25 June 2013

The Chinese Incursion: Need to Introspect

IssueVol. 28.2 Apr-Jun 2013| Date : 24 Jun , 2013

Robert Kaplan in his book “The Revenge of Geography” suggests that, “India’s rivalry with China is not like the one with Pakistan: it is more abstract, less emotional, and (far more significantly) less volatile. It is a rivalry with no history behind it.” Therefore, at the highest levels we need to assess more accurately what China’s National Interests are and how and why it regards India as an impediment in its development process. Just as China expects other nations to respect its core interests and sensitivities, so should India make clear its concerns whether it pertains to refuge accorded to the Tibetan Government in exile, or India’s relations with US and/or Japan. India should convey its position emphatically on issues regarding its sensitivity to China’s military and naval presence in the countries around India, China’s relations with Pakistan pivoting on collusive military support aimed to constrain India, or India’s concern with regard to the easy availability of “Made in China” weapons and munitions to insurgents in the North-East and at the same time, India should assertively pursue its own National Interests.

A major weakness with India lies in the lack of knowledge in communication skills in Chinese language.

The recent Chinese incursion across the Line of Actual Control (LAC) in Eastern Ladakh is not a one off incident; neither is it going to be the last of its kind. Therefore, the incident warrants a deeper understanding on this matter of the differing perceptions of the LAC. Notwithstanding the fact that respective perceptions have not been shared or exchanged by both sides, measures to assert India’s claims need to be built-in without an overt display of belligerence. The perceived maladies in the present dispensation and possible recourse are discussed in the succeeding paragraphs.

At the outset it is relevant to note that China has accorded due cognizance to the Chinese armed forces as a prominent element of national power. The Chinese White Paper on Defence released on April 16, 2013, in which China has symbiotically defined the role of the armed forces as, “It is the strategic task of China’s modernisation drive as well as a strong guarantee for China’s peaceful development to build a strong national defence and powerful armed forces which are commensurate with China’s international standing and meet the needs of its security and development interests.”

Further, in pursuit of the doctrine of fighting and winning local wars under conditions of informationalisation, the modernisation of its armed forces is being suitably tailored. At the People’s Liberation Army (PLA) Headquarters, a new Department of Strategic Planning has been established as also the Department of Communications has been reorganised as Department of Informationalisation. Significantly, the Paper further states, “We will not attack unless we are attacked; but we will surely counter-attack if attacked.” These two seemingly innocuous points indicate the desire to be prepared to dominate any situation arising along its borders. Ironically, the 1962 Chinese offensive into India was deemed by them as a “self-defence counter-attack”. That the most recent White Paper on Defence reiterates the latter point should not be dismissed without due consideration.

The Boundary and Territorial Integrity

There are three steps in establishing a country’s boundary – Delimitation, Demarcation, and Delineation. In the 1960 Boundary Talks, both India and China had defined their claimed International Boundary and in the process delimited their respective boundaries. Though the term LAC figured for the first time in the letter to Nehru from Zhou Enlai in November 1959, there was no formal exchange or discussion on the alignment of the LAC during these talks. A dramatic new reality was presented after 1962 with the emergence of an unclear and unresolved LAC. Be that as it may, it behooves the Government of the day to put in place all measures to ensure the sanctity of all its claimed territorial assets with full vigour. To make excuses for any loss of territory by saying that, “not a blade of grass grows there” is indicative of a lack of conviction of its own stance and the perceptible lack of iron will and resolve to back its own consciously considered decisions and statements.

A 10-step programme to tap India’s enormous potential

First Published: Mon, Jun 24 2013
Emerging-market gloom is overdone. India, in particular, could teach the pessimists a lesson

Long-term growth depends ultimately on just two things—the number of workers and how productive they are; and India’s demographics are remarkable. 

It’s fashionable to say the era of strong emerging-market growth is over. As the US recovers, the global cost of capital will rise, holding back investment; against this background, avoiding the next crisis is the best that most emerging economies can do. If you take this view, India might seem a perfect example, with its widening current account deficit, heavy public borrowing, persistent inflation and weak currency.

I don’t think so. As a general matter, emerging-market gloom is overdone. India, in particular, could teach the pessimists a lesson.

Last week, I made a quick visit to see the chief minister of Gujarat,Narendra Modi. He’d asked me to give a presentation on how India could realize its still-enormous potential. I went through points I’d first discussed in a paper I co-wrote with Tushar Poddar in 2008:Ten Things for India to Achieve its 2050 Potential. It’s striking to me that, five years later, our recommendations don’t need revising (They do need elaborating, and I’ll get into more detail in an updated study and further columns. Modi and I are planning a conference of experts before the end of this year).

I’ll state no opinion on Modi’s chances of becoming prime minister after next year’s general election—it has been announced that he’ll lead the opposition Bharatiya Janata Party’s (BJP’s) campaign. He’s a controversial figure. Detractors call him a sectarian extremist. I will say this: He’s good on economics, and that’s one of the things India desperately needs in a leader.

Cultivating growth

Like all Indians, Modi loves acronyms. Me too. I admire his MG-squared—minimum government, maximum governance—and P2G2—pro-active, pro-people, good governance. That sums it up pretty well. I don’t think it’s a coincidence that Gujarat has avoided the slowdown that has almost halved India’s national rate of growth. The state just keeps on growing at double-digit rates.

Long-term growth depends ultimately on just two things—the number of workers and how productive they are. India’s demographics are remarkable. The country is on track to grow its workforce by 140 million between 2000 and 2020. That increase is the equivalent of the working population of France, Germany, Italy and the UK combined.

