April 03, 2010



By Dr. Subhash Kapila

(This Paper was contributed by the Author to SYNERGY, Journal of the Centre for Joint Warfare Studies, New Delhi and published by them in the January 2010 issue of the Journal. Reproduced with kind permission of the Editor SYNERGY.)


The global security environment and the global strategic calculus are in a state of dynamic transformation. This unfolding dynamic transformation is also generating a new set of strategic uncertainties unlike the predictable bipolar strategic template that prevailed during the Cold War.

Widely viewed and accepted too is the fact that the global strategic transformation underway, going by available trends, is likely to usher in an entirely new global order which would be visibly and vastly different from the international order and the global power balance that existed in the second half of the 20th Century. The first quarter of the 21st Century i.e. by 2025 or so the trends in the global transformation underway would have substantially crystallized and that would present significant challenges to the unipolar global predominance of the United States that commenced with the disintegration of the Former Soviet Union in 1991.

Asia is fast emerging as the center of gravity of the global political, economic and military power in parallel with what many view as the progressive diminution of Western hold and dominance over global affairs. While the 21st Century may not emerge as “The Asian Century”, as many would like to believe it, but it also is emerging as irrefutable that it will be Asia which would be in driver’s seat to usher in the global transformation as never before. China, India and Japan are being seriously viewed as serious contenders for global power status in the emerging ‘New World Order’.

The 21st Century could have been an ‘Asian Century’ had inherent divisive contradictions between China on the one hand and India and Japan on the other hand not prevailed and all these Asian aspirants for global power status been united in carving out a ‘New World Order’. Available indicators suggest that China is not willing to share the Asian ‘strategic space’ with India and Japan as co-equal Asian powers. Nor is China willing to allow the global limelight on it as the only Asian power in the UN Security Council as a Permanent Member to also shine similarly on India and Japan and hence its strong opposition to such initiatives.

So while Asia is emerging as the catalyst for the transformation of the global balance-of-power and the consequent changes in the global strategic calculus, China’s intra-Asian strategic rivalries with India and Japan would more markedly determine the Asian security environment. More importantly, China’s reluctance to share the Asian ‘strategic space’ and the ensuing jostling that would ensue between these three rising Asian powers would leave the door open for the United States to manipulate the Asian balance-of-power system. The United States has substantial strategic stakes in Asia and especially the Asia Pacific region in which China and Japan are co-located.

The Asian security environment in the coming decades, to a great extent would therefore be also fashioned by the United States even as the rising Asian powers too would be instrumental in doing so. A resurgent Russia is also likely to increasingly figure as a factor in Asian security environment especially with its past and present strategic linkages with China and India too.

In order to examine the ‘Asian Security Environment and Choices for India’ it is proposed to analyze the theme under the following heads:

  • Global Security Dynamics
  • Asian Security Environment: The Trends in the Making
  • India’s Security Dynamics and India’s National Aspirations.
  • India’s Strategic Choices in Asia’s Unfolding Security Environment


Asian security environment cannot exist in a strategic vacuum. The Asian security environment would to a great extent be determined by the strategic power play at the global level and which in turn requires a brief reference and examination.

The global strategic dynamics are largely determined by the policies or lack of policies of the United States as the sole superpower straddling the globe with its substantial political, economic and military leverages. In the global ‘Big Five’ the United States supported by the other European Powers, namely Britain and France outweighs the power of Russia and China, which two in any case have separate strategic priorities.

The United States possesses unparalleled military power both in terms of strategic assets and conventional military power with an awesome military punch. More significantly, the United States is uniquely placed as the only world power with force- projection capabilities with a global reach. Russia and China are nowhere near the United States in terms of force-projection capabilities.

On current indications there is no Asian regional power or a combination of Asian powers or elsewhere which can challenge Unite States global supremacy.

Strategic analysts asses and concede that neither Russia as a resurgent power intent on reclaiming its erstwhile status as the ‘second pole’ in global affairs nor China with its burgeoning military power buildup can pose a significant threat to United States global supremacy before the year 2050.

Global strategic dynamics today is also witnessing a churning of other forces at play which suggest that alternative economic and security groupings to those dominated by the United States are concurrently taking shape paving the way for a more multi-polar world. Some of which that need to be mentioned are as follows:

  • The US and Western dominated economic groupings are being enlarged to accommodate Asian and other rising economies.
  • Emergence of new politico-economic groupings like BRIC (Brazil, Russia, India and China) which in the future could attain security contours too.
  • Emergence of security-oriented groupings like the Shanghai Cooperation Organization as a Russia-China dominated security organization to check NATO’s eastward creep.

In short, what these trends suggest is that alternatives to checkmate United States global supremacy are gradually emerging, impelled by the growing economic clout of Asia’s rising powers, other regional powers and other Asian resurgent economies. This could pick up momentum in the period 2025-2050 should the United States out of ‘strategic fatigue’ induced by its overstretched strategic commitments adopt a global diplomatic draw-back posture.


The Asian security environment encompasses a very wide canvas extending from the Easter Mediterranean in the West to the Western Pacific littoral in the East. Ensconced in this wide landscape are the critical geostrategic and geopolitical regions of West Asia, Central Asia, South Asia, Southeast Asia and East Asia. During the Cold War these regions witnessed intense power-play between the United States and Russia for the control of strategic resources, cultivation of alliances and extension of political influence.

The current Asian security environment is turbulent and conflict prone induced by a number of defining developments, namely (1) US military interventions in Afghanistan and Iraq following 9/11 (2) Rise in Pan- Islamic fundamentalism and Jihadi terrorism (3) China’s massive military buildup and brinkmanship policies including with the United States (4) China’s buildup of Pakistan’s and North Korea’s nuclear arsenals (5) Conflictual flashpoints all across Asia due to regional rivalries, border disputes or religious and sectarian strife as currently underway in Pakistan.

Region-wise brief survey is called for to comprehend the trends in the making in various regions of Asia and which add upto Asia’s overall turbulence and conflictual overtones.

West Asia

Adding to the many explosive flashpoints that simmer in the region is now superimposed a strategic transformation of West Asia in which the Arab monarchial oil-rich kingdoms which were solidly pro-US seem to be veering now towards Russia and China as part of hedging strategies. China has built up the missiles arsenals of Saudi Arabia. Iran, Syria etc destabilizing the region further. Islamic fundamentalism and terrorism is prominent.

