26 August 2013

Why we should let the rupee sink

August 21, 2013 

Abandoning the defence of the rupee will allow India to shift focus to boosting exports with tax cuts.

India’s failing defence of the rupee is doing more harm than good. It’s time New Delhi left the plunging currency to market forces and shifted its focus to boosting exports and investment.

A country that decides to defend its exchange rate has only two options: impose capital controls or surrender independence over monetary policy. The Indian authorities have tried a bit of both. They have put restrictions on resident individuals and companies looking to invest overseas and in gold.

The central bank has also raised short-term interest rates, thereby giving up its ability to use monetary policy to lift GDP growth from its 10-year low.

Capital controls on residents make matters worse because foreigners fear they might be next in line. Their rational response is to rush for the exit before the gates close. Indian stocks plunged 5.7 per cent in two days after the country made it harder for residents to take their money out.

The higher interest rates engineered by the central bank since mid-July have also backfired. With the rupee in free fall, global investors are unlikely to be lured by 10-year government bonds, even though their 9.3 per cent yield is far more attractive than the 2.9 per cent return on comparable US Treasuries.

Investors will bite only if they can get a positive return after hedging the currency risk. But strong demand for protection against a rupee collapse means hedging costs are too high for that.

Meanwhile, higher interest rates are hurting banks that are increasingly reliant on short-term money market funding. Rolling over their Rs 3.6 lakh crore ($58 billion) in market debt, at interest rates that are now three percentage points higher, is bound to squeeze lenders’ earnings that are already shrinking as loan losses mount.

Rising yields on government debt will also force banks to write down the value of their bond portfolios. The longer local interest rates remain high, the greater the risk that the currency crisis turns into a banking fiasco.

India is just starting the long voyage to naval-power status

By Harsh V Pant
Aug 23, 2013 

This month India joined the elite club of nations that have demonstrated the capability to design and build their own aircraft carriers.


INS Vikrant, as the ship is called, was launched with great fanfare on August 12 by the nation's defence minister, as a sign of India's coming of age as a naval power.

Three days earlier the government had announced that the reactor in INS Arihant, the first Indian-built nuclear-powered submarine, had gone critical.

But the nautical celebrations came to an abrupt end on August 14, when INS Sindhurakshak, one of the 10 Kilo-class boats that form the backbone of India's ageing conventional submarine force, sank, after explosions at the naval dockyard in Mumbai, killing 18 crewmen.

Together these developments underscored the giant strides that India has made, but also the challenges that remain, as the country strives to emerge as a naval power.

Under development for the past eight years, Vikrant is expected to begin sea trials next year. The carrier will not only help India defend its coasts but will also allow the projection of power much further off its shores, something naval planners have long desired.

Meanwhile Prime Minister Manmohan Singh called the activation of the reactor aboard Arihant a "giant stride in ... our indigenous technological capabilities".

This project, conducted over more than a decade of highly secret work, will complete India's nuclear "triad" along with existing delivery systems using missiles and aircraft. And the submarine's ballistic missiles will give India a second-strike capability.

India is pursuing naval expansion with an eye on China, and Arihant and Vikrant notwithstanding, the country has nautical miles to go before it can catch up with its powerful neighbour, which has made significant advances in the waters surrounding India.

The aircraft carrier launch is critical for the Indian Navy, which is anxious to maintain its presence in the shipping lanes of the Indian Ocean and Arabian Sea, especially in light of China's big naval build-up. Last year China commissioned its first aircraft carrier, Liaoning, a refurbished vessel purchased from Ukraine in 1998. China is also working on is own indigenous carrier.

India remains heavily dependent on imports to meet its defence requirements, so its recent successes are particularly important. But for all the euphoria, it will be five years until the Vikrant is finally commissioned. And Arihant has yet to have its sea trials.

India has steadfastly refused to review the organisational model of the MoD, which remains frozen in time. Therefore, the inter-service rivalry results in wasteful duplications and a military-industrial complex that is only accountable to its bureaucratic masters and not to the ultimate users

A senior IAF officer shakes hands with a Swiss pilot after the arrival of the first Pilatus PC - 7 (below left) at the Air Force Academy, Dundigal near Hyderabad earlier this year. — PTI

Over the past few months, a raging controversy has gathered steam involving the Indian Air Force and Hindustan Aeronautics Limited (HAL), with the Ministry of Defence (MoD) being a mute spectator. The genesis of the case is the grounding in 2009, of the HAL built HPT 32 trainer aircraft that was being used by the IAF for basic training of its pilots, due to repeated accidents and HAL's inability to arrive at solutions.

At the time the then Chief of Air Staff had said that the aircraft fleet had experienced 108 engine failures and mishaps resulting in 23 fatalities. A fatal accident involving two experienced flying instructors broke the proverbial camel's back, leading to the final grounding of the aircraft. It also left the IAF without a basic trainer aircraft, which is a critical tool in laying the foundation on which is based the future mental and operational potential of any military pilot.

To fill this deep void, the MoD cleared the acquisition of 181 basic trainer aircraft in 2009 with immediate import of 75 aircraft and the remaining 106 to be made up of the proposed indigenous HAL design, the HTT 40. Consequently an order was placed for the purchase of 75 Pilatus PC II from Switzerland through import and the initial batch of Pilatus trainers has since been received. After a gap of over four years, the IAF will be settling down to an established training pattern for at least part of the trainees whose number will progressively grow as the number of trainer aircraft increases.

In the interim, the IAF will be compelled to resort to an ad hoc training system, which will have a negative opportunity cost attached to it, in terms of a weaker training foundation. This, though unquantifiable, will no doubt reflect on both operational capability and safety record of the IAF in times to come.

The government should devise a national aeronautics policy that caters to the requirements of all the stakeholders and put in place an aeronautics commission along with a dedicated department of aeronautics and supporting institutional bodies

As reported, the IAF is keen that the MoD exercises the option clause in the Pilatus contract to procure another 36 aircraft with the shortfall of the remaining 70 trainers also to be made through later purchases of this aircraft. If this proposal is accepted by the MOD, it will sound the death knell of HAL's HTT 40 project.

