6 April 2014

Averting a second cold war

Posted on March 31, 2014

The Japan TimesThat we live in a world of rapid change has been confirmed by the way recent developments over Ukraine have transformed international geopolitics in just a few weeks. The looming cold war triggered by the U.S.-supported putsch in Kiev that deposed Ukraine’s constitutional order and by Russia’s muscular riposte, including annexing Crimea, portends the advent of a new era.U.S. President Barack Obama’s new sanctions approach toward Russia indeed sets the stage for a potential clash between Western democracy and what American ideologues call “Putinism.”

The geopolitical tensions, military deployments and strident rhetoric point to the risk of preemptive moves and miscalculations sparking an accidental confrontation. We need only to recall how a spiral of actions and counter-actions led to World War I a hundred years ago.

Russian President Vladimir Putin’s action in annexing Crimea violated Ukraine’s territorial integrity in breach of international law, even though it followed a referendum in this historically Russian region, where the majority of residents are indisputably with Russia.

Let us, however, not forget that the U.S. and NATO have flagrantly and repeatedly contravened international law in the past 15 years. It’s a long list — the bombing of Serbia, the separation of Kosovo from Serbia, the invasions of Afghanistan and Iraq without U.N. Security Council mandate, the overthrow of Moammar Gahdafi’s regime through aerial bombardment, the aiding of a still-raging bloody insurrection in Syria, and renditions and torture of terror suspects. The U.S. National Security Agency’s mass surveillance program also disregards international law.

An international system based on the rule of law cannot be good unless norms and rules are respected on all sides. Yet power often trumps international law. Neither the U.S. nor Russia respects international borders. America, for example, invoked its Monroe Doctrine to intervene, among others, in Panama, Chile, Cuba, Nicaragua, Grenada, the Dominican Republic and Venezuela.

International law tends to take a back seat when a major power asserts a right to protect vital security interests. Indeed, when a great power needs a threat to justify its intervention in another state, it invariably finds one. There is thus a long political history of world powers quoting international law to others but ignoring it when it comes in their way. The Ukraine case illustrates the international law of convenience.

Hidden dragon on the high seas

Hidden Dragon on the high seas: China's deployment of a nuclear-powered attack submarine in the Indian Ocean sign als the beginning of its strategic encirclement of India
Sandeep Unnithan March 21, 2014 |  
On December 8 last year, India's military attache in Beijing hurried out of the Foreign Affairs Office of the Ministry of National Defence and drove to the embassy at Chaoyang. The Brigadier-ranked officer was bearing an urgent message: China has just deployed, for the first time ever, a nuclear-powered attack submarine (SSN) in the Indian Ocean. The submarine, the officer had been told, had sailed out a few days earlier to help with the People Liberation Army (PLA) Navy's anti-piracy patrol in the Gulf of Aden and Beijing was now informing New Delhi of it "to demonstrate respect for India". The news triggered alarm in the highest echelons of India's security establishment; Beijing, it seemed, had finally put steel into the string of pearls, a network of Chinese-built naval bases ringing India that stretch from Myanmar and Sri Lanka in the east to Pakistan in the west. Reports by RAW, the Defence Intelligence Agency and the Directorate of Naval Intelligence warned the government that the deployment, "seriously aggravates India's security concerns".

Shang-class SSNs at the PLA Navy base in Hainan IslandThough Beijing claimed the Shang-class SSN was part of a routine anti-piracy patrol-it returned to its base on Hainan Island in the South China Sea on February 20 after two months in the Indian Ocean-New Delhi read more sinister motives. "Nuclear-powered attack submarines don't take part in anti-piracy patrols," a senior government official tells india today. Naval analysts predict it is a precursor to the deployment of a full-scale carrier battle group in the Indian Ocean. The battle group, a mobile force comprising attack submarines, warships, tankers and troop ships, will be centred around two aircraft carriers currently under construction. Retired Rear-Admiral Raja Menon says as much. "It was a reconnaissance probe, the prelude to a full-scale deployment."

Breathing Fire

If, rather when, this happens, it will pose a direct threat to India's security and economic interests. India claims the region between the Gulf of Aden and the Malacca Straits as within its sphere of influence, one that is vital for its maritime commerce as 80 per cent of the country's energy supplies, about 3.86 million barrels of crude oil per day, pass through it. And it's largely to secure these waters that the Navy has for years been demanding 25 per cent of the defence budget-it now gets 17 per cent-to acquire aircraft, warships and submarines. Naval planners dismiss speculation that this demand is driven by a desire to move into the South China Sea and emphasise that the navy "has neither the capability nor the intent" to do so. "The Indian Ocean remains our primary focus," says a senior official in the defence ministry.

Shift in balance of power?

Now, the Chinese have sailed in and altered the balance of power in the Indian Ocean. Unlike conventional submarines, nuclear-powered submarines such as the Shang-class boats can operate submerged and almost undetected. Sailing at over 30 knots, they can attack warships, merchant vessels and use cruise missiles to hit targets on land. Chinese SSNs in the Indian Ocean can, thus, wreak havoc with India's naval plans, which rely mainly on a fleet of conventional diesel-electric submarines that are limited by range, endurance and size. A fleet of four such boats on a 'barrier patrol' can choke India's energy supplies, isolate the Andaman and Nicobar Islands and threaten the INS Vikramaditya carrier battle group. They can even impede deployment of the slower Arihant nuclear submarines from their base in Visakhapatnam into the Bay of Bengal and beyond. "India has no strategic capability yet to deter China," says retired Vice-Admiral K.N. Sushil, veteran submariner and former Southern Naval Command chief. "We are yet to sail the Arihant and are nowhere near starting our own SSN programme. We will, therefore, be self-deterred and without the capability to retaliate."