Central Asia.

Central Asia with its rich oil and natural gas wealth has become the vortex of United States-Russia-China strategic rivalries. Turbulence in contiguous Islamic regions is impacting Central Asian stability.

South Asia

South Asia is witnessing the specter of state-failure of nuclear-armed Pakistan and Afghanistan. Wrong strategic priorities of the US policies on Pakistan and despite billions of dollars in US aid, Pakistan is imploding. Pakistan’s problems are further compounded by the Pakistan Army’s military adventurism against India in the form of proxy war and terrorism

South Asia’s security environment is further compounded by China’s festering border dispute with India, China’s military brinkmanship on the issue and the China-Pakistan strategic nexus.

Southeast Asia

United States military distractions in Afghanistan and Iraq in this decade created a strategic vacuum in the region enabling China to muscle its way here. United States has belatedly realized the strategic inroads that China has made in the region and is now trying to restore the situation in its favor and one can expect a lot of US-China jostling in the region.

East Asia

Despite the current US-China friendly rhetoric currently on in this region, East Asia promises to be a conflictual flashpoint between the United States and China in the decades to come. It is unthinkable that the global superpower, the United States, and China as a ‘revisionist power’ with superpower aspirations can share the restricted East Asia ‘strategic space’. China’s proxy nuclear- armed North Korea and its threatening unpredictable provocations are perceived as threats by USA and Japan.

Overall, the Asian security environment presents turbulent, conflictual and explosive overtones which defy any conflict-resolution initiatives. In terms of major powers power-play in the Asian security environment the following trends can be discernible:

  • United States is unlikely to cease playing the predominant role in the Asian security environment.
  • United States –China strategic jostling can be expected in South Asia , Southeast Asia and more markedly in East Asia
  • United States –Russia strategic jostling can be expected in West Asia and Central Asia.
  • Russia’s resurgence is aimed at re-establishing itself as an independent global power center. If it materializes in the coming decades it could provide both a countervailing power to USA and also a possible ‘balancer’ against China’s strategic overbearance
  • India with substantial strategic stakes in virtually the entire Asian strategic landscape has yet to strategically assert itself to secure her national security interests.
  • Despite the above, India in the decades to come would circumstantially be prompted to become strategically assertive. The Asian security environment would then witness an intense power struggle between India and China.


India both in terms of her national security interests and also in terms of her national aspirations cannot divorce itself and insulate itself from the Asian security environment. Since India’s national security primary interests in terms of defending India from external and internal security threats receive continuing attention from successive Indian Governments, hence it is not pursued further in the discussion in this Paper. Of course, there is a lot of scope for efforts by the Indian Government in terms of India’s constant war- readiness in relation to threats from China and Pakistan.

The point worth noting is that both in terms of India’s national security interests and India’s national aspirations China and Pakistan would continue to figure as long range destabilizing factors to contend with in India’s security calculus.

India’s national aspirations to emerge as a major global player to begin with and a global power subsequently needs to be viewed against the contextual background of the Asian security dynamics currently taking shape and what they portend for the coming decades. These stand spelt out above.

Measured against the above trends what emerges is that amongst the present Big Five major global powers, the United States, Russia, France and Britain would generally not oppose or impede India’s national aspirations to emerge as an important ‘global player’.

The United States during the Bush Administration is on record that the United States is committed to assist India’s emergence as an important ‘global player’ on the strength of her vibrant democracy, resurgent economy and India being a ‘responsible stakeholder’ in global stability and peace. The Indo-US Nuclear Deal was a reinforcing US initiative to its perceptions that India needs to be assisted in emerging as a global player which could be an asset to the United States in the global power-play.

India enjoys strong and vibrant strategic relationships with the European Union and leading European countries like France and Britain. Their enlarging strategic engagement with India is an investment in India’s future and India’s national aspirations.

The Russia-India Strategic Partnership has been a valuable and time-tested strategic relationship for more than thirty years. Even today despite Russia’s current proximity to China, it can be maintained that Russia continues to invest heavily on India’s strategic potential and its value as an asset in global power-play. It has rekindled its strategic partnership with India after the downslide of the Yeltsin years. Russia is the only country which has publicly supported India’s aspirations to be a Permanent Member of the United Nations. India can count on Russia’s support to pursue her national aspirations to emerge as a global player.

China is the only global player which has been incessantly been engaged in impeding India’s emergence as the regional power in South Asia and lately to emerge as a global player of consequence. China can be expected to pursue policies which would be directed to ensure that India is constantly impeded from its national aspirations to emerge as a global player. China can also be expected to use her growing political clout to ensure that countries like the United States are also dissuaded from assisting India in the realization of her national aspirations.

Japan may not be currently figuring in the ‘Big Five’ league of major global powers, but Japan is viewed as a rising power which could also like India emerge as a major global player. Japan’s attitudes and relationship with India therefore becomes material and relevant to India’s national aspirations. Fortunately for both these Asian rising powers there is a marked strategic convergence of interests between these two democratic and peace-loving countries. Japan and India have unresolved territorial disputes with China and China has not been on friendly terms with them. China figures prominently in the threat perceptions of both Japan and India.

Japan and India have an ongoing functional strategic partnership with institutionalized mechanisms for political and security dialogues. Should China continue with her intransigent attitudes towards Japan and China, one could hope for a more substantive security relationship evolving between the two countries.

Within Asia , other Asian countries view India’s rise in global affairs in benign terms and as an emerging power which could contribute to Asian stability and peace as a responsible stake holder. China on the other hand evokes contrary perceptions in Asian countries.


Asia’s security environment in the coming decades is likely to unfold in strategically disruptive terms for India both in terms of her external security challenges and internal security challenges. China and Pakistan would continue to prevail heavily in India’s threat perceptions. China lately has begun displaying belligerent attitudes towards India on the India-Tibet border. Pakistan secure in the belief that it has the strategic patronage of both China and the United States persists in its unending proxy war against India through Pakistan Army sponsored frontline Islamic Jihadi terrorist organizations.

China through proxy use of Pakistan intends to keep India strategically confined to within South Asian geographical limits thereby precluding India as a contender to China on the Asian stage and by extension on the global stage.