Not unnaturally, HAL is unhappy with this development. The spark, which seems to have ignited this open fight, is a purported letter by the Air Chief to the Defence Minister in support of the IAF's proposal, including the supposed cost benefits of importing the aircraft. Those against closing of the HAL project are not only questioning the cost benefit argument, but casting indirect aspersions on the very integrity of the IAF by hints of import preference and undue favoritism.

That the current spat is being played out in the public domain is unfortunate since both the organisations come directly under the defence ministry. It is not this writer's case to wade into the details of the arguments on either side of the present controversy, but to look at the larger picture of why the perennial love-hate relationship between IAF and HAL never seems to die. The debate on whose view should prevail is by no means new.

The IAF is often accused both by HAL and the Defence Research and Development Organisation of changing staff requirements mid-stream, of being pro-import and against self-reliance in their choice of platforms and systems. The IAF's grouse is that HAL and DRDO are given first lien on meeting their requirements based on inflated claims and then failing to meet these commitments of performance, time frames and costs.

Parameters of the debate may differ but they are of little consequence until the national security establishment is able to define its priorities. The fundamental question that arises is whether our defense research and development and production are there to serve the needs of the armed forces or is it that the armed forces must play second fiddle to sustain a military industrial complex that is bureaucratically driven with an archaic mindset out of tune with the technological and commercial realities of today.

Advantage PSUs in shale gas hunt

By R. SURYAMURTHY

New Delhi, Aug. 25: The government is planning to allow state-owned ONGC and Oil India to explore shale gas in onland blocks held by them under nomination, giving them an edge over rivals who can start the hunt only after auction of blocks, whose date has not been announced yet.

“At the first stage, the state-owned firms will be allowed to carry out exploration for shale gas in onland blocks as the terms of the contracts are quite broad. However, for blocks awarded during the course of the Nelp round, the contract specifies that exploration should be related only to natural gas and oil,” a senior oil ministry official said.

The official said the note for cabinet approval was likely to be taken up early next month.

As many as 176 of the 356 blocks held under nomination may contain shale gas, according to the director-general of hydrocarbons.

The oil ministry in the cabinet note proposed that the state-owned firms would have to pay 10 per cent royalty on shale gas. The royalty on any oil from shale formations will be 20 per cent for nominated blocks.

The ministry has also proposed that the state-owned firms will have to submit a minimum work programme and pay penalty for not meeting their commitment.

Also, they will have to submit a field development plan (FDP) after which they will have to start producing within six months.

The note said “in order to ensure that the FDP is implemented well within the timelines, a stiff penalty of 10 per cent of the royalty has been proposed in case of a default”.

Shale gas is non-conventional natural gas found in non-porous rocks and requires fracking technology for its extraction, similar to the extraction of gas between coal seams in India. The unconventional gas can help India to bolster its energy security.

Shale gas has proven to be a game-changer in the US energy market, significantly reducing the country’s dependence on imported LNG. Shale gas reserves in the US have been known for a long time. However, drilling technology to facilitate commercial exploitation was developed only recently.

China, which has auctioned the first batch of shale gas blocks, aims to meet 10 per cent of its gas demand through this unconventional source by 2020.

The government plans to tap the unconventional fuel to reduce the country’s energy shortfall and has identified six basins — Cambay, Assam-Arakan, Gondwana, KG onshore, Cauvery onshore and Indo Gangetic basins.

The draft shale gas policy favours market determined pricing, spelt out in clear terms so that operators are aware of the risks before committing themselves to a project.

RENEWAL OF A SACRED TRUST

Society and politicians must respond to the army’s sacrifices

BY BRIJESH D. JAYAL

Of late the Indian armed forces have more often than not been in the news for reasons that appear to reflect a lowering of both personal and institutional moral and ethical standards. The reasons are many, not least the rising demand from the public at large for accountability and a round-the-clock electronic media hungry for sensational news. But beyond these fairly legitimate aspects of a vibrant democracy lie the general societal expectations — that members of our armed forces are expected to be a cut above the rest and, whilst society may be somewhat tolerant of the shenanigans of our administrators and politicians, it draws the line when the decay spreads to our armed forces. In a way, members of society bind members of the armed forces to an unwritten professional contract — that of mutual trust whereby they authorize the armed forces to use their awesome military power to ensure the people’s security, but within the bounds of moral and ethical codes of conduct and behaviour. A contract neither articulated nor legal — yet that has the sanction of a moral binding force, for what is a nation’s military without the moral support of its people?

Unfortunately, an open debate on the subject has been lacking in India, thus depriving all the stakeholders, namely the armed forces, the institutions of democracy, of governance and, most crucially, society at large to understand the complexities that drive the modern-day profession of arms and the necessity of a mutually supportive relationship among all the stakeholders. All this in a changing world where individualism and the pursuit of personal advancement, wealth and pleasure have come to take on greater relevance than human values of selflessness, service and sacrifice and where human rights and other pacifist movements look upon the profession of arms with a certain degree of disdain.

It is vital that even war with all the death and destruction that it entails must be conducted ethically and within the moral value system endorsed by society. Indeed, the professionalism of the military is judged not just by the achievement of various mission objectives, but by whether these were achieved through fighting a moral and ethical battle. It is by means of articulating the Hague and Geneva Conventions and the United Nations Charter that the international community has been able to differentiate conduct in what is called a ‘just war’ from the wanton killing of human beings.

Judgments about going to war fall in the political domain and the political executive must bear the moral responsibility for these actions and be able to persuade the society to which it is answerable. On the other hand, the just conduct of war covers the operational aspects that are the moral responsibility of the military, which in turn will be judged on its ethical and moral conduct, not just by the political leadership and society at large, but the international community as well.

