Inter Press Network

Intelligence Brief: Nepal

2005-10-04T07:40:00.000-07:00

Drafted By: Dr. Michael A. Weinstein

Nepal, landlocked and bordered by the rising Asian powers of India and China, has become the object of competition among its neighbors as the country has descended into severe instability. The only Hindu kingdom in the world, with a generally impoverished population of 27.7 million people and few strategic resources, Nepal interests New Delhi and Beijing as a geostrategic prize in the new "great game" for spheres of influence in Central Asia. [See: The 'Great Game' Heats Up in Central Asia]

Except for a brief period of parliamentary government after World War II, Nepal was an absolute monarchy until 1989, when King Birendra, bowing to pressure from a coalition of political parties and social movements, instituted a constitutional monarchy. The new parliamentary system was riven by fractious partisanship, failure of leadership, corruption and the persistence of poverty. In 1996, the Communist Party of Nepal (Maoist) (C.P.N.(M.)) abandoned parliamentarism and initiated an armed "people's war" in the countryside aimed at overthrowing the constitutional monarchy and establishing a "socialist republic."

The Maoist insurgency gained support among the 80 percent of Nepalese living in rural areas and now is estimated to control up to 70 percent of the countryside. The campaign to suppress the insurgency by the Royal Nepalese Army (R.N.A.) has been marked by brutality and torture on both sides, most recently documented by U.N. Special Rapporteur on Torture Manfred Nowak in a September 16, 2005 press conference following his investigative trip to Nepal.

A further plunge into instability came in February 2005, when King Gyanendra, who had assumed the throne after the heir apparent had killed his parents and himself, dissolved parliament and declared a state of emergency, suspending civil liberties, imposing press censorship and banning opposition demonstrations, in the name of fighting the insurgency more effectively and suppressing corruption. [See: "Sacking the Government Brings International Attention to Nepal"]

Gyanendra's seizure of absolute power has not calmed Nepal's political turmoil and has led to international censure, including the withdrawal of military aid to Kathmandu by New Delhi and Washington. On April 30, Gyanendra lifted the state of emergency, but did not surrender control and has not moved to re-establish the parliamentary system. Since then, Nepal has been in a state of political flux, in which the three parties to the domestic conflict -- the king, the Maoists and the parliamentary parties -- have maneuvered for advantage in an intensely uncertain situation.

Nepalese Instability: Tri-partite Conflict

The crisis precipitated by Gyanendra's February seizure of absolute power threw the parliamentary parties into the position of either attempting to mount resistance in order to recoup their losses or accepting defeat. Particularly after the king revoked the state of emergency in April, they chose the former, pursuing a three-pronged campaign to delegitimize his rule and render him unable to govern. Forming the same kind of coalition that had forced the institution of a parliamentary system in 1989, they subsumed their rivalries under a common program of restoring democracy.

As Gyanendra remained unyielding, the parliamentary parties radicalized their positions. The crisis ratcheted up to a higher level, when, in late August, the Nepali Congress Party (N.C.P.) -- the largest parliamentary grouping, which has close ties to New Delhi -- announced that it had decided to delete the goal of achieving a constitutional monarchy from its constitution. The Communist Party of Nepal (U.M.L.), the second biggest grouping, had already abandoned constitutional monarchy for a "democratic republic."

In response to the parliamentary parties' break with the monarchy, the Maoist insurgency announced a three-month cease fire and has begun releasing some of its R.N.A. prisoners, although Nepalese media report that it continues to carry out abductions of school teachers and students for "re-education." Registering a shift in the balance of power, the seven-party parliamentary coalition announced on September 16 that it would form a team to negotiate independently with the Maoists. The coalition made it clear that talks were premised on the insurgency ending violence against civilians and that the Maoists would not be permitted to join the coalition unless they laid down their arms.

Along with abandoning their commitment to monarchy and moving towards the Maoists, the parliamentary parties, with the support of student and other civil-society groups, initiated an ongoing series of street demonstrations in Kathmandu, aimed at forcing Gyanendra to restore democracy, that have attracted up to 7,000 participants and have met with mass arrests -- including temporary detention of top party leaders -- and often violent suppression by government security forces.

Faced with international isolation, the collaboration of the Maoists and the parliamentary parties and the emergence of "people power," Gyanendra has held fast to his refusal to institute a cease fire to match the Maoist's initiative and has urged the parliamentary parties to negotiate with him.

Each actor in the tri-partite conflict is playing a risky game with uncertain results.

The Maoists, who have used previous cease fires to rearm and regroup, are growing increasingly confident that their people's war strategy of surrounding Nepal's cities and precipitating urban insurrection is succeeding. Their commitment to a future parliamentary regime is at best suspect.

The parliamentary parties hope to emerge as victors by playing both sides against the middle, counting on the support of New Delhi and its Western allies, and on people power.

Gyanendra is counting on the continued backing of the R.N.A., military aid from Beijing to make up for New Delhi's suspension and residual popular commitment to the monarchy.

At present, it is impossible to predict who will emerge on top or whether there will eventually be a compromise between two or among all of the parties.

The Bottom Line

New Delhi, which counts Nepal within its sphere of influence -- due to its preponderant economic power in the country, cultural affinities and strategic advantages -- has been most severely impacted by the crisis. Indian analysts report on a power struggle in New Delhi between the Ministry of External Affairs, which backs the parliamentary parties and their efforts to negotiate with the Maoists, and the Home and Defense Ministries, which place their bets on Gyanendra, fearing a Maoist takeover and a spread of Maoist insurgencies into India, exacerbated by border insecurity. Thus far, New Delhi has chosen to back the parliamentary parties, but there is no assurance that the strategy will succeed or that it can be pursued effectively given intra-governmental conflicts.

As New Delhi faces hard choices, Beijing has seized the opportunity to move in and offer Kathmandu arms deals, one of which has already been signed. Islamabad is rumored to be doing the same. Washington and London have been left with no option but to back New Delhi as they try to pressure Gyanendra to restore constitutional monarchy and accept international mediation to end the Maoist insurgency.

The latest moves in the new great game highlight the uncertainties and shifting opportunity structures that emerge when strategically valuable, weak states begin to implode. Beijing has nothing to lose by backing Gyanendra and will win big if he holds on to power. New Delhi, which allowed the situation to get out of control, faces the possible diminution of its influence. As the crisis has deepened, New Delhi has sent troops to Indian states bordering Nepal to contain an escalated conflict.

Uncertainty is the watchword in Nepal, where much depends on how the parliamentary coalition plays its hand as it seeks to finesse the Maoists and the king.
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Al-Qaeda's Proliferating Ideology

2005-10-04T05:11:00.000-07:00

Drafted By:Erich Marquardt

The July 7, 2005 attacks in London served as reminders that there is no end in sight to the current campaign by Islamists against the United States and its allies. The attacks were committed by British citizens, some of whom were raised in the country. This fact is important since it displays how segments of the British Muslim population became so alienated by British foreign policy that they contributed to al-Qaeda leader Osama bin Laden's movement against the United States and its allies.

Furthermore, the strikes came after similar attacks in Madrid, where on May 11, 2004, 191 people were killed and more than 600 wounded when ten bombs were detonated on the city's train line. Spain has held many suspects in these attacks; some are Moroccan, others Tunisian, but all are Muslim.

If attacks such as these continue, it will mark al-Qaeda's success at listing an accurate set of grievances against the West that many Muslims share. By exploiting those who agree with this set of grievances, al-Qaeda is bound to organize, and, more importantly, inspire segments of the Muslim population to take violent action against the U.S. and its allies. [See: The Threat of Al-Qaeda and the Islamic Revolutionary Movement]

Implications of the London Attacks

The July 7 attacks in London were coordinated effectively, with multiple militants exploding four bombs within an hour's time frame. Three of the bombs struck underground trains, while the last bomb destroyed one of London's trademark double-decker busses. The attacks occurred in downtown London and sent a message to many governments that similar style incidents could occur anywhere. The attacks left some 50 dead and hundreds injured. Abu Hafs al-Masri Brigades, an Islamist group that was formed in 2001, claimed responsibility for the actions. [See: "Intelligence Brief: Islamist Terrorism in Europe"]

Two weeks after the July 7 attacks, Muslim militants targeted London's transportation system again -- the Brigades also claimed responsibility for these attacks. Where the July 7 militants succeeded, the July 21 militants failed. The July 21 attacks targeted the London transportation system yet none of the bombs detonated properly and there were no serious casualties. Indeed, one of the suspects, Hussain Osman -- also known as Hamdi Issac -- argues that the July 21 attacks were merely "copycat" attacks intended to foment fear and panic, but not to actually kill anyone.

London investigators have also not been able to uncover any connection between the July 7 attackers -- who are believed to have died in the attacks -- and the July 21 attackers. The July 7 attackers, for instance, were of Pakistani descent, while the July 21 attackers were African. Investigators have not ruled out a connection yet. More importantly, investigators believe that the two groups of militants had no organizational relationship with al-Qaeda. This development, if it is true, further highlights how bin Laden's rhetoric has emboldened Muslims across the world who agree with his argument of the need for a "defensive jihad" against the U.S. and its allies. [See: "The Threat of Al-Qaeda and the Islamic Revolutionary Movement"]

If there were no organizational ties to al-Qaeda, the London attacks signify the difficulties in preventing such acts in the future since there is no one group to infiltrate and eliminate. For instance, while the latest attacks were claimed by the Brigades, it is not clear whether the organization had any real role in the operations.

Abu Hafs al-Masri Brigades

The Brigades were formed in 2001 after the death of al-Qaeda leader Abu Hafs al-Masri -- known as Muhammad Atef -- in Afghanistan; the organization's title also bears his name. Their first attributed attack occurred on March 9, 2004, when two suicide bombers detonated themselves in Istanbul, killing one person and injuring five others. Then, on May 11, 2004, the group claimed responsibility for the terror attack on Madrid's transportation system, where 191 people were killed and more than 600 wounded when ten bombs were detonated on the train line. The Brigades claimed that the strike was in response to Spain's military support of the U.S.-led occupation in Iraq.

However, it is not clear how involved the Brigades were in all of these incidents; indeed, many of its claims have been proven false. For instance, the organization claimed responsibility for the August 5, 2004 bombing of the Marriott Hotel in Jakarta, in addition to the power blackout in August 2003 that affected the northeast United States; both claims turned out to be false. Because of these inconsistencies, it is possible that a figure within the organization lays claim to attacks in which the group had no role, simply to promote the notion that the organization is an organized and lethal force.

The veracity of the Brigades' claims are important, considering that after the London attacks the organization released a statement giving Italy, Denmark and the Netherlands an August 15 deadline to withdraw troops from Iraq. Failure to meet the deadline, the organization argued, would result in assaults on these countries by Islamist militants. This deadline has concerned Italy greatly, since the country fears that its support for the U.S.-led war in Iraq has made it a high target for Islamists.

Concern in Italy

Italians fear that members of their own Muslim population could follow al-Qaeda's ideology and launch an attack on Italian soil. On July 12, for instance, the Italian military intelligence agency S.I.S.M.I. released an alarming report where it stated that some 300 Islamist suicide fighters successfully reached Iraq from other countries -- three of them were proven to have come from Italy. This knowledge is concerning and embarrassing for the Italian government, as it sheds doubt on Rome's ability to combat internal militants since it cannot even prevent them from leaving Italy to fight in Iraq.

However, even if the Brigades does not have the operational capacity that it proclaims, Italy's support of the U.S. still makes it a target for other Islamist militants, and the government is aware of this. The success of the July 7 London attacks, and even the fear caused by the failed July 21 attacks, prodded Rome to action, and in recent days it has taken serious measures against potential Islamists within its borders.

On August 15, Italian police announced that more than 100 suspected Islamists had been arrested, and that Rome would expel hundreds more; the action is part of Italy's anti-terror sweep that is now possible due to legislation passed after the London attacks giving the Italian police more power. According to the Italian Interior Ministry, police targeted "Islamic gathering places: call centers, Internet points, Islamic butcher shops and money transfer businesses."

The ministry also stated that it ordered more than 700 people to leave Italy for violating immigration laws. Also on August 15, the ministry stated that its current intelligence can "confirm that an elevated risk for a terrorist attack in our country remains." As the September 11, 2001 anniversary draws near, the Italian government is being extra vigilant in case militants are planning to launch an attack on that day in order to tie special significance to their actions.

Denmark and the Netherlands

Denmark is also a country on the Brigades' hit list. Some 500 Danish troops are in Iraq fighting alongside U.S.-led forces. Islam is now the second largest religion in Denmark, making up about five percent of the population.

In recent weeks, Danish police have been very visible in the country's capital, Copenhagen, and have been especially vigilant in protecting the city's public transportation system.

While it has not responded with the same vigor as Rome, Copenhagen has taken action against some Muslim extremist groups. Just recently, for instance, Fadi Abdullatif, spokesman for the Danish wing of Hizb ut-Tahrir -- a radical Islamist group -- was arrested due to his threats against the Danish government. Such rhetoric was seen in a Hizb ut-Tahrir handout, distributed in Denmark, that said, "So, travel to help your brothers in Fallujah and exterminate your rulers if they block your way."

