May 14, 2010

Will high gold price dampen Akshaya Tritiya spirit?

http://beta.thehindu.com/business/article429991.ece

Believe it or not, the crisis in Greece has hit the bullion market hard and the price of the yellow metal has breached its all time peak. It opened at $1,248.95 on Friday, well above the all time high of $1,126 that was set in March 2007. The continuing climb in the world gold price has created a scare in the minds of the trade in India, which has been pinning its hopes high on account of the Akshaya Tritiya on Sunday.

Industry sources say that after the trade and the jewellery industry went into recession last year, there was a significant rebound in the first quarter of 2010. The trade was hoping to cash in on the festive season revolving around the Tritiya on May 16 and even built up a substantial inventory. But “the Greek tragedy has hit us hard. Over the past two days, the bookings or orders have waned, though we still hope that families will throng the shops on Sunday,'' says G. Kasturirangan, manager of a leading jeweler in T.Nagar, Chennai.

World Gold Council vice president K. Shivram explains that in January-March this year, India has officially imported 192 tonnes of gold. This compared with a mere 26 tonnes during the same period last year. Buoyed by this consumption, trade and industry had prepared for a major launch for the May-June season on May 16. But the situation in Greece, and its possible repurcussions in a few other countries of the European Union, has sent gold prices soaring. “Gold has always been a safe haven for investors and in many countries of Europe too there has been panic buying — converting currency into gold. Continuing concern over the EU and this sudden spurt in demand has resulted in this surge in the price,'' he reasons.

Despite being a major consumer of the yellow metal, India's production remains at a meagre 3.5 tonnes. As a result, it imported 578 tonnes last year, which was 18 per cent lower than the previous year. Indian consumption works out to around 650 to 700 tonnes, with jewellery accounting for nearly 450 tonnes and the balance as investment in gold — in the form of coins.

The slow but steady drop in global production, along with a growing demand for gold, in addition to its becoming a safe investment, has led to a continuing rise in its price over the years. Industry forecasts the price to jump further to breach the $1,300-mark before long. Industry sources here estimate the Akshaya Tritiya sale alone to be in the region of 40 to 50 tonnes, with the south accounting for the bulk of it. The marriage season that follows this festival further boosts the sale, retailers say. About 65 to 70 per cent of gold or jewellery sale is for weddings.

With just one day to go, the trade is keeping its fingers crossed for the bumper sale on Sunday. As the value of the rupee has gained vis-a-vis the dollar, the hope is that the Indian buyer has not faced the full brunt of the gold price rise in the past few weeks.

Iran Establishes Its First Soft War Camp

http://www.persia-house.com/node/1145

in Headliner Security Issues Vol. 34
Iranian Government Expands Efforts to Protect Citizens from Alleged Western Cultural Assault

Alef - Summary translation by Persia House
May 5, 2010

Mehdi Esmaili, the Governor of Isfahan’s Political-Security Deputy said today, “Considering the [Ahmadinejad] administration’s approach to cultural issues, and [with the aim of making] optimum use of the allocated budget, a joint secretariat has been created, so that the efforts of provincial cultural councils are not duplicated.” According to a Majlis-ratified article, 100 billion tomans [~ $100 million] of the cultural budget has been allocated to Isfahan, where, Esmaili reported, the first soft war camp in Iran began operation yesterday, May 4.

India asks US for help in manned space programme

http://news.rediff.com/report/2010/may/15/india-seeks-us-help-on-manned-space-flight.htm



May 15, 2010 04:30 IST

Tags: Indian Space Research Organisation, Boeing Defence, US, National Aeronautics and Space Administration, Vehicle Health Monitoring System

Here at Cape Canaveral, Florida [ Images ], the ongoing countdown to the 132nd space shuttle launch is also counting towards the end of this iconic space programme. Washington has decreed that the Atlanta, which is scheduled to blast off on Friday, will be the third last shuttle mission ever. With a follow-on programme nowhere in sight, America's space shuttle pioneers stare at an uncertain future.



President Barack Obama [ Images ] has decided that it is wasteful and risky to continue using the space shuttle for transporting US astronauts and stores to and from the International Space Station [ Images ]; instead, this low-tech, "near-earth" task should be farmed out to commercial agencies. The cutting-edge capabilities of the National Aeronautics and Space Administration should be directed towards new frontiers in outer space. But there is no new space policy that spells out an alternative task.



The US is now considering using cheap Russia [ Images ]n launches for sending its astronauts to the ISS. Russia has warehouses full of decommissioned missile rockets called the RD-170; these are re-engineered into RD-180 rockets, which cost a tenth of America's.



But, for the longer term, the US is eyeing a closer linkage with the Indian space programme, something that New Delhi [ Images ] has already suggested to Washington. In February, Indian Space Research Organisation chief K Radhakrishnan and K R Sridhara Murthi, MD of Isro's marketing arm, Antrix, met senior Boeing executives and suggested closer ties. Boeing is the OEM of the space shuttle. Senior Indian leaders and diplomats, including Ambassador to the US, Meera Shankar, have persistently pressed for closer US-India space cooperation.



Now, senior executives from Boeing Defence, Space and Security (BDS) have divulged the details of cooperation that ISRO has sought for building up India's [ Images ] capacity for manned space missions. Kevin Hoshstrasser, the head of Boeing's operations at the Kennedy Space Centre in Orlando, Florida, reveals that ISRO has sought assistance in four specific areas:

A launch escape system (LES) to enable astronauts to escape from a rocket that is undergoing catastrophic failure. Last week, Boeing successfully tested their latest escape vehicle.

A life support and environmental control system, which creates an environment inside the space capsule in which astronauts can comfortably carry out their functions. This removes carbon dioxide and maintains humidity levels.

Vehicle Health Monitoring System (VHMS), which keeps a constant check over key systems.

Reusable space systems and composition cryogenic tanks. These tanks would be used to store fuel for India's cryogenic motors.

Senior Boeing executives are in contact with ISRO and Boeing has prepared an internal white paper on US-India space cooperation. For discussing substantive, and potentially classified, issues with ISRO, Boeing has applied to the US government for a Technical Assistance Agreement.



Boeing's Business Development Senior Manager for space systems, Sam Gunderson, is emphatic that Boeing wishes to partner ISRO and in building Indian space systems. Brushing away concerns about US export licencing, Gunderson says, "Dual use restrictions (under the US law: International Traffic in Arms Regulations) in space cooperation would be significant, but we can find a way to work around those."

Space partnership has gained momentum since the US-India nuclear pact. In 2009, ISRO invited Boeing to a conference in India on robotics. The moon mission, Chandrayaan-1, carried NASA [ Images ] sensors made by Boeing.



As the countdown continues at the Kennedy Space Centre, the excitement that suffuses a shuttle launch is tinged with disappointment at the impending closure of the shuttle programme. Scientists explain that no rocket in the world can send up 7 astronauts to the ISS for extended missions, and also carry 25 tonnes of bulky cargo. The space shuttle is made even more invaluable by its ability to bring back tonnes of cargo to earth from the space station, material that would otherwise be wasted.

Ajai Shukla in Florida

Americans un-united on Pakistan postmarked terror

S Rajagopalan

http://www.dailypioneer.com/255949/Americans-un-united-on-Pakistan-postmarked-terror.html

One had expected that the Times Square incident would reinvigorate the lost spirit of 9/11 and lead to Pakistan emerging as the new Afghanistan in the hurt American worldview. But no, it was back to placatory postures.