This despite the fact that deployment of the Chinese SSN in India's backyard was not entirely unexpected. Naval watchers were well aware of the three-phase strategy of military expansion, propounded by PLA Navy chief Admiral Liu Huaqing in the late 1980s-upgrade the navy into a blue water force or one capable of operating beyond territorial waters; deploy in the Indian Ocean between 2011 and 2020; and undertake global operations sometime between 2021 and 2049. The PLA Navy has since advanced this timeframe. Using piracy as an excuse, it has deployed warships to protect its merchant vessels and sailors in the Gulf of Aden since 2008. "For China, piracy has come as a huge opportunity," an Indian admiral told india today late last year. "Now they will continue their deployments on some pretext or the other."

Foreign Policy À La Modi

India's Next Worldview

APRIL 3, 2014
A Modi supporter after a rally in Gurgaon on the outskirts of New Delhi, April 3, 2014. (Adnan Abidi / Courtesy Reuters)

Between April 7 and May 12, some 814 million Indian voters will have a chance to exercise their fundamental democratic rights by selecting a new government. In a country that has faced scrutiny for its chaotic administration, contentious politics, and vast inequity, the democratic process will unfold in routine and expected ways. Despite India’s massive corruption problems, the ballot will be mostly free and fair. Voter turnout from all classes, and particularly the poor, will be substantial. Following a more recent precedent, no single party will gain an absolute majority in parliament. And, in the aftermath of a relatively smooth transfer of power, the new government will take the reins and begin the task of forming a cabinet.

Predictability also applies to foreign policy. Observers in the United States blanch at the prospect of a Prime Minister Narendra Modi, the candidate of the right-wing Bharatiya Janata Party (BJP), whom they believe may apply his Hindutva, or Hindu nationalist, beliefs to Indian foreign policy. Their worry is shared by many Indians, who believe him to be at best indifferent to, and at worst hostile to, the concerns of Indian Muslims. What the effect of a Modi government would be on Indian domestic politics is an open question. But no matter who assumes the country’s highest office, the broad contours of Indian foreign policy are not likely to change dramatically. 


A look at Indian foreign policy since 1964 confirms that it has been characterized more by continuity than by change. And even those changes that have occurred, while important, have been incremental, and unrelated to the political ideology of the party in power. After all, as a serving Indian ambassador recently told me, “An elephant is not prone to making sharp turns.” 

Time for smart negotiations with Maoists

Niranjan Sahoo
03 April 2014

In another daring attack recently, some 200 heavily armed Maoists ambushed convoys of paramilitary forces in Chhattisgarh’s Sukma district, killing 15 para-military personnel in most gruesome manner. Happening on the heels of last year’s most audacious Darbha Ghati attack that claimed lives of many high profile politicians of the same State, the Sukma attack has sent shock waves across the security establishment as well as the political class with general elections round the corner. 

How would one interpret the Sukma incident? Are Maoists on a revival path, as many analysts make one to believe? But the fact is that notwithstanding some daring attacks in the recent times, the Maoists seem to be on retreat now. The biggest evidence of their rapid decline comes from the voters’ turnout in Chhattisgarh assembly elections despite a boycott call from the Maoists. In the Maoist stronghold of Bastar, more than 70% people cast their votes, braving the consequences of the boycott call. 

A close scrutiny of inputs emerging from the ongoing counter-insurgency operations suggests that after vacillating for a considerable period of time, the Centre and the affected States have put up a better show. Despite resource constraints (especially infrastructure and capacity deficit), five worst affected States -- Chhattisgarh, Jharkhand, Maharashtra, West Bengal and Odisha, have shown admirable political courage to take on Maoists in their strong holds. After denials and many half starts, these states have brought visible improvement in coordination and combat operations. The Centre (especially under Mr. Chidambaram’s tenure as Union Home Minister) played a major role in the counter-insurgency surge, particularly in terms of providing critical security and intelligence infrastructure to States. 

The joint counter-insurgency operation, which took some serious traction in the aftermath of the most brutal 2010 Latehar attacks in Chhattisgarh, which killed 76 para-military personnel, has yielded significant results in checkmating Maoists forward movement. The most decisive outcome is that the rebels have lost some of their key leaders, including Kishenji, Cherukuri Rajkumar alias Azad and very recently Maddu Serisha, a key woman leader in charge of Jharkhand and Odisha. Approximately 20 prominent members of the 39-member Central Committee have been neutralized by the security forces in past two years. While six key members were killed, 14 senior leaders like Narayan Sanyal, Kobad Gandhi, Pramod Mishra, Amitabh Bagchi have been arrested. The biggest gain is the sensational surrender of Gudsa Usendi, the spokesperson of the Dandakaranya Special Zonal Committee. Importantly, security forces have gained critical upper hand over Maoists by capturing more than 6000 active cadres in the last three years. The loss of top leadership coupled with the arrest of many active cadres has made them defensive and desperate. 

Indians Reflect on Their Country & the World

MARCH 31, 2014
Troubled by Economic Problems, Corruption,
Pakistan and China
Survey Report

On the eve of an election for the Lok Sabha, India’s national parliament, Indians are disgruntled about the state of their nation, deeply worried about a range of problems facing their society and supportive of new leadership in New Delhi. However, despite a faltering economy, they remain fairly upbeat about their personal finances and hopeful about the economic prospects of both India and the next generation.

Notwithstanding recent high-profile official frictions with the United States, the Indian public has a generally positive view of America. Meanwhile, Indians are divided in their opinions about the world’s rising superpower: China. And they remain deeply wary of Pakistan, although they would like to see Indo-Pakistani relations improve.

These are among the main findings of a Pew Research Center survey conducted between December 7, 2013, and January 12, 2014. Face-to-face interviews were conducted with 2,464 randomly selected adults at their place of residence, in states and territories that are home to roughly 91% of the Indian population. The margin of error is ±3.8 percentage points. (For more details, see methodology statement at the end of report.)

More than twice as many Indians are dissatisfied as satisfied with the way things are going in the country (70% vs. 29%). And this discontent is shared by those who would like to see the Hindu-nationalist opposition Bharatiya Janata Party (BJP) lead the next Indian government, those who prefer the current governing coalition led by the left-of-center Indian National Congress (Congress) party and those who favor some other party to lead.