The Netherlands was also threatened with the August 15 deadline. However, the Netherlands withdrew its troops even before the threat was levied. Nevertheless, the country feels that it could be next in an attack, especially since it has large Moroccan and Turkish communities that have not been completely integrated with Dutch society.

Conclusion

It is difficult to draw conclusions regarding the Islamic revolutionary movement. A logical assessment is that U.S. military operations against al-Qaeda in Afghanistan scattered an already relatively primitive organization. Continued U.S. vigilance in that country and elsewhere will make it difficult for al-Qaeda to orchestrate any large-scale attacks against the United States, or even its major European allies.

Yet, because of al-Qaeda's attractive ideology, similar attacks such as those that occurred in London and Madrid, in addition to those that have been executed in other capitals around the world, will continue. In these cases, militant individuals or Muslim war veterans will be drawn together to undertake the planning and execution of attacks against the interests of the U.S. and its allies. These individuals and groups may have no organizational relationship with al-Qaeda, but agree with bin Laden's rhetoric against the West and are willing to use violence to further this goal.

While it is possible to prevent al-Qaeda from developing into a larger and more sophisticated organization, it is less possible to prevent small-scale attacks from unknown and unidentified militants who develop plans to attack the West with the motive being equal to a religious and political grievance. Preventing these attacks will require the creation of a security state, a possibility that is not likely in Western countries. Of course, as long as vigilance remains high, it is also unlikely that Muslim militants will be able to execute a massive and sustained terror campaign. However, such knowledge is not especially reassuring to the West as it only takes one lucky and well-placed strike to cause a major catastrophe.
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Examining the Threats to Indonesia's National Interests

2005-10-04T04:56:00.000-07:00

Drafted By:Erich Marquardt

With 210 million people, Indonesia is the world's fourth most populous state and possesses Southeast Asia's strongest military. Consisting of more than 17,000 islands, spanning from the east of Malaysia to the western portion of the island of New Guinea, Indonesia controls critical sea lanes and airways, making it a strategic regional state in Southeast Asia. Ruled by authoritarian military leaders since its independence from the Netherlands in 1949, Indonesia was a strong ally of the West during the Cold War and an adversary to communism. Throughout this period, the military was the dominant political force in the country and kept a tight rein on political power, imprisoning and killing political dissidents to eliminate threats to its rule.

After the end of successive military dictatorships, first by General Sukarno from 1945 to 1967 and then by General Suharto from 1967 to 1998, the government of Bacharuddin Jusuf Habibie agreed to economic liberalization policies in addition to lifting controls on labor unions, political parties and the media. Indonesia's first nationwide elections after the successive military dictatorships of Sukarno and Suharto took place in June 1999; since these elections, Indonesia has seen peaceful transfers of political power.

As Jakarta continues to struggle with political stability, it faces a number of threats to its interests. It has strived to retain its territorial integrity, fighting off separatist rebels in Aceh and Papua provinces; it has suffered from Islamist violence, best displayed during the October 2002 terror attack on a Bali nightclub that killed 202 people; the present civilian government of President Susilo Bambang Yudhoyono has tried to limit the power of Indonesia's most dominant faction, the military; and it must prepare to adapt to the changing security arrangements in East Asia due to the rising status of China as a regional power. How the present government in Jakarta handles these significant threats to its interests will determine the future shape of Indonesia's internal and external security disposition.

Threats of Separatism in Aceh and Papua Provinces

In Indonesia's Aceh province, located on the northernmost part of the island of Sumatra, separatist rebels of the Free Aceh Movement, known as Gerakin Aceh Merdeka (G.A.M.), have been fighting the Indonesian government for 30 years. No stranger to separatism, Jakarta fought a recent losing battle against separatists on the eastern portion of the island of Timor, known as East Timor.

The conflict in East Timor culminated in January 1999 when the Indonesian government of Habibie agreed with a U.N. process to allow the East Timorese to vote on independence. Approximately 98 percent of registered voters took part in the election, and 78.5 percent of those voters called for independence from Indonesia. The Indonesian Defense Forces, or Tentara Nasional Indonesia (T.N.I.), in an attempt to influence the election, and in retaliation to the final result, responded roughly, causing much violence and destruction. Indeed, the attacks against the East Timorese were so harsh that it critically affected Indonesia's relations with other states, resulting in the U.S. Congress severing all military ties with its once strong Cold War ally. While Indonesia was forced to relinquish sovereignty in East Timor, it does not plan on surrendering sovereignty elsewhere in its island chain, such as in the provinces of Aceh and Papua.

More independent than other parts of Indonesia, and more Islamic in character, Aceh never fully submitted to Dutch rule. After Jakarta took control of the province as part of its independence from the Netherlands, separatist tension remained, heightened by the fact that Aceh is abundant with such natural resources as timber and natural gas; these resources have been used by the central government in Jakarta, creating animosity among the more separatist elements of the population in Aceh who feel that their resources are being exploited.

G.A.M. calls for an independent and Islamic state and uses military force to agitate against the centralized rule of Jakarta. In addition to targeting Indonesian troops, the organization has attacked such international economic interests in the region as Exxon Mobil's natural gas facilities in Aceh. The movement is believed to have received funding and equipment from Iran and Libya; however, most of its arms are thought to come from sources in the region.

In response to G.A.M.'s insurgency, the Indonesian military frequently uses brutal tactics to destroy the organization's resolve. Human rights groups accuse the military of using tactics of abduction, rape, torture and mass killings against G.A.M. members and alleged supporters; as stated by the New York-based organization Human Rights Watch, "Substantial evidence from several reliable sources, including Indonesia's own National Commission on Human Rights, establishes that Indonesian security forces have engaged in extra-judicial executions, forced disappearances, torture, beatings, arbitrary arrests and detentions, and drastic limits on freedom of movement in Aceh."

Nevertheless, T.N.I.'s actions in Aceh have managed to push the rebels out of major cities and into the more rural areas of the province. While it appears that G.A.M. has been weakened, it still exists as an organization and continues to launch scattered attacks on Indonesian interests.

Indeed, G.A.M. just completed negotiations with the Indonesian government in Helsinki, mediated by former Finnish President Martti Ahtisaari. As recently stated by Ahtisaari, "Issues discussed included special autonomy or, as proposed by G.A.M., self-government; amnesty and other measures to facilitate an agreement; security arrangements; monitoring of the implementation of the commitments; and timetable."

At the end of the talks, both sides came to common agreement over some of the key issues involving the conflict. G.A.M. publicly stated that it would drop its quest for independence in exchange for Aceh's greater autonomy from Jakarta. G.A.M. and Jakarta have agreed to a third round of discussions, planned for the middle of April.

On the western portion of the island of New Guinea, T.N.I. has engaged separatist rebels of the Free Papua Movement, known as the Organisasi Papua Merdeka (O.P.M.). O.P.M. is a political organization, with a military wing, that fights for independence and autonomy for the indigenous people of West Papua. Not a major threat to Jakarta, O.P.M. has engaged in military struggles with T.N.I., which reacts with a heavy hand, seen through the actions by the KOPASSUS, the Indonesian special forces unit. Human Rights Watch argues that "disproportionate reprisals against civilians and suspected separatists [occur]. Arbitrary detention, torture, disappearances, and arson are widespread in this region of Indonesia."

Successive governments in Jakarta, and especially the highly nationalistic T.N.I., have as a major policy goal the preservation of Indonesia's current territorial integrity. After the loss of East Timor in 1999, Jakarta has worked to prevent the fragmentation of its territory, an often difficult task due to the spread-out nature of the country's islands. Both the United States and China, two states with influence in the region, have supported Indonesia in these efforts since a fragmented Indonesia would create risk for the stability of the straits. Ralph Boyce, the U.S. ambassador to Indonesia, explained this risk, telling the U.S. Congress in July 2001, "However, the flip side, which is instability in the world's fourth most populous nation, would threaten not only Indonesia's immediate neighbors, but also our own strategic and regional objectives.

Islamist Violence

Indonesia's large Muslim population makes it vulnerable to advances by Islamist organizations to recruit and train militants to launch attacks against the United States and Western interests. There are active, militant Islamist organizations operating in the region, and attacks against Indonesian and Western interests have already transpired.

On October 12, 2002, Indonesia suffered from a terror attack on a nightclub in the resort-city of Bali. The bomb blasts killed 202 people, many of them Westerners flocking to Indonesia's beautiful tourist destinations. The attacks were launched by Jemaah Islamiyah. On August 5, 2003, the group attacked the J.W. Marriott hotel in Jakarta, killing a dozen people. Finally, on September 9, 2004, nine people were killed when a car bomb detonated outside the Australian Embassy in Jakarta, injuring almost 200 people -- Indonesian authorities attributed this attack to Jemaah Islamiyah, although it is not clear if the organization claimed responsibility.

As these attacks demonstrate, militants have been able to launch successful, high-profile attacks on Western interests within Indonesia. The United States is concerned that Islamist organizations could increase their ranks and strength in Indonesia and launch even more debilitating attacks. Because Indonesia controls some of the world's most trafficked and vital sea lanes, it could provide a lucrative opportunity for Islamist organizations to cripple the global economy. As clearly defined by the U.S. State Department, "Indonesia remains a linchpin of regional security due to its strategic location astride a number of key international maritime straits."

For instance, the Straits of Malacca are a key sea lane for the transport of goods, as they link together the Indian and Pacific Oceans. Twenty-five percent of world trade passes through the Straits. Some 80 percent of Japan's oil is brought through the Straits, and as China increases its energy consumption and purchases of oil from the Middle East, it too sees the majority of its energy traffic pass through these critical sea lanes.

Furthermore, due to the dynamics of the Straits -- shallow reefs and narrow channels -- sea traffic is slow, meaning that any major attack would be extremely damaging. After all, the Straits are already a major target of pirates; the International Maritime Bureau ranks the Straits as the second hardest hit piracy hotspot on the globe. Some potential attack scenarios include the hijacking of an oil tanker and using it in conjunction with explosives to create an enormous bomb that could be used to attack coastal regions. The environmental disaster alone from the explosion of an oil tanker would be tremendous. Attacked in a narrow part of the channel, the oil spillage could be enough to block the route for other ships, having a significant effect on the global economic market.

For this reason, the United States, and its allies in the region, has worked with Indonesian security forces to analyze these scenarios and devise counter-terrorism techniques to combat their realization. China, too, has given assistance to Jakarta, offering to send military equipment at reduced rates for use by the T.N.I.

The Indonesian Military

The Indonesian military is the strongest power faction in Indonesia. The country was ruled by military leaders until 1998, and while a civilian government now rules in Jakarta, that government is handicapped by the entrenched power of the military. In the words of Juwono Sudarsono, the civilian minister of defense, the military "retains the real levers of power. … From the political point of view, the military remains the fulcrum of Indonesia." To highlight how independent of the central government the military is, it is estimated that almost one-third of the T.N.I. budget derives from the Indonesian government, with the rest of the budget coming from unaccountable sources; Dana R. Dillon from the Washington-based Heritage Foundation claims that these profits emanate from "illegal logging, poaching, drug smuggling, and protection rackets."

Until 1998, Indonesia was ruled by generals; this rule fostered an atmosphere where members of the military were exempt from many of the norms and laws affecting civilian society. Furthermore, under the concept of dwifungsi, the military was able to assert itself in social and political affairs. Dwifungsi reserved political posts within the government for military officers. This created a condition where officers served in all levels of the government, even in parliament, causing the entire government to be under the oversight of the military.

The system of dwifungsi is no longer active and a number of reforms have been pushed through to try to limit its past effects. For instance, military officers must now resign from the armed forces before filling a position in the civilian government. The police, too, have been separated from the military. Nevertheless, the atmosphere prevails today, seen through the many human rights offenses committed by the T.N.I., and shown by military leaders who are still unwilling to give up their entrenched positions of power to a civilian government.

Up until the early 1990s, T.N.I. and the U.S. military enjoyed good relations. According to the U.S. Defense Security Cooperation Agency, from 1950 to 1993 the United States trained more than 8,000 Indonesian officers in U.S. military schools, in addition to providing Indonesia with hundreds of millions of dollars in military assistance grants, loans and credit used to purchase U.S. military supplies.

Throughout this period, however, the little civilian oversight of the military caused T.N.I. to become grossly corrupt and violent. In November 1991, the Indonesian military shot at peaceful protesters in East Timor, leading to the deaths of hundreds of people. The following year, in 1992, the U.S. Congress ended its security assistance to Jakarta. In 1995, the ban was relaxed, only to be reestablished following the reaction by T.N.I. to the 1999 decision by East Timor to separate from Indonesia.