An axiom still to be disproved in the generally rocky US-Pakistan relationship is that it is Islamabad which stands to benefit from every crisis of its making. So it has been over the past couple of weeks since the botched bid to bomb New York’s Times Square was traced to a Pakistani American, trained by the Pakistani Taliban in the art of bomb-making in a Pakistani lair in the lawless tribal tracts of North Waziristan.

No less a personage than the US Secretary of State has had to virtually eat her words after some tongue-lashing at Islamabad following the conclusion of US agencies that the Pakistani Taliban was behind the Times Square plot. With Pakistani lawmakers protesting against her “tirade”, Clinton’s top aides did a quick about-turn. They have since ended up highlighting her praise for the “sea change” in Islamabad’s attitude towards combating terror and explaining away her warning of “very severe consequences” if the next major terror bid on American soil is traced to Pakistan.

Washington clearly does not want to antagonise Islamabad beyond the bare minimum. So when some irate lawmakers suggested that the Obama administration should cut off its massive aid to Pakistan if it failed to cooperate, the State Department promptly ruled out such a prospect, voicing satisfaction with the cooperation the US was getting from Pakistan. It, however, looks to Islamabad to launch a robust military offensive in North Waziristan, something that it has been reluctant to undertake so far.

President Barack Obama himself was guarded last Wednesday when an Afghan journalist asked him about Pakistan’s troublesome policy towards her country. Suggesting that Pakistan has begun to recognise that its primary concern is not India, but the “cancer” of terror in its midst from groups that were allowed to congregate over a period, he took care to say: “I am actually encouraged by what I’ve seen from the Pakistani government over the last several months.” He also made the point that it may take Pakistan some more time to find a way to effectively deal with the extremists in areas that have been loosely governed from Islamabad.

Can the US flex its muscle a little more? Will it take matters into its own hands in North Waziristan, the staging ground for the likes of the Al Qaeda and the Taliban? Bruce Riedel, a leading South Asia expert who has served in three US administrations, reckons that the US’s options to act against Pakistan are “severely limited”. This is regardless of a very serious possibility that the next mass casualty terrorist attack on the United States will be postmarked Pakistan. As he put it in an interview to the Council on Foreign Relations, a stiff diplomatic demarche is not going to satisfy anyone and the best option may be to “get Pakistan to do more now”.

Riedel, who chaired a specially-constituted inter-agency panel that helped develop President Obama’s Af-Pak policy last year says military options are unattractive in dealing with a country with nuclear weapons that is determined to defend itself. If there is another terrorist attack that is traced to Pakistan, the first option should be to press the Pakistanis to move into North Waziristan. It will be very difficult for the US to take unilateral action as it would infringe Pakistani sovereignty and risk a conflict with that country, he says, adding: “There are no attractive options for dealing with this. The best option is to get Pakistan to do more now.”

Robert Grenier, CIA’s former chief of station in Islamabad and a director of CIA’s counter-terroorism centre, believes that whatever the current level of engagement, US-Pakistan relationship cannot withstand a significant terrorist attack on the US homeland, should it emanate from Pakistani soil. But he, too, cautions that a cross-border US combat military presence in Pakistan would be disastrously counter-productive.

It is not a matter of whether, but of when there will be another significant terrorist attack in the US. And if, God forbid, it involves some link to Pakistan, as well it might, there will be hell to pay. The open question is: Just what would the US do? The Times Square incident has already begun to generate the usual pressures for expanded drone attacks in Pakistan, and even for consideration of a direct US military presence,” Grenier notes in an article written for Al Jazeera.

Lisa Curtis, the South Asia specialist at the Heritage Foundation and a former State Department staffer, reckons that the Times Square development may well drive the future direction of relations between the US and Pakistan that are already strained by mutual mistrust and differing perceptions of regional security. While Islamabad moved swiftly to detain and question Pakistani-American Faisal Shahzad’s contacts and family members, she sees a testing time ahead when Washington will most likely want access to those detained.

Curtis feels the US demand could fuel pubic controversy at a time when many Pakistanis distrust the US to the point that they believe the entire Times Square case may be a conspiracy against Pakistan. “Moreover, if it turns out he (Shahzad) had links to India-related groups like Jaish-e-Mohammad or Lashkar-e-Taiba, Washington’s efforts to cooperate with Islamabad will become strained unless Pakistan’s military takes steps to sever ties between its intelligence services and these groups, and to neutralise their operational capabilities,” she says.

The Times Square terrorist attempt highlights the need for Pakistan to deal firmly and unambiguously with all terrorists, including those targeting arch-rival India. The challenge for America remains convincing Pakistani leaders that pursuing comprehensive and consistent anti-terrorism policies does not mean sacrificing a ‘strategic asset’,” says Curtis, who has served in the US missions in New Delhi and Islamabad in the 1990s.

-- The writer is the Washington Correspondent, The Pioneer

Why the Gorkhas could solve the Afghan imbroglio

May 13, 2010 20:59 IST

Leaving Afghanistan to the tender mercies of the Taliban [ Images ] and the Pakistan army [ Images ] could mean another 9/11-like attack -- only this time with nuclear weapons, writes Colonel Dr Anil Athale (retd).


http://news.rediff.com/column/2010/may/12/why-the-gorkhas-could-solve-the-afghan-imbroglio.htm

Even as Afghan President Hamid Karzai [ Images ] met US President Barack Obama [ Images ] in Washington on Thursday, the Americans continue their search for a way out of Af-Pak quagmire. Unfortunately the whole Af-Pak debate is so stuck in economical truth and selective memory that a clear understanding of the problem is necessary before we think of an out of box solution. While the problem that the US faces is tough, it must be clearly understood that it is India that will face the repercussions of an adverse outcome in Afghanistan.

The US went into Afghanistan in 2001 to destroy Al Qaeda [ Images ] and dethrone the Taliban who sheltered them. Taliban were jointly-fathered creatures of the US and Pakistan during operation 'Cyclone' (1979-89).

It is also clear that Al Qaeda-Taliban, located in landlocked Afghanistan, could only carry out their global jihad with access provided by a complicit Pakistan. It was an Af-Pak problem in 2001 itself, complicated by the nuclear weapons with Pakistan. Again the Pakistani nuclear weapons were a joint Cold War enterprise between the US and China to create a balance with India that was in Soviet camp and a nuclear power since 1974.

The twin Frankensteins -- nukes and Taliban -- were created during jihad 1.0 when madarassas were funded by American dollars, the Mujahideen were the good guys, Pakistani dictator Zia-ul-Haq was the defender of freedom and a certain Osama bin laden [ Images ], a valued ally.

In Jihad 2.0 on since 2001, America is again throwing dollars to check and shut down madarssas, re-brainwash the fanatical youth and is worried about Pakistan's nukes.

The cardinal mistake the US made is to ignore the Afghan/Pak past. For most of the people world over, war is a business to be gotten over and peace is the goal. While for the Afghans and Pakistani tribesmen, it is a way of life, sport and normal condition.

If not fighting against foreigners then they fight amongst themselves. John Masters in his autobiographical Bugles and the Tiger (published by Michael Joseph Ltd, London [ Images ] 1956) has drawn a vivid picture of the battles the British fought there in 1936-37. In this case the history seems to repeat itself with vengeance.