Despite a dramatic slowdown in economic growth in the last few years, more than half (57%) still describe the country’s economic performance as at least “somewhat good.” And nearly two-out-of-three (64%) expect the nation’s children to be better off as adults than people are today.

But as Indians head to the polls, there is pervasive, intense concern about a range of current economic troubles. By overwhelming majorities they say inflation, joblessness and inequality are not just problems for the country, but very big problems.

In the face of these challenges many Indians voice despair. Nearly two-out-of-three lament the political and parliamentary deadlock that hobbles national problem solving. And by overwhelming margins, Indians say corruption by public and business officials – those whom citizens might look to for solutions– is a significant problem.

Little wonder then that only about four-in-ten Indians retain a lot of confidence in either the national government or the Lok Sabha.

Indo-Pacific security links: Obama's visit to Asia, Indonesia, MH370, the pivot and more

3 April 2014

The Indo-Pacific is a strategic system encompassing the Indian and Pacific oceans, reflecting the expanding interests and reach of China and India as well as the enduring role of the US. The Lowy Institute's International Security program presents a weekly selection of links illuminating the changing security picture in this increasingly connected super-region.
Barack Obama is visiting Japan, South Korea, Malaysia and the Philippines this month. Things have already started well, with a successful trilateral meeting between President Obama, President Park and Prime Minister Abe last week on the sidelines of the Nuclear Security Summit in The Hague.

Rory Medcalf on Indonesia's role in defining the Indo-Pacific region.

As John Carlson noted on The Interpreter last week, Japan has agreed to transfer a large amount of weapons grade nuclear materials from its civil program to the US for recycling and disposal. But China wants more reassurance.

Grant Turnbull looks at the military and maritime surveillance technology being used in the Indian Ocean to search for missing flight MH370.

The debate on the US pivot to Asia continues. The Ukraine Crisis has cast doubt for some on the ability of the US to faithfully rebalance. But for others, the crisis merely proves that the policy is the appropriate strategic response.

Will international law help prevent a similar Ukraine-like crisis in Asia? Bonnie Glaser and Ely Ratner think so.

The Lowy Institute International Security Program's work on Indo-Pacific security is supported by two grants from the John D and Catherine T MacArthur Foundation

US Presence In Afghanistan Post 2014: Does It Serve Indian Interests?


In his final address to Afghanistan's parliament on 15 March, the Afghan President Hamid Karzai fired possibly his last verbal salvo (as the President) at the US, when he said US soldiers can leave Afghanistan at the end of the year because the Afghan military (ANSF), which already protects 93 per cent of the country, was prepared to take the responsibility for the entire country.[1] He reiterated that he would not sign the Bilateral Security Agreement (BSA) with the US unless peace could first be established in Afghanistan. Karzai in his speech also again urged the Afghan Taliban to join the peace process.

As the US veers between threatening the “zero option” and pulling out all troops from Afghanistan at the end of this year to maintaining appropriate presence irrespective of the BSA[2], there is this narrative that continued US presence in Afghanistan post 2014 does not serve Indian strategic interests. Such a narrative would also raise some broad questions in the Indian context; Will a Taliban dominated stable Afghanistan pose any security threat to India? What is the US strategy in Afghanistan, what implications does the US strategy hold for India and is there an overlap between Indian and US interests in Afghanistan? The aim of this paper is to address some of these issues.

Afghanistan sans US Troops

A respected Indian strategist recently argued in an article that continued US military presence in Afghanistan makes little operational and strategic sense (for India), and it will only keep the region’s jihad factories, especially in Pakistan, in business and in turn compel US to seek greater cooperation from the Pakistan Army and ISI.[3] He added that US regional counterterrorism objectives are hardly in sync with those of India. Keeping Afghanistan in turmoil allows Washington to play geopolitical games regionally, including propping up the Pakistan military. It is also implied that US is “peremptorily offering the Afghan Taliban administrative autonomy in the south and east, including provincial governorships”, to extract in exchange a security guarantee for the planned US bases. The article concludes that a complete US military withdrawal, coupled with international efforts to strengthen the hands of the next Afghan administration and further US aid to Pakistan being made contingent on non-interference in Afghanistan, will be the best of the available options to help stabilise the country.

The argument presupposes that the US presence is the motivation for the multitude of jihadi groups in FATA, Pakistan is the driver of the Afghan Taliban, al Qaeda is now a fringe player in the region and that threat to India emanates from the Pakistani jihadi groups. In a nutshell, if Pakistani and US interests (and interference) is removed from the Afghan political equation, we would see a stable Afghanistan with a reconciled and reintegrated Taliban, pursuing its own national interests which may or may not result in very close relations with India but Afghanistan will not support any anti-India elements on its soil.

US Support to Afghanistan

The US residual presence in Afghanistan post 2014 has been assessed as critical because, one, the ANSF though now largely considered capable of launching independent tactical actions, lacks ‘key operational enablers’ in terms of logistics, recce & surveillance, close air support, casualty air evacuation assets, which are at present being provided by the US and the ISAF. Two, training requirements of the ANSF, which has a high rate of attrition due to various reasons, are met by the ISAF and ISAF contributing nations in turn have indicated that they won't stay in Afghanistan without the US presence. Third, the provision of the future US economic aid to Afghanistan, crucial for the maintenance of the ANSF, has been tied to the presence of US troops in Afghanistan post 2014.The above issues will have to addressed in the near term before an Afghanistan without US forces is deliberated. It must also be noted that a UN peacekeeping force replacing the ISAF will be found deficient in all key areas and possibly finds support in the rationale that US presence in the region is the sole driver of local jihadis.

The Haqqani Group and India- the danger ahead.

By Dr. S.Chandrasekharan

It is generally believed that the Haqqani group is a regional player in Afghanistan restricted to Loya Paktia provinces and Khost as well as the Northern Waziristan of Pakistan. This could have been the position till about five years ago, but it is not so today.