Then, in 2002, another incident occurred involving T.N.I.; an ambush resulted in the deaths of two U.S. citizen teachers in Papua province on New Guinea. The F.B.I. complained about the little support it received from Jakarta in investigating the murders, which led Congress to further restrict the International Military Education and Training (I.M.E.T.) and Extended International Military Education and Training (E-I.M.E.T.) programs. It is thought that the Indonesian military had a role in the murders. Until the U.S. Secretary of State certifies to Congress that T.N.I. is assisting in the F.B.I. investigation on the murders, the military education and training programs will remain restricted and so will U.S. arms sales to the Indonesian government.

Jakarta claims that it is working to comply with the United States on these matters. Nevertheless, U.S. Senator Patrick Leahy said in a speech on the floor of the U.S. Senate in early February, "Although senior Indonesian military officers have repeatedly vowed to support reform, they have done next to nothing to hold their members accountable for these heinous crimes. Instead, the Indonesian military has consistently obstructed justice."

It is for this reason that the current civilian government of Yudhoyono is seeking closer ties to the Unites States and the reestablishment of the I.M.E.T. programs; Yudhoyono seeks to establish civilian control over the entrenched power of the military. The I.M.E.T. programs, for example, provide officer training courses to member countries, presently consisting of Malaysia, Thailand, Pakistan and India. It is funded by the U.S. Department of State.

The Defense Security Cooperation Agency of the U.S. Department of Defense describes the I.M.E.T. program as one that "exposes students to the U.S. professional military establishment and the American way of life, including amongst other things, U.S. regard for democratic values, respect for individual and human rights and belief in the rule of law." The department further explains that the purpose of I.M.E.T. is to "further the goal of regional stability through effective, mutually beneficial military-to-military relations which culminate in increased understanding and defense cooperation between the United States and foreign countries; and to increase the ability of foreign national military and civilian personnel to absorb and maintain basic democratic values and protect internationally recognized human rights."

Because I.M.E.T. pushes civilian control of the military, it is in the interests of the civilian government of Yudhoyono to increase relations with the United States and to get its military involved in this program; this explains why Juwono is pushing for a "re-engagement" with Washington. For the entrenched military leaders, however, increasing ties with the United States could lead to the erosion of their power to civilian rule, which would be a new development for Indonesia. U.S. Deputy Defense Secretary Paul Wolfowitz understands this assessment, noting during a January 2005 visit to Indonesia, "Cutting off contact with Indonesian officers only makes the problem [of corruption] worse."

The military's long nationalistic history of taking actions necessary for the preservation of Indonesia's territorial integrity and security as a state makes it skeptical of improved relations with the United States. It rations that excessive force is necessary to retain control over Indonesia's many islands, where uprisings are common and separatist groups are trying to follow the example of East Timor. Indonesian military leaders worry that if it were to increase relations with the U.S., it will lose the ability to take the necessary measures to preserve Indonesia's national interests.

The Changing Security Environment

The civilian government in Jakarta is striving to reestablish good relations with Washington. In addition to its desire to firmly control the Indonesian military establishment, Jakarta also recognizes that the security environment in Southeast Asia is changing as China increases its regional power. Indonesia's modern history with China has been rocky because Jakarta cooperated with Washington to resist the spread of communism. Relations with China were not officially resumed until 1990, although since 1985 economic relations between the two countries had been reestablished. Presently, the two countries are continuing to improve relations, and trade between them has increased greatly.

For instance, a free trade area is being planned that will encompass the states that make up the Association of Southeast Asian Nations (A.S.E.A.N.) and China, creating a market of 1.7 billion people. Indonesia, as the largest economy in A.S.E.A.N., will have a huge role in trade relations with China. China is already Indonesia's fourth-largest export market and one of China's primary resource suppliers, especially in oil and gas.

However, there are potential conflicting interests between the two states. China will seek a more influential role in Southeast Asia, especially considering so many of its resources and trade will emanate from there. This will induce China to seek greater control of the region to protect its own interests and to receive the benefits that come with being a regional powerhouse. Indonesia, on the other hand, is large and independent enough to desire complete autonomy from China. Furthermore, because the United States is seeking to continue its influence in the region, Jakarta will likely attempt to balance between China and the United States, obtaining the best concessions from each.

As an example of this, if the Bush administration is able to reestablish ties with Jakarta, it will result in more U.S. weaponry being sold to Indonesia, which would be used to patrol the country's critical sea lanes. China, too, has offered fighter jets and other weaponry to Indonesia, much for the same reason but also to improve relations with a country that was formerly its antagonist.

As an example of this balancing technique, after the Chinese offer of weaponry, Juwono said that the Chinese "emphasized there would be no conditionality" and that Jakarta considered the offer "attractive." Juwono said his response to Beijing was that Indonesia's decision "depends on the strategic partnership. If it's junior partnership for Indonesia, no way." Indonesia is able to maintain this balance because the Chinese understand that Jakarta can always turn to the United States for equipment if Jakarta considers Beijing's conditions on the weapons purchases to be too demanding. And the United States knows that if it attempts to influence Indonesia's political decisions excessively, Jakarta could seek more support from Beijing.

Conclusion

As Southeast Asia's largest and most powerful state, Indonesia is a keystone country that is courted by both China and the United States. Both countries seek to gain influence in Jakarta, especially since the country patrols the Malacca Straits -- a critical passageway for global trade. Indonesia can attempt to balance the two powers off each other, gaining economic and military benefits from both while preserving its autonomy.

Yet, Indonesia faces a series of internal problems with which it must deal. It faces separatists in two of its provinces, and has already lost to a separatist movement in East Timor. It has suffered from multiple terrorist attacks within its borders and must be vigilant in preventing such an attack from affecting trade through the Straits. Its nationalistic military is loathe to submit to civilian rule and still retains the "real levers of power."

Yet, if Jakarta is able to control the many threats to its interests, and maintain good relations with both the United States and China, it has a promising future. The plan to create a free trade area encompassing China and the A.S.E.A.N. states will help to unite East Asia's economic ideals, improving the region's development and placing it more independent from the West.
*****
URL:http://www.pinr.com/report.php?ac=view_report&report_id=274

Intelligence Brief: Sudan

2005-10-04T03:37:00.000-07:00

Drafted By: Dr. Michael A. Weinstein

The largest country in Africa in land mass and a rising oil power -- pumping 300,000 barrels of crude per day and working to raise the total to 500,000 by the end of 2005 -- Sudan was at the center of East African politics during the week of September 19, hosting a regional counter-terrorism conference, inaugurating its first "unity" government, resulting from the agreement ending the country's north-south civil war, and reporting a victory in its other civil war -- in the western region of Darfur -- amid warnings from United Nations envoy Jan Pronk that the conflict was escalating to dangerous levels.

Once the haven for al-Qaeda and an Islamic confrontation state, Sudan has more recently -- especially since 9/11 -- changed its strategic aims and its foreign policy, moving towards integration with the broader world community and its loose capitalist order, under pressure from Washington, but also as a result of a domestic decision to focus on the possibilities for economic development opened up by its oil industry.

Khartoum's major foreign policy objective is to have Washington remove Sudan from its list of countries sponsoring terrorism. Although Washington publicly credits Khartoum with cooperation in its effort to suppress revolutionary Islamist groups, it has not acceded to Khartoum's wish because of the persistence of the Darfur conflict and the fact that Sudan serves as a route for Islamist fighters heading north to Iraq. Removal from Washington's list is important to Khartoum, not only because U.S. economic sanctions would be lifted, but because improved relations with Washington would encourage foreign investment in Sudan generally.

Counter-Terrorism Conference

Hosting the September 20-22 counter-terrorism conference, which brought together security chiefs from 16 north-central and east African states, and observers from Egypt, Libya, Yemen, Saudi Arabia, China, the U.N., the E.U. and the U.S., was a primary goal of Khartoum, which hoped that its selection would enhance its international legitimacy.

Although the states represented at the meetings have genuine domestic interests in suppressing international Islamic revolutionary groups and domestic insurgencies that operate across porous borders, the conference was also an extension of Washington's grand strategy for the region, which is based on the long-term aim of gaining access to the region's states in order to foster military-military relations and undertake civil affairs projects. Washington hopes that its strategy of penetration will provide the basis for friendly regimes in the area that will suppress radical Islamism and work to alleviate endemic poverty, which Washington sees as the root cause of the region's instability.

It is not an accident that the states attending the conference overlap with the countries falling under the "area of responsibility" and "area of interest" of the Combined Task Force Horn of Africa for U.S. Central Command, which is based in Djibouti and is tasked with implementing Washington's regional strategy. While the conference was going on, Major General Timothy Ghormley was in Washington holding a press briefing underscoring Washington's policy in soberly optimistic terms.

Held in secret, except for televised opening remarks, the conference was more a symbolic show of solidarity than an advance over the pledge to cooperate made by the participating states at their first meeting in Kenya in 2004. The Declaration on Counter-Terrorism issued at the end of the conference reaffirmed earlier commitments, mentioned a "plan of action" and included a pledge to combat terrorism "in all its forms." The latter responded to complaints by Khartoum that Washington applies a "double-standard" in its "war on terrorism," targeting radical Islamism to the exclusion of other armed movements.

Conspicuously absent from the conference were Eritrea, which had not been invited, and Somalia, a failed state with an interim government based in Kenya, waiting on promised peacekeeping troops from Uganda and Sudan to secure its relocation to Mogadishu. Khartoum accuses Asmara of providing support to the rebels in Darfur. Somalia is the focal point of al-Qaeda activity in East Africa. In his press briefing, Ghormley admitted that his Task Force had made little progress in gaining access to Eritrea and made it clear that he was barred by administration policy from intervening in Somalia.

The effectiveness of regional cooperation with Washington's policy remains problematic. States in the region -- Sudan in particular -- are more interested in gaining legitimacy for their own domestic counter-insurgencies than in suppressing international Islamic revolution. Eritrea remains in an incipient state of war with Ethiopia. Each interested party in the region will define "terrorism" according to its own priorities, blunting and confusing intra-regional collaboration.

Unity Government and Escalation in Darfur

The selection of Khartoum to host the counter-terrorism conference was, in part, a reward for its 2005 peace agreement with the Sudan People's Liberation Movement/Army (S.P.L.M./A.) that ended a twenty-year civil war between the Muslim north, which controlled the state apparatus, and the Christian and animist south. [See: "Sudan's Changing Map"]

During the conference, the unity government prescribed by the agreement was sworn in, with the National Congress Party, representing the north and supporting President Omar Hassan al-Bashir, gaining 52 percent of the cabinet appointments, including the power ministries and the finance and energy ministries. Left with only the foreign ministry among the important posts, the S.P.L.M./A., which had fought hard for the energy ministry, was dealt a blow to its credibility with its constituency. Analysts predict that there is now a high likelihood that in four years the south will vote to separate from Sudan, as allowed by the peace agreement.

As the unity government was experiencing a shaky start, the civil war in the Darfur region heated up when the rebels there seized a town in violation of a 2005 cease-fire agreement. Khartoum responded with military force and succeeded in retaking the town. The African Union (A.U.), which is mediating peace talks between Khartoum and the two rebel groups in Abuja, Nigeria, urged all sides to hold to the cease-fire, and U.N. envoy Pronk issued a gloomy assessment of the situation, calling on countries that had promised aid to Darfur to honor their pledges.

The Bottom Line

As Khartoum seeks to break out of international isolation, it faces the legacy of northern domination of Sudan's south and west. Northern interests remain dominant in the country, but they have been challenged by previously suppressed regional groups.

Unwillingness of the northern political class to share power more generously promises to lead to eventual secession by the south and continued warfare in the west. The latter will constrain Washington to keep Khartoum on its list of terrorism sponsors. Hosting the counter-terrorism conference did nothing to change Khartoum's precarious position and enhance its international legitimacy.

Drained by civil war in the west and persisting tensions with the south, Khartoum will be hard pressed to achieve its development goals.

Having chosen to stay out of Somalia, at odds with Eritrea and equivocal towards Sudan, Washington risks being drawn into regional conflicts on one or another side rather than achieving its aim of regional integration. If Washington takes sides, it risks exacerbating instability; if it refrains from doing so, its effectiveness will be, at best, modest.
*****
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Poland's Rightward Turn and the Significance for Europe

2005-09-30T07:34:00.000-07:00

Drafted By: Federico Bordonaro

As expected, a right wing majority was the result of Poland's September 25 general elections. The Law and Justice Party (PiS), led by the twin brothers Lech and Jaroslaw Kaczynski, won 28 percent of the vote, beating its likely ally, the liberal-conservative Civic Platform (P.O.), which received about 26 percent of the vote.

Like in previous post-communist era elections, the current ruling party -- the Democratic Left Alliance (S.L.D.) in this case -- has been brutally punished by voters. S.L.D. won a disappointing 11 percent of votes, although forecasts predicted an even worse thrashing for President Aleksander Kwasniewski's party. Poland is perhaps the only European country that has experienced such a sudden, dramatic change in its popular support.

With far-right parties such as the Self Defense Party (Samoobrona) and the catholic-nationalist League of Polish Families each taking 10 percent of the vote, the next parliament will be dominated by Poland's various right-wing factions. However, Polish sources say that negotiations to give birth to a new government have been difficult, for the conflict between PiS and P.O. over economic liberalization and cuts to the welfare state will need a compromise and could lead to an internally divided coalition.