India’s strategic choices therefore essentially boil down to achieve a strategic breakout from this ‘India Containment’ by China. This task becomes extremely difficult for India as in the strategic calculus of the United States today, China is fast emerging as a global power which the United States perceives that it must strategically co-opt in its strategy to lessen the strategic challenges that globally confront the United States.

India’s choices perforce boils down to playing the international system and managing the major global powers in a manner and giving preference to those who can assist India in breaking out of the China imposed ‘India Containment’.

But before that some contextual realities need to be outlined which the Indian policy establishment needs to embed in its mindsets as they proceed to formulate India’s choices in the unfolding Asian security environment.

Contextual Realities That India’s Policy Establishment Needs to Embed in its Mindsets in Formulation of India’s Choices in the Unfolding Security Environment.

These are spelt below in outline for reasons of brevity in this Paper:

  • Non-Alignment. This is no longer a strategic choice .It neither would promote India’s national aspirations nor a sound policy choice in the grim Asian security environment that is unfolding
  • “Soft Power” Policy Choice. Strategically, this choice or approach would not propel India to emerge as a global power. This is a choice of those who shirk from hard strategic choices. India’s choice of “Soft Power” approaches can commence once she acquires a global power status on the strength of her credible “Hard Power” capabilities and demonstrated use of such power to ensure her national interests. ‘Soft Power’ approaches work only in a benign security environment and the unfolding Asian security environment is certainly not a benign one.
  • “Hard Power” Policy Choice. This is an inescapable and inevitable choice for India to be counted as a global player ready to accept a global role which more often than not involves the will to use power firmly and also to use ‘hard power’ for political and military coercion to secure policy ends. India’s inability to reorder her South Asia security environment and lack of respect for India’s standing as the regional power basically arises from the Indian political leadership’s reluctance to use ‘hard power’ and shy away from the use of India’s tremendous comprehensive national power strengths to attain policy ends.
  • “Balance of Power” Strategy. India can no longer shirk from incorporating this concept in its policy choices by a virtual condemnation of this approach which it used to do earlier, presumably as it was in contradiction of her ‘non-alignment’ fixations. Nor is there any alternative of “Balance of Interests” as a former Indian Foreign Minister sought to make. Even after India emerges as a global player it would still have to resort to ‘balance of power strategies.


At the turn of the millennium, India under the BJP Government commenced on establishing a series of ‘strategic partnerships ‘with the major global players and others too in different regions of Asia. The main aim was to signal a departure from India’s long held obsession with no-alignment policy fixations. That trend has been maintained by the successor Governments too. However this now stands reduced to a routine formulation with all and sundry.

India is pathologically opposed to military alliances and hence this contrivation of ‘strategic partnerships’. Curiously, in the pursuit of this strategy of ‘strategic partnerships, India also signed such an agreement with China some years back. No strategic utility seems to have emerged.

With China currently engaged in a reversion to pre-1962 belligerence with India and China’s persistent policy of “India Containment” India’ strategic choices.

basically boil down to the following, if the overall aim is checkmating China’s moves to thwart India from emerging as a global player and in the process generating military turbulence against India on her peripheries and within India.

  • United States-Centric Strategic Engagement Inescapable
  • Russia-Centric Strategic Engagement Should Continue as Priority Policy Choice
  • India-Japan Strategic Engagement Needs Impetus
  • India’s ‘Poly-Centric’ Strategic Engagement in a Multipolar World.
  • India as a Strategically Independent Asian Power and Strategically Autonomous Global Power Center: The End Aim

The last named would be the ideal strategic choice for India but to reach that final round, India in the interim would need to use all of the above named alternatives as preferred choices. A comparative analysis of these choices is carried out in the succeeding paragraphs.

United States-Centric Strategic Engagement Inescapable

The United States as analyzed earlier in this Paper would continue to be the global predominant power for decades to come. India cannot emerge as a global player despite the United States nor can India emerge as a global player, if the United States is opposed to it. The US-India Strategic Partnership was conceived in 2000 presumably with this in view.

The United States too perceived that India with her power potential and democratic political structure could be a future strategic asset for the United States in a multipolar world that was like to take shape in the 21st Century. Implicit in the US-India Strategic Partnership from both sides, though not publicly articulated, was the contingency of China-containment.

However this implicit understanding does not seem to be a United States priority now going by the advocacy in influential circles in the United States of a G-2 combination of USA and China for management of global political and economic affairs and which can be construed by extension strategic affairs too. Such US policy trends run counter to India’s ultimate national aspirations and also conflicts with the underlying premise of the US-India Strategic Partnership of China-containment.

Therefore in terms of India’s policy choices the US-Centric Strategic Engagement choice is an inevitable and inescapable imperative but cannot emerge as the sole option because of the ambiguities of United States policies on China and its obsessive fixations with Pakistan in the South Asia context not mindful of the fact that Pakistan is China’s proxy in South Asia. Hence this cannot emerge as the top choice.

Russia-Centric Strategic Engagement: Should Continue as a Priority Policy Choice

The Russia-India Strategic Partnership was the first substantive strategic partnership forged by India. This strategic partnership has stood the test of time for more than three decades except for a short break of the Yeltsin years who was susceptible to US pressures.

To the credit of Russia as India’s strategic partner it needs to be recorded that in South Asia unlike the United States and China which played balance-of power’ strategic policies aimed at India through Pakistan, Russia never resorted to such policies.

Similarly, Russia even with its strategic proximity to China in the last decade or so has kept China out of its strategic calculus when devising its policies on India. Russia is the only major power which has publicly supported India’s Permanent Membership of the UN Security Council ignoring China’s opposition for the same.

India would stand to lose heavily in the ensuing multipolar global system should it devalue its strategic engagement with Russia. India for her own strategic insurance should continue as a policy priority its Russia-Centric Strategic Engagement.

India- Japan Strategic Engagement Needs Impetus

This falls within the purview of a purely indigenous ‘Asian Strategic Engagement’ choice for India. Stated before is the fact that in the 21stCentury, within Asia there are only three notable ‘rising powers’ namely China, India and Japan’. Stated also earlier is the fact that of these three China is reluctant to share not only the ‘Asian strategic space’ with India and Japan but would impede their emergence as global players in the international arena.

India and Japan as rising powers of Asia are both democratic nations and unlike China enjoy a wider international acceptability as responsible nations not intending to be revisionist powers.