Despite the NATO coalition operations which involved "raid, disturb and destroy" the lines of communications of the Haqqani territory and selective drone strikes in northern Waziristan, it is now admitted that the sustained counter insurgency campaign against the military capabilities has not weakened the group to any significant level. On other hand, the influence of this group has slowly crept northwards towards the outskirts of Kabul and beyond in the northern regions where the northern alliance is supposed to have a significant hold in that territory.

What is more. The Haqqani group has been responsible for many recent spectacular attacks in Kabul itself.

From the Indian point of view, the attack on the Indian embassy compound in Kabul on 7th July 2008, was a combined operation of Lashkar-e-Toiba and the Haqqani group. The suicide bomber who rammed his vehicle near the gate of the embassy was one Hamza Shukhoor, a Pakistani national supplied by the LET and trained by the Haqqani Group to strike against Indian interests. The involvement of the ISI has been vividly described in the article by Carlotta Gall in New York Times of March 2014.

There is a view here in India, that the Haqqanis have targeted Indian interests only on the instigation of Pakistan ISI and had otherwise have not directly attacked Indian assets in Afghanistan. This "ostrich like" view does not hold good anymore. Given time and space the Haqqani group is likely to strike at India’s economic and strategic interests that are considerable now directly and indirectly.

From a long term point of view the Haqqanis should be seen as having considerable potential to disturb the Indian security interests. While it is known that the LET and the Jaish-e-Mohamed have participated operationally with the Haqqani group by way of training and supply of suicide bombers, it is a question of time before the Indian Mujahideen are also taken for training of the group. For this purpose, the recruits need not even go to Afghanistan, but stop at Miranshah in Pakistan itself for training. Miranshah is well known from the Soviet times as the central assembly point and conduit for infiltration into Afghanistan. The Haqqani group is said to be running two Madrassas, a big mosque and quite close to a security base of Pakistan.

Full details of the nexus between the Haqqani group and Pakistan’s ISI are given in chapter 5 of the book just published titled "Fountainhead of Jihad" by Vahid Brown and Don Rassler (pages 151 to 182) and what is said there is not being repeated here. They continue to enjoy royal treatment while moving men and materials from and to Afghanistan from North Waziristan and in making raids into Afghan territory and returning to safe havens within Pakistan.

The Haqqani territory neatly fits in with Pakistan’s archaic concept of "strategic depth" in the east in the event of a conflict on its borders. Counter insurgency operations especially by the American forces against the Haqqani network have been thwarted by Pakistan’s establishment, by deliberate leakage of intended raids and letting the Haqqani groups to return to safe havens inside Pakistan.

Afghanistan or Talibanistan?

April 2, 2014 

Afghan National Army soldiers learn to medevac casualties at Camp Shorabak in Helmand Province on Feb. 19, 2014. For many, this was the first time they had been aboard a helicopter. (U.S. Marine Corps)

Will the country see relative stability and freedom after 2014?
Col. Robert M. Cassidy

This year will see a set of key events in Afghanistan: variables of pivotal magnitude that may well determine whether it succeeds as a state or succumbs to another Taliban takeover.

If Afghanistan succeeds and endures, the struggle will have ultimately been the good war of the last 12-plus years: in terms of the justification for going to war, in the way the coalition ultimately prosecuted it, and in the context that the international community will have fulfilled a post-war moral commitment to the Afghan allies we supported and fought alongside.

The value of the political object, the morality of the war, and the perception of victory or defeat comprise the most compelling logic of the contest of wills there. There are impediments that increase the risk of failure, yet also momentum that favors success. And there is history, and the history of wars in Afghanistan does not suggest that catastrophic failure is inevitable – if the coalition continues to support Afghanistan after 2014.

The political object, and its perceived value, guide war. The value of the political object of the Afghan War – dismantling, defeating, and denying al-Qaeda sanctuary – derives from the horrific consequences of the 9/11 raids. The political object, when achieved and sustained, will prevent this from happening again. However, the perceived value of the object has diminished in the eyes of the supporting polities because of the costs and duration of this war. In other words, the political and domestic will to persevere have waned.

The Taliban, al-Qaeda, and Islamist zealots of similar cloth have endured significant disruption, displacement and dismantling of their capacity to carry on, yet their will to continue has not relented. This is because of the fanatical religious creed that animates these enemies, and because of the physical and materiel sanctuary and support they benefit from in Pakistan’s border areas. Generous funding from Saudi Arabia and other gulf states also helps. For the likes of the Quetta Shura and the Haqqanis, their mantra is ‘Islam or death.’ For Western polities, it is, ‘bring the troops home.’

Pakistani security elites believe they can counter their existential nemesis, India, by supporting the Taliban and using the Haqqanis to foment insurgency in Afghanistan. Although this notion of strategic depth is a figment of these elites’ febrile and fertile imaginations, their cost-benefit strategic calculus is not likely to change unless there is a huge shift in how the U.S. and the West confront Pakistani duplicity. In other words, in the minds of the Pakistani security leadership that decides strategy, the benefits of supporting and protracting the insurgency in Afghanistan outweigh the costs.

Chittagong Tribunal Verdict and its Implications

April 3, 2014

In a landmark judgment, the Chittagong Metropolitan Special Tribunal-1 in Bangladesh sentenced fourteen people to death including Paresh Baruah, self- styled Commander-in-Chief of United Liberation Front of Asom (ULFA); Matiur Rahman Nizami, current chief of Jamaat-e-Islami and Industries Minister in the Bangladesh Nationalist Party (BNP)- Jamaat coalition government (2001-06); Luftozzaman Babar, BNP’s former Minister of State for Home Affairs and former chiefs of Bangladesh’s two premier intelligence organisations. Judge S M Mojibur Rahman delivered the verdict on January 30 after nearly ten years of the incident. Baruah had been absconding since the recovery and the tribunal tried him in absentia. All the accused were tried under the Arms Act for illegal possession of firearms and Special Powers Act of 1974 for weapons smuggling.