At any rate, a right wing president (who will likely be P.O.'s candidate Donald Tusk or PiS' rival Lech Kaczynski) is expected to be elected when Polish voters return to the ballot boxes in October.

For the European Union, Warsaw's rightward turn means that Eastern Europe's most influential new member will likely strengthen its (already existing) pro-U.S. and anti-Russian policy, and will highlight some fundamental differences in the perception of European construction among European elites and their populations.

Warsaw's Geopolitical Orientation

Poland epitomizes the pro-Western former communist East. With some 40 million inhabitants, it is demographically the most important among the ten countries which joined the E.U. in 2004. At a political level, Warsaw is the new E.U. member that consistently showed the willingness to join a renewed Euro-Atlantic political, security and economic alliance. For Poland, joining the E.U. and entering the transatlantic security community is one single goal -- although composed of two aspects.

During the E.U.'s 2003 split in the face of the Iraq intervention, Warsaw joined the Anglo-American axis without hesitation. This put Warsaw at odds with Franco-German diplomatic maneuvers and let French President Jacques Chirac express his disappointment toward the "newcomers," which some observers expected to show more compliance to the Paris-Berlin combine. On the contrary, Poland actively supported the U.S.-led war against Saddam Hussein's Ba'athist government in Iraq.

History and geopolitics has, in fact, inexorably affected Warsaw's foreign policy orientations. Poland was once a powerful state. During the 16th and 17th centuries it formed a multi-ethnic empire extending from the Baltic Sea to the Black Sea's northern region; Poland has known the hard rule of great powers ever since. Split among Austria, Prussia and Tsarist Russia since the end of the 18th century, and occupied by Hitler's army in 1940, the country was then made a satellite by the Soviet Union after Moscow helped to defeat Nazi Germany in WWII.

Germany and Russia are, therefore, inevitably perceived as geopolitical rivals by Warsaw. Although post-1990 relations with the two states are at unprecedented good levels, Poland will carefully avoid weakening Anglo-American influence in favor of a Russo-German axis, or even in favor of any one of those powers increasing in strength. This fundamental interest prevails over Warsaw's traditional excellent relations with France since Paris often looks to be the political brain behind the attempt to build a more autonomous Europe, thus reducing Washington's influence in European affairs.

In addition, Poland is trying to regain its leading role in Central and Eastern Europe by shaping enhanced cooperation with the Baltic states, Ukraine and even Georgia. In 2004, Warsaw actively supported the pro-U.S., pro-Western "orange revolution" in Kiev, and it's rapidly emerging as a solid U.S. ally when it comes to stirring up a similar civic movement in pro-Russia Belarus. [See: "The Poland-Belarus Controversy and the Battle for Eastern Europe"]

Such orientations have clearly emerged in Poland's foreign policy during the social-democratic rule of the last few years, so the rightward turn is not a synonym of Warsaw's reorientation, but instead a strengthening of some already working trends.

In August 2005, Warsaw launched a new initiative with Kiev, Vilnius and Tbilisi, aimed at forging a democratic community to foster liberal and pro-market policies in Eastern Europe. Such a move was clearly directed at easing Belarusian and Moldovan integration into the E.U.-N.A.T.O political, economic and security architecture, while at the same time securing the transport of Caspian oil and gas resources to the Eastern and Northern European markets via Georgia and Ukraine, thus bypassing Russian and Belarusian territories.

For Washington's broad geopolitical aims, Poland is gaining more and more importance. Warsaw's goals coincide with Washington's interests on a number of foreign policy issues. The new containment of Russia is certainly the most evident, but on a more general cultural and ideological level Warsaw's commitment to liberal democracy and pro-market reforms can prove decisive to carry American values in Eastern Europe, where populist policymakers can easily achieve wide popular support.

Moreover, from the American view, Poland's role in the enlarged Europe is also one of containment versus the French and German ambition to lead a united continent from a more autonomous one. However, the Franco-German combine is losing momentum, and some influential politicians in Paris and Berlin (like Nicolas Sarkozy and Angela Merkel) do not share plans to build a European superpower if it is not in a solid partnership with the United States.

If the more free market oriented policymakers take the lead in Warsaw's coming right wing coalition, pro-British and pro-American politicians in Western Europe will gain an even more valuable ally. However, national contexts still play a major role in the European Union, and dramatic changes in the economic policies in France, Germany and Italy are less likely than progressive re-adjustments of national social models. [See: "In the Heart of Europe: Social Models and Geopolitics"]

Why Poland Matters

European elites have an interest in carefully analyzing the evolution of Polish politics. After France and the Netherlands rejected the E.U.'s Constitutional Treaty, the European integration process as a whole entered a serious crisis. Apart from the fragile constitution's fate, the problem for the E.U. is that public opinion in the core countries is now disillusioned with the process itself.

The Polish right wing coalition set to rule in Warsaw will not help to revitalize the integrationist effort toward a strong political union: the PiS party explicitly warned against an immediate switch to the euro, and will probably win the battle against its allied party P.O. -- which would like to ditch the Polish national currency in favor of Brussels' single currency.

Furthermore, both the PiS and the P.O. have announced that they won't move to help the E.U.'s constitution, but instead will wait and see what Britain will do in this regard. Given the improbability of a short-term British rescue of the E.U. Constitutional Treaty, this will mean even more uncertainty for the constitution's destiny.

The 2004 enlargement was in the end a source of political troubles for the Franco-German combine and its historical allies in Western Europe, though unity remains a diplomatic success in light of Europe's turbulent history. Poland, like the Baltic states, Slovakia, the Czech Republic or the membership candidates Bulgaria and Romania, are afraid of Western European hegemony and clearly opted for a double security guarantee: N.A.T.O. (i.e. the U.S.) and the E.U.'s common security and defense policy.

In addition, Eastern Europe has often chosen to implement pro-market reforms which many advocate be applied to France and Germany. If citizens in France and Germany perceive European integration as a tool to enhance their own social models, voters in Poland and elsewhere in Eastern Europe seem to perceive it as the way toward more free market, U.S.-inspired reforms.

As a consequence, the British view of Europe as a wide free market federation and as the European pillar of a renewed transatlantic alliance has gained new strength to the detriment of neo-Gaullist or social-democratic visions in continental Europe.

Conclusion

The Polish general elections will not overly affect Warsaw's foreign policy, but they will strengthen an already existing pro-American course.

How much a new E.U. member can influence Western countries' policies remains difficult to predict, but when all is said and done, the European political landscape seems fairly fragmented at the moment.

However, the new Polish coalition will have to cope with inner competition, as the Civic Platform will try to gain momentum and to foster decidedly pro-market reforms, whereas the Law and Justice Party will probably seek a more moderate path. If the two parties fail to set a coherent policy, a further rise of radical outsiders such as the nationalistic and populist Self Defense Party could weaken the current rulers and open the way to a difficult phase in Warsaw's post-communist course.
*****
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Confrontation Looms as I.A.E.A. Passes Resolution on Iran

2005-09-30T06:49:00.000-07:00

Report Drafted By:Erich Marquardt

For the past few years, Iran has been testing the resolve of the international community on the issue of its nuclear research program. Iran, a signatory to the Nuclear Non-Proliferation Treaty (N.P.T.), argues that it reserves the right to control the nuclear fuel cycle. Tehran states that control over the cycle is important for Iran's development of nuclear energy. Indeed, according to the N.P.T., a state does reserve the right to control the nuclear fuel cycle, including the process of enrichment. The sticking point is that the process of enriching nuclear fuel is controversial because while enrichment is necessary to create nuclear energy, the enrichment process, if enhanced, can also be used to produce weapons-grade material to create nuclear weapons.

On September 24, the International Atomic Energy Agency (I.A.E.A.) passed a resolution stating that "Iran's many failures and breaches of its obligations [under the N.P.T.] ... constitute noncompliance." The resolution calls for Iran to end the conversion of uranium and to answer more questions about its past nuclear activities. Failure to comply with these demands could result in Iran's nuclear case being brought before the U.N. Security Council, an action that could result in economic and military sanctions being placed on the Persian state.

Background to the Current Crisis

Certain members of the international community, led by the United States, for years have feared that Iran is attempting to develop nuclear weapons under the guise of its nuclear energy program. In the past, Iran has admitted to keeping aspects of its nuclear research program secret from the international community, and there is the possibility that there are still aspects of the program that remain hidden from international inspectors. Since the start of the current crisis, the I.A.E.A. has been trying to ascertain whether Iran's failure to disclose certain parts of its nuclear research program constitutes a violation of the N.P.T.

The United States and its allies want to prevent Iran from acquiring nuclear weapons because such a development would give Iran more power in the Middle East. A country with nuclear weapons has more foreign policy leverage since it becomes more costly to threaten a nuclear power with military action. It would limit the ability of the United States -- or any other power in the region -- to take military action against Iran, since any such action could result in Tehran retaliating with nuclear weapons. [See: "Why States Seek to Acquire Nuclear Weapons"]

If Iran were able to add nuclear weapons to its threat arsenal, it would also be better able to assert itself in the region, possibly to the detriment of regional stability and, therefore, to U.S. and Western interests. Regional instability can create uncertainty over the global supply of energy, a concern that was an important factor in the Bush administration's decision to push Iraq out of Kuwait in 1991, and played a factor in the current Bush administration's decision to remove Saddam Hussein from power in Baghdad.

Furthermore, Israel, which is the major U.S. ally in the Middle East, views a nuclear-armed Iran as a major security threat. Iran is the main sponsor of the Islamic group Hezbollah, an organization that was responsible for bearing the brunt of the resistance against the Israeli invasion and subsequent occupation of Lebanon and is still responsible for occasional attacks against Israeli interests today. Israel worries that if Iran were able to acquire nuclear weapons, it would be able to spread its influence better in the Middle East to the detriment of Israel's security situation. Israel remains the only Middle Eastern state that possesses nuclear weapons, and by losing its monopoly in nuclear arms, it would also lose some of its ability to influence Middle Eastern affairs. [See: "Can Israel Maintain its Nuclear Superiority in the Middle East?"]

The United States has been very clear in its accusations that Iran is attempting to develop nuclear weapons covertly. On September 21, for instance, State Department spokesman Adam Ereli said at a daily briefing that Iran needs to "stop pursuing a nuclear weapons program under the guise of a civilian nuclear program."

Nevertheless, the United States does not consider military action against Iran a viable option under the present circumstances. For instance, the ongoing insurgency in Iraq has resulted in the overextension of the U.S. military; many of Iran's nuclear facilities are believed to be hidden, making it difficult to eliminate its nuclear research program through air strikes; and, the skyrocketing price of oil is weakening the economies of oil-dependent countries, and any military move on Iran would add more instability to energy supplies, thus lifting oil prices even higher.

Because of these restraints, the United States has pursued a policy of isolating Iran from the international community with the hopes that this pressure will cause Iran to abandon its drive to control the nuclear fuel cycle. Iran has extensive relations with the international community, and the Bush administration thinks that this is the country's vulnerable point. [See: "Washington's Iran Strategy: Ostracizing Tehran from the International Community"]

This explains why Washington has been careful not to be perceived as the primary party taking a hard line with Iran, as can be seen in U.S. Secretary of State Condoleezza Rice's recent statement about the E.U.-3's role: "We are not trying to be in the lead on this one because it's the E.U. that they [Iran] walked out on. Remember that our strategy has been that the European Union offered to engage them in these talks."

The administration's strategy has been to lobby the E.U.'s three most influential states -- the United Kingdom, France and Germany (the E.U.-3) -- to pursue Washington's hard line with Iran. On September 19, Rice explained this strategy in an interview with Time Magazine. Rice said, "Ultimately, I don't believe the Iranians can afford to be completely isolated from the international community. ... This is a very worldly population that is accustomed to being a part of the international economy, international politics. I don't think Iran wants to get that isolated. And I think it's one reason that they have been so anxious to avoid referral to the Security Council."

Rice's statements do explain why Tehran has attempted to engineer a foreign policy that does not relinquish its right to control the nuclear fuel cycle but also does not permanently damage relations with its major trading partners, such as certain states in the European Union; Iran depends on European states economically and a loss of trading relations with the bloc would have a negative impact on the Iranian economy.

Therefore, in the past, Tehran has retreated from its bold nuclear rhetoric in order to prevent the E.U.-3 from moving closer to Washington's policy line on Iran. For instance, on October 21, 2003, the E.U.-3 convinced Iran to place an extra protocol on its signed copy of the N.P.T.; the protocol allowed for more intrusive inspections by the I.A.E.A. and placed into effect a temporary halt on all uranium enrichment activities inside Iran.

Nevertheless, after this agreement was established, Iranian Foreign Minister Kamal Kharrazi made a statement highlighting Iran's motivations behind complying with the European demands: "We suspended uranium enrichment voluntarily and temporarily. Later, when our relations with the I.A.E.A. return to normal, we will definitely resume enrichment." Early in 2004, Kharrazi continued to pursue this policy line, arguing that "it's our legitimate right to enrich uranium."