Even with unspectacular growth of a little more than 6% a year, India’s economy could be 40 times bigger by 2050 than it was in 2000—about as big as the US economy will probably be by then (though not as big as China). But it could do so much better than that. Growth of 8.5% over the entire period is possible—with growth of more than 10% over the next 15 to 20 years not out of the question—provided it makes some changes.

It’s all about productivity. India scores poorly on indexes of economic variables that are critical for economic efficiency—-worse than Brazil, China and even Russia. To change that, it needs to do 10 things:

1. Improve its governance. This is probably the hardest and most important task— the precondition for the rest. Modi is right: Whoever leads the next government in 2014, India needs maximum governance and minimum government. There is no point having the world’s largest democracy unless it leads to effective government.

2. Fix primary and secondary education. There has been some progress here, but a huge number of young people still get little or no schooling. I sit on the board of Teach for All, a global umbrella organization for groups that encourage the brightest graduates to spend at least two years teaching. Today India has about 350 teachers in these programmes. It could do with 350,000 or more.

3. Improve colleges and universities. India has too few excellent institutions. Its share of places in the Shanghai ranking of the world’s top universities should be proportional to its share of global gross domestic product—meaning 10 universities in the top 500 (it currently has just one). Make that an official goal.

4. Adopt an inflation target, and make it the center of a new macroeconomic policy framework.
5. Introduce a medium to long-term fiscal-policy framework, perhaps with ceilings as in the Maastricht Treaty—a deficit of less than 3% of GDP and debt of less than 60% of GDP.

6. Increase trade with its neighbours. Indian exports to China could be close to $1 trillion by 2050, almost the size of its entire GDP in 2008. But India has little trade with Bangladesh and Pakistan. There’s no better way to promote peaceful relations than to expand trade—and that means imports as well as exports.

7. Liberalize financial markets. India needs huge amounts of domestic and foreign capital to achieve its potential—and a better-functioning capital market to allocate it wisely.

8. Innovate in farming. Gujarat isn’t a traditional agricultural producer, but it has improved productivity with initiatives like its white revolution in milk production. The whole nation, still greatly dependent on farming, needs enormous improvements.

9. Build more infrastructure. I flew in to Ahmedabad via Delhi, and out via Mumbai, all in a day. I got where I needed to go—but it’s obvious how much more India needs to do. Adopt some of that Chinese drive to invest in infrastructure.

10. Protect the environment. India can’t achieve 8.5% growth for the next 30 to 40 years unless it takes steps to safeguard environmental quality and use energy and other resources more efficiently. Encouraging the private sector to invest in sustainable technologies can boost growth in its own right.

I’ll have a lot more to say about the details as this project moves forward. For now, suffice to say that India’s potential is vast—and given the will, it can be tapped. Bloomberg

Jim O’Neill, former chairman of Goldman Sachs Asset Management, is a Bloomberg View columnist.

The improbable evacuation of Jungle Chatti

Manu Pubby : Gauchar
Tue Jun 25 2013

Flood-ravaged houses and hotels in the market of Uttarkashi Monday. PRAVEEN KHANNA

In the register of daring rescue operations the armed forces have undertaken so far in Uttarakhand, the evacuation of about 1,500 pilgrims from a narrow valley in Jungle Chatti stands out. Not just for the perfect coordination between the army and the air force but also the extraordinary risks involved.

The pilgrims had been stranded in Jungle Chatti — a steep stretch of path between Gaurikund and Ram Bada set in a mountainside looming over a raging river and prone to landslides — for five days without food or water.

The first flash flood hit the valley of Kedarnath on the night of June 15, when it was teeming with pilgrims to and from the shrine.

The flood cut down the footpath on either side and carried away dozens of pilgrims. So wide are the landslides on both sides that an alternate path would be required to climb up to the shrine.

Since the pilgrims at Jungle Chatti had more reaction time to get out of the way given that it is downstream both of the worst-affected Ram Bada and Kedarnath Temple, many of them managed to climb up the mountain.

But as the area lies in a narrow valley without any means of communication and out of the visual range of most aerial sorties, it took search teams four days to find a large number of people stranded on a small stretch of land. Soon after a passing helicopter located a few people in the area, efforts were made to airdrop essential supplies to them. "The valley is so narrow and the gradient of the mountains so steep that all efforts to drop food and water were unsuccessful. The supplies went down in the river," said Lt Gen N S Bawa, GoC of Uttar Bharat.

Then, the armed forces tried to land a helicopter on the narrow ledge — which is all that is left of Jungle Chatti — but the efforts came to nought, as did the attempts to slither troops because of strong winds and the limited space available. "The narrow valley made Jungle Chatti the toughest place to fly in," said Col Suneet Sohal, who is leading the Army Aviation's rescue work.

The army men had only one option left. They jumped down from a Cheetah helicopter on the ledge. It was as dangerous a move as it could get — one misstep could have sent them rolling down into the raging river below. They, however, managed to stand firm and quickly set up a makeshift helipad. The first helicopter landed soon.

"The first meal that most had was after five days when a chopper landed at Jungle Chatti. The number of sick and hungry kept on swelling as many came down from the mountains after seeing a chopper land," an army officer said.

Then began perhaps the most intense air evacuation operation in Uttarakhand so far. The air force and the army moved at a blistering pace to airlift the pilgrims out to Gaurikund, from where bigger Mi-17 helicopter could operate, because even a slight dip in the weather would have made flying impossible in the valley.

