October 11, 2008

Icelandic meltdown


‘Vulgar ambition’ among the country’s sheltered elite was at the root of its financial collapseTony Allen-Mills, Reykjavik
A FEW days before the terrorist attacks of September 11, 2001, the then-prime minister of Iceland was in lyrical mood as he addressed a meeting of his country’s diplomatic corps.

David Oddsson was renowned for his literary interests. He wrote two plays in the 1970s, translated an Estonian history textbook and now he was quoting WH Auden, the British poet, who had written of Iceland half a century earlier: “Fortunate island/ Where all men are equal/ But not vulgar — not yet.”

Oddsson said his government’s aim was to “manage things so well” that future poets would return to Iceland to pay similarly handsome compliments. Instead, the 60-year-old former prime minister finds himself at the eye of the financial storm that last week swept away his country’s banks and provoked a decidedly vulgar outbreak of international rancour.

Oddsson stepped down as premier in 2004 and was rewarded a year later with a new job as chairman of the country’s central bank.

The appointment went largely unremarked at the time, but last week’s collapse of the Icelandic banking system — and the eruption of a nasty diplomatic spat with Britain — has caused many Icelanders to question the wisdom of handing effective control of a supposedly independent financial institution to a powerful, right-wing politician who enthusiastically espoused the free-market policies of Margaret Thatcher and Ronald Reagan.

Oddsson’s distaste for the euro and his rigid support of a high interest-rate policy aimed at taming inflation thrilled British savers and lured billions in inward investments.

Yet several analysts last week concluded that serious misjudgments by the Icelandic central bank had opened the door to meltdown and destroyed the national currency, the krona.

“Oddsson has very strong political views,” said Professor Snjolfur Olafsson of the University of Iceland. “A lot of people think he has been the main problem.”

As both politician and banker, Oddsson played a crucial role in Iceland’s emergence as a Nordic powerhouse with a punch that far exceeded its size. His career in many ways symbolises both the energy and vision that propelled a country with the population of Coventry (around 320,000) to world-beating fiscal eminence.

Yet it also reflects the pressures of a sheltered Icelandic elite that would have seriously disappointed Auden. The Nordic restraint the poet so admired gave way to vulgar ambition.

ABOVE the door to the Bar 11 nightclub in downtown Reykjavik hangs a sign that reads: “Lead us into temptation”. For much of the past five years, Iceland’s ruling class obliged, with dramatic effects on the ancient alleys of this once-dormant cod-fishing capital.

Down the street from Bar 11, the windows of another nightclub are covered with portraits of scantily clad Viking maidens. Around the corner there’s an “Erotik Cafe”.

Souped-up Range Rovers and Maseratis are a common sight on Laugavegur, a street packed with boutiques, bars and gourmet restaurants serving delicacies such as puffin terrine and guillemot smoked in tea leaves.

Yet as each day brought a fresh announcement of disaster last week, the only happy faces belonged to British tourists who were suddenly flush with devalued kronur.

The roots of Iceland’s volcanic transitions — from grim insular subsistence to electric Euro-cool to instant global shame — are surprisingly easily traced. It all started in the 1990s with a newly liberated horde of thirsty Russians and an angry young Icelander named Thor. The son of a Reykjavik shipping owner, Bjorgolfur Thor Bjorgolfsson set off for St Petersburg in 1993 to explore business opportunities in the wake of the collapse of communism.

With his father, Bjorgolfur Gudmundsson, Thor helped form a bottling plant that was later sold to Pepsi. The proceeds were reinvested in a local brewery that quickly flourished.

Named Bravo International, Thor’s operation had 17% of the St Petersburg market by 2002, and healthy sales in Moscow. When Heineken expressed an interest, Thor sold the business to the Dutch giant for a reported $400m (£235m), and promptly spent much of the proceeds on a 45% share in Landsbanki, newly privatised by Oddsson. Thor named his father as chairman, both men were on their way to becoming billionaires and a new age of Viking raiders was born.

With a trio of private banks behind them, the Bjorgolfurs and a group of like-minded entrepreneurs leveraged their strong currency and buckets of then-easy credit into an acquisition spree. Thor’s father snapped up West Ham United. Icelandic investments mushroomed in British high streets, from Somerfield supermarkets to Slug and Lettuce pubs.

“Few Icelanders were rich and it was suddenly very easy to borrow cheap money,” said Olafsson. “Several people at the time expressed doubts about the country getting in so much debt. But basically we were proud that Icelanders could get rich, too.”

The first shock occurred in 2006, when analysts at Merrill Lynch, the US investment bank, and the Danske Bank of Copenhagen warned that Icelandic banks had taken on too much debt in relation to the country’s GDP and were vulnerable to a credit squeeze.

Oddsson responded with characteristic aggression. Talk of a banking crisis was “preposterous”, he said. “I don’t think this is a crisis, not even an indication of a crisis.” A Landsbanki economist dismissed the doubts as “fantasy”.

After a brief wobble, the krona and the stock market recovered, but a fateful lesson had been learnt. Icelandic banks needed to even up their balance sheets. The central bank’s commitment to raising interest rates to combat inflation offered a promising solution — high-interest deposit accounts.

Thus was born Icesave, Kaupthing Edge and Heritable, a trio of ventures that proved magnets for bargain-minded British savers. No other western bank could match Iceland’s interest rates.

The only surprise was that in the rush to profit from their savings so many British investors failed to heed the warnings that multiplied this year. In January, Moody’s, the credit-rating agency, described Iceland’s banks as “fragile”. A study by Morgan Stanley concluded that Iceland’s banks were 7.5 times more likely to default than their European counterparts.

In July the International Monetary Fund published a gloomy report on Iceland warning about impenetrable ownership structures and murky lending practices. Several analysts concurred that the Icelandic central bank was simply too small to support the debts incurred by the private sector.

Oddsson’s response was to accuse unnamed foreign hedge funds of conspiring to undermine the Icelandic economy. He blamed “speculative attacks . . . that give off an unpleasant odour of unscrupulous dealers”.

WHEN the end came last week, there was a ruthless irony about Iceland’s collapse. For all of their free-lending ways, Landsbanki, Glitnir and Kaupthing had largely steered clear of the sub-prime mortgage fiasco that started the crisis.

Until the final moments before Landsbanki and Glitnir were put into receivership and Kaupthing was in effect renationalised, Icelandic officials were complaining that none of the banks deserved to go under, that their core businesses were sound, and that they hadn’t behaved irresponsibly.

Prime minister Geir Haarde, a former political ally of Oddsson, declared with grim understatement: “What we have learnt from this whole exercise over the past few years is that it is not wise for a small country to take a lead in international banking.”

Others have reached an additional conclusion — that it is not wise for politicians to run central banks, especially in very small countries.

Iceland might have achieved a softer landing had the central bank reduced its interest rates and put a brake on lending. Instead the central bank clung to an outmoded inflation target of 2.5% — even when that rate climbed rapidly to a 20-year record high of 12.3% last May.

Inflation is around 14%; on Friday the central bank announced that one of Oddsson’s two fellow governors, Ingimundur Fridriksson, was taking a “short medical leave of absence” on the advice of his doctors. Earlier last week Iceland’s president, Olafur Ragnar Grimsson, was treated in hospital for heart problems.

At her office at the University of Iceland, the country’s best-known political personality was also in sorrowful mood. In 1980, Vigdis Finnbogadottir became the world’s first elected woman president.

She is now a sprightly 78, still works for Unesco and other international causes, and runs an institute named after her. Last week she recalled that after a volcanic eruption in 1973 Icelandic workers succeeded at what experts had declared impossible: they diverted a stream of boiling lava away from a fishing harbour by pumping seawater onto the flow.

Yet the volcanic effects of a global economic meltdown proved impossible to divert. “It has been a very strange crisis,” she mused. “We have talented men, but unfortunately they flew too high. We recognise that perhaps people invested too much. But that’s the weakness of mankind.”

As British and Icelandic officials prepared to sit down yesterday to hammer out questions of compensation, more critical voices were beginning to be heard. “What will happen when the dust settles ?” asked the Rev Karl Sigurbjornsson, the bishop of Iceland. “A lot of people will be very angry”.

At Hresso’s café a few steps from the government building, one of Iceland’s most popular authors reflected on what he described as “the crash of the Icelandic dream”.

Andri Snaer Magnason said that when he published Dreamland two years ago, some Icelanders laughed at its subtitle, “A self-help manual for a frightened nation”. He added: “People were laughing about fear last year. They don’t think it’s funny now”.

Vigdis was confident that Iceland would recover, though probably much chastened. She turned to a popular Icelandic metaphor to sum up her view of the future: “All hailstorms stop sooner or later.”

What they said

Geir Haarde, Iceland’s prime minister What we have learnt from this whole exercise over the last few years is that it is not wise for a small country to try to take a leading role in international banking.

Sigurdur Einarsson, chairman of Kaupthing bank We are not Barclays, HBOS or Lloyds TSB, but I believe we are the twelfth largest bank in the UK and we were not allowed to participate in the rescue plan. We asked and the answer we got was a firm ‘no’.

Gordon Brown, prime minister What happened in Iceland is completely unacceptable . . . They have failed not only the people of Iceland, they have failed people in Britain.

Island’s hot and cold fronts

THINGS weren’t always so gloomy at Iceland’s big banks — far from it. Only last June the second-biggest lender, Landsbanki, chartered

two 737s to fly all 600 of its London staff, from the postboy to directors, to Iceland for a weekend of entertainment.

By day they were driven around the sights, including the Strokkur geyser, and went whale-watching. By night it was dinner and dancing.

It was not the first time the bank had displayed such largesse. It staged a similar event two years earlier, over three weekends to fit in all its staff across Europe.

Landsbanki had indulged in an aggressive spending spree, snapping up City stockbrokers Teather & Greenwood and Bridgewell plus Dublin-based Merrion and Kepler in Europe.