Yet, the next crisis occurred in late 2004. During this crisis, once the point came where Iran would lose the support of the E.U.-3, Tehran announced on November 14 that it would fully suspend all uranium enrichment-related activities.

Throughout these crises, the E.U.-3 had been hesitant to take Washington's suggested hard line on Iran, which involved referring it to the U.N. Security Council for a vote on possible sanctions. The E.U.-3 attempted to work with Iran to offer it political and economic incentives in return for its commitment to not control the nuclear fuel cycle. The main goal of this policy was to provide Iran with the necessary enriched nuclear fuel so that it could pursue a nuclear energy program, yet not allow it to control the entire fuel cycle, thus removing the possibility that Tehran could seek to create nuclear weapons at a later stage through its own indigenous uranium enrichment program.

However, Iran was unwilling to accept this deal, calling its right to control the nuclear fuel cycle a matter of national pride and security. Secretary of Iran's Supreme National Security Council Ali Larijani said that "pressuring a country like this is resisting a country's national pride." In response to the E.U.-3's offer of providing Iran with nuclear fuel, Larijani argued, "There is no international guarantee that governments would provide us with nuclear fuel. We cannot lay the fate of this nation in the hands of other governments."

Therefore, the E.U.-3 began to move more toward Washington's current policy on Iran, and on September 24 pushed a resolution through the I.A.E.A. board that could result in Iran being referred to the Security Council.

The September 24 Resolution

In the days before the September 24 resolution, the E.U.-3 hesitated over their proposed draft since Russia and China -- two countries that have veto rights on the U.N. Security Council -- reacted negatively to the draft motion, implying that such a resolution could result in a veto. A veto of this resolution by Russia or China in the Security Council could create a diplomatic row with the two Asian states on one side, and the E.U. and the U.S. on the other; this is a development that most countries involved want to avoid.

Indeed, while the E.U.-3 did decide to approve a resolution that could refer Iran to the Security Council, it was watered down from what the U.S. had initially hoped. Any threat of sanctions was removed from the resolution, although sanctions still would be a possibility if the issue makes it to the Security Council and it votes to sanction Iran for violating the N.P.T. Furthermore, the resolution did not outline a time frame when Iran would be put before the Security Council but instead said that such a referral could occur if Iran does not cease uranium conversion and if it fails to answer additional questions on its nuclear research program.

The resolution also showed how the international community is divided over referring Iran to the Security Council. The resolution passed with 22 votes in favor, one vote against, and twelve abstentions. In the past 20 years, there have only been two instances where the I.A.E.A. board has not passed a resolution by consensus. Both Russia and China abstained from the vote.

After the vote, members of the E.U.-3 stressed that Iran still had ways to avoid being referred to the Security Council. French Foreign Minister Philippe Douste-Blazy said, "This resolution shows the international community's concern about Iran's non-cooperation regarding the non-proliferation rules. At the same time, the text keeps open the possibility of negotiations which we must take advantage of, without delay, in order to put forward proposals which could re-establish trust." The U.K., which usually toes the closest to the U.S., said that, "Iran has an opportunity now to address the clear concerns of the I.A.E.A., and the lack of confidence in Iran's nuclear intentions."

But the statements, and the resolution, did not proceed much further. While the resolution worked to the Bush administration's advantage, it still gives Tehran time to maneuver away from having any punitive measures placed upon it.

Russian and Chinese Resistance

Despite not voting against the I.A.E.A. resolution, Russia and China have reservations about bringing Iran before the Security Council. On September 21 in a speech in San Francisco, RIA Novosti reported that Russian Foreign Minister Sergei Lavrov said, "While Iran is cooperating with the I.A.E.A., while it is not enriching uranium and observing a moratorium, while I.A.E.A. inspectors are working in the country, it would be counter-productive to report this question to the U.N. Security Council." Lavrov continued, "It will lead to an unnecessary politicizing of the situation. Iran is not violating its obligations and its actions do not threaten the non-proliferation regime."

Moscow refuses to state that Iran has violated the N.P.T., saying instead that the country is still abiding by the treaty. Washington argues that because of Iran's decision to keep aspects of its nuclear research program secret, it has undercut the principles of the N.P.T. which act as a violation

In a sign that Russia may be willing to veto any Security Council resolution punishing Iran, the Russian Foreign Ministry released a statement that "it will not contribute to the search for a solution to the Iranian problem by political and diplomatic methods."

The statements made by Lavrov and the Foreign Ministry display Moscow's unwillingness to support tougher action on Iran. Indeed, for Moscow, E.U.-3 and U.S. action against an important trading partner and a country that resists U.S. influence in the Middle East is just another sign of Moscow's weakening international influence. Combined U.S. and E.U. efforts in Moscow's near abroad have led to its loss of influence in Eastern Europe and, at least temporarily, in Central Asia and the Caucasus. Moscow has been struggling to reassert itself after the devastating collapse of the Soviet Union, and so far it has not been very successful.

Russia also is the party responsible for being the primary supporter of Iran's nuclear research program. Moscow is building the US$1 billion nuclear reactor at Bushehr, and has provided Iran with much of its nuclear knowledge. If the Bushehr reactor goes operational, it can be expected that Moscow will assist Tehran in the creation of more nuclear power plants, offering Russia a lucrative economic future in the field of nuclear energy. Moscow also provides Tehran with the bulk of its military equipment -- such as MiG-29 fighter aircraft, Su-24 fighter bombers, T-72 tanks, and Kilo-class attack submarines -- making it a major contributor to Iran's growth as a regional power.

The Chinese, on the other hand, also warned against taking Iran's nuclear issue before the Security Council. Chinese Foreign Minister Li Zhaoxing reportedly told an E.U. grouping, led by British Foreign Secretary Jack Straw, that bringing Iran before the Security Council "could encourage Iran to take extreme measures" and would, therefore, be counter-productive.

China has its motives for preventing a condemning resolution. China, for instance, has seen a dramatic increase in energy demand due to its rapid economic development. In order to find new energy resources, it has looked to countries near its borders that still have reserves to be exploited. Since Iran does not share economic relations with the United States due to U.S. sanctions on the country that stem from the 1979 Islamic Revolution, Beijing has been able to foster new energy ties with the country. About 15 percent of China's imported oil and natural gas comes from Iran, and U.S. attempts to destabilize Iran would pose a threat to China's energy and economic interests.

China, too, is wary of attempts by the U.S. to weaken countries such as Iran, since Beijing fears that Washington will take future actions aimed at containing China's rise as a major power in Asia. For instance, in an example that displays the Bush administration's views on China, on September 21 U.S. Deputy Secretary of State Robert Zoellick argued that China's "actions on Iran's nuclear program will reveal the seriousness of China's commitment to non-proliferation." This statement can be read that China's continued support for Iran on this issue demonstrates its willingness to take actions counter to U.S. interests, explaining the U.S. rationale for containing China.

Furthermore, China and Russia have been improving their bilateral relations and have been cooperating in order to limit the spread of U.S. influence in Central Asia. Both countries are working together to increase the cohesion of the Shanghai Cooperation Organization (S.C.O.), and have caused the S.C.O. to release a statement calling for the withdrawal of the U.S. military from its member states. [See: "The Significance of Sino-Russian Military Exercises"]

The resistance by China and Russia played a role on the E.U.-3's final proposed resolution; while the resolution passed did affect Iran's interests negatively, it did not result in any immediate action on Iran, giving Tehran once again more time to avoid being the victim of any substantial international action against it.

Nevertheless, Russia and China still abstained from voting on the resolution. While the two states were not willing to vote against the resolution, questions remain on whether they would be willing to issue a veto if a future resolution that threatens sanctions comes before the Security Council.

Despite their resistance to U.S. and E.U.-3 efforts on Iran, it cannot be said that Russia and China would welcome Iran becoming a nuclear power; both countries may be interested in placing restraints on Iran's nuclear development. Nevertheless, it appears that an Iran with nuclear weapons is not as much of a concern to Russia and China than is the ability of the United States and the E.U.-3 to refer Iran to the Security Council and to place economic and military sanctions on the country.

How Iran Might Proceed

Before the September 24 vote, Larijani said that it was unfortunate that "countries with economic ties with Iran, particularly in the petroleum area, have so far not defended Iran's rights." This tact taken by Iran was an effort to threaten with economic repercussions those countries that are supporting U.S. policy on Iran. Iran is the second largest oil exporting country in O.P.E.C., and has the ability to cancel billions of dollars in contracts with European energy companies. It also possesses the world's largest gas reserves. Larijani explained this threat, stating, "Some countries with economic interests especially in oil do not show any feelings of responsibility the [Supreme National Security Council] is determined to create a balance and provide the ground for their participation [in energy projects] accordingly."

Billions of dollars in contracts are on the line, with companies such as Royal Dutch Shell, Repsol of Spain and Total of France facing a major loss of business. Iranian President Mahmoud Ahmadinejad was even more succinct on his country's economic threats, telling the Iranian parliament that "economic ties are not irrelevant to political ties" especially with "hostile" countries that "fail to recognize Iran's legitimate rights" under the N.P.T. For instance, China, Russia and India also have major energy contracts out with Iran, and those countries have shown no interest in jeopardizing such contracts due to questions over Iran's controversial nuclear program.

For instance, in early 2005 India and Iran signed off on plans to construct a 1,609-kilometer (1,000 miles) natural gas pipeline from the Iranian port of Assaluyeh to the Indian state of Rajasthan, traversing Pakistan; additionally, in 2004, Iran signed a 30-year, US$70 billion liquefied natural gas deal with China's Sinopec.

That being said, India did vote in favor of the I.A.E.A. resolution due to its hope of acquiring more nuclear technology from the United States. In July 2005, India and the U.S. signed a nuclear deal that granted New Delhi access to civilian nuclear energy cooperation; however, the U.S. Congress has not yet approved the entire deal. New Delhi was concerned that Washington was hinging future nuclear support on India's vote for the resolution condemning Iran. However, because India was not behind drafting the resolution, and has shown little outspoken regard for punishing Iran due to its nuclear program, Tehran views India in a different light as it does the U.S. and the E.U.-3. [See: "The Implications of the U.S.-India Strategic Partnership"]

Therefore, behind these threats, Tehran's hope is that major European energy companies will lobby their governments and ask for a less confrontational foreign policy when it comes to dealing with Tehran. It will be important to note whether Iran proceeds with executing its economic threats now that the E.U.-3 has pushed through a resolution that threatens Iran with referral to the Security Council.

Conclusion

The three-year posturing between Iran and the United States is moving closer toward confrontation. The U.S. has been able to convince the E.U.-3 to put more pressure on Iran to abandon its desire to control the nuclear fuel cycle. However, as expected, both Russia and China have increased their resistance to attempts by the E.U.-3 and the U.S. to place Iran before the Council. Nevertheless, the U.S. and the E.U.-3 have managed to push the I.A.E.A. board to pass a resolution that threatens to refer Iran to the Security Council if it does not pursue a series of measures to explain its nuclear activities.

Before the I.A.E.A. vote, Iran tried to demonstrate to the E.U.-3 that it will not abandon its wish to control the nuclear fuel cycle, even though this could damage economic and political relations with the European bloc. Tehran was betting that resistance by Moscow and Beijing to the joint U.S.-E.U.-3 maneuvers would soften the E.U.-3's line and give Iran the ability to continue its nuclear research program. While a softer resolution was passed, it still damages Iran's interests since the resolution demands that Iran end the conversion of uranium and demands that it answer more questions about its nuclear research program; failure to comply with these demands could result in it being referred to the Security Council.

It is important now for Iran to keep Russia and China on its side. If Iran does eventually get referred to the Security Council, it will need one of those two countries to veto any resolution that calls for sanctions. However, any such veto would create an international crisis and there is little doubt that both Russia and China want to avoid this development. It can be assumed that they will now put pressure on Iran to make its nuclear efforts look innocuous and to prevent a major escalation of rhetoric with the U.S. and the E.U.-3.

The United States, on the other hand, will have to continue to pressure the international community to resist Iran's wish to control the nuclear fuel cycle. With the intervention in Iraq draining U.S. resources, Washington is not in a position to begin a new front across the border in Iran, even if that only involves executing air strikes on Iran's suspected nuclear facilities. With the price of oil seeing record highs, the United States and the E.U.-3 cannot afford to pursue any action that could result in uncertainty over oil supplies since that would push the price of oil even higher, threatening a recession in oil-dependent countries. Indeed, this concern could also affect how willing the U.S. and the E.U.-3 will be eventually to implement sanctions on Iran, since this, too, would create concern in the market.

