4 November 2013

"An Uphill Climb for the Oil Giants"

September 30, 2013

Author: Leonardo Maugeri, Associate, Environment and Natural Resources Program/Geopolitics of Energy Project

Belfer Center Programs or Projects: The Geopolitics of Energy Project

The big international oil companies are going through a crisis little noticed by analysts and the markets. It is a crisis of results and of vision.

Simply put, the majors — companies like Exxon Mobil, Royal Dutch Shell and BP — aren’t growing. They have discovered relatively little oil in recent years despite increasing investment. They also have lost their exclusive lock on the skills that made them indispensable to oil-producing countries.

Several factors are at play. The big companies are gradually becoming producers of natural gas more than oil. In some cases, 50 percent of their reserves, their unproduced resources, consist of natural gas. It might be appropriate to call them gas majors than oil majors.

The problem with this transformation is that it threatens their profitability, which is today still largely based on oil fields that were developed many years ago and whose output is in steady decline.

Natural gas is worth much less than oil. It is often difficult to market, and most of its margins are taken up in the cost of transportation and liquefaction. This is the situation for some of the big discoveries of gas in Australia, for example, that may wind up being marginally profitable at best.

It may also prove difficult to make large profits from other large recent gas discoveries, for example in African countries like Mozambique and Tanzania. Everything needed to develop these finds, including highly skilled people, will need to be imported at very high cost.

On the other hand, the big gas discoveries in the United States have caused the price of gas to drop to a point where it is worth about 20 percent of oil for the same energy output, making many gas projects barely profitable.

The signs of trouble are already evident in oil majors’ profits today, which are far lower than those of seven or eight years ago, taking into account the crude prices at the time.

Let’s take as an example the two biggest oil majors, Exxon Mobil and Royal Dutch Shell.

In 2012, with an average oil price of Brent crude higher than $100 per barrel, Exxon Mobil posted net profit of $44.9 billion. However, in 2005, when Brent averaged slightly less than $55 per barrel, Exxon Mobil’s profit was $36.13 billion, about $42 billion in today’s dollars.

In other words, the price of oil almost doubled from 2005 to 2012, but Exxon profit edged up only a few billion dollars. Shell did worse, posting a profit of $27 billion in 2012 compared to $26.3 billion in 2005.

At the same time, oil majors are struggling to increase their production. In the best cases they are maintaining their levels of barrels of oil equivalent, mainly through increases of far less profitable natural gas. Most majors are producing less than they did in the mid-2000s, with some like BP doing much worse.

The majors have also watered down many of the capabilities that once required countries to turn to them if those countries wanted to develop their oil and gas reserves.

In the 1990s the oil majors began to cut costs sharply, in part by reducing the number of people they employed.

They have outsourced some of their essential functions on a large scale in order to maintain profits. For example, more than 75 percent of the value of the work of exploration and production of oil and gas worldwide is performed by service companies like Halliburton and Schlumberger on behalf of oil companies, not by the giants themselves.

"Natural Gas in the People’s Republic of China"

Report Chapter
October 29, 2013
Belfer Center Programs or Projects: The Geopolitics of Energy Project

Part of a joint study by the Center for Energy Studies at Rice University's Baker Institute and Harvard University's Kennedy School on the geopolitical implications of natural gas.

Steven W. Lewis, Ph.D. - C.V. Starr Transnational China Fellow, James A. Baker III Institute for Public Policy

"Natural Gas in India: Difficult Decisions"
Report Chapter
October 23, 2013
Belfer Center Programs or Projects: The Geopolitics of Energy Project

Part of a joint study by the Center for Energy Studies at Rice University's Baker Institute and Harvard University's Kennedy School on the geopolitical implications of natural gas.

Charles Ebinger - Senior Fellow and Director, Energy Security Initiative, Brookings Institution

Govinda Avasarala - Senior Research Assistant, Energy Security Initiative, Brookings Institution

"Natural Gas in the United States"
Report Chapter
October 23, 2013
Belfer Center Programs or Projects: The Geopolitics of Energy Project

Part of a joint study by the Center for Energy Studies at Rice University's Baker Institute and Harvard University's Kennedy School on the geopolitical implications of natural gas.

Michael A. Levi - David M. Rubenstein Senior Fellow for Energy and the Environment and Director, Program on Energy Security and Climate Change, Council on Foreign Relations

From rocks to riches ***

Nov 04 2013

Is it time to throw some cold water on the so-called shale revolution? The answer depends on who is holding the canister of water. If it is an American or Chinese, perhaps not. But if it is a European or an Indian, perhaps yes. Why?

The shale revolution has been the focus of interest of the petroleum industry for several years, and for good reason. It has opened up an entirely new frontier of hydrocarbon resources and it has substantially relieved the US of the burden of oil and gas imports. Many hydrocarbon-producing countries are now looking to replicate the US's success. The question is, will they succeed? The answer will depend on how effectively they manage the "above the ground" impediments. In India, the latter could be the deal-breaker.