With Japan having given notice that it intends to focus more on independent strategic choices a great opportunity exists for India to strike more strategic convergences with Japan and forge a substantial India-Japan Strategic Partnership. Substantial headway already exists in this direction independently by India and also under auspices of the previous US Bush Administration.

India’s Poly-Centric Strategic Engagement in a Multipolar World

India’s strategic engagement policy choices necessarily have to be viewed at two levels. At the first level are the existing global powers and the Asian powers perceived by the international community as rising or emerging global players .At the second level India cannot ignore the regional powers which are prominent in the various regions of Asia and also in Africa and South America as once India emerges as a global player of note it would need strategic partners worldwide.

In Asia the regional powers that India would need to take note of are Israel, Turkey. Iran, Kazakhstan and Indonesia.

In other regions India would need strategic partnerships with South Africa, Egypt and Brazil to name a few.

India’s poly-centric strategic engagement is distinct from non-alignment as here the determining factors are strategic governed by India’s national security and economic interests including energy security. The focus has now to be strategic and not political idealism.

India’s poly-centric strategic engagement both within Asia and elsewhere would have a challenging task as it would have to contend with competing strategic priorities of other global powers and more specifically China.

India as a Strategically Independent Asian Power and Strategically Autonomous Global Power Center: The End Aim

India’s national aspirations call for this send-aim as a strategic imperative to be recorded at this stage itself. This is being reiterated because whatever strategic choices India adopts in the coming decades need to be crafted with this end-aim in view and which must not be lost sight of.

India’s strategic policy choices in terms of preferred strategic partners and strategic preferences should be restricted to those that can assist India in the direction of achievements of her national aspirations. The lengthy examination of the contextual factors at the global level and the Asian level throw some meaningful pointers towards this end.

In terms of the Asian security environment, India needs to emerge as an independent ‘Asian Power’ whose strategic interests and strategic sensitivities cannot be discounted by the global powers including China. The generation of India’s Comprehensive National Power needs to be directed towards tis end by India’s political leadership’.

At the global level India should emerge as a strategically autonomous global power center with the potential to draw in its fold regional powers and other geo-strategic entities which could add to India’s strategic weight in the global reckoning.

The paths for India towards this end can only be generated by India’s political leadership adopting policies which attach premium to development of India’s ‘hard power’ potential and the will to use power to achieve policy ends.


India’s potential to emerge as an Asian Power and a global player in the decades to come is well recognized by the global powers including China. This recognition is not some gratuitous offering by the global powers to India but emerges from a hard-headed deliberate analysis of India’s strategic power potential.

However, India needs to recognize that in any strategic setting and especially in the Asian security environment which is developing, where India has to contend with a serious rival like China, India’s emergence as an Asian Power and a global player would greatly depend on India’s own political readiness and political will to shoulder strategic responsibilities which are inherent in any power status. There are no ‘soft options’ here.

India’s political leadership of all political hues has yet to demonstrate to the global community by demonstrated strategic performance that India’s political leadership has it in itself to back its diplomacy with muscle when the chips are down to secure India’s national security interests. This precept must begin in South Asia to begin with.

The challenging Asian security environment which promises to be more disruptive than benign and the policy choices that the Indian political leadership exercises in the coming decades would determine whether India has arrived to emerge as an Asian Power and a global player, or regrettably, India has let slip strategic greatness to bypass it.

(The author is an International Relations and Strategic Affairs analyst. He is the Consultant, Strategic Affairs with South Asia Analysis Group. Email:drsubhashkapila.007@gmail.com)

America’s Wounded Ally,India is annoyed by Obama.


By Sumit Ganguly | NEWSWEEK
Published Apr 2, 2010
From the magazine issue dated Apr 12, 2010

Barack Obama is in danger of reversing all the progress his predecessors, including George W. Bush, made in forging closer U.S. ties with India. Preoccupied with China and the Middle East, the Obama administration has allotted little room on its schedule for India, and failed to get much done in the short time it did make. Hosting Prime Minister Manmohan Singh at the November state visit, the administration managed to produce cordial photo ops, but the agreements reached on education, energy cooperation, and the like dealt with trivia.

Indian diplomats close to Singh say the lackluster results show how far the relationship has fallen since Bill Clinton and the two Bushes transformed a strained Cold War rivalry into a close strategic partnership between the world's largest democracies. Obama's predecessors built a relationship around trade negotiations, joint military exercises, and ad hoc coalitions for humanitarian assistance in the aftermath of the Indonesia tsunami. Despite his reputation for uniquely pushy diplomacy, it was George W. Bush who concluded the landmark deal that recognized India as a legitimate nuclear power and opened the door to the sale of civilian nuclear technology to India. No single American move has done more to demonstrate Washington's respect for New Delhi as a rising and equal power. Now Obama, who came to office promising to respect U.S. allies, is backpedaling on that deal, to the growing chagrin of the Indians.

Obama appears largely oblivious to India's concerns. When the U.S. gathered its allies in the Afghan war at a London summit in January, Indian officials felt they were marginalized because their views were not sought or paid heed to in any fashion. They were even more annoyed by U.S. declarations of a "new dawn" in relations with India's old adversary, Pakistan, and the apparent trust American officials now place in Pakistan's willingness to fight the Taliban, both at home and in Afghanistan. Their feeling is that top Obama advisers, like national-security adviser James Jones and the special representative for Afghanistan and Pakistan, Richard Holbrooke, have little experience in South Asia and have displayed remarkable naiveté in public statements.

More than once, Jones has argued that reducing Indo-Pakistani tensions would allow Pakistan to redeploy forces from its Indian border to the fight against the Taliban along the Afghan border. This is utterly fatuous in the view of Indian officials, who believe Pakistan is still dallying with the terrorists who target Indian interests in Kashmir and who orchestrated the devastating 2008 attacks on Mumbai. Despite all this, India has renewed talks with Pakistan and moved military personnel away from the de facto border in the disputed state of Jammu and Kashmir; Pakistan has yet to reciprocate. As a result, some officials in New Delhi are livid about Jones's remarks. Holbrooke triggered a similar reaction in early March: after Afghan Taliban killed a number of Indian workers in Kabul, he blithely stated that the victims were not targeted on the basis of their nationality. Indian officials publicly dismissed Holbrooke's remarks as uninformed. Behind the scenes, they see his comments as part of a larger pattern of Obama administration insensitivity toward India.