Despite efforts to ingratiate itself with workers, including an office refurbishment, the bank apparently took a laissez-faire approach to knitting its newly acquired operations together. A staffer was told: “You’ll work it out for yourselves,” when he asked a Landsbanki executive what the integration plan was for his department.

The Icelandic invasion of the UK was not restricted to Landsbanki, and there are few corners of British life that remain untouched by the influence of this tiny island nation of only 300,000 people. A number of local councils have deposits at Icelandic banks, as does Transport for London; slices of our high streets are in the hands of its investors, notably Baugur, the retail conglomerate; high-profile entrepreneurs such as chef Gordon Ramsay and property investor Robert Tchenguiz were financed by Kaupthing, the country’s biggest lender.

Iceland is portrayed as a close-knit, insular society, and those who did business with its bankers and investors noted an air of inscrutability.

Tony Shearer ran Singer & Friedlander before its takeover by Kaupthing. At meetings with the Icelanders before the bid, discussions rarely focused on business, something he found curious. “They’re nice people but there was no engagement on a business level at all,” he said. Like Landsbanki, Kaupthing was a good host, taking executives salmon fishing after the takeover.

Simon Burke ran Hamleys, the toy retailer, when Baugur bid for it in 2003. He had no direct dealings with them in the takeover battle but noted their determination to win. “There was no charm offensive. Their offensive was all based on cash,” he said. It had even taken the unusual step of raising its offer on rumours of a higher counterbid from a rival.

Paul Manduca, chairman of Bridgewell when it had a bid from Landsbanki, said: “They weren’t in the business of asking for advice. They had the money and they knew what they wanted to buy.”

Over a few years the Icelanders snapped up a range of UK assets, but what will happen to many of those businesses is unclear.

Teathers, for example, which continues to trade, is looking for a new owner after Straumur, another Icelandic bank, pulled out of a deal to buy it. Baugur insists that its British retail operations will be safe from the turmoil affecting banks. Gunnar Sigurdsson, its chief executive, said: “Our portfolio companies have committed loan facilities with Icelandic and other international banks, commitments which may not be revoked or altered by those banks unless done so in accordance with the agreed terms of those loan facilities.

“The businesses are performing well and the portfolio is generating strong cash flows, which is key in markets like this.”

The Candy brothers have secured a deal to buy out Kaupthing’s interest in two property deals it is working on — one for the former Middlesex Hospital in London, and the other in Beverly Hills, California.

And Ernst & Young (E&Y) was appointed last week as administrator to Kaupthing Singer & Friedlander Ltd, the UK arm of the bank. Among its assets are the fashion retailer Phase Eight, ADP, a chain of dentistry surgeries, and a stake in Bay Restaurant Group, owner of chains such as La Tasca and Slug & Lettuce.

E&Y said it was too early to say what might happen to these investments.

US strategic review of Afghanistan may consider Indian involvement


11 October 2008

Increased violence along the Afghan-Pakistan border, and a rapidly changing security environment in Afghanistan, warrants a full review of American strategy, a top US military officer said yesterday. Navy Admiral Mike Mullen, chairman of the Joint Chiefs of Staff, said the review would look at broadening the scope of the Afghanistan strategy and apart from improving interagency coordination in this war-torn country would also look at including Pakistan and India in the overall effort to combat the Taliban and the al-Qaeda.

Adm. Mullen noted that both countries have long historic links to Afghanistan and have an important role to play there.

Diplomatic sources in Washington stressed that the idea of allowing India a larger role in the Afghan strategy, or even including them in any joint force to control the Pak-Afghan border has not been discussed formally between US and Pakistani authorities. They also said that it was very unlikely that Pakistan would welcome any such move.

Pakistan, for long, has considered Afghanistan as part of its 'strategic depth' and has tried hard to limit Indian influence in this war-torn country. India has a minimal security presence in Afghanistan, mainly para-military commandos that guard contingents of Indian workers involved with various infrastructure projects.

In an interview with the Pentagon Channel Adm. Mullen, noted the increased sophistication of al-Qaida and Taliban operatives in the border region and expressed concerns about the border region becoming a safe haven for insurgents.

"Things have changed enough in Afghanistan and Pakistan to warrant a review of our overall strategy there, and in fact, part of the effort is to try to ensure better coordination on both sides of that border, which is a safe haven [for insurgents]," the admiral said.

According to Mullen, the United States, NATO and other countries had failed so far to forge the kind of strategic unity necessary to stem the rise in violence.

"One of the big struggles we have is developing a comprehensive approach to all of this," the admiral said. "We're just not there."

"I don't think it's going to turn around overnight. So I would anticipate next year being a tougher year," he added.

"It's been very, very tough fighting this year and it will be tougher next year unless we (develop) a way to get at all aspects of the challenge," he said.

"It's the full spectrum - the political piece, the diplomatic piece, the economic piece, in addition to the security piece - that's got to improve dramatically."

Worsening situation
The United States has 33,000 troops in the country, 13,000 of them under NATO command. All told, Mullen said there are now about 64,000 Western soldiers in Afghanistan. Another 6,000 American troops will be inducted into the country by February of the coming year.

The United States has for some time now stepped up pressure on NATO allies and others to increase the numbers of their troops. US Army Gen David McKiernan, NATO's top commander in Afghanistan, has asked for an additional deployment of 15,000 more US troops over and above those already earmarked by the Pentagon.

Last month, amid rising insurgent violence and tensions with Pakistan, president George W Bush ordered a review of US strategy in Afghanistan. The review is being led by Lieutenant General Douglas Lute, a deputy national security adviser, with the participation of senior representatives from the Pentagon and other departments. Officials said the review would be a "...larger, more cross-governmental approach."

With time running out for the administration, with only months to go, the White House wants to move quickly, officials said. The order for a review comes amid growing concern that insurgent groups operating from safe havens in Pakistan have gained strength over the past two years.

Officials said there was broad support for an approach that "doesn't look at Afghanistan as an island, but looks at it in connection with Pakistan."

"The problems we are seeing in (eastern Afghanistan) are directly attributable to what is going on the other side of the border," they said.

If India is indeed taken onboard in an integrated Afghanistan policy it would be yet another indicator of the rapidly developing relationships between the United States and India and fast-shifting geo-political dynamics of the Indian sub-continent

Zeitgeist: Addendum



A bleeding stalemate on the ground in Afghanistan, a bleeding Pakistan tottering towards a possible collapse of the State and a total policy confusion in the corridors of power in Washington DC and other NATO capitals.

2. That has been the outcome of seven years of Operation Enduring Freedom, which was launched by the US on October 7,2001, in the wake of the 9/11 terrorist strikes by Al Qaeda in the US.

3.In Afghanistan, the US and the other NATO forces and the Afghan National Army (ANA) control Kabul, the Capital, and other major towns and the Neo Taliban, resurrected from the pre-10/7 Taliban , controls the rural areas. Neither is in a position to dislodge the other from the areas controlled by it, but each is able to inflict bloody casualties on the other--- the US and other NATO forces through the use of heavy artillery and air strikes and the Taliban through weapons of Pakistani origin and through the inexhaustible flow of suicide terrorists.

4.In Pakistan, a Pakistan-version of the Taliban called the Tehrik-e-Taliban Pakistan (TTP) has arisen post-2002 and has been operating in tandem with the remnants of Al Qaeda, including Osama bin Laden and his No.2 Ayman al-Zawahiri, who are now reported to be based in the North Waziristan area of the Federally Administered Tribal Areas (FATA). It is a coalition of jihadis, which has been operating in the FATA and in the Swat Valley of the North-West Frontier Province (NWFP)---- Afghan Pashtuns, Pakistani Pashtuns and Punjabis, Uzbeks of the Islamic Movement of Uzbekistan (IMU) and the Islamic Jihad Union (IJU), Chechens of the 1980s vintage who had deserted from the Soviet Army, Uighurs of the East Turkestan Islamic Movement in the Xinjiang province of China and Muslims of different ethnicities from the Muslim immigrant diaspora in the West----jihadis of Pakistani origin from the UK, Spain and Denmark, Turks and Uighurs from Germany and some others.

5. The post-2002 Pakistani version of the Taliban has proved to be even more deadly than its Afghan counterpart. The Pakistani Taliban carried out 56 attacks of suicide terrorism in the tribal and non tribal areas in 2007 and it has already carried out 40 so far this year. The number is just one-third of what the Afghan Taliban has carried out, but strategically more significant and deadly----- attacking carefully chosen military and intelligence targets in heavily-protected cities and cantonments----even in Islamabad and Rawalpindi, where the General Headquarters of the Pakistan Army are located.

6. In the "News" of October 10, 2008, Dr Muzaffar Iqbal, a Pakistani analyst, wrote: "With an average of three suicide attacks per week in which at least thirty persons die, there will be 1,560 dead Pakistanis within a year. Add to this approximately 15 "extremists" being killed daily in the northern region, and we have a total of 7,035 dead. Further: for every hamlet, village, and hideout bombed, and with every "extremist" killed, we have an average of ten families displaced. So within a year, northern Pakistan will be a huge graveyard and there will be several thousand internally displaced persons living in makeshift camps in the rest of the country. In addition, there will be thousands of emotionally and mentally unstable persons available to anyone who can convince them that life is not worth living anymore, so come on and die for this or that cause. The net result will be an escalation of violence in all parts of the country and the spiral of violence and death reaching all corners of the country. How did we get here? "

7. A more difficult question engaging the attention of military commanders and policy-makers of the NATO countries is---- is a mid-course correction necessary and how to carry it out? Senior military officers of the NATO have started telling their policy-makers that the war against the Taliban in Afghanistan is unwinnable. Better make a deal with the Taliban to bring the war to an honourable end where there will be neither winners nor losers. However, they are not yet saying that the war against the Taliban in Pakistan is unwinnable. They think that if the Pakistan Army steadily maintains its present offensive in the tribal belt with discreet air support from US Drones (pilotless planes), the TTP can still be defeated.