Dozens of seven-minute sorties evacuated 390 people from Jungle Chatti in a matter of hours on June 22, the fifth day since the flood.

The next day, with bad weather looming, an even bigger air effort was set in motion to get out 540 pilgrims. About 200 more able-bodied pilgrims were moved out on foot by adventurous army men who managed to cut a steep path out.

"If this was a war effort, several pilots and soldiers would be in for some heavy-duty gallantry awards. Jungle Chatti, as of now, is completely evacuated. The people who will go there now are reconstruction teams but that will be another story," an army officer summed up the operation.

In the crosshairs of Rambo’s para-truths- Relief politics in the middle of tragedy


A soldier helps a woman at a maNew Delhi, June 24: A unit of army engineers, the 5 Sikh battalion and Army Aviation Corps pilots today rescued more than 800 people through a combination of engineering skills and daredevil-flying to bridge a chasm over the Alaknanda river with ropes and helicopters.

But their feat is likely to be lost in the din that political leaders have unleashed following Narendra Modi’s visit last week and claims that he helped “rescue” 15,000 people and in a Rambo-act “para-dropped” a medical team. Competitive claims are flying between the BJP and the Congress on what they have done to give relief to the stranded in Uttarakhand.

Even the army is not “para-dropping” its paratroopers. The special forces are either trekking through the hills or slithering down from hovering helicopters. There isn’t a drop-zone in the hills in which paratroopers can land. The army and the air force would have done it if there was one.

Air chief marshal N.A.K. Browne, usually careful with his words, promised today that “the rotors of our helicopters will keep churning till the last stranded person is rescued”.

Congress vice-president Rahul Gandhi, who was out of the country, visited Dehradun today in what is being seen as a late response to the impact of Modi’s two-day trip to Uttarakhand last week that got the Gujarat chief minister more mileage in cyberspace than his helicopter could log.

The impression that has been created — that Modi rescued 15,000 people of Gujarat from the tumult caused by nature’s fury in Uttarakhand — does not withstand scrutiny. Modi himself has made no such claim. But his party’s state unit spokesperson, Anil Baluni, has explained that there was a sophisticated plan put together by Modi to energise and bring his folk back home.

How do you distinguish a Gujarati from a non-Gujarati in a crowd of hapless pilgrims from across the country desperately seeking succour? Besides, the Gujarat chief minister was not given permission to land anywhere beyond Jolly Grant because that could interfere with relief and rescue.

He was keen but he was denied the permission. Defence minister A.K. Antony, better informed of the situation, decided not to go to the zone at all for that reason.

Absurd claims of a rescue act in which 15,000 were evacuated in two days of a VIP visit are leaving the army stumped. An officer in army headquarters was stupefied when someone responding to the army’s official Twitter account handle sent a direct message asking why the army cannot replicate what Narendra Modi has done.

Such tales of Himalayan “Feku”-ness risks taking the attention away from those who are actually conducting the rescue and saving lives at the risk of their own even if they are paid to do so.

Between tales of buffoonery and bluff, the politics of rescue and relief is also threatening to diffuse the focus on the job at hand — that there are thousands still stranded and missing.

The current rescue act in Uttarakhand is challenging even the skills of battle-worthy men and women, not to speak of politicians. Today’s feat by the army and its aviation squadron is just one illustration of what it takes.

Although rain and strong winds in the mountains created almost impossible conditions for flying, the army still decided to chance the rescue act today because of the desperation of the people.

Its engineers and infantrymen strung a “Burma Bridge” over the chasm, created after the permanent bridge was washed out in the floods. Yesterday, the soldiers had brought down more than 840 men, women and children from Badrinath on the way to Govindghat.

But 15km from Badrinath and 5km before Govindghat, the road cum track was proving impossible to negotiate because the permanent bridge had been washed away.

To string the “Burma Bridge”, the soldiers went up and down the cliffs on either side of the chasm, tied and nailed the ends of the ropes to the hillsides and to sturdy trees.

Then, one by one, the soldiers asked the able-bodied to cross the bridge over the gushing river, holding two ropes with the hands while gingerly stepping on a third with the help of an escort. They tied each person with another rope in a contingency measure.

The Army Aviation Corps deployed two Cheetah helicopters. Each Cheetah can carry two persons apart from the two pilots. In the rain and the wind through which the Cheetahs made 59 sorties, 55 went into creating a heli-bridge — each Cheetah landing at one end, picking up the aged and the infirm, and landing at the other, depositing them and returning to fetch more.

China agrees to Indian condition on not freezing troop levels

New Delhi, Tue Jun 25 2013

Signalling its willingness to meet India halfway on creating a new architecture of confidence-building measures on the Line of Actual Control (LAC), Beijing has accepted New Delhi's condition that the proposed Border Defence Cohttp://www.indianexpress.com/news/china-agrees-to-indian-condition-on-not-freezing-troop-levels/1133472/0operation 
Agreement (BDCA) will not amount to freezing current troop levels on the frontier.

Responding to the Indian draft of the agreement, sources said China has also clarified that it does not expect the clause on returning inadvertent border-crossers to apply to

Tibetans as well. Many Tibetans cross over to India for fear of persecution, a channel India has historically kept open.

The second Chinese draft on the BDCA has arrived just days ahead of the next round of Special Representative-level talks on the boundary issue on Thursday.

National Security Advisor Shivshankar Menon, who will lead the Indian side, is expected to discuss the details with his newly-appointed Chinese counterpart, State Councillor Yang Jiechi.