There is always a moral dilemma that confronts military leaders. Not only do they have to cope with the stresses of professional decision making, they must do so under the benign eye of their political executives which, at the end of the day, answer to the people who elect them. This relationship can at times be problematic, considering that the working environments of the two — military and civil — systems are often poles apart. Any effort to intercept this line of communication by the bureaucracy acting as interlocutors or the media in the garb of public opinion would be contrary to the spirit of this relationship.

Cong master of PR management

25 August 2013

There are many people dotted all over the country for whom the Congress is indeed the “default party,” as Rahul Gandhi conceded a week or so ago. They vote for the Congress not because they always endorse the policies of the party or are convinced that the Nehru-Gandhi family must always rule India, the vote for the Congress is often a matter of habit, ingrained into people’s minds by family custom or even neighbourhood tradition.

Last week I met many such “default” Congress voters in eastern India. Almost to a man (and woman) they had only question: Has the Congress given up the battle for 2014?

The question may strike the hangers-on in Akbar Road as contrived, but to most casual observers of politics it seems a pertinent query. Yes, there is a flurry of activity trying to rectify the party’s inadequate presence in the social media — a much over-rated phenomenon as far as elections are concerned. There are also interesting interventions by, among others, the oh-so-superior Salman Khurshid describing Narendra Modi as a wide-eyed frog who presumably never benefitted from an Oxbridge exposure. There was the casteist disdain of Ghulam Nabi Azad who equated the Gujarat Chief Minister with ‘Gangu teli’ without inviting a harsh rebuke from the editorial classes. And finally, there was the launch of an anti-Modi website by a curious alliance of social snobs, human rights activists and Maoists which, predictably, received generous coverage in The Hindu.

However, the issue of the Congress’ political abdication doesn’t centre on what it is doing to preach to the converted or how the activists are being kept busy running around like headless chickens. The Congress, the party occasionally needs reminding, is in Government. It is the complete dereliction of this responsibility and the grim reality of a Prime Minister who is seen but not heard that is prompting loyal Congress voters to ask whether the party is seeking involuntary liquidation.

Take the events of last week. First, there was the free fall of the rupee which was met with the Finance Minister reassuring the natives in his halting manner that all is well. More than feeling comforted that the “dream team” will soon drive away the pessimism and lead India to superpower status, the erosion of the rupee generated an epidemic of black humour. Second, there was the mysterious disappearance of the Coalgate files and the equally mysterious reappearance of some of the lost documents — a feat that made people wonder whether the spirit of the late Gogia Pasha had been summoned. And, finally, the nation witnessed the Lady Bountiful assure a bankrupt nation that no one in the country would go hungry again. Crisis? What crisis? Actually, the preoccupation of the Government seems to be focussed on information management.

From the week prior to Independence Day when we witnessed the awkward Ashok Gehlot asking a child what she was writing, to the new Bharat Nirman advertisements which have assured people that India is full of colourful, smiling and frolicking natives, the brains trust of the UPA has devoted its energies telling people pessimism is illusory and that India should be in a state of ecstasy.

Thus, the Capital’s leading pro-Congress newspaper informed readers on Saturday morning that “PC pep talk ends Rupee’s six-day fall” and that the “Currency sees biggest single-day gain in a decade”.

This spin was as credible as an American paper recording the 1932 Olympics hockey final with the headline: “Bodlington scores”. The game, just in case anyone has forgotten, was won by India 24-1. Likewise, when the Sensex shed nearly a thousand points in just two days of trading, a financial paper deemed it fit to list the stocks that were available at a bargain price. This attempt to talk-up the mood has also coincided with a campaign-again limited to the media-to tell people how horrible and deceitful Narendra Modi really is.

An ambition all at sea

Aug 26 2013

The loss of 'INS Sindhurakshak' highlights shortcomings of India's maritime capability in a time when Chinese naval power is reshaping regional geopolitics

The tragic accident that sank the INS Sindhurakshak and caused the deaths of several Indian sailors has once again drawn attention to the shortcomings of India's naval power. India now has just 13 ageing submarines operational, and the longstanding ambitions of many in India's naval community to challenge China as an emerging maritime power seem more distant than ever. In the present circumstances, India will do well just to maintain its edge over Pakistan.

It is best not to get too carried away with such crude measures of national power. Yet, India and other Indo-Pacific countries do have legitimate concerns about the truly impressive growth of Chinese maritime capability. It is not merely a question of scale. It is the fact that the composition of China's naval development seems to be changing. Ever since China began its military modernisation drive after observing the American performance in the 1991 Gulf War, concerns about China's rapid progress have been soothed somewhat by the fact that it seemed to be pursuing a solely defensive strategy.

Yes, China was investing in advanced submarines, missiles and combat aircraft, but reassuringly, it seemed to be in the service of a strategy that sought no more than to deny to other powers the use of the waters surrounding its territory and more specifically, to deter America and its allies from intervening in a conflict with Taiwan. This was a relatively modest, inward-looking ambition. There was little effort put towards projecting China's military capability outward, onto the open ocean.

But that's all changing. China is no longer focusing solely on "denial" capabilities, such as submarines and anti-ship missiles. It is also building large, modern, ocean-going surface ships and the support ships that will give them the range to operate on the open ocean far from home bases. China is now conducting flight tests from its first aircraft carrier, and will probably build at least two more. And Chinese shipyards are building what looks to be a world-class destroyer, dubbed the Type-052D.

Then there's the fact that China is now the only country in the world running two simultaneous programmes to develop stealth fighter jets. Or that it is developing a new class of cargo airlifter that will give its air force global reach. And, above all, consider that the Pentagon, in its latest annual assessment of the People's Liberation Army, judged that China is intent on building a "wholly indigenous defence industrial sector".