The shale revolution refers to the extraordinary success America has had in unlocking oil and gas molecules from shale rock. The fact that hydrocarbons existed between the pores of these rocks has been known for long, but it was not until 1998, when George Mitchell, the chairman of a small independent oil and gas company based out of Houston, drilled the first commercially viable horizontal well in the Texas Barnett shale basin, did it become possible to monetise them. His success enabled companies to fracture the shale rock by bombarding it with a combination of water, chemicals and salt under extreme pressure (hydraulic fracturing or "fracking") and then producing the released molecules through a network of horizontal wells splayed across the basin. The big players invested billions and the term "shale gale" entered theoil industry lexicon. Gas production in the US has surged over the past five years — so much so that companies that had created gas import re-gassification facilities have now applied to convert them into gas liquefaction export plants. President Barack Obama is currently sitting on more than a dozen such applications. The price of US gas has crashed to less than half the price of gas in Europe and a quarter of the price in the Asia-Pacific region. And US oil production has increased at a rate faster than any country in the world. There is now talk that America might achieve self-sufficiency in oil, too.

These extraordinary results have catalysed worldwide interest in "shale gas" and "tight oil" (liquids from shale). Other governments have asked their technocrats essentially three questions. Does the country have shale rock? If so, what might be the "unconventional" hydrocarbon potential? And what must be done to develop and monetise this potential?

The response to the first two questions has, so far, been almost uniformly encouraging. Most countries have established that they do have shale, and that non-US reserves are potentially huge. China, for instance, is expected to have larger reserves than the US; the UK is hoping to replace declining North Sea output with shale production, and India has been encouraged by initial studies. The US Geological Survey and the International Energy Agency studied seven of India's 26 sedimentary basins. Their conclusion was that four of these basins contained shale and "risked reserves" of between 65 to 100 trillion cubic feet of technically recoverable shale gas. The answer to the third question, however, has been more cautious. There is now mounting concern about "above the ground" impediments.

India’s Other Border Problem

By Ankit Panda
November 2, 2013

Just a week after Prime Minister Manmohan Singh's trip to Beijing, where he signed a Border Defense Cooperation Agreement, China has reminded India of its other border conflict: Arunachal Pradesh. The Hindu reports that China opened a new highway that links Medog, Tibet’s so-called “last isolated county,” with the rest of China. The Global Times called Medog “the last roadless county in China” – it did not mention India at all.

The opening of the highway is not a border provocation in the same way as the Daulat Beg Oldi incident earlier this year. The entire highway runs squarely through Chinese territory. However, in August 2013, Chinese troops had camped out for two days within territory that India perceives to be part of Arunachal Pradesh. Most recently, prior to Manmohan Singh’s trip to China, two athletes from the disputed region were given stapled visas to travel to China for a tournament.

Chinese developments aside, India has other reasons – many of its own making – to be concerned about the future of Arunachal Pradesh. India has faced an image problem in Arunachal Pradesh because the local population has a tendency to compare the India-provided infrastructure to the vastly superior Chinese infrastructure just across the border in Tibet. The North-East has also largely been ignored as a development priority given India’s populist politics, which bank on winning electorates primarily to the west of the Siliguri Corridor. 

Arunachal Pradesh is not only geographically peripheral to New Delhi, but also in terms of its identity. India’s North-East is an immensely diverse Asian melting pot, and the prime source of local identity is derived from tribal affiliation, and ethno-linguistic factors. Indian national politics are perceived to be distant. C. Uday Bhaskar, a well-known Indian strategist, condemned what he sees to be a “pattern of episodic interest” in Indian politics to the North-East whenever an acute threat from China flares-up; there seems to be no long-term strategic vision to develop the region.

New Delhi’s handling of Arunachal’s needs can be contrasted with Beijing’s attention to Tibet. The central government in Beijing, acknowledging its strained past in integrating Tibet, invested 137.8 billion yuan in the region between 2006 and 2010 and as a result raised local GDP growth over China’s already-impressive national average. Tibet grew by 11.2 percent over that period. Tibet also experienced a boom in foreign trade and tourism. 

India has attempted to develop niche tourism (such as agro-tourism) in Arunachal Pradesh. The Ministry of Tourism demonstrates an increase in budgetary attention to Arunachal beginning in 2006. New Delhi needs to take seriously the infrastructure needs of the North-East in its long-term strategy to retain its territorial integrity east of the Siliguri. Infrastructure development in Arunachal can only serve to bolster India’s Look East policy – the North-Eastern states are India’s gateway to Southeast Asia after all. Bhaskar has emphasized this point. 

US-India Defence Trade: Sizing up the competition

Date : 30 Oct , 2013

US Secretary of Defence Leon E Panetta meeting with Prime Minister Manmohan Singh

American defence suppliers realise that India is perhaps the largest potential market open to them in the world today. But so do all the competition. This is not a market in which to make a quick buck. India qualifies as a valid customer fulfilling the three essential requirements, namely demonstrable and active threats to its national security, an abiding interest in addressing and staying ahead of these threats with leading-edge technology and a reasonably sufficient exchequer to be able to respond to these threats.

Any analysis of competition must be cognizant of India’s substantial and growing capability to cater to its own national security requirements…

In a recent op-ed, Commodore C Uday Bhaskar (Retd), former Director of the Indian Institute for Defence Studies & Analyses, noted that paradoxically, the world’s two largest democracies have had, “an estranged relationship for over 50 years.” That “estrangement” underwrote the virtual absence of the US as a significant defence supplier to India for most of that half-century. The notable exception perhaps proving the rule was the three-year US Military Assistance Program book — ended by the Chinese incursion in the fall of 1962 and the 22-day India-Pakistan War in September 1965.