This agreement is a Chinese idea that was first formally conveyed at the bilateral defence dialogue, headed by the defence secretary on the Indian side. The new Chinese administration followed it up quickly and even handed over the first draft of the BDCA in the first week of March.

A bit surprised by the sense of urgency China was attaching to the agreement, New Delhi conducted a detailed analysis of the draft and found important areas of concern. These included clauses which alluded to maintaining agreed troop levels along the LAC.

Given that China had already built effective infrastructure on its side of the border to allow it to station troops at a fair distance from the LAC, sources said these terms suited Beijing more than New Delhi. Moreover, the flat topography on the Chinese side makes troop movement faster and easier than on the Indian side.

The biggest fear was that this could thwart the major military expansion India has undertaken along the LAC. While two additional divisions have already come up, the final go-ahead to set up a new corps, which would amount to a fresh accretion of about 90,000 soldiers, is also due soon.

For India, any new agreement should not go beyond providing a better architecture of confidence-building measures to ensure peace and tranquility on the LAC.

The other key concern related to the clause on returning inadvertent border crossers. While India has followed this principle with its other neighbours, concerns were raised on whether this would also apply to Tibetans. India wanted this explicitly clarified.

After the Depsang face-off, India was also keen that the agreement contain specific measures on dealing with such situations in the future. One of the main problems the Indian side faced during the crisis was the mismatch in communication between what authorities in Beijing were conveying through diplomatic channels and what the local commanders on the Chinese side were telling their Indian counterparts at flag meetings.

While earlier protocols make the point that in such situations both sides will re-establish status quo and start negotiations, India wanted these to be amplified in greater detail in the new agreement.

All this formed part of the Indian response to the Chinese draft, which was passed on in early-May, ahead of Chinese Premier Li Keqiang's visit. Later, Prime Minister Manmohan Singh and Li agreed that the two Special Representatives must explore ways to strengthen peace and tranquility on the LAC following the Depsang face-off.

By handing over their second draft now, the Chinese side has ensured that Menon and Yang take negotiations to the next level.

The dark and covert world of black money

Monday, 24 June 2013 | Joginder Singh 

A consortium of international journalists has recently exposed a network of offshore entities, some of which are owned by Indians. This is yet another example of how funds are being siphoned out of the country

In the 1860s, while talking about corruption in his country, US President Abraham Lincoln had said: “I see, in the near future, a crisis approaching that unnerves me and causes me to tremble, for the safety of my country. Corporations have been enthroned, an era of corruption in high places will follow, and the money-power of the country will endeavour to prolong its reign, by working upon the prejudices of the people, until the wealth is aggregated in a few hands and the Republic is destroyed”.

It was a prophetic warning, which India should also have heeded post-independence so as to control graft. Today, widespread corruption has not only caused immense harm to the country and its economy, but has also dealt a severe blow to good governance.

Recently, the biggest global exposé on offshore investments and secret financial transactions, has revealed details of more than 1.2 lakh offshore entities and trusts belonging to individuals and companies in more than 170 countries and territories, including India. Details of these transactions were found in 2.5 million secret files and two million emails exchanged over a period of 30 years. According to Indian media reports, there are 612 Indians on the list, which include two Members of Parliament and several industrialists.

The details were obtained by the International Consortium of Investigative Journalists. Based in Washington, DC, the ICIJ is an independent network of reporters who work together on cross-border investigations. The secret files provide facts and figures — cash transfers, incorporation dates, links between companies and individuals — that illustrate how financial secrecy has spread aggressively around the globe.

The exposé has also thrown light on the functioning of ‘nominee directors’ in offshore companies, several of whom have also been engaged by Indian patrons of offshore companies. For instance, a cluster of 28 ‘sham directors’ have been identified for having served as the on-paper representatives of more than 21,000 companies between them, with some individual directors representing as many as 4,000 companies each.

The exposé comes shortly after another list became public containing the details of 18 Indians who had bank accounts in LGT Bank in Liechtenstein and around 700 others who had accounts in HSBC, Geneva. In a few cases, account holders were prosecuted and had to pay penalties to the Income Tax authorities for deposits they had made abroad without paying taxes in India.

This is a major development in the fight against money laundering — which is defined as disguising the source or ownership of illegally-gained funds to make them appear legitimate, or hiding money to avoid paying taxes or using legally-gained money in pursuit of unlawful activities.

The Government of India has officially received the data and the Union Ministry for Finance has said that inquiries have been put in motion. Investigating black money is a stupendous task before our Central Board of Direct Taxes. One reason for this is that the laws in this area are weak and, as always, it is the responsibility of the prosecuting agency to prove the guilt of the accused. Why, in certain cases such as tax evasion of say Rs10 crore or more, can’t the tables be turned?

During his tenure as Union Commerce Minister, President Pranab Mukherjee had once made a memorable comment, in a meeting where I was also present, which is worth reproducing. He said: “I have seen companies become bankrupt or close down, but not the owner of such firms or companies”.

The U.S.-India Strategic Dialogue: Forging the Next Phase of Cooperation

JUNE 20, 2013
Upcoming strategic talks offer an opportunity to cultivate personal ties and shape the future of U.S.-India relations.

U.S. Secretary of State John Kerry arrives in New Delhi on June 23 to take part in the U.S.-India Strategic Dialogue, a forum inaugurated in 2009 to discuss the full range of bilateral issues. In this Q&A, Ashley J. Tellis explains that relations between Washington and New Delhi are stronger than they have been in decades. The strategic dialogue offers an opportunity to cultivate personal ties and shape the future of the relationship.