That's something not even the US can boast (even America imports some weapons and components), and it probably isn't achievable for China either. But keep in mind that, even with all the advanced programmes just described, China is barely breaking a sweat. This is not the Soviet Union we're talking about, which tried to build a military force to match the US with an economy that was barely half the size. China has been smarter, focusing first and foremost on growth and development, with military spending remaining a second-order priority.

For India, what compounds the challenge of China's maritime ascendancy is the fact that India itself remains a largely continental power. India sees maritime capability as the means by which it can truly manifest its status as a global power, but the troubles and tensions on its borders act as a constant break on such ambitions. India's parlous relations with Pakistan and China, and to a lesser extent Myanmar and Bangladesh, require constant diplomatic attention and military investment, particularly in land, air and nuclear forces. An ocean-going navy is simply less relevant to these cases.

Losing the plot in the neighbourhood

By Jyoti Malhotra

BSF personnel patrol the India-Bangladesh border in Agartala, Tripura. The government has been unable to explain to the BJP and others that if the Land Boundary Agreement was not ratified, it would feed into the anti-Indian strain of Bangladesh politics. Photo: Ritu Raj Konwar

Having made amends on Maldives, there is hope that the Manmohan Singh government may yet salvage ties with Bangladesh, Bhutan and Pakistan

A couple of weeks ago, former Maldivian President Mohamed Nasheed stopped in Delhi on his way to Saudi Arabia for umrah. He met Prime Minister Manmohan Singh and other senior officials in the Indian establishment. No press releases were issued, but the signal was clear: without saying sorry, India was apologising to Mr. Nasheed and his Maldivian Democratic Party for having supported the “coup” against him in February 2012 and recognising his successor and current President Mohamed Waheed.

At least in the Maldives, the Manmohan Singh government has sought to correct its botched analysis of the political situation. Across the rest of South Asia, Delhi has so clearly lost its nerve that it has failed to project the leadership that is expected of it. Worse, by taking the path of least resistance, the Congress-led government has often ended up siding with regressive and reactionary forces at home as well as in these countries.

Bangladesh, for example. Finally, the Bill to ratify the Land Boundary Agreement (LBA) was introduced in the Rajya Sabha last week — but had to be deferred again, because of opposition by the Bharatiya Janata Party — nearly two years after it was signed by Dr. Singh and Bangladesh Prime Minister Sheikh Hasina in Dhaka. Having failed to call Trinamool leader Mamata Banerjee’s bluff on the Teesta waters agreement, the Prime Minister hid behind the compulsions of coalition-building and failed to explain to senior BJP leaders early enough the importance of ratifying the LBA by the necessary two-thirds majority in Parliament.

Partisan politics

The meeting between the PM and the BJP came only a few days ago, far too late for any serious bargaining. With the government’s credibility falling by the day, the BJP, which hopes to win back power in 2014, failed to put national interest above partisan politics and strung Dr. Singh along. It insisted that Delhi first takes on board the views of States neighbouring Bangladesh — knowing, very well, that West Bengal would refuse to toe the line — and then put up the lone Asom Gana Parishad MP, Birendra Prsad Baishya, to opposing the Bill in the Rajya Sabha and bringing the House to a standstill.

Maoists: Crimson Tide

 24 Aug , 2013

With adequate potential for civil war aimed at Balkanizing India, the Maoist insurgency requires total national focus and synergy, according equal importance to politico-social-economic issues in addition to operations by security forces to manage violence levels. As India races against time to manage social change, the Maoist insurgency must be given due priority. India must also, in all sincerity, establish deterrence against irregular forces and their external support bases on proactive basis.

If we cannot get our act together, the Maoist insurgency will consume us in the coming years.

The repeated dance of death in Dantewada, Bhadrakali, Garhchiroli and the recent macabre killings of 13 CRPF personnel and four civilians at Latehar closely followed by severely injuring another 11 CRPF personnel at Bokaro has once again exposed government intransigence and the hollowness of claims by the Home Ministry since 2010 that the Maoist insurgency will be resolved in the next two to three years. The fable of Indian crabs pulling each other down is passé – replaced by the Indian ostrich that simply refuses to recognise what is so very obvious. Ironically, the lives of security forces personnel appear to be of little value.

Latehar has affirmed the gross lack of understanding of the Maoist problem, absence of required strategy, inadequacies of the security forces and most significantly, leaving the issue to be dealt with by individual States. If China and Pakistan are leaving no stone unturned to create a civil war-like situation in India, it is because we have offered them, and continue to offer them a readymade asymmetric battlefield covering 40 per cent of the country. The writing on the wall is clear – if we cannot get our act together, the Maoist insurgency will consume us in the coming years. The crimson tide is coming.

Ideology

It would be prudent for the policy makers to read the Maoist document titled “Strategy and Tactics for the Indian Revolution” scripted as late as 2004 that says, “The central task of the Indian Revolution is the seizure of political power. To accomplish this, the Indian people will have to be organized in the People’s Army and will have to wipe out the armed forces of the counter revolutionary Indian State and establish in its place their own state”. It further goes on to say, “As a considerable part of the enemy’s armed forces will inevitably be engaged against the growing tide of struggle by various nationalities, it will be difficult for the Indian ruling classes to mobilize all their armed forces against our revolutionary war”.


Treating the Maoist insurgency lightly and underestimating their military potential will be a great folly.

On Kabul, take a wider view

Aug 26 2013

It is in India's interests to encourage dialogue between Karzai and Sharif

Today, Hamid Karzai will call on Nawaz Sharif in Islamabad. Since 2002, Karzai has made 19 trips to Pakistan, but this is the first time he will meet Sharif since the latter's election as the new prime minister of the country.

There are many bones of contention. Afghanistan continues to accuse its neighbour of harbouring the Taliban leadership in Quetta and nurturing terrorist outfits — including the Haqqani network — which have been attacking not only Nato forces and Afghan National Army (ANA) personnel, but also the Indian embassy and consulates. Kabul is particularly resentful of Pakistan's alleged sabotaging of the reconciliation process. The first chief of the High Peace Council, Burhanuddin Rabbani, was killed in 2011 by the Taliban. The assassin, according to Kabul, came from Pakistan. Moreover, moderate Taliban voices open to holding independent dialogue with the Karzai government are allegedly being systematically eliminated.