Additionally, the failure to find weapons of mass destruction in Iraq continues to hinder the United States' credibility on the international scene, and an attack against a country that does not have a proven nuclear weapons program would not be welcomed in the international community and could further erode Washington's ability to pursue an effective, multilateral foreign policy.
*****
URL:http://www.pinr.com/report.php?ac=view_report&report_id=371

Bangkok Struggles to End Separatist Violence in Southern Thailand

2005-09-30T06:21:00.000-07:00

Drafted By: Adam Wolfe

While the world looks to suture the recent Aceh peace agreement onto the violence that is bleeding southern Thailand, the region's Muslim insurgency is eyeing the benefits of globalized terror networks. Bangkok has tried a variety of responses to the separatist violence -- everything from imposing martial law to dropping 100 million origami birds inscribed with peace messages onto the region -- but nothing has curtailed the violence, which has killed some 900 people since January 2004. With every attempted tactic, Bangkok seems to reinforce the differences between the Muslim, Malay-speaking south and the Buddhist, Thai-speaking majority.

Bangkok insists that the insurgency is an internal problem that it can deal with, but the separatist groups have ties to international Islamist militant organizations and the situation is gathering the potential to destabilize the greater region. At this juncture, it appears that the violence will increase -- and possibly destabilize parts of the region -- before Bangkok or the separatists can be convinced to sit across the table from each other in formal peace negotiations.

Background on Southern Thailand

The regions of Pattani, Yala and Narathiwat were part of an independent sultanate, the ancient kingdom of Pattani, until annexed by Thailand (then known as Siam) in 1902. The residents speak Yawi, a Malay dialect, and are Muslims, having adopted Islam in the 13th century. In these ways, the region is very different than the rest of the country, and because of this it has always failed to attract much attention from the central government, helping to further increase the income disparity between the south and the rest of the country.

For decades, southern separatist groups have quarreled with the government. In the seventies and early eighties, Muslim separatists were involved in drug smuggling and other operations with the remnants of Malaysia's communist insurgency based on Thailand's southern border, ostensibly to finance their attacks against the government (though many of the militants have historically been more attracted to banditry than waging war against the government).

The separatist groups also conducted several attacks against public schools, government-run clinics and police stations in the region because they were seen as anti-Islamic tools of the state. In February 2002, Thai security forces killed Saarli Taloh-Meyaw, the leader of the Pattani United Liberation Organization (P.U.L.O.), but maintained that there was no organized, violent separatist movement. Bandits and criminal gangs were blamed for the bloodshed, which in many cases was, and to a large extent still is, the cause.

On January 4, 2004, thirty armed separatists raided an army depot in Narathiwat, stealing over 300 guns and killing four Thai soldiers. Eighteen nearby schools were set on fire at the same time. The next day, two police officers were killed by a bomb they were trying to defuse. Another bomb injured a police officer, and two more were dismantled that day. It became clear soon after the incidents that a new chapter in the conflict between the Muslim separatists and the Thai government had begun. The following weekend, the Thai government imposed martial law on the three southern-most provinces, and for the first time admitted, publicly, that it was battling a Muslim, separatist insurgency.

Since then, the violence on both sides has only increased. There are frequent killings, in addition to attacks on government and Buddhist buildings. Public beheadings of Buddhists (360,000 of the 1.3 million southern residents practice Buddhism) have lead to gun training sessions for the remaining Buddhist population (it's estimated that over 34,000 have fled) being taught in Buddhist temples by Thai military officials. The counter-offensive launched by Bangkok has also been responsible for at least its share of deaths in the region. Most notoriously, in October 2004, 78 people from the small town of Tak Bai died by suffocation while in police custody after being rounded up at a protest that turned violent. On April 28, 2005, Thai security forces killed more than 100 poorly armed militants after separatists launched a series of raids on security posts.

There is evidence that the separatists are using more sophisticated bombs and techniques as they learn from successful attacks. The security forces have apologized for the most egregious violent acts of suppression, but do not appear to be backing away from putting violent repression at the center of the counter-insurgency strategy. The government's latest attempted strategy gives more power to the prime minister to contain the separatist movement, which is likely to create a more powerful backlash.

The Government Response

Thai Prime Minster Thaksin Shinawatra's government is the country's first stable, democratically elected government. He was the first prime minister to serve out his four-year term, and in February his Thai Rak Thai (T.R.T.) party gained an even greater majority. However, in July his public approval rating dipped below 50 percent for the first time. His taking a more direct role in the southern conflict is, at least in part, designed to reverse his sinking popularity.

Thaksin's government has tried a variety of methods to contain the southern separatist threat -- none, so far, have had the intended effect. The police and the army were each given a chance at being in charge of the response, development funds have been promised and threatened with withdrawal, and martial law has been imposed. Of the several initiatives launched this year, one does seem to have some promise of success.

In March 2005, the National Reconciliation Commission (N.R.C.) was created to recommend steps to end the conflict. The N.R.C. has had some success in convincing the government that it needs to focus on the sources from which the separatist movement draws strength, instead of only on military responses. It convinced the government to release a full report on the killings at Tak Bai last October. The commission also has received widespread praise from the West and A.S.E.A.N. countries. Still, the N.R.C. is not scheduled to release its full report until early 2006 and has no direct role in drafting government policy. Thaksin continues to ignore the N.R.C. when it suits his convenience.

On July 17, without judicial approval, the Thai Cabinet issued an emergency decree that grants the prime minister sweeping new powers over the three southern provinces. Thaksin now has the power to order the detention of suspects for seven days without trial, censor the media, tap phones and expel foreigners. The emergency rules also grant immunity to security forces in emergency zones -- a direct dismissal of the N.R.C. recommendations. The net effect of this shift from martial law to rule by emergency decree is more likely to harden the conflict rather than bring about its end. The southern conflict is not strictly military in nature. The decree does nothing to bring the southern, Muslim population into the process of ending the violence, as the N.R.C. has recommended -- the emergency powers only drive another wedge between the south and the rest of the country. Predictably, there has not been a decrease in violence since mid-July.

The Conflict's Significance Outside Thailand

Malaysia's government has been put in an awkward spot by Thailand's southern conflict. There is domestic pressure to support the separatists, who draw their ancestry back to Malaysia, and the northern state of Kelantan has launched a fundraising campaign to assist Thais fleeing the violence.

Still, maintaining diplomatic relations with Thailand is very important for Kuala Lumpur. When 131 Thai Muslims fled across the border in late July, Malaysia was reluctant to repatriate them. This has increased tensions between the two states. Kuala Lumpur's suggestion that the A.S.E.A.N. states should take up the issue of southern Thailand's conflict was sharply dismissed by Bangkok, and Malaysia has said it will not return the refugees until Thailand can provide assurances that their human rights will be protected. This bilateral tension could spread to the greater region, where the balance of power is in a fragile transition. [See: "India's Project Seabird and the Indian Ocean's Balance of Power"]

Thailand's reaction to Malaysia has been typical of Bangkok since the present conflict began in January 2004: every suggestion that an outside moderator be brought in has been met with a harshly worded assurance that Bangkok can resolve the separatist problem on its own. The recent Aceh agreement in Indonesia has been floated as a model for negotiations between the separatists and the government, but Bangkok has dismissed this in addition to all other calls for outside mediation.

However, if the links between Thai separatists and international Islamist militant groups should become operational, pressure on Bangkok to accept outside help in ending the conflict may prove convincing. While the groups like P.U.L.O. have received financial support from abroad, there is no evidence that any foreigners are fighting alongside or training the separatists, and the groups claim that all their weapons have been obtained locally. As the conflict continues, this may change. There is evidence that the separatists are growing in sophistication, and this may eventually lead to globalizing their conflict by tapping into the existing Islamist militant networks.

Conclusion

There is little reason to believe that the conflict in southern Thailand will be resolved in the midterm. The Thai government is still attempting to suppress the separatist movement without outside assistance, even though every attempt thus far has failed. The latest plan of giving the prime minister more direct control over the situation seems destined to join its predecessors in the wastebasket of failed strategies.

The Muslim separatist movement is still a localized one, though it does have some contact with international Islamist militants. Should it choose to exploit these relationships, and globalize the conflict, the Thai government will not be able to defend its policy of sovereignty before peace in the face of the overwhelming diplomatic pressure that will follow. Pressure from the West and A.S.E.A.N. countries to accept outside mediation can also be expected to increase after the N.R.C. releases its final report in early 2006. Until then, more bloodshed can be expected in southern Thailand.
*****
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Economic Brief: Italy's Loss of its Strategic Markets

2005-09-22T03:55:00.000-07:00

Drafted By: Federico Bordonaro

On September 14 and 15, Italy's overall economy experienced two potentially decisive events. After almost seven months of struggle, on September 14 the board of Banca Popolare Italiana (B.P.I.) accepted that the Netherlands' ABN Amro acquire B.P.I.'s 29.5 percent stake in Antonveneta, Italy's ninth-largest bank, for about €2.5 billion (US$3.1 billion).

The following day, Russian gas giant Gazprom publicly expressed interest in buying stakes of Italy's SNAM Rete Gas, a company dedicated to natural gas and crude oil provisioning and distribution, created by Italian oil company ENI. Due to Gazprom's financial strength, and because of an Italian law which obliges ENI to sell its stakes in SNAM (now at 51 percent), reducing its shares to 20 percent by 2007, it is likely that the Russian corporation will succeed.

The two financial moves signal a changing scenario in Italy's economy, and will have crucial economic and geopolitical consequences.

Gazprom's Bid for SNAM

Gazprom is already the main gas supplier to Italy. By acquiring 30 percent of SNAM's stakes, the Russian giant will play a relevant strategic role in Italy's gas distribution market. In May 2005, ENI's former CEO, Vittorio Mincato, already sold Gazprom the rights to directly sell two billion cubic meters of gas to Italian consumers. The Russian group, however, appears determined to take control of the whole gas distribution market in Italy.

It is no secret that Gazprom is directly controlled by Moscow, and, more precisely, by President Vladimir Putin and his powerbrokers. In fact, Putin's direct involvement in the corporation's strategies look evident. Since an anti-monopoly Russian law forbids a group to expand its power at home to a certain extent, Gazprom's enormous financial strength is naturally flowing abroad. Germany and Italy seem to be its two main targets, but the strategies are different, although the unifying characteristic of the two enterprises is the Kremlin's active role in them.

Gazprom will benefit from the Russo-German agreement to build an ambitious Baltic pipeline to convoy Russian gas directly to Germany via the Baltic Sea, thus avoiding Russia's geopolitical rival Poland. The project was strongly wanted by German Chancellor Gerhard Schroeder and Putin as the basis for a Russo-German energy strategic partnership. [See: "The Poland-Belarus Controversy and the Battle for Eastern Europe"]

In the Italian case, Gazprom is instead trying to couple its already preponderant role as supplier with a strategic control of gas distribution, a goal announced by Putin himself after his last bilateral talks with Italian Prime Minister Silvio Berlusconi by stating that new investments in the Italian gas distribution network were both in Gazprom's and in Russia's interests.

As ENI's new CEO, Paolo Scaroni, recently highlighted, the European gas market is experiencing a dramatic increase in consumption. In 2004, the 15 western E.U. states consumed around 454 billion cubic meters of gas, but such a figure is expected to rise to 580 billion by 2015. At the same time, European gas production is declining. Russia, Algeria and Norway are now the three main gas suppliers, and the E.U. will depend upon gas imports for 90 percent of its needs in ten years. Russia will play a key-role in this supranational strategic market, but Italy is set to be the first E.U. country to experience foreign leadership in the distribution market as well.

ABN Amro's Bid on Antonveneta and Italy's Banking System

Perhaps the most revolutionary event in the Italian economy has been ABN Amro's success to takeover B.P.I.'s stakes in Antonveneta -- a move which likely opens the way for the Dutch bank's future control over the whole Italian bank. ABN Amro's takeover will be the first cross-border bank takeover, provided it is not prevented by the Bank of Italy which has been dramatically weakened by its governor's -- Antonio Fazio -- involvement in a major scandal. Fazio has allegedly tried to help B.P.I.'s maneuvers to maintain control over Antonveneta, but his phone conversations with B.P.I.'s chief, Giampiero Fiorani, were intercepted by the financial police in July. The incident has damaged both Fazio's and the Bank of Italy's reputations and the country's image as a safe place to do business. However, for the same reasons, it has accelerated the process of dismantling Rome's banking system's "protectionist" tradition.

It is now to be expected that other big foreign banking groups will try to acquire Italian banks. In July, Spain's Banco Bilbao Vizcaya Argentario tried to takeover Italy's Banca Nazionale del Lavoro. The move failed, but ABN Amro's success could change everything.

Moreover, the single currency itself, whose credibility heavily depends upon the ability of capital to flow freely in the European Union, is said to benefit from such market liberalizations.

The Bottom Line

Italy is losing its long-standing state grip on two strategic economic sectors: energy and banks. The opening up of the once unassailable Italian banking system is being warmly welcomed by liberal factions, for they consider such developments the only possible way to revitalize the allegedly limp and inefficient field.

Similarly, liberal economists and many decision-makers consider the foreign takeover of big national companies such as SNAM both inevitable and beneficial because, they argue, foreign investment will be encouraged, and corporate governance will be strategically and financially more transparent and effective. Ironically, the Italian "liberal" turn in the energy market will benefit actors such as Gazprom, whose link with a great power's geopolitical strategy is self-evident.