This is the fourth round of the strategic dialogue between the United States and India, and it is significant because it will define the agenda for U.S.-Indian relations for the duration of U.S. President Barack Obama’s second term. It will also be the first time that Kerry meets his counterpart, Indian Minister for External Affairs Salman Khurshid, in a formal setting. 


The range of U.S.-Indian bilateral engagement is immense—so much so that it is hard to keep track of the multiplicity of activities under way. To give just a few examples, the United States and India collaborate actively on strategic issues such as defense, counterterrorism, diplomacy, and regional security; science and technology; agriculture; health; energy; education; and space exploration. 

The agenda for cooperation in these areas was defined early during the first Obama term, and much of the practical business during this round of the dialogue will center on reviewing progress and evaluating where new initiatives are worthwhile.


The centerpiece of the talks will be the conversations Kerry has with Khurshid and Indian Prime Minister Manmohan Singh on the direction of the U.S.-Indian relationship and what must be done to deepen it further. 

More specifically, I think the dialogue should have three aims. The first and most important objective for Kerry, in my view, must be building personal relationships. Developing a rapport with his Indian counterpart will do more for the bilateral relationship than any specific “deliverables” at this juncture because the myriad activities under way are already yielding their own fruits outside of the public eye. I also hope the secretary gets an opportunity to reach out to Indians outside of government—in industry and civil society, for example—because that’s where the most exciting things occurring in India are taking place, and that’s where the future of the bilateral relationship will be forged. 

The second objective should be having a freewheeling but comprehensive conversation about the state of the world, particularly the situation in Asia and important subregions such as East Asia, the Middle East, and the larger South Asian area. Too often, conversations on these subjects follow the scripted talking points drafted by bureaucracies for their principals. While these have their place, both Kerry and Khurshid would be well served by a genuine conversation that allows them to build personal ties and develop a better appreciation of each other’s predicaments and concerns. 

The third objective should be encouraging India to accelerate the economic reforms that it began two decades ago but has yet to complete. If implemented, these reforms would offer the best opportunities for deepening the bilateral relationship. For that reason, they merit serious conversation. 


Obviously, I expect that the secretary’s conversations with his Indian interlocutors will be wide-ranging. However, I think three areas will certainly come up because they are on the minds of senior Indian policymakers today. 

AFGHANISTAN: Kerry-Kayani Secret Deal Stinks

Paper No. 5515 Dated 24-Jun-2013
By Dr Subhash Kapila

“Afghan Revelations: Pak-US Secret Diplomacy Created Doha Roadmap”---The Express Tribune, Pakistan. Headline, June 20 2013

“The Haqqanis are no longer the bull’s-eye of US military operations. They are no longer in the ‘kill or capture and be rewarded’ category. They are part and parcel of the team that would represent Mullah Omar with which Washington is deeply engaged,”---Pakistan Foreign Ministry official quoted in the above Pakistani newsreport.

The United States in its desperation to exit Afghanistan by end-2014 has seemingly let its new Pro-Pakistan US Secretary of State run loose in striking a bargain with Pakistan Army Chief General Kayani without considering the lateral strategic fallouts in the region.

The United States secret deal brokered by Secretary of State Kerry with Pakistan Army Chief stinks of duplicity and backstabbing the Afghan President besides betraying India which has sizeable and legitimate strategic national security interests in Afghanistan.

The Kerry-Kayani deal stinks because in a manner unbecoming the standing of a global power, the US Secretary of State capitulated to all the demands of the Pakistan Army Chief on Afghanistan, namely:
  • Direct US peace talks with Afghan Taliban in Doha, Qatar where the US facilitated the opening of what the Afghan Taliban proclaimed as the Islamic Emirate of Afghanistan
  • US reconciliation with America’s inveterate foes of more than a decade in the Afghan War, namely Afghan Taliban leader Mullah Omar and the Haqqani brothers. Both these entities were responsible for suicide bombings and attacks on US Forces in Afghanistan.
  • US agreeing to work towards reframing of the Afghan Constitution to cater for Taliban power-sharing in Kabul, on departure of US Forces.
  • The notorious Haqqani warlords listed by the US State Department as global terrorists would no longer be on the target list. They will be honoured by Washington by allowing them to sit on the high table of negotiations.

In essence what the US Secretary of State Kerry has done through this secret deal with the Pakistan Army Chief is to “Revert Afghanistan to SQUARE ONE”, as it existed on the eve of US military intervention in 2001. “Operation- INFINITE JUSTICE” which was the original name of US military intervention in Afghanistan is now being brought to an ignoble end and this US operation can best be titled now as “Operation- INFINITE STRATEGIC BLUNDER”

In case this secret Kerry –Kayani Deal is not aborted by President Obama and allowed to fructify, it has all the damaging potential for:
  • Hastening the partition of Afghanistan
  • Destabilisation of the entire Af-Pak region
  • Domestic political conflict between PM Nawaz Sharif and the Pakistan Army Chief General Kayani outgrowing his boots because of Kerry’s patronage,
  • Talibanisation of Pakistan
  • Strategic turbulence on the Indian Sub-Continent
  • Embedment of China’s military in Afghanistan courtesy Pakistan Army and the Taliban being accorded political legitimacy as part of the secret Kerry-Kayani deal.
  • Rendering President Karzai, the duly elected President of Afghanistan, installed by the United States itself, as dispensable in the course of pursuance of US traditional policies of ‘political expediency’. By doing this the United States would lose all political credibility on any future role in Afghanistan’s affairs. Indicative of this fact was the Afghan President breaking off the security dialogue with the United States.
  • Irretrievably damaging the already floundering US-India Strategic Partnership. As I wrote in a recent Paper of mine that the US-India Strategic Partnership was neither “Strategic” nor a “Partnership”
  • Possible emergence of an alternative grouping to promote Afghanistan’s security and stability of Russia-Iran-India which I recommended in one of my earlier Papers on Afghanistan.
Besides the telling and lasting damage that would accrue to United States strategic image of being labelled as a “Strategic Loser”, nowhere will this adverse image find more resonance than in East Asia where the United States is trying to rebalance its Force Deployments against The China Threat.