In 2010, Abdul Ghani Baradar, Mullah Omar's key operational aide, who was covertly in touch with officials from Kabul, was arrested. Meanwhile, Mullah Omar is allegedly being held in a safe-house in Pakistan. The struggle, apparently, is over the ownership of the peace process. Karzai wants moderate Taliban voices to be free of Pakistani influence so as to have a truly Afghan-led peace process. Pakistan wants to retain its strategic significance in the Afghan political landscape by controlling the peace process.

Islamabad, for its part, accuses Afghanistan of offering a safe haven to Islamist groups targeting the Pakistani state, including Maulana Fazlullah, a leader of the Tehreek-e-Nafaz-e-Shariat-e-Mohammadi (Movement for the Enforcement of Islamic Law) and Mangal Bagh Afridi of the Lashkar-e-Islam. The TNSM, now allied with the Tehreek-e-Taliban (TTP), had come to the rescue of the Afghan Taliban in 2001 and may well attack Pakistan from that side of the border now that the withdrawal of Nato forces is giving militants room for manoeuvre. Lashkar-e-Islam, a smaller militant outfit, continues operating in the Khyber Tribal Agency, while its leadership frequently travels to the Nangarhar province in Afghanistan.

Karzai may also be asked, once again, to recognise the Durand Line as an international border in order to ward off the risk of Pashtunistan. But there is another, more immediate cause for concern for Islamabad: the Indo-Afghan rapprochement that materialised in 2011 after the first "strategic partnership" ever signed by Kabul. This agreement is problematic from the Pakistani point of view. First, New Delhi has committed itself to training Afghan soldiers in counter-insurgency operations. Second, India would provide arms to its partner. Indeed, that was the reason for Karzai's visit to India in May, according to Pakistani officials, who made it clear that they disapproved of it.

In spite of the trust deficit resulting from the factors mentioned above, Afghans and Pakistanis know that they have to come to terms with reality. That implies talks as well as compromises.

In little more than a year, most of the Nato forces will have withdrawn from Afghanistan. The US may retain military bases, but these will not enable Kabul to control territory beyond cities. Certainly, the ANA will get arms and training, but it will probably not be in a position to resist a full-fledged Taliban offensive. Worse, fractured along ethnic lines, it might even break up if the current Afghan political elite fails to mend its internal differences.

The US has come to terms with this reality. That's why it wanted to hold talks with the Taliban in Doha. But that round of negotiations failed because Karzai was not in the loop. He was also upset by the plaque on the Taliban office in Doha, bearing the words "Islamic Emirate of Afghanistan" (the official name of Afghanistan between 1996 and 2001). Talks may be relaunched, but Karzai is probably not very confident that they would be in his interest. The Pakistanis have also remained aloof from the Doha process.

Pakistan Army: Coping with Internal Security Challenges

By Gurmeet Kanwal 

http://saisaonline.org/analysis/pakistan-army-coping-with-internal-security-challenges/

The greatest challenge that the new Pakistan government faces is on the national security front. Over the last decade, the deteriorating internal security environment has gradually morphed into Pakistan’s foremost national security threat. The inability of the Pakistan army to meet internal security challenges effectively is a particularly worrying factor. Fissiparous tendencies in Balochistan and the restive Gilgit-Baltistan Northern Areas are a perpetual security nightmare. Karachi remains a tinderbox that is ready to explode. The Al Qaeda has gradually made inroads into Pakistani terrorist organisations like the Lashkar-e-Toiba (LeT), the Jaish-e-Mohammad (JeM), Harkat-ul-Jihad Al-Islami (HuJI), Tehreek-e-Nafaz-e-Shariat-e-Mohammadi (TNSM) and the Lashkar-e-Jhangvi (LeJ). While the Al Qaeda is still far from forming an umbrella organisation encompassing all of them, it is moving perceptibly in that direction. The Tehreek-e-Taliban Pakistan (TTP) has consolidated its position in North Waziristan and appears capable of breaking out of its stronghold to neighbouring areas.

The Nawaz Sharif government has now announced a new counter-terrorism policy. However, before examining the future efficacy of this policy, it is first necessary to take stock of the army’s counter-insurgency campaign.

Difficult Counter-insurgency Campaign

As the Pakistan army’s previous operational expertise lay in creating and fuelling insurgencies and not in fighting them, it failed to sense that it was creating a Frankenstein monster at home by encouraging fundamentalist terrorism abroad and failed to fight the scourge effectively for almost 10 years. Large parts of Khyber-Pakhtoonkhwa and FATA have been under Taliban control for many years. The challenge to Pakistan’s sovereignty in Swat and Buner was addressed with brute force only after the Taliban appeared to be on a triumphant march to Islamabad. The insurgency in South Waziristan was tackled on a war footing after years of procrastination, but the writ of the Tehrik-e-Taliban Pakistan (TTP) still runs in North Waziristan. The civilian administration continues to place its trust in the false hope that it can sign durable peace deals with the Taliban – a tactic that has failed in the past.

The army has been facing many difficulties in conducting effective counter-insurgency operations even though it has deployed more than 150,000 soldiers in the Khyber-Pakhtoonkhwa and FATA, and has suffered over 15,700 casualties, including over 5,000 dead since 2008. Total casualties including civilians number almost 50,000 since 2001. Special Forces units of the Pakistan army, the elite SSG, are also directly engaged in fighting the militants. Sometimes the army is seen to be unwilling to conduct high-intensity counter-insurgency operations due to apprehensions that fighting fellow Muslims would be demotivating in the long run. Many soldiers, including officers, are known to have refused to fight fellow Muslims. Several cases of fratricide have been reported. Questions are now being raised about the army’s lack of professionalism in counter-insurgency operations and its withering internal cohesion.