The Bhaskar article underscored the Johnny-come-lately aspect of the entry, to be accurate, re-entry of the US into the contemporary Indian military supply context. The renewed relationship, an outgrowth of the mutually-stated US-India “strategic partnership” that was enunciated in the wake of the terrorist attacks of 9/11 and accelerated following the 60-hour orgy of terrorism in Mumbai in November 2008, is just beginning to bear visible fruit with the delivery of C-130J military transport aircraft.

P-8I Multi-Mission Maritime Patrol Aircraft

Four international defence suppliers to India over the years in order of volume have been Russia and its predecessor, the USSR, Israel, the United Kingdom and France. Any analysis of competition, however, must be cognisant of India’s substantial and growing capability to cater to its own national security requirements. In point of fact, the hitherto largely public sector defence production establishment supplies the bulk of the needs of the military, paramilitary and armed police equipage. This capability encompasses virtually all of the wheeled vehicles required by the services, the bulk of small arms and crew-served weapons through light artillery, most communications and C2, and currently, virtually all naval and Indian Coast Guard surface vessels many of which are of Indian indigenous design. India’s complex of arsenals, ordnance factories and parastatal corporations domestically build a variety of tactical and transport aircraft, though predominantly of foreign design and/or under international licence.

India has been less successful in designing and developing more complicated military hardware despite several notable, perhaps notorious efforts, in this context. One recalls the abortive effort to create a multi-role fighter aircraft, the HF-24 Marut that began as a joint project with the other prime mover of the erstwhile Non-Aligned Movement – Egypt. The latter quickly dropped out of the picture and India’s focal aircraft industry company, Hindustan Aeronautics Limited (HAL), actually produced a number of HF-24s that went briefly into service with the Indian Air Force (IAF). In a more sophisticated follow-on to the HF-24, the Defence Research & Development Organisation (DRDO) in collaboration with the HAL has spent the last quarter century trying to operationalise the “Tejas” Light Combat Aircraft. Although the design is indigenous, the few LCAs flying to date are powered by the GE F404 engine with a possible shift to the more powerful F414 engine when/if the Tejas Mk II goes into serial production.

India has been less successful in designing and developing more complicated military hardware.

Indian Mujahideen: Evolving Challenge

Sanchita Bhattacharya
Research Associate, Institute for Conflict Management

Revelations made by Indian Mujahideen (IM) ‘India operations chief’ Yasin Bhatkal aka Mohammad Ahmed Siddibappa Zarrar aka Imran aka Asif aka Shahrukh, and his associate Asadullah Akhtar alias Haddi, during their ongoing interrogations by several agencies have brought to the fore some new facts. The duo also reconfirmed much that was already known about IM. The revelations in their totality outline the emerging challenges that Indian security agencies are going to face in the foreseeable future. Bhatkal and Haddi were arrested from Indo-Nepal border on August 28, 2013.

In the most startling of revelations so far, Yasin Bhatkal is reported to have told security agencies that the "IM is trying to turn into an al Qaeda-like terror network". An unnamed official noted, further, "Two options were on the table - either the IM would turn an assisting outfit of Qaeda in India or merge with it to work directly under the command of Zawahiri [al Qaeda ‘chief’ Ayman al-Zawahiri]."

Yasin Bhatkal has also claimed that there has been a split within IM ranks. According to interrogation reports, the IM structure changed after the Batla House (New Delhi) encounter of September 19, 2008. The entire organization split into two factions — Azamgarh and Bhatkal. While the Azamgarh Unit was led by Amir Reza Khan, with Shahnawaz Alam as his lieutenant, Riyaz Bhatkal headed the Bhatkal Unit. Some reports, however, suggest that Yasin Bhatkal has also spoken about another unit led by Mohammad Sajid alias Bada Sajid and Mirza Shadab Beg. Significantly, these names also appeared in the National Investigation Agency’s (NIA) First Information Report (FIR) on allegations related to terrorist activities of members of IM and conspiracy for waging war against the Government of India, dated September 10, 2012, along with seven other IM cadres.

Indeed, an unnamed security official observed, "Our initial assessment was that the group has weakened with (the) arrest of so many cadres and there is division. But the IM… has grown many folds. Each group has its men and logistics in India.”

These two developments, if found to be correct, are ominous.

The growing links with al Qaeda are a very real threat, suggesting that the global jihad has started focusing increasingly on India, bringing new and more dangerous strategies, tactics and resources to this theatre. Indeed, current al Qaeda leader Ayman al-Zawahiri in his first specific jihad guidelines, endorsed the right of Islamist militants to fight "Indians in Kashmir", as reported on September 17, 2013. Further, an al Qaeda statement released on September 30, 2012, indicates that the terror group is evolving its strategy on the Myanmar-Assam region. In the statement, Ustad Ahmad Farooq, who was appointed as al Qaeda's head of the 'preaching and media department' for Pakistan in 2009, warned that the recent killings of Muslims in Myanmar and Assam "provide impetus for us to hasten our advance towards Delhi." June 2013 reports indicated that Maulana Asim Umar, a senior al Qaeda ideologue, released a video titled “Why There Is No Storm in Your Ocean?”, exhorting Indian Muslims to join the global jihad. IM and al Qaeda are believed to have discussed attacks on foreign nationals based in India, most notably Jews. Significantly, in September this year, New Delhi asked all Mumbai-based Jewish establishments to step up security measures in the face of an impending terrorist threat. India's Union Home Ministry has also briefed Israel about a possible IM attack on Israeli nationals visiting Rajasthan, especially in the tourist centre of Pushkar, Jaisalmer and Jodhpur.