Afghan revelations: Pakistan-US secret diplomacy created Doha roadmap

Published: June 20, 2013

ISLAMABAD: Months-long painstaking and secret negotiations involving Islamabad and Washington have yielded a detailed roadmap for steering negotiations with the Afghan Taliban which will start to unfold with the release of five Afghan prisoners from Guantanamo Bay and the return of the captured US soldier PFC Bowe Bergdahl, at present in Taliban custody.

While the opening of the Taliban office in Doha, Qatar, has captured headlines across the world, wide-ranging interviews with highly-placed diplomatic, military and foreign office sources reveal that this office is but one of the many elements of a complex process, the ultimate aim of which is for all stakeholders in Afghanistan to share power through an inclusive election process under a possibly modified Afghanistan constitution.

“The journey begins now and if all goes well should co-terminate with the exit of the American combat troops and holding of elections in Afghanistan that brings everyone onboard,” says a diplomatic source who has been involved in this process.

Other elements of this process are complete reconciliation with the Taliban led by Mullah Mohammed Omar, multiple-level dialogue between the Taliban and non- Pashtoon groups, agreement on the constitutional framework to govern Afghanistan after safe and trouble-free exit of the US forces from the Afghan soil, gradual cessation of kinetic operations and crucially, dispensing with Hamid Karzai in the political sense in case he tries to subvert peace efforts.

There is little doubt in anyone’s mind that this road is slippery and with no guaranteed success. However, a near-complete and rare alignment of views between the US administration and Pakistan’s policymakers achieved through a robust and out-of-media-glare talks has created space for ‘pulling this one off’, says the source. “There has been some direct dialing between Pakistan and John Kerry, the US secretary of state, working under clear guidelines from president Obama,” says one of Pakistan’s top negotiators.

This direct dialing sometimes bypassed the US embassy in Islamabad while Pakistan’s mission in Washington too stayed pretty much on the margins of what was transpiring between the two capitals.

The main issues that the two sides have had to grapple with all centered around the Taliban’s core leadership led by Mullah Omar.

“The Americans had three solutions for the Taliban problem. First, the Alpha solution, was to beat them into submission and retard their capacity to fight permanently. This failed. The Bravo solution was to fight them hard through a troop surge and force them to accept Afghanistan’s new realities like the presentday Afghan constitution and the leadership of president Karzai. That too did not work. The third, the Charlie solution, was more of a compulsion. Accept Taliban as a legitimate power in Afghanistan, talk to them, accommodate their main demands even it meant abandoning assets like Karzai. I think you are looking at the Charlie solution being played out,” says a military official.

The clearest indication of this radical shift in the US outlook towards the Taliban is in their acceptance that the onceroundly condemned Haqqani Network is essential to peace and deserves to be on the table in Doha. The Haqqanis, who dominate Afghanistan’s troubled and violence-infested eastern provinces, have been Washington hard-liners’ favourite punching bag and recipient of most of the military operations conducted by Isaf and Nato led by the US. Declared as international terrorists their leaders have also been the focus of drone attacks inside Pakistan besides being at the centre of the US accusations of Pakistan being a sanctuary and a safe haven for forces killing American soldiers in Afghanistan.

“The Haqqanis are no longer the bull’s eye of US military operations. They are no longer in the ‘kill or capture and be rewarded’ category. They are part and parcel of the team that would represent Mullah Omar with which Washington is deeply engaged,” says another source at the foreign office.

This ‘deep engagement’ is trilateral and would not have come about without Washington getting exhausted with its stand-alone efforts to cultivate the Taliban minus Islamabad. Pakistani officials say that Washington tried several dialogue processes, in many capitals of the world, some even with low-ranking members of the Haqqani Network, but each time they hit a dead end. No faction could move ahead without the sanction of the Taliban top leadership.

As the costs of war in Afghanistan mounted, and the withdrawal deadline neared, the Obama administration found itself in a bind that could only be circumvented if Mullah Omar agreed to be part of the dialogue.

“The hardliners among the Taliban ranks did not want to give any space to US forces. They had realised that by stalemating international forces they had actually won militarily. They would not concede an inch of diplomatic space to the US who, in their perception, had lost out in the battlefield,” explained a high-ranking foreign office official involved in talking to the Taliban.

“It was then Pakistan’s turn to use its influence even though everyone in Washington had deep doubts about the Taliban showing flexibility. Our pitch to the Taliban was that by becoming part of the dialogue process they could gain international sanction, end conflict peacefully and achieve their goals of foreign forces exiting their country much more swiftly than through perpetual conflict that offered total victory to nobody.

“We also had to argue long and hard with Washington to change the sequence of its demands and instead of asking for the Taliban to straightway accept the Afghan constitution and abjure violence let confidence-building measures take place that would start the process of reconciliation,” says the foreign office official. The same sources also said that the real breakthrough in these negotiations came through personal diplomacy between John Kerry and Pakistan’s Army chief Gen Ashfaq Parvez Kayani.