John Masters writes of the British-Afghan battles in 1937, "The terms ruthlessness and brutality was a relative and the definition used on the frontier was the Pathan definition. The Pathan's mined and booby-trapped the roads with dud shells and grenades (what we call Improvised Explosive Devices today). They never took prisoners but mutilated, skinned alive and beheaded any prisoners they took."

"The troops found that a British officer taken prisoner was flayed while still alive and his skin pegged on the rocks near the British camp."

Masters writes that the Gorkhas, then fighting for the British, replied in kind and would peg a prisoner to the ground in the hot sun with every passerby kicking him till he died of thirst and repeated blows.

But there is another and uncanny similarity between the present and events of 1937. I am referring to the case of Pir of Ippi. The Pir revolted against the British on November 25, 1936, called it jihad and for the next 12 years Waziri and Mehsud tribesmen, less than 1,000 in number, kept a well-equipped British Army of 40,000 engaged. At the time of independence in 1947, the Pir remained free and finally died of old age in 1960.

The British managed to control the situation in two years time mainly with the Indian army [ Images ] troops, the Gorkhas and Sikhs. The tribals at that time were armed with primitive guns and were perpetually short of ammunition. Once jihad was declared it became impossible to 'buy' tribes, as loyalty to faith was above all.

Cut to the 21st century. Thanks to Jihad I, the frontier area is flush with arms and ammunition. The tribal is as well equipped as the soldier. Add to this his native skill in the use of terrain and local knowledge and you have a formidable foe. Mountainous terrain neutralises technology. Like the Pir of Ippi, Osama Bin Laden remains out of reach of the Americans even after nine years of fighting.

The Americans seem to have underestimated the influence of religion and ideological sympathy for the jihad's objectives, though not methods, that ordinary Muslims feel. It is also doubtful if economic aid package could deal with the issue of extremism. It is true that economic hardships helps extremism gain recruits, but economic prosperity is no bar to extremism. The cases ranging from 9/11 hijacker Mohammed Atta, to a million rupee salary earner like Mansoor Peerbhoy of the Indian Mujahideen [ Images ] and the recent would-be bomber of Time Square in New York Faisal Shahzad, were motivated by factors other than poverty.

In fact, all of them belonged to well-to-do families of the so-called moderates (Faisal is son of a retired air vice marshal of the Pakistan air force). Given the above analysis, it is extremely doubtful if the American strategy in Af-Pak will succeed.

What is needed is a strategy of containment in the area with efficient and adequate boots on the ground. Just like the Pathans, the Gorkhas too love fighting and soldiering. In mountain operations, they have no peers. Not for nothing, did the British trust the Gorkhas when Prince William [ Images ] did duty in Afghanistan.

The situation in Afghanistan needs to be controlled for at least 20 years or so in the interest of world peace and security. It is time to think of a Peace Enforcement Force under the UN to occupy and keep the barbaric tribesmen in check. This force cannot be operating with its hands tied like the UN peacekeepers, who operate under strict conditions of engagement.

Instead what is being suggested is a Korea-like UN intervention. The task will be carried out at a fraction of the cost of NATO forces -- which are ineffective any way. The Indian army has the facilities to train these forces at existing regimental centres and the officering pattern of these forces could well be based on international cadres. As a bonus, the situation in Nepal will automatically stabilise, for the 'real' problem in Nepal is not Maoism but unemployment and poverty. Much like the Swiss in the middle ages, the Gorkhas could well be the guardians of peace!

On an informal employment, the Gorkahs are already doing these jobs from Europe to Hong Kong! What is suggested is institutionalising a Gorkha force at an international level.

This is just the basic idea and much work will have to be done to give it practical shape. Yet, leaving Afghanistan to the tender mercies of Taliban and Pakistan army will mean return to pre 9/11 situation and risking another 9/11 like attack in the future, only this time with nuclear weapons.

Colonel Dr Anil Athale (retd) is a former joint director, war studies, ministry of defence, and co-ordinator of the Pune-based Initiative for Peace and Disarmament.

Colonel Dr Anil Athale (retd)

This is no Iron Lady

Ajey Lele

http://www.dailypioneer.com/255963/This-is-no-Iron-Lady.html

Hillary Clinton’s ‘tough’ posture vis-a-vis Pakistan in the wake of last fortnight’s failed Times Square bombing comes with a ring of déjà vu. But the ‘trust deficit’ in US-Pak relations is now open knowledge.

On July 15, India’s External Affairs Minister, SM Krishna, would be holding talks at Islamabad with his Pakistani counterpart, SM Qureshi. These talks are the fallout of the meeting between Manmohan Singh and Yousuf Raza Gilani at the SAARC summit in Thimphu in April and are intended to bridge the ‘trust deficit’ between both the countries. Interestingly, the so-called ‘trust deficit’ is also growing between the two partners in the fight against global terrorism — namely the US and Pakistan.

The US Secretary of State, Hillary Clinton, is livid with the Pakistani establishment particularly after it has been established that the man arrested in connection with last week’s failed car-bomb strike in New York City, Faisal Shahzad, is an American citizen of Pakistani origin and was trained in Pakistan for this act. Clinton has warned of “severe consequences” if a terror attack against the US would ever be traced back to Pakistan. In fact, she has even claimed that a few ‘lower officials’ in the Pakistani establishment are also aware of the whereabouts of Osama bin Laden and the Taliban supremo, Mullah Omar.

This is an extremely serious threat and the charges about the knowledge of the whereabouts of world’s most-wanted terrorists are very serious. However, the issue is whether Hillary actually mean what she says. Does she mean business or is her tough posturing only for public consumption?

Clinton is not the first Secretary of State to have taken a tough stand on Pakistan. Colin Powell and Condoleeza Rice had at various junctures warned Islamabad of the ‘consequences’ (always left vague) of flirting with Islamic fundamentalism. During her three-day goodwill visit to Pakistan (October 2009) with the aim to build and repair fragile relations, Clinton herself had made a few blunt remarks admonishing Pakistan. She was of the opinion that Pakistan has squandered opportunities to kill or capture Mullah Omar and Osama Bin Laden, who probably are hiding in the lawless tribal region bordering Afghanistan. She had warned Pakistan that its relationship with the US is not a ‘one-way street’.

However, nothing changed in the last seven months. There was no evidence on the ground to suggest that Pakistan was serious about US concerns. But, this time she is forced to do it again because of the evidence inciting the Pakistan angle in the Times Square failed bombing incident.

The problem with Hillary’s approach is a blow-hot-blow-cold Pakistan policy. During her October 2009 visit, she ended up giving $103.5 million to the Government of Pakistan’s law enforcement and border security programmes, apart from other significant sums for energy, humanitarian relief to displayed families, etc. This time too, even after criticising Pakistan severely, she also argues that the US is getting ‘good cooperation’ from Pakistan and it’s been a real sea change in the commitment from the Pakistan government in the recent past. On one occasion in the past, she had mentioned that Pakistan has been up to a lot of

lip-service and is led by people who are in the business of fooling Pakistan interlocuters, but at present, the Pakistani government, the Army and intelligence services are more serious

Handing out grim warnings, but continuing to provide monetary assistance and by promoting a strategic alliance, the US leadership is, in fact, indicating to Pakistan that the US needs them more.