Indian hospitals could show U.S. hospitals how to save money without cutting quality

By Vijay Govindarajan and Ravi Ramamurti
Published: November 2

Vijay Govindarajan is a professor of international business at Tuck School of Business, Dartmouth College. Ravi Ramamurti is a professor at Northeastern University and director of its Center for Emerging Markets. They are co-authors of the article “Delivering World-Class Healthcare Affordably,” in the current issue of Harvard Business Review.

No matter how the fight over Obamacare shakes out, the biggest challenge facing U.S. health care will remain reducing costs while improving quality of care and access for patients. The experience of a few innovative Indian hospitals may point the way forward.

India’s health-care system as a whole has many problems, but our research has uncovered nine private hospitals that provide quality health care at a fraction of U.S. prices. Most of these hospitals are accredited by the U.S.-based Joint Commission International or its Indian equivalent, the National Accreditation Board for Hospitals & Healthcare Providers. At a hospital where the procedure is performed, a patient would pay $120 for cataract surgery, $250 for a caesarean-section delivery, $2,000 for a knee or hip replacement, $2,000 for an angioplasty, $2,900 for cancer radiation treatment and $3,200 for open-heart surgery — 5 percent to 10 percent of U.S. prices. These private hospitals deliver medical outcomes comparable to that of good U.S. hospitals, as measured by medical complication rates or post-treatment survival rates. Furthermore, they’re profitable.

Even if Indian hospitals paid U.S.-level salaries for all health-care staff, which are as much as 20 times higher, their prices would be one-fifth of U.S. levels. That is because these nine hospitals are super-efficient at using resources — doctors, equipment and facilities — and because they work incessantly to improve every process. Their services have to be affordable because their patients are poor and typically pay 60 percent of their medical costs out of pocket.

How do the Indian hospitals do it? They have innovated in three areas, and for each of these, U.S. hospitals would do well to follow their example.

The first innovation is using a hub-and-spoke design, with hub hospitals located in major cities and spoke hospitals in rural areas. This strategy concentrates the best equipment and expertise within the hub, with telecommunication links that allow hub specialists to serve spoke patients remotely. Since these specialists perform a high number of specific procedures, they quickly develop skills that improve quality. By contrast, hospitals in the United States are uncoordinated, duplicating specialized care without enough volume in most of them to make procedures affordable. Even when hospitals consolidate, the motive is often to gain pricing power over insurance companies rather than to lower costs.

The U.S. and Pakistan: An Incompatible Couple

The United States and Pakistan are like an incompatible couple who can't help bickering when together while well aware that divorce is not an option. The awkward joint appearance of US President Barrack Obama and Pakistani Prime Minister Nawaz Sharif for a press briefing after their White House meeting on 23 October, when they declined to take questions from reporters, aptly summed up the troubled relationship. This dysfunctional kinship, however, is moving towards a climax as the US withdraws forces and equipment from Afghanistan primarily through Pakistan.

The bottom line is that the glue holding the two countries together consists of more negative than positive elements. Washington needs Islamabad in its ongoing war on Islamist terrorism - a desperate necessity at least until the withdrawal of its troops from Afghanistan. And cash-strapped Pakistan is humiliatingly dependent on handouts from Washington and US-sanctioned International Monetary Fund loans.

This dependency exists against the background of mutual Pakistan-American mistrust at the popular level.

A 2013 survey by the Pew Research Center shows that only 11 percent of Pakistanis have a favorable view of America. An earlier survey by the Pew Center and the Carnegie Endowment for International Peace revealed that only 10 percent of Americans have a great or fair amount of trust in Pakistan. It also showed that 97 percent of Pakistanis familiar with US drone strikes held a negative view of them. "Those who are familiar with the drone campaign also overwhelmingly (94%) believe the attacks kill too many innocent people," stated the report. "Nearly three-quarters (74%) say they are not necessary to defend Pakistan from extremist organizations." In stark contrast, a survey by the Washington Post-ABC News in February 2012 found that 83 percent of Americans supported Washington's drone attacks.

Reflecting popular opinion, Sharif, appearing next to Obama, said "The use of drones is not only a violation of our territorial integrity but they are also detrimental to our efforts to eliminate terrorism from our country." His government was committed to bringing them to an end, he added.

Obama left Sharif's words - delivered at the brief briefing in a tone so soft that reporters strained to hear him - stand alone, and refrained from making any related statement of his own. Strikingly, the word "drone" was missing in their 2,500-word joint statement. By contrast, the term "terrorism" appeared 13 times and "nuclear" 10 times - not in the context of parity with the US-India civil nuclear agreement that Sharif wanted, but in the context of "nuclear terrorism."

Well practiced in the art of politically expedient leaks, the Obama administration disarmed Sharif's protest on the drones - on which he had secured all party backing in Pakistan's National Assembly - by briefing Greg Miller and Bob Woodward of the Washington Post.

Factbox: Key Facts About Tajikistan

Published: November 3, 2013 

(Reuters) - Here are some key facts about the Central Asian state of Tajikistan, where President Imomali Rakhmon is likely to win another seven-year term in a November 6 election. 