U.S.-Taliban Talks Hang in the Balance

June 24, 2013

Afghans fear for their future as U.S.-Taliban talks have been routed by a diplomatic row.

Last Tuesday a handful of landmark developments took place in Afghanistan, starting with the transfer of power from NATO-led International Security Assistance Force (ISAF) to local Afghan forces.

An announcement that the U.S. would hold direct talks with the Taliban this week in Doha made the day even more significant.

The talks were poised to be the first direct engagement between the U.S. and the insurgent group since 2001, when the international troops overthrew the Taliban-led government in Kabul.

The Taliban said in a statement, as quoted by the BBC: "The Islamic Emirate of Afghanistan doesn't want any threats from Afghanistan soil to other countries, and neither permits anyone to threaten other countries using Afghanistan soil. We support a political and peaceful solution that ends Afghanistan's occupation, and guarantees the Islamic system and nationwide security."

In a video interview with Al Jazeera, speaking from Washington, Afghan political analyst Nabi Misdaq said: “The Taliban [has] been fighting for over 30 years as a Mujahideen group against the [Soviet] Russians and now under their own name since 1996, and against the Americans since 2001. They also want this war to come to an end.”

While all of this seemed to point towards hope that the situation in the war-torn country was about to change, it unraveled on Thursday when a diplomatic row over the Taliban’s new office in Doha derailed the insurgent group’s previously scheduled talks with the U.S., to be followed by direct talks with the Afghan government as well.

The row was the result of Afghan President Hamid Karzai’s concern that the armed group might use the venue of the talks to mobilize funds for their activities. He further worried that direct talks between the Taliban and the U.S. could render the Afghan government irrelevant to the peace process.

Karzai initially welcomed the U.S. decision to engage the Taliban, but later backtracked saying there is a"contradiction" in America’s stance and suspended the Bilateral Security Agreement talks with it.

The main objection involved the name “Islamic Emirate of Afghanistan” given to the Taliban’s office in Doha. According to Karzai’s spokesperson, Aimal Faizi such a name does not exist elsewhere and Washington was made aware of Kabul’s sensitivity regarding this issue. The Taliban has since removed an objectionable sign, flag and flagpole from its Doha office. However, it is not yet certain whether this gesture will be sufficient to get talks back on track.

Realpolitik: Taliban Style

By Zachary Keck
June 25, 2013

As countless others have pointed out, the biggest issue with Clausewitz’s dictum that war is the continuation of policy by other means is that it implies there is a clear dichotomy between the end of diplomacy and the start of war. This simply doesn’t exist in the modern era (if it ever did at all.) Indeed, in 4th generation warfare, the spoils usually go to the side that is best able to integrate their political and military capabilities. Such is the only conclusion one can draw from the Second Vietnam War, where the North Vietnamese achieved their policy objectives despite never defeating the U.S. military on the battlefield.

In recent weeks, the Taliban have been proving themselves to be shrewd practitioners of 4th generation warfare. The group has long shown it can wage a formidable insurgency inside Afghanistan by combining sustained military assaults— often on high-profile targets— with adequate governance in areas it controls. But it isn’t clear that this is enough. Unlike in Vietnam, where the Tet offensive could produce real political gains, the absence of the draft has left too many Americans disconnected from the war, and therefore immune if not disinterested altogether in developments on the ground.

Furthermore, it’s not at all clear that the Taliban’s military punch could successful dislodge the Afghan government security forces after 2014, should substantial foreign assistance continue to pour in. After all, the Soviet Union’s regime in Kabul withstood the insurgency after Soviet troops left Afghanistan, only to succumb to its adversaries after the Soviet Union collapsed and aid dried up.

This is why the Karzai government has been so unnerved by the Taliban’s diplomatic offensive, which began long ago but has picked up steam in recent weeks. Mullah Omar’s group seems intent on wooing every interested party—and there are a lot of them, many of whom are at odds with one another— into acquiescing to the Taliban reassuming power in Kabul.

First among them are Afghans themselves. Although dissatisfaction with the Karzai government is widespread, memories of the atrocities the Taliban committed when in power have left many Afghans—particularly non-Pashtun Afghans—ranging from extremely apprehensive to unalterably opposed to the group’s return to power.

The Taliban have sought to assuage these concerns in a variety ways. One such way is playing up the benefits of their return to power. Thus, in a conference with Qatari officials last week, Mohammad Naim, a Taliban spokesperson said the group’s Doha office was being opened to support “a political process and a peaceful solution” to the conflict in Afghanistan that would “end the occupation” and “pave the way for real security, something the people [of Afghanistan] want and aspire for.”

The Taliban have also long been promising they want an inclusive government in Kabul, not one dominated by Pashtuns only.

“In his speeches and statements, our leader Mullah Mohammad Omar has repeatedly said that we want a government that includes all Afghans," Naeem told Radio Free Europe/Radio Liberty last week. "It should be a government, in which all our people and their representatives can participate and be a part of. It should give Afghans the hope that it a government for all of them and this country belongs to all of them."

Keep the war away

Nitin Pai June 23, 2013 Last Updated at 21:49 IST

Washington is now set to begin formal negotiation with Mullah Omar's Taliban in Doha

More than a year ago, after Barack Obama announced thatAmerican troops would leave Afghanistan by 2014, his move was criticised as being "all exit, no strategy". That is a fairly accurate characterisation of the Obama administration's approach in its second term towards Afghanistan. The tyranny of a fixed withdrawal date is not only compelling Washington to act with undue haste and artificial desperation, it is also making the administration oblivious to even medium-term consequences of its own geopolitical interests.