For more than six decades US-Pakistan association has veered between dejection and euphoria. Pre-9/11, Pakistan was one of the only two supporters of Taliban in Afghanistan, the other being Saudi Arabia. But post 9/11, General Musharraf was not left with any choice than joining the US bandwagon on ‘war or terror’ and renounce the Taliban. For all these years the US has been given access to few military bases by Pakistan for providing logistical and other supports for its campaign in Afghanistan. To Pakistan’s credit it has been helping the US by handing over a few Al Qaeda members.

On their part, the Pakistanis have allowed the US to bomb its own territory by using UAVs. This has led to some Pakistani civilians being injured or killed. On the other hand they have also not forgotten to have their pound of flesh — they got America to life old sanctions against Pakistan. They are also receiving billions of dollars in aid and the US has declared Pakistan as its major non-NATO ally. Most importantly there is no major check on how Pakistan spends the money or whether it uses it to buy military apparatus in excess of what is donated by America.

Hillary’s outburst should be viewed at two levels. One, it is part of the diplomatic offensive launched by the US to mollify the families of US soldiers serving in the Af-Pak region. It may also be part of a wider US game plan. They are trying hard to pressure Pakistan in different ways. They know that for any administration in power in Pakistan it would be very difficult to allow US troops on their soil and that the US can only fight the Taliban in Pakistan from a ‘standoff’ distance by using UAVs. Unfortunately, this is not paying the desired results. Hence, it may be just to appease Pakistan.

Issues like 26/11 is also seen with some amount of coldness by the US. Realistically speaking, the US is mainly interested in making it sure that US interests all over the world are secure. They do not want any terror attacks on their soil at any cost. If Pakistan can assure this then they may be even ready to a blind eye towards issues relating to India. For them, at this stage, South Asia is important only because of Afghanistan and gone are the old worries about nuclear weapons being held by Pakistan and India.

At another level, it could be said that the approach of Hillary Clinton is somewhat in line with the diplomatic slant she adopted. It is said that she has a bit of Margaret Thatcher in her and that her ‘touch’ image is part of an intention to project a tough image. Even during her election campaign when she was competing with Obama, many voters had found her cold and calculating. At that time she had issued tough statements against Iran.

This is not the first time that Hillary Clinton has spoken tough words about Pakistan. But unfortunately her actions are not followed by firm steps to prove that she means business. As far as India is concerned they should not derive any ‘pleasure’ from Hillary’s outburst. For India, Pakistan is our own problem and we should not look towards the US for finding a solution to it.

-- The writer is Research Fellow, Institute for Defense Studies and Analyses

WARNING SIGNALS FROM POK

B.RAMAN

Quoting local political sources in Jammu & Kashmir, the British Broadcasting Corporation reported in its web site on May 14,2010, that terrorists ( it calls them as always militants) have regrouped in Pakistan-Occupied KasHmir (POK).

2.It quoted Mr.Arif Shahid, Secretary-General of the All Parties National Alliance (APNA), as saying as follows: " Jihadi activities have been restarted during the last few weeks.Most of the activities are concentrated in the Neelum Valley along the Line of Control.Militants were based there in large numbers and have set up camps in the area. The men are not locals - they have long hair and beards. Most do not speak the local language."

3.The BBC added that local citizens in the Neelum Valley told it much the same thing. It quoted a local resident as saying: "We are scared.The armed men are moving around the area and are trying to cross the border. We can make out from their appearances and languages they are not from any part of Kashmir."

4.Mr Shahid said that he believed that the militants were planning to sabotage the ongoing Pakistan-India peace negotiations. He added: "They have set up camps in the region and many are crossing the border.This is the start of another proxy war."

5.According to the BBC, Mr.Shahid's comments were corroborated by Shaukat Maqbool Bhat, head of the anti-Indian Jammu Kashmir National Liberation Front (JKNLF).Bhat told the BBC: "The fighters are there and they are regularly crossing into India.The local people are very scared - they believe the [militant] crossings are going to restart artillery exchanges between the Pakistani and Indian armies."

6. An ominous part of the BBC report is the claim that the people who are re-grouping in the POK do not seem to be locals and speak a different language. Generally, Pakistani terrorists trained and infiltrated into J&K from the POK speak either one of the Kashmiri dialects or Punjabi. The local residents can identify both. The fact that the BBC's sources have not been able to identify the language spoken by the people re-grouping in the POK would indicate that these persons could be Pashtuns recruited either by the Tehrik-e-Taliban Pakistan (TTP) or one of the Punjabi Taliban organisations such as the Lashkar-e-Toiba (LET), the Harkat-ul-Jihad-al-Islami (HUJI), the 313 Brigade of Ilyas Kashmiri, which used to be a wing of the HUJI, the Jaish-e-Mohammad (JEM) or the Harkat-ul-Mujahideen (HUM).

7. Pakistan's political and military leadership, its intelligence agencies, its judiciary and civil society do not admit that there is terrorism in J&K. They always project what is happening in J&K as a freedom struggle. They justify the activities of these organisations in J&K on the ground that J&K is Pakistani territory where they have a right to act in solidarity with the Kashmiris.The Government of Pervez Musharraf as well as the present Government headed by Prime Minister Yousefv Raza Gilani make a clear distinction between the so-called freedom struggle in J&K and acts of terrorism in Indian territory outside J&K.

8. They regard whatever assurances they had given since January 2004 regarding not supporting terrorism as applicable only to Indian territory outside J&K. They also feel that while the US and other Western countries would be against any Pakistani-sponsored terrorism in Indian territory outside J&K, they would not react strongly against renewed acts of violence in J&K, which they regard as a disputed territory.

9. The TTP and the Punjabi Taliban organisations criticise the Pakistani Government on two grounds----- firstly, its implied support to the US Drone (pilotless planes) strikes in South and North Waziristan and, secondly, its alleged restrictions on the activities of the Pakistani terrorist organisations not only in Indian territory outside J&K, but also even in J&K.

10.The Pakistan Government is not in a position to stop the Drone strikes. Moreover, the Pakistan Army looks upon the Drone strikes as necessary for the success of its own ground operations against the TTP. However, to soften the TTP it would not hesitate to give it and its Punjabi associates a free hand in J&K. An increase in acts of terrorism in J&K, with the participation of not only Pakistani Punjabis, but also the Pashtuns of the Taliban, is a risk to be guarded against in the months and weeks to come. ( 15-5-10)

( 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 )

May 13, 2010

PAKISTAN: QUO VADIS?

B.RAMAN

Till 1971, Pakistan’s internal security threats arose from India in its Eastern wing and from Afghanistan in its Western wing. After the birth of Bangladesh in 1971, it no longer faces any internal security threats from India even though its army and intelligence agencies imagine without basis that it still does.

2.The traumatic effect of the Indian role in the birth of Bangladesh, which continues to influence the thinking and assessment of the Pakistani military-intelligence establishment, makes them see an Indian hand in every internal security problem they face----whether in Balochistan or in Sindh or in Khyber-Pakhtoonwa (formerly known as the North-West Frontier Province NWFP).

3.Its internal security fears from Afghanistan arise from the strong feelings of Islamic and ethnic solidarity between the Pashtuns on both sides of the Pakistan-Afghanistan border. While the Pakistan Army feels confident that it will be able to crush separatist movements in Balochistan and Sindh despite the imagined Indian role, it does not have a similar confidence with regard to the Pashtuns. The fact that the Pashtuns constitute about 20 per cent of the total strength of the Army adds to its apprehensions.