GEOGRAPHY: Tajikistan, a landlocked former Soviet republic, covers an area of 142,000 sq km (55,000 sq miles). It borders Kyrgyzstan in the north, China in the east, Afghanistan in the south and Uzbekistan in the northwest.

The Pamir mountains, topping 7,000 meters (23,000 feet) and known locally as the "Roof of the World", make up more than 90 percent of its territory.

POPULATION: 8 million. Tajiks are ethnically akin to Persians and their language is similar to Farsi. Ethnic Tajiks make up 84 percent of the population, Uzbeks 12 percent, Kyrgyz 0.8 percent and Russians 0.5 percent.

HISTORY: After the demise of the Soviet Union in late 1991, a civil war broke out in 1992. Tens of thousands of people were killed during the five-year conflict. In 1997, Rakhmon's Russian-backed government signed a peace agreement with the United Tajik Opposition, led by Islamist guerrillas.

Tajikistan was a staunch supporter of Washington's "war on terror" in the aftermath of the September 11, 2001 attacks.

Former imperial master Russia opened a military base and took control of a Soviet-era space monitoring centre in 2004. In October 2013, Tajikistan ratified a deal with Russia to extend Moscow's military presence until 2042.

Tajikistan is one of the main export routes for Afghan heroin to Russia and into Europe.

RELIGION: Sunni Muslims make up 96.6 percent of the population and Shia Muslims 2.8 percent.

ECONOMY: Tajikistan remains the poorest of the 15 post-Soviet nations. Its gross domestic product grew by 7.4 percent year-on-year in the first three quarters of 2013, roughly the same as in the same period a year ago.

In October the International Monetary Fund lowered its GDP growth forecast for Tajikistan this year to 6.7 percent from an April projection of 7.0 percent.

Some 1.2 million people, more than half of the workforce, work abroad, mostly in Russia. They send home remittances exceeding $3 billion a year, or more than 40 percent of the nation's GDP. Monthly wages average just $135.

Forty-seven percent of Tajiks live below the poverty line, according to World Bank data. Tajikistan's gross domestic product totaled just $860 per capita in 2012, putting it in 161th place in the world between Chad and Kenya.

(Reporting by Roman Kozhevnikov; Editing by Dmitry Solovyov and Gareth Jones)

What to Pack When You're Leaving a War

As the U.S. retrograde hits its peak, what will America really leave behind in Afghanistan?

Such a small word, such a giant operation. The drawdown of U.S. forces from Afghanistan -- known as the retrograde -- is to be completed by the end of 2014; in raw tonnage, it's the biggest single military logistical undertaking ever. For size and complexity, think of something in between D-Day and the moon landing. To the Taliban, the retrograde is the shortening shadow of a decade-long war against Western occupation, announcing the dawn of victory. Increasingly left to fend for itself, the Western-backed Hamid Karzai regime is under pressure to settle with the insurgents, or risk being swept away by a second Islamic Emirate of Afghanistan. As America's Afghan war draws to a close, is there a way for the United States and its allies to snatch victory from the jaws of retreat? While it's too early to say for sure, history does not look kindly on retreating superpowers.

But before we get bogged down in the semantic quagmire of assessing what victory sounds like, let's first take a look at the hard numbers. The U.S. drawdown from Afghanistan will fill 40,000 containers, a task requiring 29,000 personnel, and costing more than $5.5 billion. The retrograde hits its peak just about now, at a rate of 2,000 containers and 1,000 vehicles repatriated each month, before winter snows make the mountains impassable.

In-country, the retrograde consists of sorting yards at Bagram Airfield and eight other bases, where vehicles and other military equipment will be dismantled and stripped of weapons and ammo before being stuck in a seaworthy box. In all, the army has to account for approximately 2 million pieces of non-rolling stock and 24,000 pieces of rolling stock that need to be retrograded, transferred, or disposed. About 10 percentof these items will remain in Afghanistan, for the benefit of the Afghan National Army or -- equally likely -- as a welcome addition to the livelihood of smugglers and other traders. The rest will be removed via one ofthree routes: by truck, to the Pakistani port of Karachi; north through the former Soviet 'stans of Central Asia and Russia proper to the Baltic and Black Seas on a combination of road and rail dubbed the Northern Distribution Network; or by air, to the Indian Ocean atoll of Diego Garcia and then directly into Fort Blair and other airbases in the continental United States. Each route is fraught with dangers and limitations, together providing the retrograde with that Biblical example of logistical improbability -- a camel passing through the eye of a needle.

Doubtlessly, the outbound convoys will suffer some Taliban strafing; but essentially, the insurgents are glad to see the back of the Americans. And emboldened: in July, the Taliban even opened an embassy-like office in Qatar, the better to pursue a talk-and-fight strategy. While it is not clear how much talking is being done -- the office closed in July -- continuing attacks on U.S. and Afghan bases are a clear sign the Taliban is testing the strength of the drawing down Western forces and their replacement, the Afghan national army.

No wonder that the U.S. retreat won't be complete, not even on Dec. 31, 2014. Afghan and U.S. officials are still haggling over the exact figures -- with an exasperated Obama reportedly threatening complete withdrawal -- but the numbers bandied about vary between 5,000 and 12,000 NATO troops to remain in Afghanistan beyond 2014, plus a small counterterrorism force. The Afghan forces will then be solely responsible for fighting the Taliban on a "day-to-day basis," but even so a continuing U.S. military presence will be necessary to make their gains "sustainable," Gen. Joseph F. Dunford Jr., the commander of U.S. and allied forces in Afghanistan, told the New York Times in July.