India won't wait indefinitely for the White House to put the relationship back on track. Instead, it is cutting deals with nations that respect its significance. Russia, which had let old Soviet ties to India wither, is now dramatically renewing the connection. Prime Minister Vladimir Putin recently visited India and went home with multiple agreements, including deals on civilian nuclear energy and more than $1.5 billion worth of advanced naval aircraft. Obama's inattention is what makes Russia's advance possible.

It's hard to understand why Washington would continue to neglect such a valuable ally. India is a vast and growing market, a significant military player in South Asia, a growing force in global talks on climate change and nuclear nonproliferation. So instead of ignoring or publicly upbraiding India, Washington needs to find a way to avoid the acutely sensitive issue of Kashmir, while enhancing counterterrorism cooperation and actively seeking India's input into the larger discussion on Afghanistan. Doing so will help secure Washington's relationship with a nation that is too important to keep on the sidelines.

Ganguly, a professor of political science at Indiana University, Bloomington, is currently the Ngee Ann Kongsi chair in international relations at the S. Rajaratnam School of International Studies, Singapore.

India visit aimed at strengthening ties: Geithner

Washington, Apr 3, (PTI):

Ahead of his visit to India next week, US Treasury Secretary Timothy Geithner has said his aim is to deepen America's relationship with the ''economically and strategically important'' country, where he would discuss global reforms and issue of terrorism financing.


"... I think there's certainly a deep commitment on the President (Barack Obama's) part to strengthen this relationship, a deep appreciation for the challenges India's facing and the common interest we are facing on these kinds of things," Geithner told a group of Indian journalists here.

"I have watched him, listened to the President on this kind of stuff and I know he shares that kind of view very strongly," he said, adding the sole purpose of his April 5-6 trip is to deepen and strengthen the bilateral relationship. Geithner said that terrorism financing is one of the issues that would be part of his talks with Indian officials.

"I can't give you any detail on it (terrorism financing) but I know we will be talking about it as we have always talked about it. We have a lot of very productive, constructive things we have been able to do together on that front, we will keep doing it," he said. Geithner, who will formally launch the new US-India Economic and Financial Partnership, along with Finance Minister Pranab Mukherjee, said the main purpose of his maiden trip to New Delhi and Mumbai as Treasury Secretary is to work to "establish a long-term" relationship with India.

"I have huge admiration for the policy of India in the economic, financial (sector) and for the Prime Minister and have great admiration for what they have accomplished in dealing with this difficult time," he said. Geithner said he wants to build a much stronger cooperative partnership with India on broader global financial issues, which are important for both the countries.

"One reason I am going to India is to get a better sense of what is happening there -- both in the economy and the broaden reform process in the financial sector and elsewhere. As always I am going to make sure that the leaders in India get to understand directly from me how we are managing our challenges here and how thing feel here," he said.

"I think that in anytime we have these kinds of conversations with a major partner, we spend a lot of time talking about the basic economic challenges in both countries. In India's case, it is more important and a little different cause, "not just because India is so important to us economically and strategically but it is going to be important because we're at a point in the broaden G-20 progress" and it is crucial that both sides work closely together in trying to set the agenda of reforms, he said.

There is a huge amount of promise in the G-20 framework for cooperation in international, economic and financial issues, Geithner said. He said the initial response to the financial crisis has demonstrated that they want to make sure that they carry forward the momentum of the commitment to cooperation on the rest of the international reform agenda.

They have also shown a broad interest in strengthening the multilateral financial institutions and on trying to make sure that as recovery strengthens they are putting in place a more balanced pattern of growth globally that will provide prospective of a more durable, stable recovery in the future, he said. By establishing a long-term relationship with India, Geithner explained, the US wants to build a much stronger cooperative bilateral partnership on broader global financial issues, which he thinks are important to both countries.

"We think that as we are reforming the architecture of the system, we want to make sure that countries like India are playing a rule of compensability to overcome (the crisis) using their economic strengths. As we do as much as we can, we understand where relative interest lies and how we can advance those interests," he said.

Geithner, who would be meeting Prime Minister Manmohan Singh besides Finance Minister Mukherjee and other top Indian officials, said he does not "actually sense a lot of tension or disagreement with India" on the core parts of global financial reforms. But that does not mean it is not worth talking about it because it is good for both countries to be close on these things, he observed.

"As you know we are going through a transforming set of reforms here in the financial sector and we have negotiated in the G-20 process a set of broader international principles for reform so that we are moving in parallel, not separately in this area and I am sure I will have a chance to talk with them about what we are doing in the United States and what we want to see by the major economies as well," said the Treasury Secretary.

To a question about the sense of dismay in India on some of the statements made by the US President about American jobs being 'Bangalored', Geithner said: "This President understands deeply, as much as any President in American history and may be more because of his personal experience, how important the world is to the United States, economically, strategically."

"He (Obama) understands that America would be stronger if the world was stronger. So I think you will see in him policies that are completely consistent with that basic orientation, that basic judgment, those basic values."

Geithner -- who had visited Bangalore in 2000 when he was the Under Secretary of the Treasury for International Affairs, along with the then Treasury Secretary -- said the US has been much more open for a much longer time than almost any major economy. "We are committed to that and we're going to be very supportive trying to make sure American companies keep operating globally but this is just a good simple pragmatic tax reform towards neutrality," he said.

Acknowledging that there are disagreements between the two countries on economic issues, Geithner said: "But look at the quality of the disagreements relative to what has been typical for major economies. Compare the US versus Europe versus Japan." "I think we are doing remarkably well in terms of the mutual interests and one of the reasons for it is because I think the Indian entrepreneur plays such a large role in the American economy today. You know it is just remarkable," he said.

The differences between the two countries are mostly defined by the differences in their economies, Geithner said. "We believe we have a huge mutual stake in closer economic ties, integration and we have a very strong interest in working together closely in the G-20 ... in pursuit of common interest for reform and like in any of these things, any time two countries need to discuss financial stuff, the agendas will be similar in some ways but just different where we have different issues of concern."

Unlike China, Geithner said the US is going to be talking in India about the exchange rate regime. "I think India is becoming more open, runs a flexible exchange rate regime. Its basic pattern in growth has been less export dependent, oriented over time. Different economy, different structure, different choices. But that changes the nature of the kinds of things we talk about when we talk together."