Washington is now set to begin formal negotiation with Mullah Omar's Taliban in Doha. Things got off to a rocky start after the Taliban put up signboards and flew flags as if they were legitimate state entities, which drove Hamid Karzai, the legitimate president of Afghanistan, apoplectic with rage. The United States is clearly indulging the Taliban, who see no reason to concede anything given that the Americans have declared their withdrawal date. The negotiations in Doha are only likely to increase the legitimacy of Mullah Omar's group in the eyes of the international community.

More importantly, instead of bringing the war to an end, the Doha negotiations will just rearrange the pieces for the start of a new phase of the civil war. In a couple of years, the US and its Western allies will have washed their hands of Afghanistan. The Afghan government will be abandoned - the North Atlantic Treaty Organisation (Nato) is unwilling to even adequately fund the Afghan security forces beyond 2014 - and the Afghan people will be left at the mercy of the Taliban, tribal warlords and interfering neighbours.

Beyond 2014, many Western analysts see an Afghan government in control of the towns while the Taliban control the countryside. This is actually a pretty picture. The Taliban are unlikely to be satisfied with the countryside and will try to take the towns. At the same time, they will suffer dissensions in their ranks and perhaps even see factional splits. Ethnic and tribal warlords, neither affiliated to the Taliban nor loyal to the Kabul government, are likely to gain strength especially in the western and northern regions of the country. All this means a whole lot of fighting, devastation and human suffering.

It is this picture India must prepare for.

The generals in the Pakistani military establishment will certainly be stroking their moustaches in satisfaction if not outright triumph. Their investment paid off. Despite severe pressure from the US, the Pakistanis deceitfully protected the Taliban leadership from harm for more than a decade, and now have a card to play in negotiations over Afghanistan's future. This was the day Rawalpindi was waiting for.

Mullah Omar's Taliban will certainly be favourably inclined towards Pakistan, at least in the short term. This could be useful to Rawalpindi in, for instance, putting down the insurgency in Balochistan. However, in the Pashtun tribal areas, Hakimullah Mehsud's Tehrik-e-Taliban Pakistan (the Pakistan Taliban) is at war with the Pakistani state and swears allegiance to Mullah Omar. The Pakistan Taliban bears considerable animosity towards the Pakistani army and it is unclear if Mullah Omar will be able to persuade Hakimullah Mehsud to stop his campaign. Rawalpindi will not have it easy.

Pakistan's options will be further constrained by two factors: first, the extent of the residual US presence in the region (special forces and drones); and second, its dependence on international financial institutions to hold its economy together.

Misunderstanding China’s Credit Bubble

By James Parker
June 24, 2013

It is not usual for events in a country’s money markets or interbank lending system to garner the attention of the non-financial media. The recent spike in China’s Shibor rates was one of the rare cases when such a story “went mainstream”. Much of the commentary was useful and considered, but there are a few consistent misunderstandings that seem to emerge, especially in online comment sections, whenever someone mentions “China” and “financial crisis” in the same article.

One common argument is that since the much of the debt being built up in China is between various government, and pseudo-government entities (e.g. lending between the state banking system and the state owned enterprises (SOEs)), there will not be a problem. The argument normally centers on the idea that the government can just forgive its own debts to itself, and therefore avoid non-performing loan crises, bank runs and other shocks. 

Obviously it is a bit naïve to assume that China has somehow found a new and foolproof formula for perennially high, problem-free growth. Aside from doubts about whether the premise is correct (not all of China’s runaway debt is clearly government-related), and whether such a “miracle cure” would run smoothly, as well as questions about who is really paying when such things occur, it is important to note that shocking corrective crises may not always be the worst-case scenario. As covered before in Pacific Money and elsewhere, China’s debt buildup is actually a symptom of misallocated investment. Using accounting tricks or other financial magic to hide or “resolve” the former (the debt) allows the latter (the associated wasteful investments) to continue.

Misallocated investment means that the value (wealth) created by a project fails to exceed the value put into it, including all subsidies and externalities – hidden or otherwise. China’s economy contains many forms of these subsidies, but even with them, levels of credit in the economy have been increasing dramatically. These increasing levels of credit are a symptom of the underlying problem, not the problem itself. The blind chasing of headline GDP statistics alone fails to account for whether or not real wealth is being increased or decreased. To simplify, increasing levels of unpaid debt over the long term indicate that investments are not creating the wealth with which to repay them: There is subprime lending going on in China. 

In the United States before its “subprime crisis”, the system misallocating credit was able to continue for much longer than it should have done due to financial innovation (which dispersed the risks but did not resolve them), overly abundant liquidity and a lack of regulatory ability to see and control the problem in time. Financial Innovation of a different nature is proceeding apace in China (the so called “Shadow Banking” system). This is not intrinsically a bad thing, but as in the United States last decade, in this case the innovation is enabling ongoing misallocated lending and investment. Liquidity creation is running wild, with money supply jumping each year since 2008 even as growth slows. Meanwhile, regulators have been struggling to tackle problem areas for years. In other words, China’s system is not efficiently allocating resources.

Hence, the ability of the Chinese government to “magic away” its debt burden through internal debt forgiveness and accounting or financial trickery is like masking the symptoms of a cancer without treating the underlying condition itself. The Chinese government and financial authorities are well aware of this, even though their predecessors failed to tackle the problem earlier on. As debts pile up without a proportionate increase in the ability to repay them, eventually there must be a problem.