4.Its past quest for a strategic depth in Afghanistan was motivated by military calculations---- the need for a greater elbow room for its Army and the Air Force in the event of a military conflict with India. Pakistani military leaders should know that the acquisition of a nuclear weapon capability by the two countries and the expected US presence in the Af-Pak region for some years to come have considerably reduced the chances of a direct military conflict.

5.Its present Afghan policy is influenced not by the perceived need for a strategic depth in the conventional sense, but by the newly-felt need to prevent Afghanistan from becoming a spring-board for destabilizing operations in its Pashtun belt. Its past quest for a strategic depth in Afghanistan was a defensive reaction. So is its present quest for the re-establishment of its influence in Afghanistan.

6.Deobandi extremism in Pakistan, which is at the basis of many of its internal security problems, was a product of the policies followed by the late Zia-ul-Haq between 1977 and 1988. His attempts to protect Pakistan from an overflow of the newly-triumphant Shia Revolution in Iran led to the aggravation of the ever present Shia-Sunni divide in the country. Terrorism in Pakistan was initially a bye-product of the Shia-Sunni violence. Many of the terrorist leaders of Pakistan today earned their jihadi spurs in the anti-Shia movement. They subsequently drifted away from anti-Shia violence and gravitated initially to the jihad against the Soviet troops in Afghanistan and then to the jihad against the Indian presence in Jammu & Kashmir.

7.However, a hard core of the anti-Shia elements in the Sipah-e-Sahaba (SES) and the Lashkar-e-Jhangvi (LEJ) has persisted with the anti-Shia violence. They allied themselves with the Afghan Taliban when it was in power in Afghanistan and subsequently with Al Qaeda when it moved over into North Waziristan after 9/11. Suicide terrorism was brought into Pakistan by the anti-Shia elements.
8.Zia’s genuine conviction as a Deobandi, who believed that Pakistan’s salvation lie in more and more of Islam and not less, strengthened the role of the religious clerics in Pakistani society and eliminated whatever secularist influence was there in the country and its institutions. The use of Islam as a destabilizing weapon against India, with a large Muslim population, started under him. Islam acquired a military significance and potency in the eyes of the post-1947 crop of military officers, who grew up to middle and senior levels of leadership under Zia.

9.Islam was also used as a domestic weapon against political leaders who sought to challenge the pre-eminent role which the Army had assumed for itself. Islam as an ideological and military weapon, which Zia in a well-calculated opportunistic move placed at the hands of the US for use against the Soviet troops and communism in Afghanistan, served the US well in the humiliating defeat and withdrawal of the Soviet troops from Afghanistan.
10.More than 20 years after the withdrawal of the Soviet troops from Afghanistan, neither the US nor Pakistan has been able to put this weapon back in its sheath. There are new non-State wielders of this weapon----Al Qaeda and its associates against the US and its perceived allies even in the Islamic world and the Talibans and their allies against the Pakistani State and the US-led NATO forces in Afghanistan.

11.Those who live by militant Islam shall fall by militant Islam. That is the spectre threatening Pakistan today. The threat to Pakistan’s existence as a State arises no longer from India, but from militant Islam. Just as communism started swallowing its own children, militant Islam has started swallowing its own children in Pakistan.

12.The fight against terrorism in Pakistan has a military and an ideological dimension. The Pakistan Army is paying attention only to its military dimension. It is avoiding countering its ideological dimension. Unless Islam is demilitarized and sent back to the mosques and madrasas where it belongs, Pakistan stands in danger of being weakened and destabilized by its own creations. A Frankenstein’s monster is difficult to control. It is even more difficult to control a religious Frankenstein’s monster.
13.Pakistan was born in the name of Islam. Unless it is able to control this monster, it stands in danger of being bled to death in the name of Islam. Zia thought Islam would be Pakistan’s salvation. Instead, Islam as fashioned by him could become its curse. (14-5-10)

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

Reuters Busted for Indecent Exposure: The Automobile Industry in Venezuela

By RAMÓN SANTIAGO - AXIS OF LOGIC, May 13th 2010

http://venezuelanalysis.com/analysis/5357

In their report, “ANALYSIS-Venezuela car industry gridlock as dollars run out,” Reuters pays another shill to tell another half-story about Venezuelan affairs. In this “analysis” they shamelessly expose their indecency as a major news broker in western media. I'm writing this critique for Axis of Logic to call Reuters on what they pass off as journalism and help clarify what is really happening in the auto industry in Venezuela.

In 2009 there were approximately 5.6 million vehicles in Venezuela. From 2005 to 2007 new car sales were 1.15 million units with a further 350,000 being sold in 2008/2009. Thus, the number of vehicles on Venezuela’s roads increased at least by 30% in five years, even allowing for cars being put out of service. This is the reason for heavy traffic congestion in the cities and not necessarily due to cheap gasoline.

The consumption boom in all sectors from 2004 – 2008 was not only due to rising oil prices but also due to the fact that oil revenues came into the economy instead of being spirited away to off shore banks. Local banks were obliged by the government to grant car loans at 17% which is a real bargain in Venezuelan loan terms.

At the same time the private sector was booming and its growth outstripped the state sector (including oil) during these years. The economic and consumption boom, fueled by easier consumer credit and a proliferation of credit cards in the market, encouraged more people to buy new vehicles, most of which were imported using preferential dollars by the car dealers. Unfortunately for the consumer all sorts of tricks began to be played out to fatten up the dealers’ profits.

The first step back in 2005 was when there were many cases of customers buying a new vehicle and then not being able to take delivery…..unless you paid a cash premium of anything from US$2000 – US$5000 to the dealership. You would then have your car the next day. In other words, the customer bought and paid for the car but the dealer held it as ransom until the customer paid him a bribe for delivery.

In 2006 the dealers began to ration cars by hoarding them in huge parking lots and telling customers that there were no cars available since they had not received the preferential dollars from the government Exchange Control Commission CADIVI.

At that time, for example, the official price for a Ford Explorer on the Ford Venezuela web site was around Bs. 105 million (in old bolivares), or US$49,000. Not too far removed from the selling price in the US. However, with the “policy” of hoarding vehicles prices began to escalate and the vehicle in this example was selling for up to Bs. 250 million or US$116,000. In other words a total rip off but people were desperate and naïve enough to fall into this game.

The whole scheme was a mafia type operation between the dealers, banks and insurance companies. The bank would give you a loan for more than the official value of the vehicle and the insurance company would insure it at the inflated selling price.

The public lost and the dealers, banks and insurance companies cleaned up by fleecing the public. It was been estimated that excess profits made from this scheme in just over two years (2006 and 2007) amounted to more than US$20 billion not including the role in this scam played by the banks and insurance companies.

As you can clearly see, the “price distortions” referred to by Reuters have nothing to do with the official exchange rate. These have been caused by the dealers selling vehicles over and above list price. The second hand market has just followed the lead of the dealers.

In 2006, at a meeting at CADIVI’s headquarters, the main sectors of Venezuelan industry were present including car dealers. In 2007, 37% of the preferential dollars granted to importers went to the automotive sector for new vehicles and spare parts. The dealers and spare parts sales companies took the dollars, imported at the preferential rate and then sold the products at the black market rate to the public. Thus, the US$20 billion in excess profits was even higher bearing in mind that these “businessmen” made a fortune off the exchange rate as well.