By B.Raman

On April 1,2010, India and China embarked on a six-month programme to celebrate the 60th anniversary of the establishment of diplomatic relations between the two countries. S.M.Krishna, the Indian Foreign Minister, is visiting China for four days from April 5 to join the celebrations.

2. Forgotten---at least for the time being--- are the suspicions, distrust and harsh words of last year over the visits of Prime Minister Dr.Manmohan Singh to India’s Arunachal Pradesh State on the Chinese border in the North-East to campaign for local candidates in the elections and of His Holiness the Dalai Lama to Tawang in Arunachal Pradesh at the invitation of the local people. China claims Arunachal Pradesh as its territory and calls it Southern Tibet. It wants India to hand over to China under the border negotiations under way without progress at least Tawang if not the whole of Arunachal Pradesh.

3.The Chinese have a long memory. They have not forgotten that one of the old Dalai Lamas was born in Tawang and that the present His Holiness fled from Tibet into India in 1959 across the border in the Tawang area. They have made it clear that there will be no border agreement unless India transfers at least Tawang to China. That would mean the exodus of the Indian population from the territory handed over to China. No Indian Government, however popular, may be able to sell such a transfer favourable to the Chinese to the Indian Parliament and people.

4.2009 was full of alarming reports about the Chinese further strengthening their military infrastructure in Tibet and Chinese military patrols repeatedly intruding into Indian territory. Faced with opposition criticism of its perceived inaction against the growing trans-border assertiveness of China, the Government of India pressed ahead with an already ongoing programme for strengthening its military infrastructure in the Indian territory. India is many years behind China in developing its infrastructure in the border areas.

5.2009 also saw non-governmental Chinese analysts discussing in seemingly unofficial web sites and blogs the options available to China for teaching India a lesson should it become necessary. A repeat of the humiliating defeat of 1962 was one such option discussed. Taking advantage of the various separatist movements in India in an attempt to balkanize the country was another. An article on possible Indian balkanization by an unknown and insignificant Chinese analyst added to the already strong Indian suspicions of China.

6.China was active and assertive not only in the border areas. It has been equally so right around India’s periphery. Taking advantage of the suspicions and distrust of India in the other States of the South Asian region, China, which is not a South Asian power, has acquired a growing South Asian presence.

7.It continues to help Pakistan in further strengthening its nuclear and missile capabilities which are directed against India. After having completed the construction of the Gwadar commercial port on the Baloch coast, it has promised to develop it further into a modern naval base which would be available for use to the Chinese Navy too.

8.It won the gratitude of Sri Lanka by supplying it arms and ammunition to crush the Liberation Tigers of Tamil Eelam (LTTE) and is embarked on the expansion of the Hambantota commercial port, which might one day be developed into a naval base. A grateful Sri Lanka has given a block for gas exploration to a Chinese company without inviting bids. India was given a block for exploration without bids and China was treated on par with India.

9.There are as many Chinese tourists visiting the Maldives as Indian and a Chinese bank has been allowed to operate in the Maldives to meet the foreign exchange needs of the Chinese tourists.

10.In Bangladesh, Prime Minister Sheikh Hasina, despite her strong friendship for India, has continued with the look East policy of her predecessor Begum Khalida Zia and strengthened the links with China. During her visit to China in March, an agreement was signed with a Chinese company for oil/gas exploration in Bangladesh. She also sought Chinese help for the upgradation of Chittagong into a modern deep sea port. Her Government has sought to calm Indian concerns by reassuring India that India will also be allowed to use the Chittagong port modernized with Chinese help.

11.At least, Sri Lanka and Myanmar have sought to treat India on par with China by granting it equal rights of oil/gas exploration, but Bangladesh has not given any such contracts to India due to strong local opposition to India playing any role in the development of its energy resources.

12.Sheikh Hasina also discussed with the Chinese plans for linking Yunnan with Bangladesh through Myanmar by a modern road. If the Chinese company finds oil or gas in Bangladesh it is only a question of time before the Chinese production facilities in Bangladesh are connected with those in the Arakan area of Myanmar so that oil and gas from Bangladesh can flow direct to Yunnan through the pipeline connecting Arakan with Yunnan now being constructed.

13.In Nepal, China is looking for a road link to connect Nepalese roads with those in Tibet and for an extension of the railway line from Lhasa to Nepal.

14.Thus, the Chinese have been developing their infrastructure of potential military significance around India’s periphery. The Chinese think and plan long-term. Indian response is ad hoc. Just as New Delhi woke up late to the likely threats by land from the North, one realizes belatedly that the threats are from the South, East and West as well.

15.Whatever limited influence India has in South Asia is in danger of being eroded by the Chinese inroads. India is yet to work out a comprehensive response to it. All the sweet words of the 60th anniversary cannot hide this harsh reality. ( 3-4-10)

( The writer is Additional Secretary(retd), Cabinet Secretariat, Govt. of India, New Delhi, and, presently, Director, Institute For Topical Studies, Chennai. He is also associated with the Chennai Centre For China Studies. E-Mail: seventyone2@gmail.com )

Confidential : John Nolan

John Nolan
Uncover Your Competition's Top Business Secrets Legally and Quickly-And Protect Your Own

Business Nugget
by Robert Morris

Many organizations do little (if anything) to protect their most valuable information. I don't know why. The first objective of Confidential is to explain what an effective intelligence gathering system is and does. The second objective is to explain how companies can effectively protect the intelligence they possess. Drawing upon more than twenty years of extensive prior experience in intelligence and counterintelligence, Nolan offers a number of “tools” and “techniques” from which to select those most appropriate. (He even helps with the selection process.) Perhaps the best place to begin is to complete what he calls an “intelligence audit.” It consists of two different clusters of basic questions. First: What do we need to know? Why? What do we need to know that we do not as yet know? How and from which sources can we obtain what we lack? Finally, what are our strategic objectives? For example, what kinds of intelligence will we probably need within the next 12-18 months? Why? Then: What does our own intelligence consist of? How is it organized? Which of it is most valuable? Why? From whom should our most valuable intelligence be protected? How?

The “good news” is that any organization can (with appropriate modifications) implement a system base on Nolan’s Integrated Business Intelligence Model. The “bad news” is that any organization lacking such system remains vulnerable to adversaries who have such a system in place. Organizations claim that their “most valuable assets walk out the door at the end of each day.” As Nolan explains in Confidential, the implications of that statement often involve much more than generally realized. Stated bluntly, those "most valuable assets" could well include proprietary information that should not be removed (usually having been photocopied) at the end of a business day.