Arms and Ammunition Seized

On April 2, 2004, ten trucks with arms and ammunition were seized from two vessels at the Chittagong Urea Fertilizer Limited jetty which is under the Ministry of Industries. The weapons recovered from 1500 wooden boxes included 4,930 types of firearms, 27,020 grenades, 840 rocket launchers, 300 accessories of rocket launchers, 2,000 grenade launching tubes, 6,392 magazines and 11,520 bullets. Two cases were filed immediately at the local Karnaphuli police station under the Special Powers Act and Arms Act. It was the largest ever seizure of an arms consignment in Bangladesh. The seizure generated a big furore in Bangladesh and neighbouring India after it was discovered that the weapons were meant for the separatist ULFA.

Trial Process

The trial of both the cases began in 2005 with several loopholes as the investigation team deliberately overlooked a number of important aspects such as “who had brought the arms, from which country, what was the destination and how was a jetty of a state-owned body was used for uploading the weapons”. During the initial stage, only the labourers, truckers and trawler drivers were implicated leaving the principal conspirators and organisers at bay as the then government tried to cover up the involvement of its ministers, top intelligence officials and bureaucrats. There were allegations of deliberate attempts on the part of the government to suppress facts in order to weaken the case. It was only after a military-backed caretaker government took over in Bangladesh on January 11, 2007, both the cases received new lease of life. On February, 14, 2008, the chief judge of the Chiattagong Metropolitan Tribunal ordered re-investigation following a prosecution petition and consequently, the cases took a decisive turn. In June 2011, investigators submitted two supplementary charge-sheets accusing eleven new suspects. Investigations revealed the direct involvement of some key politicians of the then BNP-led government, former chiefs of two premier intelligence agencies, bureaucrats, ISI and ULFA.

International Linkages

The verdict thoroughly exposed the international conspiracy that was hatched by various organisations and personnel to destabilise India’s restive North Eastern region. According to the charge-sheet, all the arms and ammunition were manufactured by Chinese firm NORINCO. The funds had been procured from Pakistan. The weapons were purchased with the help of a UAE-based firm belonging to a Pakistani businessman and brought to the Chittagong port in a ship that had come from Hong Kong via Singapore.


By Amitava Mukherjee

Indian External Affairs Minister Salman Khurshid’s admission in February that the Indian government has asked its Ministry of Water Resources to clarify whether the Chinese dams on the Yarlung Tsangpo (called Brahmaputra in India) are run-of-the-river type or storage dams proves conclusively that New Delhi has so far taken all Chinese assurances in this regard with a pinch of salt. It appears that diplomatic nicety, rather than carefully analyzed facts, had earlier induced not only the Indian Prime Minister Manmohan Singh but some other responsible government ministers to accept Beijing’s stand that the proposed hydro-electric projects on the Brahmaputra in Tibet are all run-of-the-river types and hence pose no threat to India’s downstream interests. But beneath diplomatic compulsions, doubts about the Chinese river training activities on the Brahmaputra persist in Indian minds and therefore New Delhi has been raising the issue again and again with Beijing. Very recently an inter-departmental committee with representatives from the ministries of external affairs, defence and the Department of Space has decided to take up the matter with Beijing.

China is currently building a hydro-electric power plant at a place called Zangmu in the middle reaches of the Brahmaputra in Tibet. It has also announced its decision to construct three more such plants on the same river at Dagu, Jiacha and Jiexu. Although India previously accepted the Chinese explanation of the abovementioned projects being run-of-the-river type, the latest statement from the country’s external affairs minister reveals that skepticism over Chinese intentions remains. Although Indian allegations about Chinese dam-building activities on the Brahmaputra date back more than a decade, Beijing admitted to the construction of the Zangmu dam as late as 2010 and only after a series of denials. Moreover, run-of-the-river projects can be seen as a necessary step to lower water levels and potentially reroute the main river course. In this sense, any dam in a geologically unstable area like Tibet could turn out to be ruinous.

The Chinese decision has created panic in northeastern India, where the Brahmaputra is a lifeline and widely regarded as an important part of the region’s cultural heritage. There is still a confusion about the exact number of dams China intends to build on the Brahmaputra. Jana Jagriti, a non-governmental organization (NGO), has averred that China would construct twenty six hydro-electric projects in the upper reaches of the Brahmaputra. One may dispute the number but the fact remains that China has targeted a capacity of 120 million kilowatts of hydro-electricity in its 12th five year plan period from 2011-2015.

The Chinese government has a penchant for grandiose projects and there are reports that it may construct a giant hydro-electric project at a place called Medog near the Great Bend of the Brahmaputra. This project might just be at the drawing board stage now but Beijing has been upgrading the Bome-Medog road in Tibet, an indication of the kind of infrastructure development that generally precedes a big project. This power station, if constructed, will be twice as big as the Three Gorges Dam on the Yangtze River, the world’s largest hydro power plant. It would have a generation capacity of 38-49 gigawatts which is more than India’s current total installed hydro power capacity of 33 gigawatts.

Drive a Wedge Between Russia and China

April 4, 2014

There’s no question that Russia’s annexation of the Crimea is a blatant violation of international law. However, talk of a new Cold War and of “containing” Russia take our eyes off of more pressing threats and potential opportunities, namely cutting a deal with Iran and driving a wedge between a (potentially) revisionist Kremlin and a rising China.

The Obama White House should do three things. In the short-term, reach a settlement that Finlandizes Ukraine. Next, reassure NATO allies in Eastern Europe that Russia will be kept out of their backyards. Finally, reengage the Kremlin in order to prevent it from getting closer to Beijing.

Obama got it right when he said that Putin’s behavior is driven by weakness. Russia is in a state of relative economic, military and demographic decline, having squandered the nearly decade-long oil boom to reposition itself on the international stage. The best and brightest that aren’t Kremlin insiders already voted with their feet and moved to the West—and show little interest in returning home. In prospect theory-speak, states that are in the domain of losses tend to be more risk acceptant, and, therefore more aggressive, than rising powers that have time on their side.