Such a new Italian economic context comes -- paradoxically -- at a time of growing neo-protectionism, often unspoken or disguised as "economic patriotism," but it also comes in the age of a renewed, intense competition among big corporations to take control over strategic markets. Not only U.S. and E.U.-based groups, but also Russian companies and probably, very soon, big Chinese competitors will try to conquer their share of influence in the Italian markets. [See: "Economic Brief: Economic Nationalism"]

Look for Italy's economic jewels to quickly become the prize of an economic competition whose stakes won't be merely financial, but also geopolitical. Rome's inability to continue its protection of some of its national strategic sectors is a natural consequence of the E.U.'s rules, and will probably further enhance the Europeanist orientation of its elites.
*****
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In the Heart of Europe: Social Models and Geopolitics

2005-09-16T03:25:00.000-07:00

Drafted By: Federico Bordonaro

In an interview with the French daily Le Monde, E.U. Commission Vice President Guenther Verheugen from Germany said on September 3 that a unique "European social model" -- so often mentioned by observers -- simply does not exist. National legacies in Europe, Verheugen explained, are visible in social and public policies, and different approaches to the welfare state, industrial policy and labor markets are evident throughout the old continent's main states.

As the German elections approach, the social model is increasingly perceived as the largest election issue and the pivotal subject for voters who are used to a generous public spending policy and a set of guarantees in the labor market. Not only in Berlin, where Chancellor Gerhard Schroeder rapidly eroded much of last summer's lag behind the conservative C.D.U./C.S.U. candidate Angela Merkel by attacking her "pro-business" and allegedly neo-Thatcherite program, but in France too, where Prime Minister Dominique de Villepin is engaging in a difficult and ambitious neo-Gaullist industrial and energy policy. [See: "Intelligence Brief: French Energy Policy"]

The future of French and German public and social policy, however, will not be determined by economics alone; geopolitics also plays a major role. Believing that the British model can be implanted in the two continental countries is a doubtful prospect.

The German Election Campaign

After two successive wins, the Social Democratic candidate Gerhard Schroeder appears to have lost the upper hand in favor of the C.D.U.'s new leader Angela Merkel. However, although in July the C.D.U.'s alliance with the F.D.P. liberals seemed likely to win an absolute majority, recent polls show that the preferences of German voters are becoming increasingly balanced. A "Grand Coalition" is no longer unthinkable, and is even probable according to many observers. The C.D.U./C.S.U. plus F.D.P. coalition's share of votes is predicted to rest at 48.5 percent by the latest polls taken on September 13, according to which Schroeder's S.P.D. has risen from 29 percent last July to 33.5 percent now, which, with the Greens at seven percent, gives them a total of 40.5 percent of the national vote.

The eight years of Schroeder's rule have coincided with the poor performance of the German economy; paradoxically, the S.P.D.'s attempts to introduce the liberal reforms that Merkel and her liberal allies promise to accelerate are probably going to hinder the chancellor's chances of re-election. In fact, the S.P.D.'s flirtation with liberal-moderate policies have produced a schism in the German Left, as former S.P.D. leader Oskar Lafontaine has formed a Left alliance, known as W.A.S.G., with the former East German Party of Democratic Socialism (P.D.S.). As a result, this harder and more socialist-oriented Left will be leaving the S.P.D. and its Green allies without a crucial eight to nine percent of the vote, thus opening the way for Merkel's win. [See: "Intelligence Brief: Germany"]

Apart from big business and liberal factions, German voters do not seem to be punishing Schroeder's policy for its alleged lack of economic liberalism. On the contrary, as soon as Schroeder started continuously attacking Merkel's liberal agenda, linking her policy to Anglo-American neo-liberalism, the polls started to show a trend reversal. In fact, German citizens do not appear to be out to penalize Schroeder's allegedly state-centric economic policy. Instead, as in the other Euro-zone countries, they will merely be voting against the government because they view it as incapable of adequately protecting their prosperity and social guarantees against globalization while engineering new society-friendly methods of creating new jobs. Many among the S.P.D.'s disappointed voters will therefore choose the W.A.S.G. and not the C.D.U. Should Merkel come to power, she will have to cope with a complex political power-sharing environment.

Moreover, by abandoning the S.P.D.-Green majority, the Germans would certainly not be striking a blow against Schroeder's Middle East policy and his steadfast refusal to provide German troops to the U.S. in Iraq. Nor would they be negatively sanctioning his strategic partnership with Russia. If Merkel is elected as the new chancellor next week (with a clear majority, or in a Grand Coalition), she will hardly be able to drastically change the orientation of German foreign policy. On the contrary, she will probably opt for a balanced mix, first and foremost by trying to decrease friction with the United States, and to upgrade Germany's role in a revised transatlantic relationship -- making Berlin Washington's chief continental partner.

Secondly, she will probably try to adopt a prudent stance in regards to the E.U.'s further enlargement (with Turkey being the main issue), taking care not to treat newcomers as irrelevant minor powers but also negotiating more realistically to promote German interests. Finally, Merkel will attempt to avoid anti-U.S. and pro-multipolarity rhetoric when attending to Berlin's energy policy projects with Moscow.

France's Right Wing Dilemma: Villepin or Sarkozy?

While Germany is heading toward elections, its main continental ally, France, is witnessing an interesting internal political battle. After the E.U. Constitutional Treaty's rejection in the referendum on May 29, 2005, a new prime minister, de Villepin, was chosen by President Jacques Chirac as Jean-Pierre Raffarin's successor. While Villepin is thus getting the chance to launch new and ambitious policies, another right-of-center politician, Nicolas Sarkozy, is rapidly emerging as the champion of a more pro-American, neo-liberal alternative in the fragmented French political landscape. Sarkozy is today the interior minister and can count on growing popular support for his business-friendly agenda, coupled with a strict domestic security policy. To Sarkozy and his supporters, France is suffering from insufficient liberalization and heavy bureaucracy, and consequently flawed with high unemployment and hindered competitiveness.

Presidential elections in France are scheduled for 2007, and until then, two competing right wing agendas will be in the forefront of the country's attention. One is that of Villepin, whose core is the revitalization of a Gaullist legacy based on economic patriotism, the protection of strategic markets such as the defense and technology sector, and an ambitious energy policy predicated upon a strong research and development effort, with the aim of cutting oil and gas dependency as much as possible and promoting further exploitation of nuclear power, bio-fuels, solar energy and hydroelectricity. The other is Sarkozy's approach, based upon an enhanced reformist program of privatization and the opening up to foreign investors, liberalization and the reduction of state social spending, in line with the policies implemented in the previous decade by British conservative and labor governments in different, yet similar flavors. [See: "Economic Brief: French Protectionism"]

A third component of the French Right also appears to be rapidly on the rise, headed by the sovereignist candidate Philippe de Villiers, whose main political goal is a radically different European policy, aimed at transforming the E.U. into a confederation of reinvigorated nation-states. De Villiers opposes Turkey's admission into the E.U., favors a very restrictive immigration policy, and considers French sovereignty the indispensable foundation for launching a new industrial policy, protecting French agriculture and enhancing France's role in the world.

All these examples in Germany and France -- the E.U.'s core states -- clearly show how difficult it is to speak about a "European social model."

Geopolitical Constraints and the Construction of Europe

Social models are in fact historically shaped, and mutually interact with foreign policy orientations. The latter, however, are inextricably linked with geopolitical constraints. France, Germany and Great Britain are today's most influential Western European powers because of their geographic, demographic, economic and military characteristics. It is wrong to state that Britain is the inventor of economic liberalism in Europe. Liberal democracy and juridical institutions did not conquer England because of inscrutable psychological factors, but instead because of the country's position in Europe.

As an island, Britain could base its security upon a strong navy, without need of centralized efforts to build a strong army of soldier-farmers like in Prussia, or to continuously engage powerful neighboring armies like in France. Therefore, the U.K. could afford a less demanding fiscal policy than that of other great powers such as France, Sweden, Prussia, or Russia. London's propensity for trade is also a consequence of its enviable security context, and so are the incessant British efforts to prevent continental powers from uniting and dominating the entire European geopolitical landscape.

France and Germany also differ profoundly from one another, in terms of both human geography and physical geography. Their access to wealth, power, energy, security, and technology could not follow the same lines as in British history. Their respective, and in certain respects similar, social models have nonetheless been able to foster both democracy (and domestic stability) and security. Therefore, decision-makers like de Villepin maintain that it still remains to be proved that importing the British style of liberalism, as revived by former Prime Minister Margaret Thatcher in the 1980s, is their only chance of boosting their economy. Politicians such as Merkel and Sarkozy will constantly have to face internal resistance to their programs because factions in the French and German elites prefer the reformist agenda to be coupled with "economic patriotism" rather than with a globalization-inspired policy of opening up to foreign capital. [See: "Economic Brief: French Protectionism"]

As some German social democrats such as Franz Muentefering, and some French Gaullists have recently argued, adopting the Anglo-Saxon social model in Germany and France would give powerful economic and financial foreign groups (but especially American) the chance to take over assets of vital importance for the national economy. Economic competitiveness often conceals power struggles among states, and the recent wave of economic nationalism in the U.S. and E.U. proves this once again. [See: "Economic Brief: Textile Quotas"]

Social models, in the end, will be decisive for the geopolitics of Europe's construction. Should the Anglo-Saxon liberal way triumph in Germany and France in the next ten years, the E.U. can be expected to become an enlarged, business-friendly federation that will stick to a neo-transatlantic security agenda. Nevertheless, this course appears fraught with difficulties even if Merkel and Sarkozy win their elections due to the presence of powerful counter-forces deeply rooted in their countries.

If, instead, neo-Gaullist and neo-Social Democratic policies are revived in the two European core states, a strengthening of the nation-state is to be expected, and a "variable geometry" E.U. will probably see the light of day in the next decade. This will presumably go together with a more decidedly pro-multipolarity stance by Paris and Berlin, which will enhance strategic partnerships with Russia, China and other extra-European powers.

Conclusion

Social models and labor policies are not just the result of economic ideologies. They are also the effect of history and geopolitical constraints. In Europe, economic liberalism triumphed in Great Britain for several reasons, not simply due to the persuasion of certain influential individuals.

France and Germany have gradually absorbed some "Anglo-Saxon liberalism" prerogatives due to American power and influence, and thanks to the post-WWII world configuration, at a time when they needed strong relationships with the U.S. and Britain. However, they have also retained some of their respective traditions of strong state intervention in the economy, and often perceive economic globalization as an American strategy to impose U.S. economic power.

Both countries still maintain their most enduring foreign policy goals -- i.e. controlling the heart of Europe and projecting their power globally after having securitized their original geopolitical environment. A balanced multipolar world is what they perceive as in their global interest. In this sense, they oppose Anglo-American hegemony over the West, but their ruling classes are split between those who believe it is necessary to copy the current British social model in order to compete more effectively, and those who maintain that their country can effectively compete only if it can revive its own specific national model.

This internal battle among Paris' and Berlin's decision-makers will be one of Europe's most delicate issues in the next decade and one that will prove once again the power of history and geography.
*****
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The Significance of Sino-Russian Military Exercises

2005-09-15T02:48:00.000-07:00

Drafted By: Erich Marquardt, Yevgeny Bendersky

Between the dates of August 18-25, 2005, Russia and China participated in their first ever bilateral war games, dubbed Peace Mission 2005. The games were symbolic of the growing cooperation between the two powerful states. Since the U.S. invasion of Afghanistan, which led to an increasingly influential role for Washington in Central Asia, Moscow and Beijing have drawn together under the common interest of preventing further U.S. influence in the region.

Their mutual interest formed after a series of "colored revolutions" in the region; these revolutions weakened Russian influence in its near abroad and concerned China that an intensified U.S. role in Central Asia would lead to regional instability in an area that Beijing hopes to exploit for energy resources. For instance, China National Petroleum Corporation is expected to win a bid for the Canadian energy company PetroKazakhstan, which holds oil reserves in Kazakhstan and owns a major refinery there. [See: "Economic Brief: China's Energy Acquisitions"]

The purchase of PetroKazakhstan will go hand-in-hand with China's construction of a 988 kilometer (614 miles) oil pipeline that runs from Atasu, Kazakhstan to Alashankou, China. If the U.S. continues to increase its influence in the region and in the former Soviet states -- such as in Kazakhstan -- it could endanger China's access to energy.

China, too, did not desire a firm U.S. presence on its western borders since it already faces an often antagonistic relationship with the United States in East Asia, where the U.S. supports Taiwan and often engages in discourse on the need to "contain" China.

In addition to Peace Mission 2005, the most public display of this newfound cooperation has been through Moscow's and Beijing's manipulation of the Shanghai Cooperation Organization (S.C.O.). The two countries have transformed the S.C.O. into a more cohesive body, hoping to use it to prevent further U.S. influence in the region and, if possible, to end U.S. influence there altogether.

