Current politics in Pakistan are dominated by power struggles and the realignments of all major political forces in view of the up-coming presidential and general elections.

On 20 July, the Supreme Court re-instated Chief Justice (CJ) Iftikhar Mohammad Chaudhry, ruling that his suspension by the president in March was illegal. The suspension of the CJ had triggered unexpected country-wide protests by lawyers and opposition parties and led to a revival of democratic forces. Since the CJ has been re-instated, the president had to face several unfavorable decisions by the Supreme Court - such as the instruction for the Election Commission to register several million "missing" voters within 30 days and the ruling that the exiled leader of the Pakistan Muslim League (PML-N), Nawaz Sharif, was allowed to return to Pakistan. These Supreme Court rulings have noticeably weakened the president's prospect of staying in power beyond his current tenure and illustrate that the power struggle between the higher judiciary and the president has gained in intensity. At the moment, the president pursues the British and US-backed plan to strike a power-sharing deal with the opposition leader of Pakistan's People's Party (PPP), Benazir Bhutto. Negotiations between the two sides have been going on for some time and have intensified in the last weeks. According to the deal, the president would get re-elected by the current assemblies between 15 September and 15 October and subsequently step down as army chief. Bhutto - after being cleared from corruption charges and having returned to Pakistan - would then contest the general elections in 2008. The sticky points in the negotiations are Bhutto's demands for curtailing presidential power vis-à-vis the legislature and the government, and a third premiership of the PPP leader. Unsurprisingly, a Bhutto-Musharraf deal is viewed with suspicion by the military, the president's PML-Q, hardliners from the PPP, parties associated to the Alliance for the Restoration of Democracy (ARD), and other side-lined political parties. Moreover, the pact would only work if the new alliance manages to acquire the required number of votes to achieve the president's re-election by the current assemblies, an electoral victory of Bhutto's PPP, and the constitutional amendments necessary to extend the president's tenure and to allow for a third premiership by Bhutto. Apart from the judiciary, the biggest challenge to the Bhutto-Musharraf deal currently comes from Nawaz Sharif who is determined to return to Pakistan on 10 September to contest the elections despite alleged Saudi demands that Sharif "honor his commitment not to return to Pakistan." Sharif, who might face arrest due to corruption charges upon his return, recently won popular support and managed to attract party members from the PML-Q due to his uncompromising stance on civilian democratic rule and his refusal to enter into a deal with the president. If the Bhutto-Musharraf talks fail, the options for the president become very narrow. Although the president has hinted at the possibility of declaring a state of emergency or martial law, he has so far refrained from such a move. However, in case Nawaz Sharif returns to Pakistan, the president might reconsider this measure as a last resort. By declaring a state of emergency or martial law Musharraf could defer the general elections, suspend certain constitutional rules, weaken the judiciary and extend his current tenure by another year.

US-Pakistani relations remain strong, although the Bush administration has come under increasing pressure from Congress and the Senate to make financial assistance to Pakistan conditional upon democratic reforms and results in the fight against terrorism. The US continues to back Musharraf as he is perceived as a loyal and predictable ally and thus supports Musharraf's endeavors to stay in power. At the same time, Pakistan vehemently protested against US threats to launch attacks against al Qaeda fighters in Pakistan from Afghanistan. Such attacks - even if successful - would indeed not only enrage tribal militants but Pakistanis in general, and thus spark a new cycle of violence. Afghan-Pakistani relations appear to have temporarily improved. With the US pulling the strings in the back, Pakistan and Afghanistan held the first peace jirga in Kabul from 9-12 August. The meeting was attended by around 650 participants from the Pashtun areas on both sides of the common border. The Pakistani delegation was comprised of around 300 government officials, retired bureaucrats, tribal elders and politicians, including members of the Awami National Party. However, important sections of the Pashtun community in Pakistan boycotted the meeting - such as tribal elders from North and South Waziristan, members of the religious party JUI (Fazlur Rahman) and members of the national assembly. Needless to say, the Taliban and Gulbuddin Hikmatyar's Hezb-e-Islami were not invited to the jirga. Although President Musharraf was not present during the opening ceremony of the jirga, during his closing speech on 12 August he adopted a conciliatory tone, recognizing for the first time that Afghan militants were supported from Pakistani soil. The recognition of Pakistan's role in the conflict in Afghanistan further ebbed the way for the final declaration by the jirga. Among others, the jirga agreed to set up a "mini-jirga" made up of 25 representatives from each country mandated to hold on-going dialog for peace with the opposition (e.g. the Taliban). While the peace jirga appears to have raised the profile of Musharraf in the conflict in Afghanistan, the jirga's decision to strengthen security and stability along the border has also brought Pakistan closer than ever to a de facto recognition of the Durand Line by Afghanistan. Indo-Pakistani relations have remained stable although the frequency of composite peace talks has gone down. The signing of the historic nuclear deal between the US and India at the end of July has also raised discomfort in Pakistan. Pakistani officials said the deal threatened regional stability and would allow India to produce more atomic bombs.