I bought a set of new tires for a Chevy Corsa in January 2008 and paid Bs.F. 550.000 including balancing and tracking. Three months ago in February 2010, two tires cost Bs.F 750.000! Sure, Venezuela has a high inflation rate due to increasing money supply but not 68% per year unless this is being fueled by price speculation.

The Reuters “analysis” talks about the woes of the car dealers and falling sales. Let’s face it, the market is now sold out with more than a million new vehicles on the road. The dealers lay the blame on CADIVI for not offering more preferential dollars, but the government is nobody's fool. Why should CADIVI do this when the automotive sector has acted like a mafia, in cahoots with the banks and insurance companies, to fleece the public?

The vehicle assembly plants are another case in point. Having abused the preferential dollars available for many years, they do not want to pay up by buying dollars on the parallel market since their profits from exchange rate speculation would disappear.

In any case, do we, in Venezuela, want many more vehicles here? My answer is no. The money for this corrupt sector should be dedicated to improving public transport and financing the national railroad program and not used to subsidize the car-addicted middle classes who are better off than at any time in Venezuelan history in material terms.

This year the government is importing 60.000 new vehicles to be sold at fair prices and not at speculative prices by the private car dealers. Part of the money should also be used to set up a penal commission to investigate all car and spare parts sales since 2006 and bring the speculators, banks and insurance companies to justice in the context of the Law against Speculation and Hoarding which carries big fines and jail terms of 2 to 6 years.

The threat of jail time in the hell hole of a Venezuelan prison works wonders to bring such cheats back on the straight and narrow.

The recent case of 47 butchers being arrested and charged with price speculation on meat sales in Caracas should be set as an example for the car dealers, who should also be arrested and made either to repay their ill-gotten gains or spend time in a Venezuelan prison.

The Deputy for Aragua State, Elvis Amoroso, has been trying to get a law implemented to do just this but it has not made its way through the legislative process so far. Let’s hope that there are no vested interests in the National Assembly in this billion dollar scam against the Venezuelan people.

“By the end of February we had accumulated more than $2 billion in debt,” said Enrique Gonzalez, president of the Venezuelan Automobile Chamber (Cavenez). If this is not hypocrisy I do not know what is. How many millions or billions of dollars did your members make illegally in the last years, Mr. Gonzalez?

It would be a refreshing change for Reuters to look more in depth into the same which have been perpetrated against the Venezuelan people by the automotive crooks instead of lending a sympathetic ear to the complaints of those involved, such as Mr. Gonzalez. But we expect no such thing from a corrupted corporate media with an agenda to destroy the reputation of the Venezuelan government ... by any means necessary. Armed with the facts presented above, take a look at the Reuter's report at the business end of this critique and judge their “journalistic integrity” for yourself.


ANALYSIS-Venezuela car industry gridlock as dollars run out

By Eyanir Chinea

CARACAS, April 30 (Reuters) - Every rush hour, Venezuela's cities come to standstill as gas-guzzling SUV's crawl along the traffic-choked highways of South America's top oil exporter.

Yet despite the jams, the absurdly cheap subsidized fuel, and Venezuelans' well-known love affair with the automobile, new vehicles have become increasingly scarce in the recession-hit and dollar-short OPEC member country.

Since producing a record 172,418 units in 2007, Venezuela's car industry has reached near gridlock, with just 111,554 cars assembled in 2009. About 10,000 fewer cars were produced in the first quarter than the same period last year.

With local production falling, customers have to wait for at least eight months or more, leaving many showrooms empty.

In a typical auto dealer scene, a saleswoman at a Hyundai outlet kills time, listening to music on a computer.

'We don't have anything to sell, not one car,' she said in Caracas. 'The factory is at a standstill and we still don't know anything about when the cars will arrive'.

Car sector leaders complain they are receiving far too few dollars from the state foreign exchange agency for assembly plants' imports, and financing sources are drying up.

'By the end of February we had accumulated more than $2 billion in debt,' said Enrique Gonzalez, president of the Venezuelan Automobile Chamber (Cavenez).

'The lines of credit are running out. That means assembly lines will stop and models will disappear.'

Demand for cars remains red-hot, fueled by gasoline which sells for about 0.097 bolivars (2 U.S. cents) a liter, or about about 8 U.S. cents a gallon.

But President Hugo Chavez offered little hope on Sunday of easing shortages. He acknowledged the fall in car-related imports could help keep Venezuela in recession in 2010 for the second consecutive year. For more see.

But he said replenishing Venezuela's showrooms with cars was low on his list of priorities.

'What does that have to do with socialism?' he said.

Car sector woes mirror complaints of businessmen, who say Hugo Chavez's socialist drive is wrecking entrepreneurship.

Major brands like Ford, Toyota, Chrysler and General Motors which manufacture the parts abroad for assembly in Venezuela in partnership with local plants , generating over 10,000 jobs.

The sector's decline has come amid a recession that saw the economy contract by 3.3 percent in 2009 following a plunge in oil prices in 2008. Manufacturing fell 6.4 percent last year.

Many analysts believe it may shrink again in 2010, making it harder for private industry to claw back production levels.

FOREIGN EXCHANGE DEMAND

Chavez in January devalued the bolivar by 50 percent, which had been pegged at 2.15 to the dollar since 2005.

The new value of 4.3 bolivars to the dollar, with 2.6 for essential foodstuffs and medicines, has given Chavez's government more bolivars to spend on social projects but less dollars for private industry to import raw materials.

The car industry, like many private businesses, is forced to turn to a semi-legal market for its dollars when it cannot obtain foreign currency through official channels.

Since the January devaluation the bolivar has plunged to a record low of 7.50 to the dollar.

In the last quarter of 2009 the car sector recuperated briefly after the state's foreign exchange commission Cadivi supplied just over $2 billion. That relieved a dollar shortage for the car sector, as Cadivi cut back dollar allocations economy wide after the price of oil, Venezuela's main export revenue earner, began falling in the latter half of 2008.

But car sector business leaders complain that in 2010 the flow of dollars for the sector has once again dried up to just 5 percent of what is needed.

Labor disputes have compounded the problem by paralyzing assembly lines. MMC Automotriz, which assembles Mitsubishi and Hyundai cars in Venezuela, was shut down for six months of 2009 while the company negotiated salaries with workers.

The plant only switched its assembly lines on again last week following a further two month-long strike this year. Workers at the Hyundai plant were angry that a shift was canceled while the factory attempted to comply with energy rationing measures imposed by the government during an electricity crisis.

Chavez in January 2008 began imposing restrictions on foreign new car imports in order to boost local production. But recently he acknowledged the car shortage in Venezuela by signing deals for the state to import thousands of cars from political allies such as Argentina, Uruguay, China and Russia.

As production stays slow the lucky few to get their hands on a new car can make a killing in resale . Secondhand cars have also become a valuable commodity, appreciating with age as Venezuelans see them as investments.

Venezuelans prefer to spend cash in buying cars rather than see it lose value in bank accounts where interest rates are lower than 25 percent yearly inflation.

'If you are lucky enough to be given a car it's as if you have won the lottery. You can sell it on the secondary market for more than you bought it because of the distortions brought about by having an official dollar that is cheaper than the dollar on the street,' said Henkel Garcia, an analyst with local financial firm Investment Vision.