First, reach a settlement that recognizes the proverbial “facts on the ground,” namely that Crimea is now part of Russia. While there has been much talk of a Finlandized Ukraine, Cold War Austria is the better model. Divided between the allies after World War Two, Soviet and Western withdrawal saw the restoration of the state’s independence in exchange for a declaration of neutrality. Ukraine should end its blockade of critical regions of the Russian-speaking portions of Moldova in exchange for new territorial guarantees.

Any Ukrainian government would be ill-advised to make amendments to the country’s constitution that provide additional protections to the country’s ethnic Russian minority. This would legitimate Putin’s claims that Russian speakers in the Near Abroad are being persecuted and would set a dangerous precedent. Ukraine would find itself in the same position as the Ottomans after the Crimean War, when Western states used protection of the country’s Christians as a pretext for future interventions.


APRIL 3, 2014

Martin (Two Brains) Wolf, the Financial Times’ venerable economics commentator, doesn’t always have the correct answers. But he invariably poses the right questions, which, in a journalist, is often more important. In his column this week, Wolf asks, “Is China different? Or must its borrowing binge, like most others, end in tears?” 

That the Middle Kingdom’s transformation from a Communist command economy is a great success story cannot be doubted; it’s one of the wonders of modern history. Since 1991, according to the World Bank’s database, its inflation-adjusted growth rate has averaged about ten per cent a year. Rapid growth has dragged hundreds of millions of people out of grinding poverty and turned China, according to some measures, into the world’s second-largest economy. (In terms of G.D.P. per capita, the performance is a bit less impressive. In 2012, according to the World Bank, China’s was $6,091, placing it among places like Peru, Serbia, and Thailand.) 

In the past few years, however, China’s growth rate has slowed down a bit, and the country has racked up large debts. How large? Wolf provides a disturbing chart, based on figures from the International Monetary Fund, that shows overall debts rising from about a hundred and twenty-five per cent of G.D.P. in 2008 to two hundred per cent in 2013. That’s quite a leap. As anybody who has visited China recently can confirm, it has coincided with an enormous building boom, which has left many cities festooned with empty apartment buildings and shopping malls.

The worry is that large parts of China now resemble Arizona, Florida, and Nevada circa 2007, when the great Greenspan-Bernanke real-estate bubble was going “pop.” “Signs are mounting that the housing market in a number of cities is not just cooling but actually cracking,” Wei Jao, an economist at Société Générale, wrote recently. According to a lengthy report from China in Thursday’s F.T., which quoted Jao, developers are already slashing prices by up to forty per cent in selected areas. But that hasn’t been sufficient to prevent some of them from having trouble keeping up interest payments on the loans they took out to finance construction. And that, in turn, is raising concerns about the Chinese financial institutions that did much of the lending, such as banks, “shadow banks,” and trust companies. (Shadow banks are unregulated finance companies that borrow and lend at interest rates higher than those available in the regular banking system.)

To some observers, particularly fans of Hyman Minsky, the late Keynesian economist, it looks suspiciously like China may be approaching a Minsky moment—that dreadful instant at which most of the participants in the boom recognize that the game is up, credit stops flowing, one or more financial institutions moves to the verge of collapse, and panic ensues. Figures released last month show that credit from China’s shadow banks has virtually dried up. In January, about a hundred and sixty billion dollars’ worth of new loans were issued through shadow banks; in February, virtually none were.

The optimistic reading is that, for all the changes it has gone through, China is still China—an authoritarian country where the government ultimately dictates the flow of money and credit. And the government, unlike the corporate sector, is not overly indebted, so it has room to maneuver. (The International Monetary Fund reckons that the over-all ratio of public-sector debt to G.D.P. is about forty-five per cent, which is much lower than the ratios in the United States and most other Western countries.) If the biggest developers get into serious trouble, the authorities will step in and quietly bail them out, the optimists say. If liquidity dries up in the banking system, the central bank will supply it. If the public starts to fret about the banks, and an incipient run develops—always a danger in a country, such as China, that doesn’t have a deposit-insurance system—the government will bring forward its plans to set one up.

Since everybody involved knows all these things, the argument goes, there won’t be a Minsky moment to begin with, and China will escape the sort of shock that plunged the United States and other Western countries into the Great Recession. Backward induction will save the day. Indeed, the rate of growth might pick up, as the government relaxes some of the credit restrictions it had imposed to cool down the property market and possibly even introduces a new fiscal stimulus.

Certainly, the financial markets don’t seem to be concerned. On Wednesday, global stock markets hit their highest levels since the end of 2007. The Shanghai market, after falling sharply between December and February, has bounced back a bit in the past few weeks. Pronouncing judgement, Wolf comes out for the optimists. “China will not have a financial meltdown,” he says bluntly. But, like many other analysts, he sees a period of lower growth ahead, as the Chinese government seeks to rebalance its economy away from debt and capital investment, and toward consumer spending and services. “The accumulation of debt is likely to end not with a financial bang but with a whimper, as growth peters out,” he writes.

Even if China can avoid the immediate danger of a crash, the move to a newer, more durable growth model represents a tremendous challenge. Some China hands, such as Stephen Roach, the former chief economist at Morgan Stanley who is now at Yale, believe the authorities in Beijing have a handle on the task, and are making progress. Other observers, such as George Soros, are more dubious. At the beginning of the year, Soros said that using stimulus policies to boost growth would only postpone the day of reckoning, because “restarting the furnaces also reignites exponential debt growth, which cannot be sustained for much longer than a couple of years.”

Since China is one of the many areas on which I am alarmingly inexpert, I’m going to remain agnostic on this one, at least for now. I would note, however, that if China manages to muddle through and achieve a “soft landing” it will be one of the few countries on record that have escaped a big credit and real-estate boom without a wrenching recession. If you want more reasons to be skeptical, I suggest reading “Avoiding the Fall: China’s Economic Restructuring,” by Michael Pettis, an economist at Peking University who also maintains a lively but irregularblog, where he has consistently warned that the challenges facing China are much bigger than many outsiders realize. If you want a more upbeat take, or you have recently bought calls on the Shanghai composite, you might consult the analysis of Roach, who has a new book out on the economic co-dependency of the United States and China.

