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Pakistan’s Bin Laden Bungle to Lift India’s US Ties, Economy

The extent of Pakistani cooperation in the raid that killed Osama Bin Laden is still unclear, but because the al Qaeda leader was found just 35 miles north of the country’s capital, the killing will be symbolic of Pakistan’s reluctant and tense political and military relationship with America. In fact, investors said, it may put an end to this relationship, turning the focus on the U.S. to build further political and economic ties with India.

Osama bin Laden
AFP | Getty Images
Osama bin Laden

“It exposes Pakistan as not a true ally and gives them very few chips left to bargain with America,” said Alec Levine, a managing director at WallachBeth Capital, in New York. “India is the big winner here.”

The U.S. has been dependant on Pakistan for intelligence in hunting terrorists within the country and Afghanistan, which covers most of its western border. In return, the U.S. has provided aid, and at times, diplomatic support, drawing the ire of India, whose relation with Pakistan has been tense over the last 50 years.

“India had snubbed the U.S. in the past because of the political side of things,” said Ron Shah, a Jina Ventures managing director. “The political side will now turn to India and trade alliances will keep getting stronger. You keep hearing about bigger cross-border contracts to come.”

Shah owns shares of Wipro , Infosys , MakeMyTrip and other India-based companies.

Shares of The India Fund declined today as investors were more focused on the short-term issue of inflation. The country’s central bank is expected to raise interest rates Tuesday. Short-term concerns about negative consequences from a deterioration in Pakistani-U.S. relations could also be the culprit, some traders said.

“The U.S. has been reluctant allies with Pakistan for the purposes of killing Bin Laden,” said Brian Kelly of Brian Kelly Capital. “Does this de-stabilize the India-Pakistani relationship? India is right next door and for the last 10 years, the two countries have traded nuclear threats.”

Bin Laden was killed in the town of Abbottabad, which houses many retired Pakistani military personnel. Questions will be raised about how Bin Laden could be hidden so close to the capital of a country pledging to help the U.S. find the world’s most wanted terrorist. President Obama did say Sunday that cooperation with Pakistan helped them find the compound, but also acknowledged that neither Pakistan, nor any country, knew about the raid as it was taking place.

“How long was the Pakistani government and military-security apparatus aware of Bin Laden’s refuge deep in Pakistani territory?” asked a report by STRATFOR, a global intelligence firm for investors, corporations and economists. “Now that the United States has a critical political victory with which to move forward with an exit from the war in Afghanistan, Pakistan now faces the strategic dilemma of how to maintain the long-term support of its major external power patron in Washington.”

Obama made a much-publicized trip to India in November last year where he announced $10 billion in trade deals. On Monday, a measure of manufacturing activity in India showed that the economy was expanding at the fastest pace in five months.

“The U.S. has to be very good friends with India because of the issues with Pakistan and as a counter-balance to China and a lot of other reasons,” said David Riedel of Riedel Research. “The U.S. got pretty seriously snubbed by the recent decision by India to go with the Europeans for their fighter jets. That was a very bad development and a bad sign.”

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Trader disclosure: On May 2, 2011, the following stocks and commodities mentioned or intended to be mentioned on CNBC’s "Fast Money" were owned by the "Fast Money" traders; Jon Najarian owns (SLV); Seymour owns (AA); Seymour owns (AAPL); Seymour owns (F); Seymour owns (POT); Seymour owns (SLW); Seymour owns (EPU); Finerman and Finerman's firm own (AAPL); Finerman and Finerman's firm own (BP); Finerman owns (C); Finreman and Finerman's firm own (CVS); Finerman's firm owns (IBM); Finerman's firm owns (JPM) and is long (JPM) leaps; Finerman owns (JPM); Finerman and Finerman's firm own (MSFT); Finerman's firm owns (TGT); Finerman owns (UNG); Finerman owns (USO); Finerman's firm is short (IWM), (SPY), (MDY); Finerman's firm owns s&p puts; Finerman's firm owns Russel 200 puts; Terranova owns (XOM); Terranova owns (BAX); Terranova owns (SLV); Terranova owns (TCK); Terranova owns (APA); Terranova owns (HOC); Terranova owns (OXY); Terranova owns (UPL); Terranova owns (FCX); Terranova owns (BX); Terranova owns (V); Terranova owns (VRTS); Terranova owns (JPM); Terranova is short (NFLX); Terranova is short S&P Futures; Terranova is Chief Market Strategist of Virtus Investment Partners, LTD; Adami owns (AGU); Adami owns (C); Adami owns ( GS); Adami owns (INTC); Adami owns (MSFT); Adami owns (NUE); Adami owns (STU)

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