8. It is a policy nightmare. What one has been seeing in the Pashtun tribal belt on both sides of the Pakistan-Afghan border is three wars in one---- against the Afghan Neo Taliban, against the Pakistani Taliban and against Al Qaeda. The war against the Afghan Taliban is not vital for the security of the West and for preventing new terrorist strikes in the West. No Afghan Pashtun has ever travelled outside his country to indulge in an act of terrorism in foreign territory. The Afghan Pashtuns, who never indulged in suicide terrorism in the past, look upon their present fight against the US and other NATO forces and their wave of suicide terrorism as part of their resistance struggle against the occupation of their country by foreign forces. They are just not interested in another 9/11 in the US homeland or another Madrid or London or Bali or Mumbai.

9. The war against Al Qaeda and the Pakistani Taliban is vital for the security of the rest of the world, including the US, other NATO countries, India, China, Russia and the Central Asian Republics. The tribals, whom the Pakistani Army used in Jammu & Kashmir in 1947-48, 1965, 1971 and 1999, were brought from the FATA. Many of the jihadis, who had indulged in acts of terrorism in different parts of the world after 2001, were trained in the training camps of Al Qaeda and its allies in the FATA. If the Pakistani Taliban and Al Qaeda are not defeated, the world will have to live constantly under the fear of another 9/11 or another Madrid or London or Bali or Mumbai.

10. Is it possible to reach a separate peace with the Afghan Taliban, while continuing the war against Al Qaeda and the Pakistani Taliban? The US is in the forefront of the war against the Afghan Taliban. It can take a decision, whether to continue fighting or whether to reach a peace and, if so, under what terms.The outcome of the war against Al Qaeda and the Pakistani Taliban depends more on the sincerity and willingness of the Pakistani security forces to fight the war to the finish, with US assistance. It is the Pakistan Army, which has to be in the forefront of this war. It has been fighting sporadically and with varying spells of intensity, but the determination to win the war is not there.

11. Just as US officers have come to the conclusion that the war against the Afghan Taliban is unwinnable and hence calls for a mix of the military and political approaches, the Pakistani officers too are coming to the conclusion that the war against the TTP is unwinnable on the ground and hence a different approach is called for in order to protect their population and security forces from the wave of suicide terrorism.

12. Is it possible to make peace with the Taliban on both sides of the Pakistan-Afghan border without weakening the war against the FATA-based Al Qaeda? With whome to negotiate? On the Afghan side, there are two vintages of the Taliban---the pre 10/7 vintage, which consists essentially of the political advisers of Mulla Mohammad Omar, the Amir, before 10/7 and the post-2002 vintage which consists of the remnants of the pre-10/7 commanders such as Jalalludin Haqqani and his son Serjuddin and the new commanders who have come to the fore in the recent fighting. The recent interactions between the representatives of the Government of Hamid Karzai and the Taliban under the auspices of the King of Saudi Arabia in Saudi Arabia during September were essentially with the Taliban of the pre-10/7 vintage.

13. Among those who reportedly attended the dinner were Mullah Muhammad Ghaus, a former Foreign Minister under the Taliban Government, Abdel Hakim Mujahed, former unofficial Taliban representative in the United Nations, Abdul Salaam Hashimi, former director of finance of the Hizb-e-Islami of Gulbuddin Heckmatyar, Maulvi Arsala Rahmani, a former Deputy Minister, Wakil Ahmad Mutawakil, another former Foreign Minister, and Mullah Abdul Salaam Zaif, former Taliban Ambassador to Pakistan. The influence of these leaders on Mulla Omar was limited even before 10/7. Before 10/7, the Saudi Intelligence had repeatedly tried through them to persuade Mulla Omar to hand over bin Laden to Saudi Arabia in order to avoid an American military strike. They could not succeed. Some of them were either captured by the Americans or surrendered to them after the war began and were in US custody for some months before they were released. They are, therefore, viewed with suspicion by the Taliban commanders.

14. Moreover, the US and other NATO forces may want a political face-saving because they are not doing well in the fighting, but why should the Taliban Commanders want one when they think they are winning? The same is the situation on the Pakistan side of the border. The TTP thinks it is doing well against the Pakistani security forces. Why should it agree to a compromise without achieving its objective?

15.Gen . David Petraeus, who was till recently the Commander of the US forces in Iraq, is shortly taking over as the Commander of the US Central Command. In that capacity, he will be responsible for the strategy in the Afghanistan-Pakistan region. In Iraq, he successfully drove a wedge between the secular Iraqi resistance fighters and the Wahabised Arab terrorists of Al Qaeda. There is a talk that he might try a similar approach in the Afghanistan-Pakistan region by driving a wedge between the Taliban on both sides of the border and the Al Qaeda remnants. He succeeded in Iraq because the former Baathists of Saddam Hussein's Army, who constituted the resistance fighters, were secular and did not like the Wahabised Al Qaeda. But, in the Afghanistan-Pakistan region, Wahabism provides the binding ties which strongly unite the Talibans with Al Qaeda. They all feel that the future of Islam is going to be decided in the fight against the US-led NATO forces. They have two common objectives--- the defeat and withdrawal of the NATO forces and the proclamation of an Islamic sharia-based rule in the entire region. So long as these objectives unite them, the Talibans are unlikely to agree to separate peace with the NATO forces. Media reports of a split between the Afghan Taliban and Al Qaeda have not been substantiated.

16. Unless and until the US is able to hunt down and kill at least bin Laden, Zawahiri and Mulla Omar, there is unlikely to be a change in the ground situation. Instead of nursing illusions of engineering a split between Al Qaeda and the Taliban and negotiating a separate peace with the Taliban, the US should focus on eliminating the Al Qaeda leadership. That was the main objective of Op Enduring Freedom and that should continue to be its main objective. (11-10-08)

( The writer is Additional Secretary (retd), Cabinet Secretariat, Govt. of India, New Delhi, and, presently, Director, Institute For Topical Studies, Chennai. E-mail: seventyone2@gmail.com )

National Seminar on Terrorism : LK Advani's Speech

Speech by
Shri L.K. Advani
Leader of the Opposition (Lok Sabha)

Inauguration of National Seminar on Terrorism
Organised by Rambhau Mhalgi Prabodhini

New Delhi – 4 October 2008

- - - - -
Our commitment: To make India terror-free
è POTA will be re-enacted; Strong action will be taken to bust terrorist cells that have mushroomed in different parts of India.

è The contrast is between NDA and UPA is that one alliance cares for India and the other cares only for its vote-bank.

è Stigmatising any faith or community in the fight against terror is wrong.

è Maligning of security forces is a dangerous new trend.

è Obnoxious propaganda by the likes of Arundhati Roy must be
firmly countered.

è Our vision is not limited by the considerations of where will our Party be after the next elections. Rather, it extends to caring about whether India will be united and strong after a hundred years, after a thousand years.

- - - - -

It gives me great pleasure to be with all of you this morning. My hearty congratulations to Shri Gopinath Munde, Prof. Bal Apte, Shri Vinay Sahasrabuddhe and others at the Rambhau Mhalgi Prabodhini firstly for organizing this seminar and, secondly, for organizing it in New Delhi. The Prabodhini regularly holds seminars and training workshops on important topics for social and political activists at its beautiful campus near Mumbai. This is perhaps for the first that it is holding a major event in the national capital. I look forward to the day when the Prabodhini can have a full-fledged centre operating in Delhi.

India is the worst victim of terrorism in the world

The subject of this seminar is highly topical. Over-familiarity with a problem sometimes lulls one's awareness about its seriousness. Therefore, it may surprise many to know that the problem of terrorism has persisted for nearly half the period of the life of independent India. Since the closing yeas of the 1970s, India has been in the vortex of foreign-sponsored terrorism, which has claimed nearly 80,000 lives, both civilian and of security forces — in Punjab, Jammu & Kashmir, North-Eastern states and in the rest of India. There is no country in the world which has been a victim of terrorist onslaught for so long, and which has suffered such enormous loss.

If a menace has continued for so long, it means that its perpetrators have a definite purpose, a definite goal. We in the BJP had correctly assessed right in the beginning that the goal of terrorists and their patrons abroad was not only to threaten the common man and the civil society, not just to create ordinary law and order disturbances , but to endanger the very unity and security of the nation. What is happening in India today has vindicated our assessment.

History will not pardon us if we fail

In the history of nations, it is important to know what challenges they face. But it is far more important to know how they respond to these challenges. Nations oblivious to the threats that eat into their vitals run an imminent danger of losing their ability to protect themselves. The warning bells are loud and clear that, even though the nation's internal security today stands seriously threatened, our response lacks political will. India does not have a seamlessly integrated counter-terrorism strategy backed by resolute operational capabilities.

There is one more thing to be said about internal security challenges. These do not manifest suddenly, nor do they mature overnight. The ominous signals they send over a prolonged period of time can be noticed unmistakably. However, if we choose not to notice them, or are incapable of taking self-protective action, history will not absolve us. It is our charge against the Congress party that it is keeping its eyes wide shut, choosing not to see, nor to strike, all for the fear of losing its vote-bank.

As far as the BJP is concerned, let me make it absolutely clear that we shall never conduct ourselves in such a short-sighted way that history would hold us guilty of not doing our duty at the right time and in the right manner. We are prepared to make any sacrifices for defending the unity and ensuring the security of our Motherland. Our vision is not limited by the considerations of where will our Party be after the next elections. Rather, it extends to caring about whether India will be united and strong after a hundred years, after a thousand years.

In the last millennium, India suffered many a blow. In the last century, India suffered blood-soaked Partition on account of a pernicious ideology. Therefore, all political parties and all sections of our society should so conduct themselves that no evil power, external or internal, can set its eyes on destabilizing, debilitating and dividing India.

