This summer has seen a cooling of US-Pakistan relations due to both the imminent withdrawal of allied forces from Afghanistan and the Taliban backlash witnessed across the region. In response, Beijing has assured Islamabad of its support for stability and development in the country. An interesting element of this reaffirmation involves the dilemma of the Attabad Lake, the area of the Hunza River that has been dammed since a series of massive landslides in Gilgit-Baltistan in January 2010 blocked the river and large sections of the highway went under water (see Himal June 2010, 'An inevitable disaster'). In July, Pakistan's ambassador to China, Masood Khan, stated at a bilateral business forum in Kashgar that 'we have a grand vision for creating multiple, trade-transport-energy corridors between Pakistan and China so that this region can be connected to South, West and Central Asia. But first things first: We must drain the lake and realign the road.'
This 'road' is the Karakoram Highway, the sole overland connection between Pakistan and China. On the face of it, the highway would seem to be little more than a conduit for border trade of basic commodities between Pakistan and China, forming a small fraction of the overall trade volume between the two countries. Currently, bilateral trade consists of some USD 8.7 billion, with Pakistan exports increasing by about 37 percent annually and China exports by about 25 percent. Even though the emergence of the Attabad Lake has reduced crossborder trade, the larger significance of the overland connection emerges in the geopolitical prospects for regional trade.