Extractive Industries and Peacebuilding in Afghanistan: The Role of Social Accountability

Published: October 30, 2013
By: Sadaf Lakhani

Mining operations in Afghanistan could be an important generator of economic growth for the country, but they also spark conflicts over environmental effects and perceptions that the economic benefits have been distributed unfairly. Local communities, the government, and mining companies would all benefit from mechanisms that focus on transparency and mediate grievances around these industries.


While Afghanistan’s economy has experienced strong growth in the past decade, declining levels of overseas development assistance beginning in 2014 are expected to substantially reduce the country’seconomic growth rate, with attendant political implications.

Commercially exploitable mineral deposits in Afghanistan could generate billions of dollars in income and be an engine of growth of the future economy.

Extractive industries in fragile countries often undermine statebuilding by either sparking, sustaining, or contributing to a relapse of violent conflict. In Afghanistan, while mineral extraction has not contributed significantly to the formal economy, minerals have historically been linked to vario us forms of conflict.

A weak and deteriorating formal governance environment in Afghanistan—with weak regulation capacity, poor compliance monitoring, and pervasive corruption—may mean that local communities are more susceptible to the negative social and environmental effects of mining operations, as well as to real or perceived perceptions of injustices in the distribution of benefits.

The issues associated with the extractive industry in Afghanistan may be addressed through social accountability mechanisms, whereby people can hold the government accountable for its promises and actions, and the government can respond in a fair and appropriate manner to the needs and concerns of the population. Social accountability mechanisms— usually facilitated through organized civil society—involve empowering local communities with information and creating effective spaces for dialogue, consultation, and the management of expectations.

Mining companies can benefit from social accountability mechanisms, which can be used to address unmanaged expectations and tensions that may compromise security and operations. In addition, social accountability mechanisms that focus on transparency and mediating grievances before they become acute and turn violent can also help manage tensions that arise between social groups and that can lead to sectarian conflict.

Social accountability in the mining sector in Afghanistan can also help restore citizens’ trust in the government and thus contribute to the country’s broader governance and peacebuilding goals.

Recent estimates of deposits in Afghanistan indicate that mineral extraction could contribute to the economic growth the country needs to sustain its efforts in peacebuilding and development after 2014. This report argues that integrating social accountability measures into governance of the extractive industry can help alleviate violent conflict by ensuring a more equitable distribution of the benefits as well as facilitate greater confidence in the state and a molding of the social contract. The U.S. Institute of Peace is working with Integrity Watch Afghanistan in testing some of the concepts in this report through a project to help support social accountability in Afghanistan’s mining sector.

Sadaf Lakhani is a social development professional with expertise in governance and private sector development in fragile situations and conflict-affected states. She has worked with The World Bank Group, United Nations Development Programme, and the European Commission in policy and program roles. She currently advises USIP on extractive industries and conflict prevention and is on the advisory board of invest2innovate. The author would like to thank Scott Smith and William Byrd for their comments on this report.

If Pakistan splinters...

03 November, 2013
Issue Net Edition | Date : 02 Nov , 2013

The Prime Minister, Dr. Manmohan Singh in a bilateral meeting with the Prime Minister of Pakistan, Mr. Nawaz Sharif, in New York.

If Pakistan splinters, it will hit the biggest stakeholder and benefactor China. In order to safeguard its strategic interests, Beijing therefore will make every endeavor to prevent the breakup of Pakistan, even to the extent of military intervention in support of the Pakistan Army.

…the migrant Muslims in West Asia (Middle East) while introducing themselves take pains to assert that they are Muslims from India and not Pakistan.

The Chinese will suffer major setback, if dysfunctional Pakistan splinters in the near future.

Many Malaysian Muslims will hasten to tell you that their country should not be compared to Pakistan. Or the migrant Muslims in West Asia (Middle East) while introducing themselves take pains to assert that they are Muslims from India and not Pakistan.

The Union of India’s consolidation and integration as a nation will get a new fillip, as the distraction created by Pakistan in the name of religion is eliminated.

Serious contradictions within Pakistan have pushed it in the pit of despair from where; it is almost impossible to recover. It is reported that many young Pakistanis out of sheer frustration are repudiating Islam and converting to other religions.

Possibly, majority of the Pakistan’s dominant community, Punjabi Sunni Muslims living in their isolated world of self-destruction do not realize the damage they are doing to Islam.

The likely breakup of Pakistan in the near future will stall expanding Chinese footprints.

Pakistan is appears to be hurtling towards self-destruction.

Beijing treats Pakistan as an extension of its war machine and a surrogate colony. The likely breakup of Pakistan in the near future will stall expanding Chinese footprints.

Impaired Pakistan is a cause of deep worry for Beijing, since Islamabad’s capability to tie-down India by launching terrorist attacks will also suffer.

If Pakistan splinters, there will be enormous gains for India.

PoK will revert back to the Indian fold and peace will prevail. This is the singular reason for Chinese to move their troops into PoK. The strategy is two-fold. First, occupy or gain influence over as much occupied Indian Territory as possible, incase Pakistan breaks up.

Second, to keep up the pressure on Indian borders since Pakistan is no position to do the same, given its present internal disarray. Further, China does not want India to be emboldened to mount an attack on Pakistan, which is already gasping for oxygen.