(Writing by Charlie Devereux, editing by W Simon ) Keywords: VENEZUELA CARS/

Copyright Thomson Reuters 2010. All rights reserved.

Sources:

1. Venezuela National Radio

2. TeleSur

3. Venezuela TV

4. Various news sources


The case against Pakistan

By Rafia Zakaria

A policeman searches a car at a checkpoint in Karachi. Security has been increased across Pakistan since the arrest of Pakistani origin 30-year-old naturalized American Faisal Shahzad in connection to a failed May 1 terror plot against New York's Times Square. –AFP Photo/Asif Hassan
The days since Faisal Shahzad’s arrest over the attempted Times Square bombing have been a delicate tightrope act for Pakistan’s relations with the United States. As details continue to emerge, the Obama administration appears to be building a case that would support the expansion of US military presence into Pakistan.


This past Sunday John Brennan, the Obama administration’s chief counter-terrorism advisor, told a major television network that all of Shahzad’s connections are pointing towards the Tehrik-i-Taliban Pakistan. Similar sentiments were expressed by US attorney general Eric Holder, who is heading the criminal investigation against Shahzad. Both officials echoed Secretary of State Hillary Clinton’s terse warning of “severe consequences” if Pakistan did not crack down more ruthlessly on terrorist networks within its territory.

Security experts in Washington have since begun to call Shahzad’s bombing attempt a “game changer” in the war against terror and have been signalling the possibility of an incursion of US forces into Pakistani territory. Several factors point to the fact that such an option is indeed being considered by the Obama administration and Pentagon officials. First, conservative lawmakers on Capitol Hill have long been sounding alarm bells asking for a wider presence in Pakistan to accomplish the goals of the war on terror. Recent hearings held on Capitol Hill have focused on groups such as Jaish-i-Muhammad and Lashkar-i-Taiba that do not operate in the areas currently being targeted by aerial drone attacks.

In a hearing held in March, several US congressmen noted that the Lashkar “had put the world on notice that they intend to escalate the carnage and take it worldwide”. Other analysts have repeatedly pointed to the necessity of expanding drone strikes into Quetta to target the Quetta shura which supposedly runs the Taliban operations. While Shahzad’s connections are not currently traced to groups other than the Taliban, the fact that he spent time in Pakistan bolsters the position of those who insist that a wider military presence in Pakistan is crucial to eliminating the threat to the American homeland.

Second, the problems faced by the highly publicised US/Nato initiatives in Marja and Kandahar in Afghanistan have created a political demand for a more decisive endgame in the region. In the footsteps of the Marja offensive in early April, The New York Times reported that many of the gains made in the area by the US Marines’ costly offensive had largely been reversed and many Taliban had moved back into the area. The Kandahar offensive due to start soon has also been the subject of lowered expectations, with experts saying that the easy absorption of Taliban fighters into the local population and the lack of visible centres of Taliban control make it difficult to win a decisive victory in the area.

The reason why the failure of both offensives — one yet to begin — is relevant to the Pakistan equation is simple: with the beginning of a US withdrawal already announced for 2011, there is immense political pressure on the Obama administration to produce some semblance of victory. The expansion of the Afghanistan war into Pakistani territory would not only be a culmination of the Obama campaign’s slogans of Pakistan being the real problem, it would also provide a visible endgame to the vexing and increasingly intractable issue of whether the war in Afghanistan has really eliminated global terrorism.

The ongoing saga of drone attacks and Pakistan’s tacit approval of them has provided further fodder to the argument that expansion of incursions into Pakistani territory would be met with vocal opposition but would more or less be tolerated by the current Pakistani establishment. Supporters of this argument point to the fact that Pakistan’s sovereignty, once foregone, is relinquished for ever and airstrikes by US forces are not too different from aerial drone attacks. Recent reports indicate an expansion of the use of the aerial drone programme to include not just high-value Al Qaeda and Taliban targets as previously planned but also “general patterns of life”. This new approach could include targeting large gatherings of people with weapons or vehicle processions even where the identities of the persons in them remains unknown. The lack of an outcry by Pakistan’s military and civilian establishment following the reports suggests that a limited military incursion by US forces could be given tacit approval.

Those who doubt that the Times Square saga will be a game changer point to the following: first, even with the escalation of terse rhetoric against Pakistan, Obama administration officials have continued to point to the fact that Pakistani authorities are cooperating in every way possible. Second, the capacities of US ground troops are undoubtedly already stretched to the limit in Afghanistan and an expansion of the military campaign, even if politically valuable to the Democrats facing elections in November, may not militarily be feasible. Little evidence exists that the obstacles faced by US troops in Afghanistan such as failure to discern the enemy, the changing loyalties of tribal leaders and an unforgiving and alien terrain, would not follow them across the border into Pakistan and thus make such expansion minimally valuable.

Finally, the fact that Pakistan chose to test-fire two short-range ballistic missiles in the footsteps of escalating rhetoric can be seen as a direct message to the United States: while ground invasions into Iraq and Afghanistan were met with little resistance, such incursions would be considerably more complicated in the Pakistani case. This last point would suggest that reminding the US of this fact at a crucial moment was designed to make the overt point that tolerating the drones does not mean automatic approval of airstrikes and ground troops.

As in the wake of the Mumbai bombings, Pakistan finds itself in a difficult position where the failure of the state to crack down on militant groups within its borders may well be used as an excuse for invasion of its territory. While Pakistan’s nuclear capability can ultimately function as an effective deterrent against invading Pakistan, it can also become the source of an obstinacy that continues to ignore the cancer of militancy in the country.

The writer is a US-based attorney teaching constitutional history and political philosophy.

rafia.zakaria@gmail.com

China, US jostle in Middle East

This century has witnessed China's emergence as the main challenger to the superpower status of the United States. In dramatic fashion, China is beginning to establish its foothold in the highly strategic, energy-rich region of the Middle East by forging strong ties with regional powers and gradually challenging US-Israel regional dominance. Thanks to decades of double-digit economic growth and accelerating military modernization, China now has both the need for and the capability of engaging the Middle East.

Confined to the sidelines during the Cold War, the
Chinese leadership finally found a window of opportunity to enter the region's politics and expand its military exports. During the 1980s, China increasingly criticized Soviet disinterest in assisting regional "revisionist powers" such as Syria against US allies. Subsequently, it sought regional influence through forging strong ties with leading anti-US powers in the region.

The Middle East was a staging area for Cold War conflicts between the United States and the Soviet Union.
Will the region become a battleground in the 21st century conflict between a rising China and a stagnant United States?

Through the 1990s,
China provided an increasing amount of ballistic missile technology to Syria. But the key partner to emerge in the region was Iran. During the Iran-Iraq war, China was a key military supplier for Iran. From the 1980s to 1997, support for nuclear programs became a pivotal element of Beijing's effort to forge a strong partnership with Iran.