The army’s convoys have been repeatedly ambushed; it has faced numerous terrorist strikes in the shape of suicide attacks and bombings; many of its personnel (especially Pushtun soldiers) have deserted as they do not wish to fight fellow tribesmen; and, many soldiers have been captured by the militants in humiliating circumstances. While some of these soldiers were later released by the militants for a large ransom, some others were killed. Soldiers are routinely overstaying leave or going AWOL (absent without leave) and even regular army battalions have seen their morale dip to worryingly low levels. There have been some reports of soldiers disobeying the orders issued by their superior officers. Complicating the issue further is the fact that the army has been gradually Islamised since General Zia ul Haq’s days and the early converts to the Jihadi way of life are now coming into positions of command. The only conclusion that can be drawn is that a once proud professional army appears to be headed inexorably downhill.

China, U.S. Vie for World Approval

August 25, 2013

The US-China rivalry is today's defining geostrategic competition. Washington is currently the biggest kid on the block, and Beijing is the strapping new boy who just moved into the neighborhood. A rivalry was almost inevitable. And there's growing evidence that the other kids on the street expect that one day there will be a new king of the hill.

Publics around the world see the global balance of power shifting, according to the latest Pew Research Center survey. Most recognize China's rising economic power. Many think Beijing will eventually supplant Washington as the world's dominant superpower.

However, public appreciation of China's centrality on the world stage has not translated into great affection. China's favorability is dropping in many nations. Globally, people are more likely to consider the US a partner to their country than see China in this way. America is also seen as somewhat more willing than China to consider other countries' interests when making US foreign policy. And US respect for individual liberty is a defining, positive element of America's image, while Beijing's abuse of human rights hurts China's brand.

The survey was conducted in March.

As its influence grows, China is learning that being a superpower also alienates people. Beijing's growing military strength is viewed with trepidation in the Asian region.

Since the 2008 financial crisis, perceptions about the economic balance of power in the world have been shifting. The median percentage naming the US as the world's leading economic power has declined from 47 to 41 percent, comparing results in the 20 nations surveyed by the Pew Research Center in 2008 and 2013. At the same time, the median percentage placing China in the top spot has risen from 20 to 34 percent, although the US economy is still larger than that of China and per capita income is higher.

This trend has been especially apparent among some of America's closest allies in Western Europe: 53 percent in Britain say China is already the leading economy, while 33 percent name the US; 59 percent of Germans also say China occupies the top position, while 19 percent think the US is the global economic leader and14 percent say it's the EU.

In contrast, the US is still generally seen as the world's leading economy in Latin America, Africa and in much of China's Asian backyard: 67 percent in Japan and the Philippines, and 61 percent in South Korea, name the US as the economic powerhouse, while small minorities name China.

However, even in many countries where America is still seen as the top dog, most believe China will someday supplant Uncle Sam. In 23 of 39 nations, majorities or pluralities say China either already has replaced or eventually will replace the US as the world's superpower. This view is more common now than it was in 2008, when Pew Research first asked this question.

In the eyes of many, America's time on top is fading. Today, majorities or pluralities in only six countries state that China will never replace the US. But in Europe the prevailing view is that China will ultimately eclipse the US. The same expectation is held by the majority or plurality in five of seven Latin American nations polled.

Two-thirds of the Chinese state that their country either already has or someday will replace the US. Meanwhile, Americans are losing faith in their own supremacy: 47 percent say China has or will replace the US, and the same number say this will never happen. American opinion has shifted significantly since 2008, when 36 percent said China would become the top global power and 54 percent said it would never replace the US.

Not clear from the survey data is whether people are pleased or displeased with China's emergence as a leading power. A median of 50 percent currently have a favorable view of China in the 38 nations surveyed outside China.

Hydropower Dams On The Mekong: Old Dreams, New Dangers

July 16, 2013

In his Asia Policy article "Hydropower Dams on the Mekong: Old Dreams, New Dangers," Stimson Southeast Asia Program Director Richard Cronin discusses dams and cooperative water development in the lower Mekong and the Obama administration's Lower Mekong Initiative.

To read the full article, click here. (pg. 32-38)

Senkaku Islands/East China Sea Disputes—A Japanese Perspective

August 14, 2013

This paper was originally prepared for a report presented at the Center for Naval Analyses April 11 workshop. This workshop report presents an overview of the issues discussed and the papers contributed by individual panelists who are recognized experts in their fields. The collection of papers examines the security implications for Japan of its unresolved territorial disputes and the associated consequences for the U.S.-Japan alliance. A download can be found to the right.

The full report can be read here.

American Interests In The Senkaku/Diaoyu Issue, Policy Considerations

August 14, 2013

This paper was originally prepared for a report presented at the Center for Naval Analyses April 11 workshop. This workshop report presents an overview of the issues discussed and the papers contributed by individual panelists who are recognized experts in their fields. The collection of papers examines the security implications for Japan of its unresolved territorial disputes and the associated consequences for the U.S.-Japan alliance. A download can be found to the right.

The full report can be read here.

The Future of American Diplomacy

By Joshua W. Walker
August 25, 2013

Is not doubling down on its great-power past, but in response to the "rise of the rest" is something more inclusive.

Globalization has been changing U.S. foreign policy since the beginning of the American Republic. From our first diplomatic post in Tangier, Morocco founded in 1777, to the more than 285 diplomatic facilities around the world today operated by the U.S. Department of State, the business of diplomacy has evolved over time.

While it is obvious that thriving markets and global security go hand in hand, along with America’s central role in both arenas, often our diplomacy and institutions do not reflect this reality. In other words, the channels of influence that America could once rely on—large, multinational consortia of first-world powers—are waning in power. If one thing is clear to ambassadors around the world, it’s that U.S. diplomacy needs a jumpstart into the 21st century.