One final point: Nothing that Nolan recommends is either illegal or unethical. Indeed, most organizations make it so easy for competitors to obtain the information desired that there is no need for illegal or unethical initiatives. Purchase this book, follow its advice, and thereby enable your organization to obtain the information it needs while protecting from its competitors the information they would love to have. Why wait?

Order Confidential here.

Find the full list of Robert Morris's Business Nuggets featured by Eastbook.com here.

Trans Saharan Gas Pipeline: Mirage or real Opportunity?

Summary: 8 % of worldwide gas reserves are located on the African continent. Its relative economic weakness and the almost total absence of gas networks leads to a very reduced interior consumption (almost nonexistent outside Algeria and Egypt) which permits an important export capacity of the continent’s gas. Linking Sub-Saharan-Africa and the European Union (EU) with a gas pipeline thus is a reasonable project in economic terms. The two sides are discussing the project with increasing intensity since the beginning of the 21st century. The strategy seems to be obvious. The European zone counts three important gas producing countries: Norway (not a member of the EU but closely associated to the Union’s energy policy), Great Britain and the Netherlands, with a respective production of 99.2, 69.5 and 67.5 billion cubic meters in 2008. However, the production of Norway and the Netherlands will start to decrease in a few years ; that of Great Britain is already diminishing significantly since 2000 and the British currently import a third of their gas in order to satisfy their needs for domestic consumption (93.9 billion cubic meters in 2008). Mathematically, EU imports will progressively increase. Fearing a dependence on Russian gas (today 25 % on average among the 27) in the near future has led the EU to develop a policy of diversification in sources of supply. If no diversification is put in place, Russia might supply about 70% of the European market (27 countries) by 2050. The option to multiply the number of re-gasification plants to import Liquefied Natural Gas (LNG) is currently clearly privileged by various EU member states such as France, Italy, Spain, the United Kingdom, the Netherlands and Poland. Persian Gulf countries, Egypt, Algeria and the United States will supply these new plants. The Trans-Saharan Gas Pipeline (TSGP), which will link Nigeria, Niger and Algeria, itself already connected to Spain and Italy by existing or under construction pipelines, could emerge as an additional source of supply in the long term. However, while this 4 128 km-long pipeline considered as a priority by the NEPAD is not a dream and not even a challenge in technical terms, solutions for several financial, security and geopolitical issues have to be found before a hypothetical formal decision can be made to further develop the project in the coming years.

Benjamin Augé is a Phd student at the French Geopolitics Institute, University of Paris 8.

Nuclear Programmes in the Middle East: In the shadow of Iran

At least thirteen countries throughout the greater Middle East have recently announced new or revived plans to explore civilian nuclear energy. They spoke of the need for energy diversification to meet growing electricity demand and the economic and environmental benefits of nuclear power. This surge of interest is consistent with a worldwide trend likened to a ‘nuclear renaissance’. Yet political factors also motivate the renewed interest in nuclear energy in the Middle East, including competition with Iran and concern about its determined pursuit of technologies that appear designed toprovide it with a nuclear weapons capability.

The IISS Strategic Dossier on nuclear programmes in the Middle East provides a comprehensive overview of the history of nuclear programmes in the region, an evaluation of national nuclear capabilities and policies, and an analysis of future aspirations. The fact-rich country profiles, which include Israel and Turkey, also assess how each state may react to an Iranian nuclear weapons capability. In addition to analyzing the proliferation risks inherent in the nuclear fuel cycle, the dossier assesses policy options, including possible regional arms control measures, that can help allow atomic energy to be harnessed for peaceful uses without engendering a ‘proliferation cascade’.

This Strategic Dossier was launched on 20 May 2008.

A live stream of the presentation and Q&A session is available.

Dubai's debt woes expose flaws in governance model

© Bloomberg via Getty Images
Dubai's Burj Khalifa is the world's tallest building at over 800 metres and was officially opened by Shaikh Muhammad bin Rashid Al Maktum on 4 January 2010

The debt problems of Dubai World, an investment company owned by the Emirate of Dubai, have cast a pall over economic activity in the United Arab Emirates (UAE) and the Gulf. They have raised questions about relationships between the seven Emirates that constitute the UAE, as well as about Dubai’s ambitious economic model and the unclear boundaries between the public finances and those of the ruling Al Maktum family. As negotiations continue on restructuring $26 billion of debt, it is clear that greater transparency in governance may be needed in the Gulf to restore business confidence over the longer term.

The confused situation surrounding Dubai World has highlighted the stresses involved in integrating regional political, regulatory and commercial practices with a global investment marketplace that places an increasing premium on disclosure and compliance. The extent of such tensions in the future may depend on how well the fall-out from Dubai World and difficulties in the Gulf property market can be contained.

Payments halt

Dubai World’s near-default was one of the aftershocks of the global economic downturn. It resulted from the collapse in real-estate prices, first in the US, triggering the 2008 financial crisis, and later in Dubai where prices had previously been spiralling. The company became unable to service the debts it had taken on to finance its heavy investment in property. On 25 November 2009 it requested a freeze on payments on $26bn of loans and bonds, and said it would seek to restructure the debts. Amid turmoil in local financial markets, a $10bn bailout loan from Abu Dhabi enabled Dubai World to meet Islamic bond (sukuk) obligations worth $4.1bn for its property-development subsidiary Nakheel that fell due on 14 December. Negotiations with about 100 creditors have since been under way, with a de facto payments standstill in place. According to media reports on 17 March, creditor banks are to be offered full repayment over seven years but at adjusted interest rates that would force banks to take losses in 2010. It is not yet clear whether this arrangement would be backed by a Dubai Emirate guarantee. The next key date is in May when another $980m Nakheel bond becomes due – a debt not guaranteed by its Dubai World parent. Some $12–13bn of Dubai’s debts fall due in 2010, and $25bn in 2011.