In the 1990s, Iran embarked on a major program of reconstruction, and gradual increases in oil prices accelerated Iran's hopes for a comeback. The reconstruction program expanded Iran's industrial base and reinvigorated the population and economy. US wars in Iraq and Afghanistan eliminated Iran's enemies to the East and West. Iran was now at a new position of strategic ascendancy and began to step up its rhetoric against the US-Israel tandem. Faced with such powerful adversaries, it sought deeper cooperation with the rising superpower, China. An emboldened Iran also honed its regional influence and consolidated it in Iraq, Lebanon, occupied Palestine, Syria and even in
Afghanistan

China's burgeoning ties with Iran are not really surprising. Iran is a host to the second-largest reserves of oil and natural gas. It is also a traditional regional power, with a huge network of allies and proxies across the region. For Iran, faced with increasing investment vacuum and international isolation over its nuclear program, China represents a potential remedy for the development of its vast energy resources and a source for modern military technology. China sees Iran as a counter-force to US allies in the region and has contemplated establishing a naval presence in the Persian Gulf, where 40% of global energy is transported.

China has also been a major source of support against the UN Security Council calls for severe sanctions against Iran. As the Atlantic allies together with Russia pushed for more sanctions against Iran, China consistently sabotaged the efforts. In January, it signaled its disinterest in any sanctions by a sending low-level representative to the "Iran Six" talks (the
United Nations Security Council's five permanent five plus Germany). During the February Munich Security Conference, China's foreign minister vehemently opposed any prospects of sanctions against Iran. The position was reiterated during the April meeting of the leaders of BRIC (Brazil, Russia, India, China).

China's trade-investment interests in Iran are deepening alongside the growing strategic as well as ideological alignment between the two powers. In the past five years, China has emerged as the major investor in Iran, with an estimated US$120 billion worth of energy investments. Despite the sanctions already in place, trade between the countries grew by 35% in 2008, to $27 billion. In 2009, China signed over $8 billion in new energy investments. Seemingly, there is an emerging China-Iran tandem.

Charming America's Arab allies
A testament to China's growing diplomatic sophistication is how it has endorsed alternative narratives, norms, and visions to challenge highly unpopular US policies in the Middle East and the Washington consensus on economic development globally. In 1996, China established the Shanghai Cooperation Organization to balance North Atlantic Treaty Organization expansion in central Asia and provide an alternative security community in greater Asia.

In direct contrast to the unpopular American approach, China later developed the Beijing Consensus, which emphasized state-led development, non-interference in the affairs of other countries, and trade without political preconditions. As anti-US sentiment grew in the Middle East, China found it easier to expand ties with all relevant regional powers, including America's Arab allies, Egypt and Saudi Arabia. China's strategic maneuverings have been a savvy fusion of mercantilist foreign policy and security-focused diplomacy.

Saudi Arabia's vast energy reserves are vital to China's long-term economic interests. In 1988, China provided a desperate Saudi Arabia with intermediate range CSS-2 missiles to meet the country's strategic needs, something that the US refused to do. Since then, relations have grown. Currently, Saudi Arabia is China's biggest supplier of crude oil - followed by Angola and Iran - and China is the Saudis' biggest export market, surpassing the troubled US market.

Since 2006, President Hu Jintao has visited the kingdom twice. Every month, the Chinese send representatives to Saudi Arabia to ensure relations are on track and energy supplies are secure. Since the establishment of ties between the two countries in 1990, trade has grown from an initial amount of $290 million to about $41.8 billion in 2008.

In 2009, 70 Chinese companies, mainly in construction and employing about 16,000 Chinese workers, were active in the kingdom. Since 2007, the Chinese have won more than $2 billion in non-energy contracts. In strategic terms, the Saudis are seeking to diversify their foreign relations - or wean themselves of dependence on the United States - by expanding ties with China. They also view their growing ties with the Asian power as a springboard to tap the growing market of Asia as the west struggles to absorb Saudi oil.

Egypt, the strongest Arab military, is a key US ally under President Hosni Mubarak and has been the second-largest recipient of US military aid after Israel. Given such intimate US-Egyptian ties, the Chinese influence in the country should be minimal. But things are beginning to change. By 2008, bilateral trade stood at $6.2 billion and by 2010 China is expected to become Egypt's largest trade partner.

Military ties between the two countries have also been improving. In recent years, high-level military and defense officials have regularly visited each other and worked on ways to expand relations further. Almost a year after a Chinese official met a top Egyptian Air Force commander, Egypt announced its plans in 2010 to co-produce an advanced fighter, under the Chinese-Pakistani JF-17 thunder combat
aircraft project. The Egyptians view China as a strategic partner that could help them achieve military self-sufficiency.

China and Israel
Through a clandestine set of operations from the 1980s until the end of the century, Israel provided China with almost $4 billion in sensitive technology. These exports, some traced back to the United States, contributed immensely to China's military modernization by upgrading Soviet technology and incorporating US technology.

As China's relations with Syria and Iran improved, there has been a marked deterioration in China-Israel relations. Pressure from the United States has also prompted Israel to put some distance between itself and China. In recent years, Israeli officials angered the Chinese leadership by making diplomatic and cultural visits to Taiwan, and the Israeli media has implicitly acknowledged Taiwan's sovereignty.

Since Deng Xiaoping, China has shifted to a more pragmatic view of the Israeli-Arab conflict and has emphasized peaceful mutual co-existence, recognition of Israel by its Arab neighbors, and Israeli withdrawal from occupied territories along with a security guarantee by Arab countries. Although China is part of the Security Council, it isn't formally part of the Middle East quartet of the United States, European Union, Russia, and the UN. China has yet to exercise a decisive role in the resolution of the Arab-Israeli conflict. Although China has been more sympathetic toward Hamas, Hezbollah, and other resistance groups in the region, it opposes terrorism as a means for accomplishing political objectives.

China-US strategic competition
China's push into the Middle East is a calculated extension of its rising global status.
Already a major ally of the only Muslim nuclear power - Pakistan - China is deepening its ties with the main US foe in the region, Iran, while wooing America's main Arab allies. Consequently, China's support has emboldened Iran's defiance and dampened prospects of serious sanctions.

US critics of China, particularly on the right, view China as a strategic competitor rather than a strategic partner and are deeply apprehensive about China's growing influence in the Middle East. They understand China's expanding ties with regional powers - such as Iran, Saudi Arabia, Syria, and Egypt - as a direct challenge to US control over strategic energy reserves in the region and are especially concerned over Chinese exports of strategic military hardware such as ballistic missiles to its allies in the region. They see China as blocking attempts to isolate Iran and empowering anti-US forces in the region, hence undermining US power in the region.

"Instead of practically begging China for support," writes former US representative at the UN John Bolton, "America should be making its own hard decisions to do what is necessary to prevent what now looks almost inevitable absent an
Israeli military strike: Iran with nuclear weapons."

China has also opposed US military expansion in the Persian Gulf and military adventurism in
Iraq and Afghanistan. It has described the United States as a source of destabilization in the region. China has also repeatedly criticized US plans to sanction and isolate Sudan over allegations of genocide, instead calling for a peaceful resolution of the issue. In general, China views sanctions as a counterproductive and ineffective means for policy change.

The United States remains the preponderant military power in the world. But while paying a heavy price - materially and ideologically - in its wars in the region and struggling with a troubled domestic economy, the United States watches as China positions itself at the center of regional politics and swiftly expands its investments, trade, and military relations with powerful regional players.

Flushed with cash and clout, Beijing is changing the regional balance of power even as a relative newcomer to the Middle East.Washington, meanwhile, is too distracted by its wars to do much more than observe the tectonic shifts.

FPIF contributor Richard Javad Heydarian is an Iranian observer and analyst of developments in the Middle East. He is based in Manila.