The key for American diplomacy is not doubling down on its great-power past, but harnessing the future on the ground. The enthusiasm and entrepreneurial spirit that became infectious in the “Arab Spring” countries will remain the norm. Young people are tapping into the culture of innovation, even amidst the political difficulties and a lack of access to money and resources. In turn, effective, pragmatic partnerships based on shared objectives—economic growth, stability and more—will be the engine for increased security and prosperity. This is the future of diplomacy, not just at the U.S. State Department—but worldwide.

On The Ground 

While terms such as “Economic Statecraft,” “Global Engagement,” and “Strategic Partnerships” have come into fashion in Washington, the tangible impact of these buzzwords is difficult to measure. Ironically, some of the most challenging places for U.S. foreign policy represent some of the greatest opportunities for these new approaches in 21-century statecraft.

The key is to create and empower stable business conditions in unstable places through private-sector leadership.

The intersection of public and private sectors has now blurred the lines in diplomacy. Today, our diplomats are beginning to understand that public-private partnerships can get the most out of available resources, technology, knowledge, and networks. In fact, these partnerships might be the most effective foreign policy tool America has at its disposal today.

A Tipping Point in Syria?

August 23, 2013

As political violence engulfs the Middle East, the White House seems to sink deeper into incoherence and passivity. Will reports of a massive chemical attack on Syrian civilians finally rouse President Obama from his torpor, or will they become just the latest outrage du jour in the region's never-ending horror show?

The Syrian opposition claimed that forces loyal to Syrian dictator Bashar Assad used chemical weapons to kill over 1,000 civilians in the Ghouta suburb of Damascus. Buttressing these reports were harrowing videos of people struggling to breath and photos of scores of bodies that born no outward signs of injury. If confirmed, the poison gas attack would put Assad in the same league as Iraq's Saddam Hussein, who used chemical bombs to wipe out 5,000 Kurds in the town of Halabja in 1988.

The alleged massacre coincides with the arrival in Syria of a UN team charged with investigating reports that the regime unleashed small-scale chemical attacks against opponents last spring. The timing suggests how little Assad worries about crossing the "red line" President Obama has drawn against the use of chemical weapons. Or perhaps it's a veiled warning about what he's prepared to do if Western powers intervene in Syria.

Although warmly applauded by foreign policy "realists," the administration's resolve to stand aloof from crisis has been a strategic and moral failure. What began as a civil uprising has morphed into something worse: a full-fledged proxy war that is inflaming the region's sectarian divisions. As Shia Iran and Hezbollah fight to save their ally Assad, Sunni jihadis -- some marching under the banner of al Qaeda - are pouring into Syria. This makes it easier for Assad to posture as a protector of Alawite and Christian minorities and a bulwark against the very Salafist terrorists that keep U.S. intelligence agencies awake at night.

But this is emphatically not a case of "the enemy of my enemy is my friend." America has no interest in the survival of a homicidal tyrant and war criminal like Assad, even if his fall presents openings to Sunni extremists in Syria. And in truth, the United States isn't very good -- thankfully -- at the kind of cold blooded realpolitik that counsels standing by while Assad, Iran and Hezbollah and Sunni fanatics bleed each other in Syria.

The problem with that approach, of course, is collateral damage, aka, all those Syrian civilians who keep getting caught in the crossfire. More than 100,000 of them already have perished, and there's no end in sight. Washington asked yesterday for an emergency meeting of the UN Security Council, but was stymied by Russia, which claimed that Syrian rebels staged the attack in a deliberate "provocation." At what point does the international community bestir itself to stop mass murder, even if that means overriding Vladimir Putin's objections to "foreign interference" in Syria? Is the idea of collective security dead?

President Obama said a year ago that Assad's use of chemical weapons would force him to "change my calculus" about U.S. intervention in Syria. It's time for the president to get out his calculator. America's interest lies in hastening Assad's departure, which would at least give Syrians a chance to establish a decent government while also dealing a major setback to Iran's bid for regional hegemony. This doesn't require U.S. troops on the ground, but it does mean stepped up efforts by the West to shift the balance of military power toward the rebels. Once Assad is gone, we will need to recalibrate our policies to help moderate forces in the Syria resistance prevent extremists from taking power. There's no doubt that this course too is filled with pitfalls, but at least it envisions a way of eventually stopping the slaughter on terms consistent with both humanitarian values and U.S. interests.

In Syria, America Loses if Either Side Wins

By EDWARD N. LUTTWAK
August 24, 2013

A man holds the body of a dead child after what activists claim was a chemical weapons attack in the suburbs of Damascus on Wednesday.

WASHINGTON — ON Wednesday, reports surfaced of a mass chemical-weapons attack in the Damascus suburbs that human rights activists claim killed hundreds of civilians, bringing Syria’s continuing civil war back onto the White House’s foreign policy radar, even as the crisis in Egypt worsens.

But the Obama administration should resist the temptation to intervene more forcefully in Syria’s civil war. A victory by either side would be equally undesirable for the United States.

At this point, a prolonged stalemate is the only outcome that would not be damaging to American interests.

Indeed, it would be disastrous if President Bashar al-Assad’s regime were to emerge victorious after fully suppressing the rebellion and restoring its control over the entire country. Iranian money, weapons and operatives and Hezbollah troops have become key factors in the fighting, and Mr. Assad’s triumph would dramatically affirm the power and prestige of Shiite Iran and Hezbollah, its Lebanon-based proxy — posing a direct threat both to the Sunni Arab states and to Israel.

But a rebel victory would also be extremely dangerous for the United States and for many of its allies in Europe and the Middle East. That’s because extremist groups, some identified with Al Qaeda, have become the most effective fighting force in Syria. If those rebel groups manage to win, they would almost certainly try to form a government hostile to the United States. Moreover, Israel could not expect tranquillity on its northern border if the jihadis were to triumph in Syria.