Terrorism: Invisible enemy's low-cost, asymmetrical war

For such strong protective force to emerge, it is necessary to know that in today's world, failure to protect internal security has emerged as the most potent threat to the unity and integrity of nations, to the stability of their polity and to the protection their Constitutional values. In post-World War period, failure to deal with internal security challenges, as opposed to foreign aggressions, has been responsible for the degradation of a large number of nation-states. Most states when confronted with serious internal threats thought it to be a passing phase and allowed the drift to reach a point where retrieval was no longer possible.

Quite often, the adversarial forces won not because of their own strength but because of the weaknesses and mistakes of the regimes that were hit. Thus, history has a big lesson for us and it would be tragic if we failed to learn from past mistakes, both of our own and of others.

An important lesson that we in India should learn — this lesson is indeed globally relevant — is that conventional wars are becoming increasingly cost-ineffective. As instruments of achieving political and strategic objectives, their outcome is unpredictable — and often, counter-productive. Hence, foreign aggressions today come disguised as proxy wars in the form of terrorism and other forms of violence. The enemy targets internal fault-lines for furthering his strategic and political objectives. Even less powerful nations are able to exercise this low-cost sustainable option, giving rise to the new doctrine of asymmetric warfare.

We can see this clearly from what both Pakistan and Bangladesh have been doing to us. Neither can match India's military strength. Yet, both have been threatening India with cross-border terrorism.

This warfare is waged by an invisible enemy, for whom the civil society is both a source of sustenance and the target. The enemy exploits the liberties, freedom, technological facilities and infrastructure to his advantage, making even the more powerful, better equipped security agencies feel helpless.

Maligning of security forces: A dangerous new trend

Maligning the security forces is often a deliberate ploy employed by the civil society supporters of terrorist outfits. Unfortunately, it sometimes influences the thinking of even well-meaning human rights activists. However, it should not be forgotten that our security forces work under extremely difficult circumstances. The rest of society can sleep peacefully only because of the diligent service rendered by our police, paramilitary and Armed Forces. I fully agree that innocent persons should not be harassed and penalised. But let us spare a thought for this question: What will happen to our society, to our Nation, if the morale of our security forces is allowed to be weakened?

Sadly, this is precisely what has happened in recent times. What is sadder is that leaders of the Congress party and the UPA Government have allowed this denigration of our security forces to take place in the mistaken belief that those who are targeting our uniformed forces are defenders of "secularism". Their thinking about secularism has become so warped that anybody who targets the BJP becomes their friend.

For example, there is this book 'Khaki and the Ethnic Violence in India' by Omar Khalidi, an Indian scholar based in America, which provided the inspiration for the Sachar Committee to seek a communal census in the Armed Forces.

Another example is a book by Arundhati Roy, a well-known author, on the terrorist attack on the Indian Parliament on 13 December 2001. The book argues, quite obnoxiously, that the attack was not carried out by terrorists but orchestrated by the security forces themselves with prior knowledge of the leadership of the NDA Government. Her recent statement that "India needs Azadi from Kashmir as much as Kashmir needs azadi from India" is seditious. The intellectual and literary community should strongly condemn such anti-national pronouncements, which are being given legitimacy by pseudo-secularists.

Minorityism has gripped the Congress mindset

Here is yet another example of how the UPA Government has chosen to be influenced by the sinister and sustained campaign launched by such people. In spite of a Supreme Court verdict, it has not carried out the death sentence on Afzal Guru, who has been convicted for his role in the terrorist attack on Parliament. His was no ordinary crime. It was an offence of hitting at the country's legislature, the highest seat of India's Constitutional authority, which symbolizes its sovereignty and democratic polity. Not even the national outrage on this issue has dented the UPA Government's apathy. Not even the extraordinary decision of the families of the martyred security personnel to return the gallantry awards has made it act. Such indeed is the grip of minorityism on the Congress mindset today.

The same mindset has dictated the Congress party's anti-national response to the issue of unchecked infiltration of Bangladeshis into Assam and other parts of the country. I was in Guwahati last week, where, among others, I met Shri Jaideep Saikia, an eminent Assamese scholar who has written a widely acclaimed book 'Terror Sans Frontiers: Islamist Militancy in North East India'. The book is indeed an eye-opener, a strong warning against a problem which the Supreme Court itself, while striking down the IMDT Act as unconstitutional, has described as "external aggression". The UPA Government's response to this external aggression is simply to turn a blind eye.

Once again, the same mindset has dictated the UPA Government's decision not to give approval to the anti-terror laws passed by the Assemblies of Gujarat, Madhya Pradesh and Rajasthan, on the lines of an identical Act that exists in Maharashtra.

I can understand a government not succeeding despite making its best efforts. But I cannot but strongly indict that government which does not take even a single positive step at the legislative, political, administrative or operational levels to a counter threat which is so profusely bleeding the nation.

Stigmatising any faith in the fight against terror is wrong

Friends, no campaign of terrorism that has continued for so long can be without an ideological motive. Recognising the anti-India ideological driving force behind terrorism, and evolving a proper nationalist ideological response to it, is critical to achieving long-term success. Here I would like to state two things emphatically. Firstly, no religion and no religious community can and should be blamed for the criminal acts of some individuals belonging to that community. Stigmatising any community in the fight against terrorism is wrong, counter-productive, and must be condemned.

At the same time, it is equally important to recognize that religious extremism of a certain kind provides the ideological fervour and outward justification for terrorism and separatism. After all, religion was indeed misinterpreted and misused to construct the Two-Nation theory, which had disastrous consequences for India, for both Hindus and Muslims. The ideology behind the ongoing war of terrorism against India is a continuation of the separatist ideology that created Pakistan. Which is why, the anti-India forces in Pakistan have sponsored cross-border terrorism as a deliberate policy to achieve Kashmir's secession from India, and also to weaken India in many different ways.

In recent years, an important new experiment has been introduced into this policy of cross-border terrorism. A section of Indian youth, misguided and exploited by their mentors abroad and radicalized by an interpretation of Islam that is propagated by Al Qaeda, have been inveigled into the vortex of terrorism. SIMI and Indian Mujahideen have emerged as the face of indigenized terror. Their literature speaks volumes about their aversion for the very Idea of a secular, plural and democratic India, and also about their resolve to destroy India as we know it.

Contrast between NDA and UPA Governments

How did the NDA Government deal with SIMI? And how has the UPA Government dealt with it? I shall not go into all the well-known details, except to say that the contrast is stark. The contrast is between one alliance that cares for India and the other that cares only for its vote-bank. So much so that two Cabinet ministers in the UPA Government had the audacity to publicly defend SIMI, which is banned as a terrorist organization, and the Prime Minister did not even upbraid them!

This contrast is also evident in the manner in which the two alliances have dealt with the issue of a strong anti-terrorism law. In a country that has suffered so much due to terrorism with international operational and financial linkages, the need for an effective anti-terrorism law ought to be so self-evident as to preclude any divisive debate over it. After all, the BJP supported the TADA Bill when Rajiv Gandhi's Government introduced it in Parliament. Without TADA, some of the culprits in Rajiv Gandhi's murder case could not have been chargesheeted. When the NDA Government assumed office, TADA had already ceased to exist. Therefore, we legislated POTA.

One of the first acts of the UPA Government in 2004 was to repeal POTA. As a matter of fact, the war against terror figured very low in UPA's Common Minimum Programme. The CMP did not mention a single step to check trans-border infiltration, choking terror's sources of funding, and smuggling of weapons and explosives, etc. The Government's weak-kneed approach, as was inevitable, proved fatal in course of time. It not only emboldened the extremists groups, but also brought down the efficacy of country's security apparatus. The momentum generated by the series of initiatives taken by the NDA government to strengthen national security, particularly the internal security, was lost within a year.

During the first year in office, the UPA Government enjoyed the fruits of the efforts of the previous Government and, as a result, not a single incident of terrorism occurred outside J&K. But in the last three years the country has been brought to a pass where the terrorists are bleeding it with the frequency, place and time of their choice. There is mushrooming of sleeper cells and subversive modules of terrorists, both indigenous and foreign, in different parts of the country. As a result, every citizen of the country from Kashmir to Kanyakumari today feels insecure about his safety.

POTA remained in existence from September 2001 till December 2004. During this period, only eight incidents of terrorist violence, including the attack on Parliament and on Akshardham Temple in Gandhingar, took place in India's hinterland, leading to 119 deaths. Contrast it with what happened after POTA was repealed: The footprint of terrorism has grown alarmingly larger in the past four years. Jammu, Ayodhya, Varanasi, Samjhauta Express in Haryana, Mumbai, Hyderabad, Malegaon, Jaipur, Bangalore, Ahmedabad, Delhi …and, in the latest attack, serial blasts rocked Agartala in Tripura just two days ago. During this period, 625 persons have been killed and 2,011 injured, depicting a five fold increase in those killed and injured. It is the same country, same people, same police and same intelligence agencies; what then explains this unprecedented increase? The answer is very simple: Weak laws have emboldened the terrorists and appeasement has failed to change their intentions.

Congress cacophony about anti-terror law

Since the serial bomb blasts in New Delhi on 13 September 2008, people's pressure on the Government to enact a strong anti-terror law has greatly intensified. But the manner in which senior leaders of the UPA Government and the Congress party have responded to this demand is pathetic.

On 17th September, Prime Minister Dr. Manmohan Singh, while addressing the Governor's Conference, said: "We are actively considering legislation to further strengthen the substantive anti-terrorism law in line with the global consensus on the fight against terrorism."