One thing is certain: what happens in China will have a big impact on the rest of the world, the United States included. It’s not just that China is now America’s third-biggest export market (and its largest source of imports). It’s the world’s biggest importer of oil, iron ore, copper, and many other commodities. For the past decade or so, it’s been the biggest source of global growth. A big shock to China would be a big shock to everybody.

The Realist Prism: U.S. Unwilling to Give or Take on Ukraine

By Nikolas Gvosdev, on April 4, 2014

It was no surprise when last Sunday’s emergency meeting in Paris between U.S. Secretary of State John Kerry and Russian Foreign Minister Sergei Lavrov ended inconclusively. The United States is not prepared to cut a 19th-century-style deal with Moscow to resolve the Crimea crisis, but neither has it articulated a 21st-century response that would change Russia’s calculus.

The Kremlin remains puzzled as to why Washington is not more responsive to its pitch for a settlement for Ukraine that would result in the decentralization, federalization and neutralization of the country. After all, similar arrangements were made as late as the mid-20th century concerning the status of Finland, Austria and Laos. The U.S. would even retain some bargaining chips to utilize on behalf of its interests in Ukraine in such a deal. The same devolution of power that might allow more Russia-leaning regions of Ukraine to forge closer ties with Moscow could be utilized to connect the pro-Western segments of the country in a closer relationship with Europe. 

And if a formal commitment to neutrality meant that Ukraine could not join NATO—a prospect that President Barack Obama has already ruled out for the foreseeable future—and could only have a looser affiliation with the European Union, it also would prevent Kiev from being roped into Russian President Vladimir Putin’s planned Eurasian Union or the existing Moscow-led Collective Security Treaty Organization. The status of Crimea, of course, is a separate problem, but even here, some have hinted at a swap that would see Ukraine accept the loss of the peninsula in return for debt forgiveness and discounted energy.

But the American foreign policy establishment today is not temperamentally suited to make such deals, which reek of realpolitik and of playing with the destinies of countries as if they were pieces on a game board. Obama’s rejection of the chessboard motif as a way to encapsulate the U.S.-Russia geopolitical competition in Eurasia is not accidental. On top of that, there are two major objections to cutting any sort of deal with Moscow over Ukraine.

The first comes from those who argue that Russia is acting from weakness, another theme heard in recent Obama speeches, and that the Putin regime is vulnerable. If Putin is next in line to be removed in a wave of popular unrest, why should Washington make any sort of deal that legitimizes a Russian zone of privileged interests in the Eurasian space? The types of deals U.S. presidents like Dwight Eisenhower or John F. Kennedy were forced to make with the Soviet superpower are not applicable to a Russia that is but a “regional power,” in Obama’s description, and not a peer competitor of the United States.

Myanmar’s Energy Sector: Inviting the World to its Shore

Vibhanshu Shekhar
Visiting Fellow, IPCS
3 April 2014

In a bid to bolster the country’s efforts to open up to the world, Myanmar, on March 26, invited 13 oil companies from all over the world to operate in oil and gas explorations in 20 offshore blocs off the coast of Myanmar in the Bay of Bengal, Moattama gulf and the Tanintharyi Basin. Ten of these are shallow water drilling projects, and the rest, deepwater drilling projects. In April 2013, the government of Myanmar had floated the tender for 30 offshore blocs and pre-approved 60 proposals in July 2013. The recent announcement comes at a critical time when the country is somewhat successfully delivering on its ASEAN Chairmanship, gradually drifting towards federalism as a founding basis of Myanmar as a nation-state, and emerging as one of the important investment destinations in Southeast Asia. 

Significance of the announcement

First, these concessions expand the scope for major market players to enter Myanmar’s energy sector. Major international oil businesses – Total, Royal Dutch Shell, Chevron, Unocal, ConocoPhillips, and Reliance Industries, among others – will participate in exploration and production operations. While previous explorations and marketing were confined primarily to Asian oil companies, these new concessions involve major oil businesses from the West. This will give a much-needed boost to Myanmar’s international attractiveness and its investment climate.

Second, the consequent entry of major market players would bring in investment and technology – two components important for the development of Myanmar’s negligible infrastructure and overall economy. With the prediction of 6-7 per cent growth in annual GDP in the short to medium term, such inflow of FDI and advanced technology may give a major boost to Myanmar’s economy, and the modernisation of its port infrastructure. This can further help its developing the country’s coastal areas as business hubs. In 2013 alone, Myanmar received over $4 billion investment, with a bulk of it flowing primarily from Asian businesses in real estate, construction and energy infrastructure.

Third, this will give a major boost to both the upstream and downstream industries along the country’s coastline. The development of industries along the coast may lead to the modernisation of the southern cities, further integrating Myanmar with the globalised world.

Fourth, this will accelerate the much –needed financial and banking sector reforms in Myanmar. Though Myanmar’s financial sector has seen some improvements over the past two years, it still remains rudimentary and underequipped. The financial regulatory system too needs to be developed. In December 2013, Myanmar decided to allow foreign banks to set-up fully owned subsidiaries following the visit of Christine Lagarde, Managing Director, International Monetary Fund; and several Asian banks have since opened their representative offices in the country. The entry of global businesses has tempted global finances and microfinance companies, such as MasterCard to enter the local market. 

Finally, the entry of international corporations and associated economic reforms indicates the end of Myanmar’s international isolation, and helps its leaders project the country as a regular nation-state. The involvement of oil companies as a result of March announcement is going to boost Myanmar’s normalisation and speed up the process of the country’s continued integration with the international business. 