Anti-India rabble rousing by ISI inspired elements in Bangladesh against India will no longer be possible.

With the break-up of Pakistan, ISI activities like export of fake Indian currency and infiltration of terrorists through Nepal will cease. Anti-India rabble rousing by ISI inspired elements in Bangladesh against India will no longer be possible.

American attempts to unhook Pakistan from China will continue to fail despite the dangling of carrot of modern weapons and technology as Islamabad’s strategic dependency on Beijing is now irreversible.

The Union of India’s consolidation and integration as a nation will get a new fillip, as the distraction created by Pakistan in the name of religion is eliminated.

India then will be able to concentrate on the principal threat posed by China.

Fragmented Pakistan will lesson the heavy financial burden placed on India’s economy with drastic reduction in the security apparatus. This will enable young India to make rapid economic strides that can outpace ageing China in a short span of time.

Walmart Plans to Replicate U.S. Small-Town Strategy in China

By Tang Xiangyang

This analysis first appeared in the Economic Observer

Walmart is about to make a move in China again. The American retail giant is envisioning developing commercial real estate, though the number and choice of sites have yet to be determined.

Walmart's aiming at small community shopping centers in the so-called third- and forth-tier cities. It's a strategy much different from the Inter Ikea Centre Group or the Wanda Group's large shopping malls whose parking lots often accommodate thousands of cars. It means that Walmart China, with its supermarkets, its "Sam's Club" members-only warehouse, and its "No. 1" online shopping site, is developing a new strategy in China. "Walmart is a well-accepted brand at the local government level," says Chen Liping, director of the Institute of Business Administration at the Capital Normal University. "It's not to be denied that it has some chance of being successful."

Whereas Walmart is renowned in China for its first-tier city supermarkets, what it does best at home in the United States are the small-scale community-based stores. The fact that Walmart's recent location scouts have chosen several less well-known cities in Guangdong Province obviously demonstrates that the company intends to copy its successful experience at home by obtaining low-price land or leases to achieve low-cost expansion.

Walmart's development move is a smart strategy, says Wang Rong, vice president of Roland Berger Strategy Consultants' Greater China office. Because the anchors at these shopping centers will be the Walmart supermarkets and Sam's Club membership warehouses, this Walmart won't face much difficulty in recruiting businesses.

Apart from luring retailers as well as food and beverage stores, Walmart supermarkets and Sam's Clubs will no doubt bring considerable shoppers to these malls. Though Walmart has not published its Chinese market data, the American giant's global reach has expanded significantly over the past decade, according to a stock analysis startup called Trefis. All but its newly opened Suzhou store are profitable. In terms of sales, Walmart's first Chinese warehouse store in Shenzhen, which opened in 1996, became the company's global top shop a few years ago. "Sam's Clubs have strong shopping mall properties," says Chen Liping.

China vows to silence Dalai Lama in Tibet

02 November 2013

In this file photo, Tibet's exiled spiritual leader the Dalai Lama is seen delivering a speech during a conference in Prague, on September 16, 2013In this file photo, Tibet's exiled spiritual leader the Dalai Lama is seen delivering a speech during a conference in Prague, on September 16, 2013

This file photo, taken on June 27, 2013 and released by the US embassy in Beijing, shows US Ambassador to China Gary Locke (L) meeting with Party Secretary of the Tibet Autonomous Region, Chen Quanguo in LhasaThis file photo, taken on June 27, 2013 and released by the US embassy in Beijing, shows US Ambassador to China Gary Locke (L) meeting with Party Secretary of the Tibet Autonomous Region, Chen Quanguo in Lhasa

AFP - China's ruling Communist Party aims to silence the voice of the Dalai Lama in his Tibetan homeland by tightening controls on media and the Internet, a top official said on Saturday.

The party's top-ranking official in the Tibet region Chen Quanguo vowed to "ensure that the voices of hostile forces and the Dalai group are not seen or heard," in an editorial published in a party journal called Qiushi.

Officials would "make sure that the voice of the party is heard and seen everywhere in this vast 120 million square kilometre region," Chen wrote in the editorial.

China has worked for decades to control the spread of information in Tibet, but some Tibetans remain able to access non-official sources of information including from exiles abroad by using radio, television and the Internet.

But the party will attempt to stamp out access to such sources by creating party cells in some websites, confiscating satellite dishes and registering telephone and Internet users by name, among a host of other measures mentioned in the the article.

China calls Tibetan exiled spiritual leader the Dalai Lama a "wolf in sheep's clothing" and accuses him of masterminding violent efforts to seek independence for Tibet.

The Dalai Lama, who fled to India in 1959 after a failed uprising against Chinese rule, says he advocates greater autonomy for Tibetans rather than independence.

Chen referred to Tibet as "a front line of the struggle against separatism" and vowed to "strengthen the role of party committees at every level, as the sole power", in the editorial.

Tensions between Tibetans and the Chinese government continue run high, with more than 120 members of the minority setting themselves on fire in protest in recent years, leading to a security crackdown.

Chinese police opened fire on Tibetans marking the Dalai Lama's 78th birthday in July, shooting at least one monk in the head and seriously wounding several other people, overseas rights groups said.

