The relationship between Pakistan and Afghanistan has become increasingly strained since the Taliban's return to power in Kabul in August 2021. Pakistan, whose then Prime Minister - the now imprisoned Imran Khan - publicly declared that Afghans had “broken the chains of slavery” after the Taliban’s return; seemingly anticipated a more cooperative relationship with the militia, along with improved security along their shared border.
The reality has been starkly different, with a significant surge in violence attributed to militant groups operating from Afghan territory.
Escalation of violence
In 2024, Pakistan experienced a dramatic increase in terrorist attacks, reaching a nine-year high. Over 2,500 individuals, including civilians and security personnel, lost their lives—a 66% rise from the previous year. The majority of these attacks were carried out by the Tehreek-e-Taliban Pakistan (TTP), a militant group with historical ties to the Afghan Taliban but reportedly now operating independently. The TTP seeks to impose a hardline interpretation of Sharia law in Pakistan and has found sanctuary in Afghanistan due to a shared ideology and history.
Pakistan has urged the Afghan Taliban to take decisive action against the TTP to prevent cross-border terrorism, including taking their own measures such as deporting Afghan refugees, instituting border closures and conducting airstrikes against suspected TTP hideouts in Afghanistan. The Afghan Taliban's response has been tepid, relocating only a small number of TTP fighters and showing reluctance to confront the group directly due to deep-rooted ties and internal risks.
Border disputes and diplomatic strains
In addition to social issues, the Durand Line, a boundary demarcating Pakistan and Afghanistan, remains a contentious issue between the parties. Afghanistan has historically refused to recognise this border, leading to frequent skirmishes. The Taliban's aggressive stance on the border has exacerbated tensions, with incidents of Taliban fighters dismantling border fencing erected by Pakistan. These actions have led to closures of key border crossings and further diplomatic strains.
Implications
The escalating conflict between Pakistan and Afghanistan poses several risks for international observers, particularly those with investment in Pakistan whose skirmishes with the Afghan Taliban could soon turn into a much larger conflict.
Further, with the Taliban not being an internationally recognised government, their legitimate access to global financial capital remains low. If additional wartime expenditure becomes necessary, they may take more drastic measures to gain access to funds.
As the conflict deepens, international businesses operating in or with ties to Pakistan or Afghanistan will face increased scrutiny. Risks include:
- Supplier Chain Risks: Ensuring no part of the supply chain involves sanctioned entities or regions, even through obfuscated corporate structures.
- Financial Transactions: Banks, large corporates and financial institutions may require enhanced due diligence to ensure compliance with anti-money laundering (AML) and counter-terrorism financing (CTF) regulations.