Japan Loosens Restrictions on Arms Exports As China Looks On

Japan’s decision to allow more arms exports leads to caution and suspicion in China.
April 04, 2014

On Tuesday, Japan announced a relaxation of its long-held restrictions on arms exports. Under the original “Three Principle on Arms Exports,” Japan was not permitted to export arms to any “communist bloc countries,” to countries under arms embargos by the UN Security Council, or to any countries “involved in or likely to be involved in international conflicts.” As my colleague Ankit wrote earlier, Prime Minister Shinzo Abe has been pushing for a change to these regulations as part of his policy of “proactive pacifism.”

The new policy allows Japan to export arms and participate in joint weapons development and production when such moves will serve international peace and Japan’s security. The requirement to serve international peace is obviously vague and open to fairly broad interpretation by Tokyo. Japan is expected to focus most of its exports on non-lethal, defense-oriented equipment, but there is already speculation that the new policy will allow Japan to join in production of the United States’ new F-35 fighter jets. Japan’s Defense Ministry has proposed that Japan serve as the Asia-Pacific maintenance hub for F-35s.

Predictably, the United States praised the move by its ally to loosen restrictions on arms exports. State Department Deputy Press Spokesperson Marie Harf told reporters, “We welcome this revised Japanese policy on defense equipment exports. It expands opportunities and simplifies processes for defense industry cooperation with the U.S. and other partner nations.” Harf added that the changes will “allow Japan to modernize its defense industry and processes so it can participate in the 21st century global acquisition marketplace.”

This latter point, that the easing of arms export restrictions will help boost Japan’s military industry, is exactly what worries China about the move. An increased ability to export arms will help Japanese defense contractors (such as Mitsubishi Heavy Industries, Kawasaki Heavy Industries, and IHI Corporation), which were caught between a virtual ban on arms exports and a steadily decreasing Japanese defense budget. Soon after the new policy on arms exports was revealed, Japan’s Defense Ministry presented a strategy to “boost the competitiveness of the domestic industry,” revealing high hopes that the loosened restrictions will bring concrete gains to Japan’s defense industry.

A revitalized Japanese defense industry is exactly what China does not want to see. Given these concerns,Foreign Ministry Spokesman Hong Lei took a fairly mild tone in response to a question about Japan’s new arms export policy. “What policy Japan pursues in the military and security fields reflects where Japan is headed. It also has a bearing on the security environment and strategic stability of the region,” Hong said. He also repeated China’s usual call for Japan to learn from history and “do more to uphold peace and stability of the region.”

Asia’s Next BRICS?

April 04, 2014

In a recent announcement, global credit insurer Coface Group said the original BRIC economies of Brazil, Russia, India and China would post below-average growth in 2014, down 3.2 percentage points on their average for the previous decade.

However, a new wave of 10 emerging economies with accelerating economic growth, solid production prospects and financing to support expansion could eclipse them, it said.

According to the France-based company, Colombia, Indonesia, Peru, the Philippines and Sri Lanka placed in its first group of star performers, with sound business climates similar to current BRICS. Bangladesh, Ethiopia, Kenya, Tanzania and Zambia made up its second group, which while having potential faced more difficult business environments.

“Naturally, it will be more difficult for the second group of countries, who could take longer to fully realize their growth potential. However, their business environment problems are relative: in 2001, the quality of governance in Brazil, China, India and Russia was comparable to that of Kenya, Tanzania, Zambia, Bangladesh and Ethiopia today,” said Julien Marcilly, Coface’s head of country risk.

The new grouping benefits from inflation rates around 2.8 percentage points lower than those facing the original BRICS, as well as having less public debt, averaging 40 percent of gross domestic product (GDP) compared to 54 percent for the then BRICS, as first identified by Goldman Sachs economist Jim O’Neill in 2001.

Nevertheless, Coface pointed to weaknesses in its “new emerging” group, including a lower share of the world population, comprising 11 percent compared to the BRICS’ 43 percent in 2001. They also have smaller economies, representing only 70 percent of the BRICS in 2001, while running average current account deficits of around 6 percent of GDP compared to the original BRICS’ surpluses.

Strategic ambiguity a hazard for Asian security

4 April 2014
Author: Richard A. Bitzinger, NTU 

One of the most dangerous challenges facing the Asia Pacific is ambiguity — particularly strategic ambiguity on the part of the two most important players in Asian security, the United States and China. How these two nations engage with each other is ultimately of paramount importance to regional security. Therefore, it is crucial that they make their intentions crystal clear, not only to each other but to the other Asia Pacific nations as well. 

China is, of course, still a very opaque country. Despite recent efforts at transparency, it is difficult to fully fathom Chinese strategic intentions. More to the point, its military modernisation efforts of the past decade have been extremely worrisome, mostly because Beijing has done such a poor job justifying its actions to the outside world. 

Its defence budget has grown at least five-fold over the past 15 years; it has added numerous types of advanced military equipment — including fighter jets, submarines, surface combatants, and all kinds of missile systems — and it has accelerated its development of a host of new weapons systems, many of them quite unprecedented, such as an anti-ship ballistic missile. 

At the same time, it has matched this military buildup with a new assertiveness in pressing its territorial claims in the South and East China Seas, and sometimes ratcheted up the rhetoric with little apparent regard for how poorly this goes down in the rest of Asia. Indeed, China’s recent behaviour is increasingly perplexing to neighbours. 

For its part, the US ‘return to Asia’ has been only fitfully enunciated. Even more disturbing is the whole issue of the US military’s so-called Air-Sea Battle (ASB). The US military has embraced ASB as a novel approach to warfare intended to counter 21st-century threats. Yet, given that so many have made ASB such an essential element of US war fighting, and considering the high stakes that it supposedly deals with, it is mystifying that so few particulars been made public as to what ASB really entails. 

ASB is often advanced as an essential military approach when it comes to dealing with modern threats. And yet so little is known, beyond some banalities, about how ASB is supposed to work in a real-world situation and, more importantly, why it is necessary. However, the lack of substance or detail surrounding ASB has permitted wide-ranging speculation as to what it really is.