· Earlier, The Hindu reported on 13th September: "In what is seen as the UPA government speaking with different voices over the need for States enacting tough anti-terror laws, the Union Home Ministry has not taken kindly to the suggestion of the National Security Adviser M.K. Narayanan favouring the Gujarat government's proposal to have its own law to deal with terrorist activities and organised crime. The NSA's suggestion was contained in a letter which he recently wrote to the Home Ministry. He reportedly saw no reason to turn down the request of the Gujarat government to have an anti-terror law. He also reportedly cited demands by a number of senior police officers both at the Central and State levels for enacting a comprehensive, tough anti-terror law. Mr. Narayanan did not see anything wrong in supporting such a demand."

· The Administrative Reforms Commission, appointed by the Government under the chairmanship of senior Congress leader Shri Veerappa Moily, strongly supported the need for stringent anti-terrorist law. Speaking to the media on 17th September, he said that "a strong anti-terror law with equally strong safeguards to prevent its misuse is needed."

On 24th September, Congress general secretary Shri Rahul Gandhi said, "There should be a strong law to deal with terror. A powerful law, not a failed law. POTA is a failed law."
In spite of these pronouncements, what is the net result? "No, no, we do not need a new law. Existing laws, if strengthened, are enough to fight terror."
How can India be safe under a Government that has no mind of its own, that speaks in so many voices, and that is led by a Prime Minister who has an office but no authority? It is difficult to find out who runs this Government and who takes the decisions.
Our commitment: To make India terror-free
Friends, there is no point any longer in demanding anything from this spineless and visionless Government. As they say in Hindi, the ulti ginati of this Government (reverse counting of its days in office) has begun. The people of India will dethrone the UPA rulers whenever the next Parliamentary elections are held.
However, this seminar is certainly a proper occasion for me to present some of our concrete promises, commitments and ideas to make India safe from terror.
1. If voted to power, the NDA will re-enact POTA. The critics of POTA have so far been unable to show a single shortcoming in it. Therefore, the least we expect from our friends in the Congress party is that, now that many of its senior functionaries have spoken in favour of a strong anti-terror law, they should support re-enactment of POTA in the 15th Lok Sabha.
I am saying this because the time has come to treat the fight against terrorism as a national issue requiring broad national consensus. It is in this spirit that I recently I wrote to former President Dr. A.P.J. Abdul Kalam, wholeheartedly supporting his suggestion for a bipartisan approach to combat terrorism.
2. The BJP favours setting up a federal anti-terror agency, which has become absolutely necessary for evolving effective coordination between the Centre and the States — and also among States themselves — in intelligence gathering, intelligence exchange, action, investigation, prosecution and planning and execution of preventive operations.

The Vajpayee government, for the first time since Independence, had formulated an integrated policy for national security. A Group of Ministers, supported by experts' task forces (I had the privilege of heading this GoM), had made nearly 300 comprehensive recommendations for completely overhauling India's security apparatus and management in the areas of Defence, Intelligence, Internal Security and Border Management. The UPA Government has shown callous neglect towards implementation of these recommendations. The next NDA Government will take up this task with the highest priority.

Implementation of the recommendations of the Malimath Committee on overhauling the Criminal Justice System will be done in a timebound manner.

The chain of India's anti-terrorism apparatus can be only as strong as its weakest link. Today one of its weakest links is the local police station and its intelligence gathering capabilities. Therefore, modernization of the police force with adequate Central assistance, which had been started by the NDA Government, will be rapidly intensified.

Finally, I wish to make a fervent appeal to all sections of our society and polity: Let us not communalise the fight against terrorism. Terrorists have no religion. They are enemies of the nation and of humanity as a whole. Let us not imperil the security of India — and, going further, the very unity of India — by going soft in the war against these enemies. This is not a war that any a single party or any single community can win. It is a battle for the survival of India, in which all communities and all political parties are equal stake holders. We wanted to extend our whole-hearted support to the incumbent government for any positive action that it is prepared to take to combat terrorism. Unfortunately, it has not taken even a single initiative in this direction to which we could extend our support.

While enemies of the nation are uniting and coordinating their actions, it is sad that narrow electoral considerations are standing in the way of political parties and governments giving a concerted fight to the menace of terrorism. I do hope that the public opinion in this country will create required pressure for political parties and their leaders to think beyond electoral considerations and fight terrorism with single-minded determination.

One last point. The Navaratri festival has begun. It will conclude on Vijaya Dashami, which symbolizes the victory of Good over Evil. I suggest that, in addition to Ravan Dahan (burning of the effigy of Ravan), let Navaratri pandals all over the country also do Atankvaad Dahan (burning the effigy of the Demon of Terrorism). Let it symbolize our collective resolve to make India terror-free.

With these words, I declare the seminar open and wish it all success.

Thank you.

Even confidence is in crisis

00:27 | 11/ 10/ 2008

MOSCOW (RIA Novosti economic commentator Oleg Mityaev) - On October 7 the Russian Government adopted a new anti-crisis package. Apart from the trillions of rubles allocated for short-term and mid-term financing of the banking system, Russia's largest banks will receive another 950 billion rubles for five years and beyond.

According to the Government and Central Bank's plan, these funds are to filter down to smaller banks and businesses, which are in acute need of refinancing. However, the crisis of confidence, which has spread over the Russian credit market, may frustrate these plans.

Starting in the U.S. mortgage market over a year ago, the financial crisis has crept all over the world causing a chain reaction of distrust in the banking sector. To increase financial security, even those American banks that were not affected by the mortgage crisis have tightened credit for home loans, not so mention the European loans. At the same time, the European banks that have stayed afloat are afraid to refinance Russian banks and companies.

The crisis of credit confidence is aggravating the on-going collapse of the world stock markets to even a greater extent. Many debtors that went bankrupt took loans against securities, which are now in the possession of banks, having depreciated manifold.

Under such circumstances, the billions (and in Russia - trillions) poured into the leading European countries' banking systems haven't had the desired effect yet. The crisis of confidence is so strong that the leading financial institutions hesitate to credit smaller banks, which, in turn, cannot re-credit business, or do not want to risk it. Private customers suffer as well: even Russia's largest banks have raised interest rates or simply put a limit on issuing credits, especially mortgages.

Unless the global banking system (including Russia), which is the monetary circulatory system for the non-financial sector of economy, resumes crediting business, the economic slowdown, and then the recession of economies stricken by the crisis of confidence, will become a reality.

In Russia, it is retailer chains that have suffered the most from the crisis of confidence. Anticipating an ever-growing consumer demand, they purchased large batches of goods on credit. With the credit stream running dry and consumers shying away, retailers found themselves on the verge of bankruptcy.

The most notorious example is the situation with Russia's largest cell phone dealers. Euroset, the market leader, was rescued thanks to billionaire Alexander Mamut, who bought it for $1.25 billion. Three fourths of that sum will be spent on buying down the debt of Euroset's former owners, instead of being transferred to their accounts. Two other large retailers - Svyaznoy and Tsifrograd - have applied a similar scheme: exchanging a former owner for a large investor. As can be seen, there are still people and companies in Russia that have funds to invest.

To raise extra capital, cell phone retailers had to start charging a commission for processing payments. On the other hand, new investors will help them survive the current crisis, and then they are likely to resell the businesses to mobile operators. As a result, Russia may convert to the European format where mobile operators sell phones themselves, with prices often discounted.

Nevertheless, it is obvious that the crisis of confidence won't be resolved that smoothly in other economic sectors. It is not only retail chains that have found themselves in debt - Russia's largest companies have been plagued by the same trouble. For example, Oleg Deripaska, the richest Russian according to Forbes, lost Canadian auto parts manufacturer Magna, which he had purchased for $1.5 billion on credit. Mr Deripaska failed to pay off his debt, and Magna went to French creditor BNP Paribas.

Because of problems with financing, the GAZ group, part of Mr Deripaska's empire, reported a one-week halt in GAZelles light commercial truck production. The assembly line stopped because of a drop in GAZ sales, which, in turn, was caused by the deteriorating auto loan market. Moreover, local GAZ dealers stopped making advance payment which is why the car manufacturer now lacks working capital to buy auto parts. So, it all came around to where it started.

For similar reasons, the Kamaz heavy-duty truck production plant announced a shortening of the workweek from six to four days through December 6.

A cut in car production against the background of the financial crisis is a global trend. Europe's Opel, BMW and Skoda, as well as U.S. General Motors and Chrysler have all announced a reduction in output.

The magnitude of the crisis is evident from the fact that Russia's largest oil and gas companies - Gazprom, LUKoil, Rosneft and TNK-BP - applied to the Government for credit to pay off their debts to western banks and maintain production. One might think their coffers had swelled with petrodollars. However, as soon as "black gold" sank below $90 per barrel, Russian oil tycoons desperately turned to the state for help.

The opinions expressed in this article are the author's and do not necessarily represent those of RIA Novosti.

October 10, 2008

US Foreign Policy under Bush: Balance Sheet and Outlook

This analysis addresses the power of the US to shape international relations under President Bush. The author explains that efforts to establish a new order in the Middle East have failed. He argues that in Asia and the post-Soviet space, too, Washington’s influence has been weakened. The analysis concludes that the partial renunciation of the neoconservative project during Bush’s second term in office was not enough to amend the country’s loss of reputation.

© 2008 Center for Security Studies (CSS), ETH Zurich

English (PDF · 3 pages · 1.0 MB)
Author: Andreas Wenger
Series: CSS Analyses in Security Policy
Volume: 41
Issue: 3
Publisher: Center for Security Studies (CSS), Zurich, Switzerland

Up close with Tiger-turned-MP

10 Oct 2008

The elusive Colonel Karuna Amman at a temporary hideout at a resort some 20 kilometers outside of Colombo. The photographer was blindfolded during the trip and Karuna vacated the area immediately afterwards.

Blindfolded and taken to an undisclosed location, ISN Security Watch's Anuj Chopra talks to elusive Colonel Karuna, a former LTTE commander recently nominated to the Sri Lankan parliament and now topping the Tiger hit list.