Dubai World’s total liabilities are believed to be as much as $59bn and, according to Moody's Investors Service, it owes $15bn to banks in the UAE. Its assets are shrinking, as its overseas investment arm al-Istithmar has been losing prime New York properties to creditors following defaults in payments, including the former Knickerbocker Hotel building in Times Square. Meanwhile, the cost of insuring Dubai’s debt through credit default swaps has risen sharply, and prices of sukuk issued by Dubai have fallen. The total debts of all Dubai-related entities may exceed $100bn, more than Dubai’s GDP, but the precise figure is not known. Question marks hang over other conglomerates owned by the Emirate and its ruler, Shaikh Muhammad bin Rashid Al Maktum. These include the Investment Corporation of Dubai, owner of Emirates airline (with $28.3bn in bonds and outstanding loans), and Dubai Holding (with total debts of $15bn).

Dubai World’s problems have raised a question mark over the Emirate’s model for economic development, with its emphasis on grandiose property schemes. Lacking oil and gas, Dubai has since the 1950s based its prosperity on all forms of private enterprise and its role as a laissez-faire city state serving the private-sector interests of its neighbours and the area. Its ambition is to become an international, not just a regional, hub – a goal it has supported by its impressive infrastructure. It has been run as a corporation, with the Emirate’s interests intermingling with those of the Al Maktum family so that the two have become hard to distinguish and disentangle. This mixing of corporatism and personal fiefdom into an unusual form of capitalism inhibits a more transparent approach and complicates debt restructuring.

Abu Dhabi’s role

The crisis has thrown a spotlight on the uneasy relationship between Dubai and Abu Dhabi, which supplies most of the UAE Federation’s income. Abu Dhabi is the capital of the UAE and its ruler is the Federation’s president. Following Dubai World's November announcement, the responses of both Dubai and Abu Dhabi were initially hesitant, confused and opaque. Abu Dhabi, which may not have been aware of the scale of the impending debt crisis, took more than two weeks to step in and questions remain about the conditions upon which its support rests.

Outsiders find it hard to judge the personal and institutional dynamics in relations between the two Emirates and so were shocked by Abu Dhabi’s slow and grudging response. While each Emirate projects a different image and adopts divergent policies (especially towards Iran), the trend since full independence from Britain in 1971 has been towards federalisation and increased centralisation in Abu Dhabi. Against this background, most commentators assume that Abu Dhabi's December rescue will cost Dubai more than renaming the new and tallest tower ‘Burj Khalifa’ after Abu Dhabi’s ruler, Shaikh Khalifa bin Zayid Al Nahayan. The delay may have reflected a determination to drive a harder bargain, and to exert greater political and commercial leverage over Dubai in future. It is clear that Abu Dhabi does not intend to back all Dubai's past commitments and, despite the potential damage to the UAE's overall reputation, may be ready to see some Dubai government-related entities and large corporations go down if they are not commercially or financially viable.

In the future, investors and lenders will differentiate more clearly and carefully between individual Emirates and between government and corporate entities, and will tend to evaluate the latter on a stand-alone basis. They had believed that Dubai stood four-square behind Dubai World and that Abu Dhabi stood behind Dubai – assumptions that government-related entities and Dubai itself had exploited in the past. Contractors and investors are now likely to insist on explicit government guarantees.

One consequence has been that Abu Dhabi-linked entities, including the investment agency Mubadala Development Company and International Petroleum Investment Company, are being downgraded by international credit-rating agencies because of the lack of explicit guarantees of Emirate support under all circumstances. This increases their borrowing costs. However, in response to heightened international scrutiny, Abu Dhabi has established a debt-management office, recognising the need to be more professional and improve performance,asrecommended by the International Monetary Fund (IMF) in February.

Ruling families

A further consequence of Dubai World’s problems may be to accelerate the long drawn-out process of disentangling the personal interests of Gulf ruling families from those of the states they oversee. This traditional interweaving has included relationships between individual Gulf governments and enterprises with close but unformalised links to senior family members. The delineation between public and privy purses has been uncertain. Establishing clearer boundaries will be not only an economic but a highly political process.

In several countries, senior members of ruling families have occupied prominent positions in commerce. Both local and international investors have naturally presumed that their activities enjoyed government backing, but such support was never articulated. In some instances the relationship between a commercial or financial enterprise and the ruler or his close relatives might never be formally or publicly acknowledged, with both sides benefitting from the privacy of these arrangements, and outsiders were content to assume government support. The easy availability of oil revenues in most Gulf countries compounded the problem of an opaque boundary between government and family funds.

However, economic, fiscal and political pressures, as well as changing attitudes, are all encouraging greater transparency and scrutiny. For example, the IMF has suggested restructuring both the Investment Corporation of Dubai and Dubai Holding, Shaikh Muhammad’s personal investment vehicle, which has been downgraded by several credit-rating agencies because of a lack of transparency. The economic downturn and tighter international scrutiny and compliance will cause locals and outside investors to inspect Gulf government income, spending, and financial and business practices more carefully. Dubai World’s problems have illustrated the consequences for government- or ruling-family-related entities, which have traditionally been privately managed, of going to the international bond market. They may therefore prove an important step along the road to greater openness and accountability. The episode has shown how traditional ambiguities that appear acceptable, and even a potential source of strength, in good economic times can become sources of vulnerability and reputational damage when the tide turns.

Investment climate

Finally, the crisis has raised urgent questions about Gulf financial markets and regulation, and, in particular, about sukukas viable traded securities. Islamic bonds are structured to pay investors a return without violating Islam’s bar on interest payments. Local doubts about sukuk, based on the lack of any generally recognised Islamic authority to evaluate and standardise Islamic banking products, were compounded by a challenge to their compliance with Sharia law by Bahrain-based scholars in 2008. Because of the immaturity of the market, there is no established mechanism for resolving defaults, and the option available to partiesto English law for disputes to be heard in local courts must be open to doubt. Anxiety over the availability of legal recourse is preventing a secondary market in Dubai’s debt from developing.

Whether or not Dubai World’s problems trigger a broader quasi-sovereign debt crisis in the region, the economic downturn and credit squeeze will increase pressure in the years ahead for greater transparency in the Gulf. This will come not only from foreign investors, but also from local business people and financiers who are conscious of international trends and eager to adapt local dispensations to the global climate. Forms of governance prevalent in the Gulf since the 1970s, which have developed fitfully and unevenly since, no longer seem well matched for the economic development activities, plans and ambitions of regional states. It is questionable whether the region can achieve its development goals without greater integration and rationalisation of its infrastructure, as well as of the roles championed by each individual Gulf state. These states may need to refashion their governance models and approach to each other if they and the region as a whole are to achieve their full potential.