Things looked far less gloomy when the rebellion began two years ago. At the time, it seemed that Syrian society as a whole had emerged from the grip of fear to demand an end to Mr. Assad’s dictatorship. Back then, it was realistic to hope that moderates of one sort or another would replace the Assad regime, because they make up a large share of the population. It was also reasonable to expect that the fighting would not last long, because neighboring Turkey, a much larger country with a powerful army and a long border with Syria, would exert its power to end the war.

U.S. Options in Syria: Obama’s Delays and the Dempsey Warnings

Aug 23, 2013

It is important to define one’s red lines. It is far more important to define the impact of crossing them and have clear options for doing so. At this point, no one can ignore the warning that the Chairman of the US Joint Chiefs of Staff General Martin Dempsey gave in a letter to Congressman Eliot Engel on August 19th, -- written just days before the August 21st reports that Assad might have used chemical weapons to produce serious casualties.

In his latest letter to Congress, General Dempsey stated that:

“Syria today is not about choosing between two sides, but rather about choosing between one among many sides choosing. It is my belief that the side we choose must be ready to promote their interests and ours when the balance shifts in their favor. Today, they are not… It is a deeply rooted, long-term conflict among multiple factions, and violent struggles for power will continue after Assad’s rule ends…We should evaluate the effectiveness of limited military options in this context…”

Choosing the Least Bad Option? King Log versus King Stork

This new letter built on warnings that General Dempsey had given in an earlier letter to Senator Levin on July 19, 2013 –although Dempsey’s August letter did close with a new set of options that many media reports ignored.

Chairman Dempsey again highlighted the fact that there are no guarantees that the U.S. can find a side in Syria that will move the country towards moderation and unity, and give its people stability and security. There are certainly many Syrians and factions that might do so, but Assad’s forces seem too strong for the rebels to be sure of defeating them, the rebels are deeply divided and might see a faction of Sunni Islamists extremist gain power if Assad falls. 

If the U.S. does not work with its allies, however, Syria may well be become a divided nation with Sunni Arab rebels in one area, Syrian Kurds in another and a mix of Alawites and Sunni supporters of Assad in another – leaving the nation without a functioning economy, millions of impoverished refugees inside and outside Syria, and in a constant state of low level civil war that could become another round of major fighting at any moment.

It is also possible that Assad may win decisively enough to control most of the country and rule its Sunni majority and Kurdish minority through a far worse pattern of repression that Syria has known since it gained independence. One way or another, it is all too likely that a failure to act will mean the civil war keeps escalating, the human impact grows, and it does more and more to impact on the region, divide Lebanon and Iraq, empower Iran in both states, and leave Israel, Jordan, and Turkey with growing problems.

These risks are not a valid argument for action for action’s sake. Regardless of whether the U.S. finds Assad has used chemical weapons to commit a major atrocity, it should not act alone or without full support from key allies, it should not act without the President going to Congress and making a case to the American people. It should not act on the basis of optimism and hope and the illusion that the political future of Syrian can be shaped from the outside – anymore than the U.S. could shape Afghanistan and Iraq or the future of the revolution in Egypt.

The best of bad options is still going to be a bad option. The last three years have left Syria a shattered mess. Quite aside from its dead and wounded, some 20% of its population is now displaced, its economy ruined, religious divisions will last for years of anger and violence, and the best mix of U.S., European, and Arab efforts cannot guarantee a stable outcome or some lasting form of moderate governance and negotiated compromise between Arab Sunni, Arab Alawite, Kurd, Druze and Christian minorities. The near term outcome is far more likely to be the worse for Lebanon rather than the best for Jordan or Turkey,

U.S. Policy Must Be Based on Learning to Live with Uncertainty and Instability

What Would al Qaeda's PowerPoints Say?

August 23, 2013

It seems unlikely that al Qaeda holds conference calls to do business, and they probably don't use PowerPoints. But for the sake of discussion, what if they did? And if they held one today, what would their presentation look like?

To al Qaeda, there would be much about which to gloat:

Slide one: “We have survived the infidel's mightiest blows.” The terrorist group's primary objective is to keep its jihad alive. Al Qaeda cannot control its own destiny, but it can try to exploit circumstances by insinuating itself into local conflicts. And it's very good at doing just that. Overall, al Qaeda's situation has improved since the Arab uprisings began. Jihadist activity has spread across North Africa and the Middle East, and the number of al Qaeda affiliates has increased. Although these new fronts are focused on local struggles, and not al Qaeda's global jihad, the fact that they have been willing to raise the al Qaeda banner — and in some cases reach out to al Qaeda itself — indicates that al Qaeda's brand is still attractive.

Slide two: “We're winning in Afghanistan. Despite public pleas from its own military commanders that they need more time, the United States is withdrawing.” Al Qaeda spins the U.S. withdrawal from Afghanistan as a failure of the infidel's ability to defeat al Qaeda there. It is a replay of the Soviet retreat and ultimate collapse. The fact is the departure of allied forces will enable the Taliban to expand its control, thereby guaranteeing al Qaeda's survival in that part of the world.

Slide three: “We're expanding.” During the past two years we have seen al Qaeda affiliates in the Magreb, Yemen, Somalia, and Iraq become more active, while new al Qaeda fronts have opened in Africa and the Middle East. Moreover, foreign fighters are joining local jihadists at unprecedented levels, and the terrorist group boasts that homegrown terrorists successfully carried out an attack on enemy soil (the Boston Marathon bombing). The unrest in Syria, Egypt, Mali and other areas provide new propaganda activities and new sources of fresh recruits. Above all, each new confrontation creates a new generation of jihadists and guarantees al Qaeda's struggle will continue.

Slide four: “America trembles in fear!” In al Qaeda's eyes, even the threat of developing new terrorist attacks rattles Western capitals, causing them to draw back, as demonstrated by the temporary closing of a number diplomatic facilities earlier this month. To al Qaeda, such responses are a sign of weakness, which in turn excites followers and strengthens al Qaeda and its affiliates.