By Anuj Chopra in Sri Lanka for ISN Security Watch

Once a battle-hardened, underground guerrilla, Vinayagamoorthi Muralitharan, more popularly known by his nom de guerre Colonel Karuna Amman, eastern commander of the Liberation Tigers of Tamil Eelam (LTTE), now rubs shoulders with MPs as a part of Sri Lanka's political mainstream.

The erstwhile Eastern LTTE commander was appointed as a member of parliament, supported by the ruling United People's Freedom Alliance led by President Mahinda Rajapakse.

At one point, he was LTTE's commander for the Eastern Province, a favorite of LTTE chief Velupillai Prabhakaran, and effectively number two in the Tamil Tiger military organization. But in 2004, he broke ranks with the LTTE, citing differences with Prabhakaran, and formed a mainstream political party called the Tamil Makkal Viduthalai Pulikkal (TMVP).

After defecting, he began fighting alongside government forces against the Tigers. His fighters joined the Sri Lankan government in its offensive against the rebels and helped the security forces to recapture parts of the eastern region from them.

In an exclusive three-hour interview at an undisclosed location with ISN Security Watch, Colonel Karuna spoke about everything from his reasons for breaking ranks with the LTTE ("I want to liberate our people - the Tamils - from the hands of the liberators") to his political ambitions ("I am in the race to convert a bullet to a ballet") to why he still maintains his private army ("I'm on the top of LTTE's hit list.")

The interview with the reclusive renegade Tiger was arranged through a set of intermediaries. The ISN correspondent was blindfolded by Karuna's personal body guard and driven to a plush resort in a village abutting Colombo.

From renegade to lawmaker

"Tamil people can now have the faith of solving their own problems through parliamentary democracy. We should forget the bitter past experiences and work to win the trust of the Tamils," Colonel Karuna told the Sri Lankan Parliament as he was nominated as an MP this week.

Talks of democracy might be an anachronism for a fierce guerrilla fighter who once inspired fear in the hearts of Sri Lankan army soldiers, but Colonel Karuna says his path is akin to the Maoists of Nepal.

"No one believed they would lay down arms. No one believed I would either. But I did," he says, lounging on a chair in a crisp stripped shirt, looking every bit the lawmaker as opposed to the guerrilla commander. "Here I am."

Karuna was appointed to the 225-member parliament to fill the vacancy of a lawmaker who quit recently to contest local polls.

But his appointment as MP has already triggered controversy.

The Sinhala nationalist Janata Vimukthi Peramuna party (JVP) has challenged his appointment in the Supreme Court, arguing the vacancy he took up belongs to an MP of their political outfit.

Moreover, human rights group Amnesty International has strongly criticized Colonel Karuna's appointment, accusing him crimes against humanity, including torture and the use of child soldiers.

Colonel Karuna, however, seems undeterred by such allegations.

Betrayal weakens Tigers?

Colonel Karuna alleges that the LTTE lost 70 percent of its fighting capacity after his group parted ways with the Tigers.

"I broke away with 6,000 cadres; 4,000 of them were battle-hardened guerrilla fighters," he told ISN Security Watch. "The LTTE recruited most of their suicide cadres from the east. Moreover, my group had the potential to launch offensive attacks."

Colonel Karuna refused to share the specifics of his current military collaborations with the Sri Lankan army. However, the Sri Lankan government has made some unprecedented gains against the Tigers in recent months, in large part because of his support. His fighters joined the Sri Lankan government in its offensive against the rebels and helped the security forces to recapture the eastern region from the Tigers last year. In the Wanni battle zone, he is believed to have shared intelligence with the Sri Lankan army about Tiger hideouts.

A military commander posted in Jaffna told ISN Security Watch that he eliminated several hundred LTTE infiltrators in government-controlled Jaffna region after he was tipped off by Karuna.

"In the current fighting in the Wanni, you notice the LTTE are only launching defensive attacks. They don't have the potential to launch offensive attacks," Karuna added. "That's why they are losing."

"Liberated from the liberators"

Karuna says he joined the ranks of the LTTE in 1983 because he believed the "war against Sinhala hegemony" was a just one.

Over the last two decades, he says the LTTE has been able to sustain itself as the world's longest running insurgency because Prabhakaran directed his efforts primarily toward building up the military.

"He built a military office of the Tigers in Tamil Nadu in 1983. He bought books on military hardware and armaments, and appointed translators to translate them into Tamil. He dedicated his efforts to building ground cadres, a naval wing, and later, the aerial wing. Cadres were sent to the middle east and south east Asia for training with other rebel groups," Karuna said.

"The LTTE's military capacity was not built up over night. It took many years of sustained effort."

Over the years, Karuna said, he was dismayed to see Prabhakaran was ignoring the interests of the eastern Tamil people, and that angered him tremendously. It was the main reason for his break with the Tigers.

He vehemently denies the LTTE allegation that his real reason for betraying the Tigers was because its intelligence wing was closing in on him for corruption and violation of the LTTE code of conduct.

At the moment, the Tigers are at their weakest and on the cusp of defeat, if Karuna is to be believed.

"The Sri Lankan government cannot afford to call a ceasefire," he says. "He [Prabhakaran] has to be crushed. You cannot trust that man."

Karuna alleges that Prabhakaran intentionally dragged out peace talks so that the rebels could use the cessation in hostilities to re-arm for further combat. "This is a battle to liberate the Tamil people from the liberators," Karuna said.

In the recent fighting in South Ossetia, Karuna says, the international community insisted the civilian population be given safe passage; until then the warring factions should not exchange fire.

"Why is the international community quiet about Sri Lanka?" he asked. "200,000 Tamils are trapped close to Kilinochchi, trapped by Prabhakaran and used as human shields. If he were a true liberator of Tamils, he would let them go. He must be pressured to give the civilians safe passage."

Several military analysts say that even if Kilinochchi falls, the Tigers will recede to the jungles, and a low-level insurgency will continue to simmer in Sri Lanka.

Karuna doesn't agree.

"War depends on territory," he says. "From the jungle, they can only manage hit-and-run attacks, but that will hardly leave a dent. The LTTE will be crushed once you push them out of their strongholds."

External forces speculation

When Colonel Karuna turned renegade in 2004, it seemed unlikely that he could have challenged Prabhakaran to this extent without some assurances from powerful patrons. Few Tiger dissidents have survived Prabhakaran's wrath in the past. There was even speculation that external forces - RAW (Research and Analysis Wing, India's most powerful intelligence agency) or the CIA - might be behind Karuna's rebellion.

When asked about this, Karuna smiled knowingly. "Wouldn't I be sitting in America or India if they had helped me? I live in virtual hiding because I am on top of the LTTE's hit list."

Human rights violations

Colonel Karuna was the LTTE head of the eastern province in 1990, when 600 unarmed police officers who surrendered to his group were subsequently massacred.

To this allegation, he shrugs, "I wasn't present in Batticaloa, but in Jaffna at that time." He says he isn't aware who was behind that massacre.

When Colonel Karuna was part of the LTTE, he was also implicated in the massacre of Muslims, including the Kattankudy and Erovar massacres in the eastern province. According to Sri Lankan military intelligence sources, "Karuna was not in the eastern province but in the Wanni during the time of the attacks on Kattankudy and Eravur Muslims. He was, however, intercepted giving orders to his cadres in the east in relation to various activities."

Even now, after laying down arms, he is accused of forming death squads to muzzle journalists and silence those who oppose his point of view and of being involved in the disappearances of civilians. UNICEF and Human Rights Watch also accuse him of recruiting child soldiers.

"Return to War: Human Rights Under Siege," a report on the human rights abuses of the current Sri Lankan government, accuses Colonel Karuna of human rights violations with the aide of the Sri Lankan government.

"The Sri Lankan government has failed to take action against the abusive Karuna group, a Tamil armed group under the leadership of V. Muralitharan that split from the LTTE in 2004 and now cooperates with Sri Lankan security forces in their common fight against the LTTE. With the LTTE's loss of territories in the east, the Karuna group has exerted de facto authority in the districts of Ampara, Trincomalee, and Batticaloa. The group also expanded its operations in the northern Vavuniya district, engaging in extortion and abductions," the report says.

Karuna has categorically denied these allegations, claiming that the LTTE is trying to discredit him.

"I have given arms to only a few cadres - 200 or 300 - for our own protection," he said. "LTTE infiltrators in the eastern province are waging a campaign to wipe out TMVP cadres. We need to protect ourselves."

While with the LTTE, he says he was involved in recruiting child soldiers, but denies his continued involvement.

"We just disbanded an army of 6,000 cadres. Why would we now engage in recruiting children? That's an absurd allegation," he said.

But he doesn't deny that some of his cadres, used to an ominous gun culture for two decades, could be involved in some violations.

"Fighting is all they have seen for two decades. It will take some time for their thinking to change," he said. "A lot of them still don't have jobs. We are trying to integrate them into the Sri Lankan defense forces. But morally, Tamils of the east hate war. We've suffered enough."

Karuna was arrested in November 2007 in the United Kingdom and served half of a nine-month term for entering on a forged diplomatic passport. He was released on 3 July 2008.

There were speculations that his passport and visa were arranged for him by the Sri Lankan defense secretary.

Karuna would not comment on who arranged the documents for him to ISN Security Watch. He said he entered the UK on forged documents because of "security reasons" to be with his wife and children.

Anuj Chopra is a freelance journalist whose stories have appeared in The Christian Science Monitor and The San Francisco Chronicle, among other publications. Chopra lives just outside Mumbai in India and is the 2005 recipient of the CNN Young Journalist Award in the print category.

