer.
In the days before the meeting, Pakistan began a crackdown on Jamaat-ud-Dawa, the militant group blamed by the United Nations for the 2008 attack on the Indian city of Mumbai, which killed 166 people. Pakistan said it had seized some 200 properties belonging to the group and passed a law to ban it—10 years after the U.N. proscribed the outfit.
China, a staunch ally of Islamabad, didn’t support Pakistan either in the final vote. Beijing has moved even closer to Pakistan with a $55 billion investment program.
The sessions of the task force—which includes 27 members, though some are groupings of countries—are held in private, with countries meant to maintain the confidentiality of the discussions. An official statement is issued only at the end of the proceedings.
“Thank you Turkey for standing with Pakistan against all odds & proving that we are one. We are proud to have a brother like you,” a post on the
the Pakistani Interior Minister, said.
Washington accuses Pakistan’s military of supporting jihadist groups, like Jamaat-ud-Dawa against India, and says the Taliban, and the allied Haqqani network, use Pakistan as a safe haven. Pakistan says the Taliban doesn’t need sanctuary in Pakistan, as so much Afghanistan territory is in its control, and has urged peace talks with the insurgent group.
Pakistan has received some $33 billion in U.S. aid since 2001, according to Washington.
—Ian Talley in Washington contributed to this article.
Write to Saeed Shah at [email protected]