Miss the live event? Join the last session of the series to hear our commodity and industry analysts examined the p… https://t.co/uIVgjwMjWG
India-Pakistan conflict update
On 26 February, India's Foreign Affairs Secretary Vijay Gokhale announced that 12 Indian Air Force (IAF) Mirage 2000 fighter jets had attacked an alleged Jaish-e-Muhammad (JeM) militant base near Balakot in Pakistan's Khyber Pakhtunkhwa province. Indian media quoted anonymous IAF sources as saying that 300 militants were killed in the attack, including senior commanders of the group. JeM claimed responsibility for the 14 February suicide vehicle-borne improvised explosive device (SVBIED) attack in India's Jammu and Kashmir state, which killed at least 40 Indian soldiers, triggering domestic demands in India for a military response against Pakistan. The Pakistani military confirmed that an airstrike took place but denied that it resulted in any damage to infrastructure or loss of life, and claimed that the IAF jets were forced to flee after the Pakistan Air Force scrambled F-16 jets.
Unlike the 2016 cross-border raid by the Indian military against suspected separatist militant bases in Pakistan-administered Kashmir, the IAF airstrike appears to have taken place inside Pakistani territory, more than 60 kilometers from the Line of Control (LoC) in disputed Kashmir. This will increase domestic pressure on Pakistan to demonstrate its capability to respond militarily, thus raising the likelihood of further incidents along the LoC and along the northern border in Punjab province.
However, the 2016 Indian raid notably marked the beginning of military de-escalation following an escalation in war rhetoric in both countries at the time. Although we assess that interstate war risks have marginally increased, escalation to a broader conflict remains a low-probability scenario.
The overwhelming preference of both sides is to avoid a very high-risk and mutually damaging broader military confrontation. In this context, the IAF raid satisfies the Indian government's need to demonstrate a robust response ahead of elections and creates political space for a gradual military de-escalation. India will claim the successful targeting of a militant camp in Pakistani territory, while Pakistan will deny that the raid achieved anything and downplay the impact. Instead, the political dispute between India and Pakistan will probably involve India's pursuit of an economic escalation to incentivize Pakistan to take more meaningful action against anti-India militant groups in Pakistani-controlled territory. Conversely, Pakistani escalation involving military action beyond cross-border exchanges of fire would encourage further airstrikes by India and increase the likelihood of unintended military escalation, further raising interstate war risks.
- Weekly Pricing Pulse: Here we go again
- Capital Markets Weekly: Emerging market borrowers plan liability management to extend duration
- EU-UK trade deal will prevent deeper and longer UK double-dip recession in 2021
- Capital Markets Weekly: 2021 debt issuance enjoys a strong start
- Africa Conflict Series: Mozambique
- Weekly Pricing Pulse: Materials price inflation continues into 2021
- Banking risk monthly outlook: Regional risks in 2021
- January US GDP forecast update
Colombia, Benin, YPF and Marfrig are among emerging market borrowers arranging liability management measures to ext… https://t.co/tq1sQLit5w