Iron Law of Economic Ignorance

"The worse and more widespread the ignorance of the causal connections between human actions, the higher the level of political intervention in society. The more one understands the causal connections between human actions and grasps the effects of political interventions, the more one opposes the more "obvious" and "easy" policies"


Political Power and Economic Ignorance


Daily Article by Jeremie T.A. Rostan | Posted on 10/9/2008

Georges Bush's recent speech in defense of his bailout plan was quite a tour de force. Indeed, it managed to explain the pending recession of the US economy by a previous situation of "easy credit" without mentioning the monstrously inflationist policy of the Federal Reserve — which reached its climax in 2003 and 2004, when it lent dollars at a negative short-term interest rate, and resulted in the creation of more dollars in a seven-year period (2000–2007) than had been created cumulatively in the two centuries since the founding of the United States.

According to the 43rd President, the fault rests entirely on "foreign investors" willing to profit from the competitiveness of the US economy. Logically, the lengthening of the structure of production brought by net investment should have resulted in aggregate profits and economic growth — but not this time. For some reason (which the president deems useless to explain) low interest rates were a curse that somehow led all financial entrepreneurs to dissipate their capital in hopeless ventures and loans.

Because of fractional-reserves policies and the de facto international dollar standard, even the billions of units of the US currency spent abroad are duplicated and sent back to America, where they encourage credit. But George Bush did not mention that.

Finally, he concluded that

the Federal Reserve should have its powers extended far beyond their current scope, notably over all financial enterprises, not just banks, and

a massive bailout of taxed funds was necessary — as an exceptional intervention and some sort of public investment which would help the economy recover and be paid afterwards.

Not all "experts" agreed. One commentator on CNN even acknowledged that the impending recession was a consequence of Alan Greenspan's "lax money policy."

Nevertheless, if some grasped the connection between these present effects and that past cause, few of them seem to have grasped that resorting to the same policies at present will necessarily have the same consequences in the future: to delay the recession, and worsen it.

Is there anything we can learn from such demonstrations of ignorance?

Economic knowledge and political ignorance
As Carl Menger explained, men's knowledge of the causal connections between natural phenomena determines the extent to which they control their own lives.[1] The outcome of their actions is only partly the product of individuals. It also depends on other factors that they do not know how to (or do not have the power to) employ as means towards their ends. Indeed, their knowledge only determines the extent to which men control their own lives theoretically. Practically, their actual control depends on the capital they have accumulated.

The causal connection between the increasing employment of higher-order goods and the increasing quantity (or quality) of 1st-order goods produced lies in the fact that the first increases the number of factors of a given causal process of production that have goods-character — i.e., extends to less proximate ones our power to direct its various factors to the satisfaction of our needs.[2]

Conversely, men's ignorance of the causal connections between natural phenomena — as well as their preference, ceteris paribus, for present satisfactions, which limits their saving — determines the extent to which they do not control their own lives, but rather depend for the satisfaction of their needs on side causes present in their environment.

We can extend this Mengerian analysis and say that men's ignorance of the causal connections between human actions determines the extent to which their control over their own lives and striving towards its improvement is limited by the present side effects of past political interventions.

Indeed, the less they grasp their future consequences, the more they tend to favor policies that seem to permit the immediate attainment of their ends — through coercion.

There is a TV commercial that says, "Imagine if firefighters ruled the world." We see Congress, packed with firefighters, one proposing policies, the others supporting them unanimously. It seems so obvious!

"Do you want more schools?"


"Do you want health care for everyone?"


It only takes thirty seconds. Then the chief concludes joyfully, "That's the easiest job I have ever had…"

Is it not that obvious and that easy? Do we want jobs for everyone? Then let's make it illegal to fire employees. Do we want everyone to be rich? Then let's distribute wealth…

Yes, we may in fact all share the same goals, in the sense that Ludwig von Mises pointed out: interventionists and partisans of laissez-faire seek the same general and "obvious" ends. But as the author of Human Action noted, the laissez-fairists do not advocate the same means, because the policies promoted by the interventionists overlook two things:

the causes of the evils they pretend to fight

their own future consequences

The causes of the present evils are the effects of similar interventionist policies of the past. The future consequences of present interventionist policies are similar to (but worse than) the present evils they fight.

Still, so complete a lack of understanding is all too common — not only on the part of "the man in the street," but also among those who pretend to teach economics.

You will not believe what I found in an "Advanced Placement" economics test, only a few days ago.

The following is number 7 of a series of "macroeconomics" multiple choice questions:[3]

To counteract a recession, the Federal Reserve should

raise the reserve requirement and the discount rate
sell securities on the open market and raise the discount rate
sell securities on the open market and lower the discount rate
buy securities on the open market and raise the discount rate
buy securities on the open market and lower the discount rate
And the answer is supposedly E.

Notice that the question is not, "Should the Federal Reserve do anything, and if so, what?"

No, the question assumes that the Federal Reserve should do something.

What this question really asks is, what intervention of the Fed will have the immediate effect of stopping a recession? It does not ask, what are the causes of recessions? It does not ask, what will be the long-term effects of the Fed's actions?

From such a perspective, it does seem obvious that aggregate losses today mean diminishing economic activity, compared to the previous period, and a policy of inflation that pumps into the economy the equivalent of the aggregate loss will permit us to maintain as high a level of economic activity as before. And such a policy is "easy": the Federal Reserve only has to turn out more green bills.

But this will only "counteract the recession" and maintain the economic activity, immediately — i.e., it will not maintain it at all. On the contrary, it will result in a new recession — more distant in time, but worse than the present one — which a similar policy originated in the past.

Conclusion: The Iron Law of Economic Ignorance
The worse and more widespread the ignorance of the causal connections between human actions, the higher the level of political intervention in society. The more one understands the causal connections between human actions and grasps the effects of political interventions, the more one opposes the more "obvious" and "easy" policies.

$24 $20

George Bush was certainly the spokesman of a more common attitude when he argued that, even if he opposed interventionism "as a general rule," he favored (as an exception) a massive taxation and inflation plan, because of exceptional circumstances. This only proves a lack of understanding of the fact that a causal connection is a necessity — even in "abnormal" conditions. Once we understand that causes of the same type have always and everywhere the same type of effects, we have to extend to all cases the praxeological principle according to which more of the same type of intervention only delays and worsens the evils it supposedly counteracts.

There is a sad irony to economic ignorance — on top of its disastrous effects. Let's call it the Iron Law of Economic Ignorance: the value of economic knowledge increases with its scarcity. That is, economic knowledge gets more valuable as the economy worsens; but the economy worsens according to the level of political intervention — which is a function of economic ignorance.

Jérémie T.A. Rostan is "agrege de philosophie." He teaches philosophy in San Francisco, California. He wrote a study guide to Carl Menger's Principles of Economics, prepared in 2008 for distribution through Mises.org. Comment on the blog.

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There have been signs of renewed support for the cause of the Sri Lankan Tamils across the political spectrum in Tamil Nadu, except from the Congress (I), which continues to adopt an ambivalent attitude. This support has come not only from the traditional supporters of the Liberation Tigers of Tamil Eelam (LTTE), but also from other parties such as the ruling Dravida Munnetra Kazhagam (DMK) of M.Karunanidhi and J.Jayalalitha of the Anna DMK, the main opposition party. Even the Tamil Nadu branch of the Communist Party of India (CPI) has come out in support of the Sri Lankan Tamils.

2.Karunanidhi, who is generally not given to using strong or emotional language, has given emotional expression to his anguish over what he perceives as the continuing policy of the Government of Mahinda Rajapaksa of suppressing the Tamils. He has conveyed his concerns to Prime Minister Manmohan Singh and stressed upon him the need to take up the matter strongly with Rajapaksa in order to stress upon him the importance of finding a political solution to the problems of the Tamils. He has convened an all-party meeting in Chennai on October 14,2008, to work out a common political approach to the Government of India.Jayalalitha has expressed her support to the right of self-determination of the Sri Lankan Tamils, but made it clear at the same time that her support to the Tamil cause should not be misconstrued to mean any change in her policy of strong opposition to the LTTE as a terrorist organisation.

3. It would be incorrect to view this renewed support as dictated by electoral considerations in view of the elections to the Lok Sabha which are expected in the next few months. Despite the increasing concern in Tamil Nadu over what is perceived as the anti-Tamil policies of the Rajapaksa Government, the Sri Lankan Tamil issue is unlikely to play any role in influencing the voters. Economic and internal security issues are likely to play a predominant role in the elections .

4. It would be equally incorrect for the LTTE leadership to view this as indicating a softening of the hostility to the LTTE after its role in the assassination of Rajiv Gandhi in May,1991. The attitude towards an LTTE led by Prabhakaran continues to be as negative as it has always been since 1991. Any wishful-thinking by Prabhakaran that he and others who were responsible for the assassination of Rajiv Gandhi are likely to be rehabilitated in the eyes of vast sections of the people of Tamil Nadu, who are now hostile to them, will be belied. All political leaders except some die-hard supporters of the LTTE, who have taken up the cause of the Sri Lankan Tamils with the Government of India, have made it clear that their support is for the cause of the Sri Lankan Tamils and not for the LTTE headed by Prabhakaran.

5. The LTTE has been gratified by this renewed support for the Tamil cause and has been playing it up. However, there is no evidence to show that either the LTTE or its supporters in Tamil Nadu, who are in a small minority, had any role in this renewed support. This support has been triggered off spontaneously by heightened concerns over the policies of the Rajapaksa Government and by the statements of some officials serving under him such as Lt.Gen.Sarath Fonseka, the Chief of the Sri Lankan Army, Gothbaya Rajapakse, his brother, who is also the Defence Secretary, and Rohitha Bogollagama, the Foreign Minister, as well as by sorrow over what is perceived in Tamil Nadu as the double-faced policy of the Government of India on the plight of the Sri Lankan Tamils and over the lack of interest shown by Manmohan Singh in taking up the issue more vigorously with the Rajapaksa Government.