Tang Xiangyang China


In fact, relying on anchor stores to stimulate the flow of people is not a strategy unique to Walmart. For instance, housewares store Ikea will be among four anchor stores when the Inter Ikea Centre Group opens several shopping malls in three Chinese cities - including Beijing - between 2014 and 2015. The three others will be the French supermarket Auchan, Suning Appliance, and Jinyi Cinema, one of China's top five theater firms.

The challenges

Despite the outside world's optimism about Walmart's move, the company, in clear contrast to the Inter Ikea Centre Group, has been very discreet about its expansion. "We are very cautious about this project. We have yet to reveal more information," its officials say.

This circumspection is no doubt driven by not-very-optimistic market conditions. As many as 150 shopping centers have been opened or are opening this year in major cites such as Beijing, Shanghai and Guangzhou, according to a July report from Jones Lang LaSalle, a real estate services and investment management company. Meanwhile, a report by the market research firm Ipsos covering the same period showed that there were already 2,897 shopping centers across China at the end of 2012.

As a matter of fact, for the first half of 2013 China's commercial real estate investment amounted to over 500 billion RMB ($82 billion), a 26% increase over the same period the year before. This rate far surpasses China's growth in GDP. Intense competition among these centers is inevitable.

Another potential problem is that e-commerce is challenging conventional malls. As another Ipsos survey showed, nearly half of respondents said that they'd increasingly shop online whereas only 11% said that they'd be visiting shopping malls more frequently.

As a retailing giant that has nearly 400 stores and 17 years of existence in China, Walmart certainly isn't unaware of the grim situation that China's shopping centers are facing. That it chooses to attack the small-scale community projects in the smaller cities is precisely because it aims to succeed by differentiating itself. In its plan, the mall surfaces, the number of tenants and shop types are all to be matched to the size of the local community.

Nevertheless, even Chen Liping, who is relatively optimistic about Walmart's ambition, says that because of China's rapidly aging population, shopping malls are also prematurely aging in China. The primary consumers visiting foreign retailers such as Walmart and Carrefour are entering middle to old age while these malls fail to find favor with the younger generations. "The post-1980s and post-1990s generation prefer shopping online or at the local shops which better understand their psychology," Chen says.

Report: China to Fund $20B in Iran Projects

Published: November 2, 2013 

TEHRAN, Iran — A report by an Iranian media website says China has agreed to finance $20 billion in development projects in Iran using oil money not transferred to the Islamic Republic because of international sanctions.

The tasnimnews website published a report Saturday quoting prominent lawmaker Hasan Sobhaninia saying the deal was reached during talks between Iran's parliamentary speaker Ali Larijani and Chinese leaders. Larijani visited China this week and Sobhaninia accompanied the speaker.

Iran government spokesman Mohammad Bagher Nowbakht said last week that some $22 billion dollars of Iranian oil money is stuck in China because of sanctions.

The U.S. and its allies have imposed oil and banking sanctions against Iran over its disputed nuclear program. Iran frequently uses barter arrangements because of the sanctions.

China is Iran's top crude oil importer.

In volatile Congo, a new U.N. force with teeth

Published: November 2

Kilimanyoke, Congo — With shells flying overhead, the Congolese soldiers pressed forward on a desolate stretch of road near the Rwandan border. Ahead of them was a rebel army, firing relentlessly. Behind them, a new U.N. combat brigade waited in white armored vehicles, ready to serve as backup.

The U.N. soldiers are in Congo with an ambitious goal: to reverse the trajectory of one of the world’s most horrific and complex conflicts, one that has killed more than 5 million people since 1998, the deadliest war since World War II. They are also here to rescue the image of the troubled U.N. peacekeeping mission in the Congo.

“To be a peacekeeper doesn’t mean you need to be passive,” their top commander, Gen. Carlos Alberto dos Santos Cruz, said hours before the offensive began. “To be a peacekeeper, you need to take action. The way to protect the civilians is to take action. If you see the history of atrocities here, it justifies action.”

Inaction is precisely what the U.N. mission here has been criticized for in the 14 years since the United Nations dispatched soldiers to Congo, the first members of what has become the largest peacekeeping force in U.N. history. Now, the U.N. Security Council has launched the Forward Intervention Brigade in a bold attempt to defeat the dozens of militias that pillage this mineral-rich central African country, which is roughly the size of Western Europe. The brigade, composed of 3,000 soldiers, is the United Nations’ first offensive combat force and is seen as a possible model for defusing crises in other chaotic parts of the world.

But the force is also an unparalleled gamble for the United Nations that challenges the basic principles of peacekeeping. It has orders to react offensively to enforce peace, essentially transforming peacekeepers into combatants. And it is openly supporting Congolese government forces, a move away from the principle of neutrality that has guided other U.N. missions.

That could affect the United Nations’ ability to negotiate peace deals with the militias and risks deepening conflicts. Humanitarian agencies are worried that Congo’s brutal militias could see the entire U.N. mission, which also includes aid workers, monitors and civilian experts, as non-neutral potential targets.

There are also concerns that the U.N. force is propping up a corrupt government and aiding an undisciplined military that has a history of human-rights abuses, including mass rapes. Many Congolese remain skeptical of the new brigade’s potential to eradicate the militias. Others have lofty expectations that could bring disappointment and further antagonism toward the U.N. mission.

But senior U.N. civilian and military officials, as well as some analysts, say the brigade could be the United Nations’ best chance to help bring meaningful change, and perhaps even a sustainable peace, to Congo.