6. The continuing use of indiscriminate air strikes by the Rajapaksa Government against the Tamil civilian population in order to intimidate it into stop supporting the LTTE has come in for strong criticism. The closing of the doors by it for a political solution reached through talks with the LTTE has added to the anger in Tamil Nadu against the Rajapaksa Government. As the Sri Lankan Army presses its offensive to re-capture the territory still under the control of the LTTE in the Northern Province, increasingly disturbing statements have been coming from officials such as Fonseka highlighting the rights of the Sinhalese majority and playing down the legitimate rights of the Tamil minority. All these developments have caused concern in Tamil Nadu that under the pretext of crushing the LTTE as a terrorist organisation, the Rajapaksa Government, whose policies are seen as largely influenced by Sinhalese hawks, is seeking to crush the Tamils as a community by exploiting the favourable ground situation and the lack of interest in the international community in the developments in Sri Lanka. Very few in Tamil Nadu take seriously the assurances of Rajapaksa that after neutralising the LTTE as a terrorist organisation, his Government will initiate political measures for meeting the legitimate aspirations of the Tamil people.

7. At the same time, there has been a perceptible disenchantment in Tamil Nadu over what is seen as the lack of interest shown by Manmohan Singh in the problems of the Sri Lankan Tamils. He is being compared unfavourably with Indira Gandhi and Rajiv Gandhi, who took a keen interest in the problems of the Tamils and did not hesitate to take up the matter strongly with the Governments then in power in Colombo. This disenchantment has turned into shock following reports of two Indian radar technicians being injured when two planes of the LTTE's air wing bombed on September 9, 2008, a Sri Lankan military base in Vavuniya, which has been co-ordinating the military operations against the LTTE.

8. The Government of India had repeatedly assured the Government of Tamil Nadu that it would give only non-lethal military equipment to the Sri Lankan Armed Forces, which could not be used in offensive operations against the LTTE. It had justified its supply of radars to the Sri Lankan Air Force on the ground that these radars were meant for use to protect strategic targets in Colombo against LTTE air strikes. There was initial opposition in Tamil Nadu's political circles to the supply of even the radars, but ultimately they were reconciled to it.

9. The information that the radars supplied by the Government of India were actually being used in the frontline areas and that two Indian technicians were helping the SLAF in their maintenance added to the concerns in Tamil Nadu and created a suspicion that New Delhi was not telling the truth to the Government of Tamil Nadu about the extent of the Indian assistance to the Sri Lankan Armed Forces in their operations against the LTTE.

10. The fact that despite the entreaties of Karunanidhi, who has been a loyal supporter of the Manmohan Singh Government, the Prime Minister did not directly take up the concerns of the people and the political leaders of Tamil Nadu with the Rajapaksa Government and that he left it to M.K.Narayanan, his National Security Adviser, to handle the matter has further damaged the image of Manmohan Singh in the eyes of sections of the political class of Tamil Nadu.

11. The revival of support for the cause of the Sri Lankan Tamils is still largely confined to the political class. This has not yet found vigorous articulation among large sections of the public. It would be unwise to interpret this as indicating that public support for the Sri Lankan Tamil cause remains limited and can be managed.

12. Any fresh humanitarian disaster consequent upon the military offensive in the Northern Province could create in Tamil Nadu a situation similar to what had prevailed in the 1980s when Tamil Nadu became a rear base for supporting the struggle of the Sri Lankan Tamils against the Sinhalese. If this happens, any success of the Sri Lankan Army in its current operations to crush the LTTE might see only the end of one phase of the Tamil struggle and the beginning of another.

13. It is important for the Government of India to show a more visible and vigorous interest in working for ending at least the ruthless air strikes against the Tamils and for ensuring that the Tamil cause is not lost sight of. The Sri Lankan Government has every right to press ahead with its counter-insurgency operations in order to restore the Government writ in the areas now under the control of the LTTE, but its use of air strikes and its perceived indifference to the legitimate concerns of India and other members of the international community should not be accepted. (10-10-08)

(The writer is Additional Secretary (retd), Cabinet Secretariat, Govt. of India, New Delhi, and, presently, Director, Institute For Topical Studies, Chennai. E-mail: seventyone2@gmail.com )

Pak now the world's top suicide bomb death capital: CSM

Fri, Oct 10 01:05 PM

New York, Oct.10 (ANI): Pakistan has overtaken Iraq and Afghanistan in suicide-bomb deaths this year, its intelligence agency reports.

Suicide bomb attacks have spiked in Pakistan, from two in 2002 to a record 56 in 2007, according to the Institute for Conflict Management, based in New Delhi. As of August of this year, the country had seen 25 suicide-bomb attacks, ICM reports.

In a grim indicator of the rise in attacks, according to Pakistan's intelligence agency, this year Pakistan has overtaken Iraq in suicide-bomb deaths.

It counted 28 suicide bombings in Pakistan that killed more than 471 people in the first eight months of this year. By comparison Iraq saw 42 such attacks and 463 deaths; Afghanistan, 36 incidents and 436 casualties.

According to the Christian Science Monitor (CSM), Thursday's suicide bomb attack at the headquarters of the Anti-terrorism Squad of the Islamabad police force, has added to the rise in bomb attacks in Pakistan.

The CSM quotes Hassan Askari Rizvi, former professor of Pakistan Studies at Columbia University, as saying: "The message [from Thursday's attack] couldn't have been clearer. The militants want to show that they have the capacity to hit Pakistani institutions - even those ones trusted with the responsibility of protecting the rest."

According to the CSM, Pakistan needs more than political will to deal with these attacks.

"Pakistan will need to improve its counterterrorism abilities. Most of the time there is no claim of responsibility, and investigations don't uncover much. Unless we have concrete information on where this is coming from and why, it will be a hard fight to fight," it quotes Khalid Rahman of the Institute of Policy Studies in Islamabad, as saying. (ANI)

India to be Iran's Top Oil Customer

TEHRAN (FNA)- India will be the top Asian customer of oil from Iran in 2009 followed by China and Japan, according to a high-ranking NIOC official.

"We are negotiating with a few Indian companies for sales of crude oil in 2009," said Ali-Asghar Arshi, Managing Director of International Affairs for the National Iranian Oil Company (NIOC).

"Currently the leading customers of Iran's crude oil in Asia are Japan, China and India but in the upcoming year the top ranking will change to India, China and Japan," he added.

The oil official said the reason for India's jump to top ranking customer is an increase in demand for Iranian crude by the country, adding that the Indian government's energy strategy is to increase the capacity of India's refineries to enhance its energy security.

India has been trying for some years to enhance refinery capacity, and both public and private sectors in the country have increased investment in refineries.

Arshi noted that India employs a complicated refining system that is able to obtain the maximum output of gas and diesel fuel from crude oil, press tv reported.

Iran's top European customers for crude are Italy, France, Belgium, Greece and Spain.

Referring to Latin America, Arshi said Iran does not sell crude to the countries in the region but has recently participated in bids to sell crude oil to Chile and Uruguay.

Iran is also constructing oil reserve tanks that will enable the country to raise its storage capacity, as part of the country's long-term energy policy.

Is Pakistan’s war against militants India’s too?

Post a commentPosted by: Sanjeev Miglani

Time was when every time militants set off a bomb in Pakistan, India’s strategic establishment would turn around and say “we told you so”. This is what happens when you play with fire … jihad is a double-edged sword, they would say, pointing to Pakistan’s support for militants operating in Kashmir and elsewhere.

Not any more. When India’s opposition Hindu nationalist Bharatiya Janata Party – which has consistently advocated a tougher policy toward Pakistan – tells the government to be watchful of the fallout of the security and economic situation in Pakistan, then you know the ground is starting to shift.

“Pakistan is on the verge of an economic and political collapse,” party leader and former foreign minister Jaswant Singh said in remarks that seem to have escaped much public attention. “It is time we understood the influence and be prepared to face it.”

Former Indian High Commissioner to Britain Kuldip Nayar, who is from the opposite end of the political spectrum, made a similar point shortly after the bombing of Islamabad’s Marriott hotel.

“If ever Pakistan goes under, India’s first line of defence would collapse. The Taliban would have secured the launching pad to attack India’s values of democracy and liberalism which do not fit into their scheme of things,” he wrote in the Gulf News.

“Terrorism is the means, Talibalistan is the end. New Delhi and Islamabad should jointly fight against the menace,” Nayar, who has long campaigned for peace with Pakistan, said.

On Thursday, a suicide attacker struck again in a high-security part of Islamabad, this time on the police headquarters itself, underscoring the militants’ ability to strike at will anywhere across the nation.

“The grim truth is that Pakistan is becoming something alarmingly close to a failed state,” wrote Sumit Ganguly, director of research at the Center on American and Global Security at Indiana University, in a piece for the Washington Post. Pakistan, he said, faces an “existential crisis on its streets and in its courts, barracks and parliament”.

The world, led by the United States, must work to put the country back together again, he said. “If not, we will face a terrifying prospect: Pakistan’s collapse (slow or otherwise) into a full-blown failed state, armed with nuclear weapons, riven by ethnic tensions, infused with resentment and zealotry, with roving bands of Taliban sympathizers and bin Ladenists in its midst. ”

So is New Delhi ready to play ball? Given that India looms large over the Pakistani mind and its security/foreign policy has been predicated to meet the threat from its larger neighbour, one obvious way for Pakistan to be more at ease with itself would be to reduce tensions with New Delhi.

The Pakistan Policy Group, comprising independent, bipartisan American experts on U.S.-Pakistan relations, said in a report that while America couldn’t really impose normalcy between India and Pakistan, “it can continually point out both countries’ interests would be served - now more than ever - by building better relations because both face existential terrorist threats.”

This weekend Indian Prime Minister Manmohan Singh launches a rail link in Kashmir, which fueled much of the hostility between the two nations all these years and remains the main stumbling block to better ties.

Is this an opportunity for Singh to announce concessions? Pakistan’s Dawn, citing unspecified news reports, said that Singh was expected to announce important peace measures with Pakistan during the trip to Kashmir.