Peace Mission 2005 and Other Regional Military Exercises

Peace Mission 2005 marked the first bilateral war games between Russia and China, consisting of land, sea and air exercises. While the two countries have engaged in joint war games in the past, they have included states from Central Asia and were never of the scale of Peace Mission 2005. The war games marked an important shift in Sino-Russian relations. While the two countries had been bound together before, such as in the Sino-Soviet Treaty of Friendship alliance, both states always harbored distrust for the other, preventing the formation of a more united bloc.

Peace Mission 2005 involved some of Russia's most advanced military equipment. China, which is bent on upgrading its huge military that still utilizes outdated technology, has been a major recipient of Russian arms sales. During the exercises, Russia was able to showcase its long-range bombers that hold the capability of carrying cruise missiles and nuclear weapons across far distances; long-range bombers are an important missing component of China's military, and the purchase of these aircraft would increase China's military capabilities. As of now, the only regional state that possesses such aircraft is India, giving it an unchallenged edge over China and other regional powers such as Pakistan. [See: "India's Project Seabird and the Indian Ocean's Balance of Power"]

By augmenting its military capabilities, China will be able to better assert itself in the region and provide it with more leverage in achieving its foreign policy goals. For instance, the acquisition of long-range bombers gives it the ability to threaten U.S. carrier fleets in the Pacific.

The war games also satisfy both Russian and Chinese political needs. They give China the ability to show Taiwan and other states in the region that it is increasing relations with Russia, still one of the world's most powerful states when it comes to military capabilities. For Russia, the war games allow it to earn more currency from arms sales, but also give it the ability to show the United States and the former Soviet states in Central Asia that increased Russia-China cooperation will make it more difficult for the U.S. and the West to penetrate the region -- hopefully limiting any more attempts of colored revolutions.

Additionally, it shows the S.C.O. that Russia and China are still relevant power actors in the region, and also sends a message to India, Pakistan, Iran and Mongolia -- states that hold observer status in the S.C.O. -- that they should consider working with the S.C.O. to achieve their strategic regional objectives.

Since Peace Mission 2005 completed successfully, Moscow and Beijing are planning similar exercises in the future, with the goal of including other influential states in the region.

For instance, even as the Peace Mission 2005 exercises were taking place, Russia engaged other former Soviet states in a new round of joint military exercises that dealt with air defense and counter-terrorist operations. On August 25, Russian air defense forces participated in a joint exercise with their Belarusian counterparts. The exercises were a precursor to the large-scale exercises on August 30 that were monitored by the defense ministers from Russia, Belarus, Armenia and Tajikistan. Also in August, Russia and Kazakhstan held joint anti-terrorist exercises in the Caspian Sea region, involving Russia's Federal Security Service forces, as well as Kazakhstan's National Security Committee and Emergency Ministry troops.

Russia's rapid pace of joint exercises hints at increased steps of preparedness of not only the special forces that attempt to conduct anti-terrorist operations, but the regular armed forces as well. The Russian military has been long hindered by deteriorating conditions as a result of the break-up of the Soviet Union in 1991, but it has slowly been beginning its emergence onto the world scene as a more coherent and better prepared force. While its latest series of war games utilizes only a small fraction of actual forces, the frequency of joint exercises with its near abroad counterparts hints at the desire to not only achieve a high level of preparedness, but to showcase to the U.S. that the Russian military is not dormant while the number of American military bases in Central Asia increases.

Nevertheless, the actual extent of Sino-Russian military cooperation has its limits. Russian analysts and mass media commented on the fact that during Peace Mission 2005, Moscow tried very hard to impress its Chinese counterparts with its military hardware. While the quality of many of the military pieces utilized in the exercises is not in doubt, Beijing was interested in seeing newer, more high-tech hardware.

China already possesses state-of-the-art Su-30 fighter bombers and manufactures Su-27 fighter planes. One of the factors that prevents China from establishing its military dominance over Southeast Asia is that it has only been able to acquire a small quantity of these advanced fighters. Given China's drive to modernize its military, it is interested in acquiring more and more advanced weaponry, which Russia is unwilling to provide at the moment since it still wants to retain a technological edge over the Chinese military. Furthermore, Russia also does not want to set off a new arms race in East Asia.

One of the major contracts to emerge from Peace Mission 2005 were Chinese orders for Russian-made Il-76 air transport planes and Il-78 air refueling tankers, as well as an agreement potentially to modernize Chinese Su-27 fighters with more advanced avionics.

Peace Mission 2005 was successful in showcasing Russia's desire to seek parity with the U.S. -- if not directly in terms of military budgets, then as being in a powerful and mutually beneficial cooperative relationship with China. Currently, Russia is drawing up plans for joint Russian-Indian exercises, as well as for possible Sino-Russian-Indian military exercises later this year.

One of the undeniable advantages of the U.S. military is its global presence, allowing it to hold joint exercises with its partners in practically any part of the globe. While Russia lost this ability with the fall of the Soviet Union in 1991, it is regaining this effective geostrategic policy by first engaging its near abroad and then expanding its influence through joint actions with new, emerging powers.

As China and India develop more advanced militaries in the near future, Russia will benefit in terms of actual partnership with these powers, even if the revenues from its arms trade will fluctuate in the next 15 to 20 years due to China and India increasing their domestic military production capabilities. Additionally, if the embargo on European sales of military hardware to China is lifted, Russia will find its major share in military sales greatly eroded by its European counterparts, potentially leading to the loss of billions of dollars of revenue.

Moscow and Beijing Create a More Cohesive S.C.O.

Since the colored revolutions, Russia has used the support of China to increase the cohesiveness of the S.C.O. Through Peace Mission 2005 and potential future war games, China and Russia are demonstrating to regional states the security blanket that they can provide. For instance, Russia has stated that it will double the size of its airbase in Kyrgyzstan, will open up a new intelligence-gathering center in Tajikistan, and conduct joint war games with Uzbekistan in late September.

Additionally, there is talk that China will open up its own air base in Kyrgyzstan. If a Chinese base were to be established there, it would mean that Russia, China and the United States would all have airbases on Kyrgyz soil. How long the U.S. will be able to keep its airbase in the country in the face of growing Chinese and Russian opposition is questionable.

Moscow and Beijing are now attempting to use the S.C.O. to rally the region's states into a more united bloc that will be better able to resist U.S. encroachment. What Moscow and Beijing offer these states in return for their commitment to the principles of the S.C.O. are not only economic and military support, but critical assurances that they will support the region's current governments in maintaining political power in their respective country's. This was most evident in the example of Uzbekistan where Russia offered support to Uzbek President Islam Karimov when he brutally cracked down on protestors in Andijan province.

In a sign of Moscow's and Beijing's success at instilling more cohesion in the S.C.O., the grouping released a report on July 5, 2005, signed by all of its members, containing a clause that rejected attempts at "monopolizing or dominating international affairs" and insisting on "non-interference in the internal affairs of sovereign states." The S.C.O. also jointly called for a timetable for the ending of U.S. military bases in the region.

Shortly after the release of the report, the clause's terms materialized in Uzbekistan. Uzbekistan, which after the September 11 attacks on New York and Washington had improved relations with the United States in order to gain some leverage with Russia, had allowed the U.S. to utilize the Karshi-Khanabad airbase in southeastern Uzbekistan for use in Washington's operations in Afghanistan. Russia, of course, became increasingly nervous over Washington's newfound influence in Uzbekistan, a country that sat in its near abroad.

However, after Karimov suppressed a rebellion in the city of Andijan on May 13, 2005, Washington joined Brussels in calling for an independent investigation of the incident. Moscow and Beijing, on the other hand, backed Karimov's actions, an action that was in line with their security assurances offered to the governments of other S.C.O. states. A little more than a month after the protests, Tashkent restricted U.S. flights out of Karshi-Khanabad. Then, a month after that, on July 29, Tashkent chose to evict the United States from the base altogether. [See: "Intelligence Brief: Uzbekistan-C.I.S."]

The fact that Washington joined Brussels in placing pressure on Tashkent for its internal suppression tactics, and that Russia and China did not, led Karimov to realize that its current regime was safer without having the U.S. involved in his country. Indeed, Uzbekistan and Russia have scheduled joint war games for September 21-23, 2005. The war games act as a message to the United States that Washington's influence is ending in Uzbekistan, and that Moscow -- with the assistance of China -- is planning on securing its influence in other states in the region.

Continued U.S. Resistance

Despite Russia's and China's newfound commitment toward preserving regional stability and limiting the U.S. role in Central Asia, Washington has and will continue to resist these attempts. As long as U.S. operations in Afghanistan continue, Central Asia will remain an important staging ground for U.S. forces.

The eviction of the U.S. from Karshi-Khanabad airbase in Uzbekistan will most likely result in more refined "rules of the game" when it comes to Central Asia and its energy-military importance. As Russia is prepared to assume greater influence in Uzbekistan, the U.S. is already courting Azerbaijan as a potentially crucial strategic partner. Azeri troops are serving in Afghanistan and Iraq, and the U.S. is a primary supporter of the Baku-Tbilisi-Ceyhan oil pipeline that will export oil from the Caspian Sea to the West.

The U.S. presence in Kyrgyzstan also places Washington in the very middle of the S.C.O.'s sphere of influence. While Sino-Russian pressure to end U.S. presence there might increase, Washington will remain firmly rooted in the region as long as it engages in support and state-building in Afghanistan. [See: "Pakistan: a Geopolitical Crux"]

Conclusion

In the face of increased U.S. influence in Central Asia, and the wave of colored revolutions in the region, Russia and China have seen a convergence of interests. Both states have as a foreign policy goal preventing further U.S. encroachment in the region and are attempting to use a more cohesive S.C.O. to reduce Washington's current influence there. Moscow's and Beijing's use of the S.C.O., and their scheduling of regional military exercises, are manifestations of this convergence in interests.

Washington is aware of these developments, and will attempt to retain its influence in Central Asia even though it has lost the use of Uzbekistan as a staging point for its operations in Afghanistan. It will no doubt continue to lobby Kyrgyzstan in the hopes of keeping its military base in that country secure.

Central Asia truly is a strategic battleground between the West and the two blocs of the East, Russia and China. The region's strategic energy reserves and its proximity to Russia's borders make it a hotly contested region in the coming years. It will be essential to watch whether China and Russia continue to improve their bilateral relations and attempt to pull all of the region's states firmly into their sphere of influence.
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Economic Brief: East African Community

2005-09-13T01:44:00.000-07:00

Drafted By:Dr. Michael A. Weinstein

As trade ministers of the newly revived East African Community (E.A.C.) -- made up of Kenya, Tanzania and Uganda -- met in early September to discuss dismantling trade barriers between the member states, their deliberations were shadowed by trade disputes, pitting Kenya and Tanzania against Uganda, and Kenya and Uganda against Tanzania. Analysts in the region saw signs that the same divisions that had caused the original E.A.C. to collapse in 1977 had once again opened up, threatening the success of the fresh experiment.

Attempts at regional economic integration have been almost universally perceived as essential steps to achieving freer world trade. In Africa alone, there are 14 regional blocs, with half the countries on the continent participating in more than one of them. Despite this dense organizational network, intra-regional trade in Africa has not moved beyond around ten percent of total trade, reflecting the dominant north-south configuration, in which less developed "southern" countries export primary products to "northern" industrial powers and import finished products from the north.

The rationale for regional integration in the less developed world is that the formation of economic blocs will foster growth and eventually strengthen weaker economies sufficiently to permit the blocs to bargain more effectively and compete more efficiently with established powers. A consensus is shared by the major industrial powers and the less developed countries that economic globalization cannot succeed unless wide disparities of economic strength are ameliorated.

Regional integration is expected to spur economic development by creating a larger market for goods produced in participating countries, allowing for the operation of comparative advantage in production, and eliminating the need to duplicate major infrastructure projects, such as satellite communications systems. It is also thought that by forming supra-national institutions staffed by technical specialists, transparency will be increased and corruption diminished. If successfully realized, regional integration would make the various blocs strong enough to be less dependent players in the bargains that need to be made to achieve inter-regional and eventually global integration.

Central to the viability of a regional bloc is the reduction of trade restrictions among its members and agreement on a common regime of tariffs imposed on goods from outside the region aimed at protecting infant industries within it. Conflicts among members of regional blocs are most likely to break out over those requirements, as interests disadvantaged by freer trade mobilize within their countries to forestall or slow integration.

Revived on January 1, 2005, after six years of tortuous negotiations, the E.A.C. has the ambitious goal of modeling itself on the European Union and eventually instituting a common currency and forging a political federation. At present, the organization is primarily a customs union in which Kenya is pledged to eliminate trade restrictions on goods exported by the other two members, and Tanzania and Uganda, which have weaker economies, are permitted to impose tariffs on Kenyan goods for the first five years of the agreement, after which the restrictions will fall.

The power configuration of the E.A.C. members reflects the provisions of the customs union, with Kenya the dominant player, Uganda the weakest partner and Tanzania in between. The trade disputes that have arisen so soon after the revitalized E.A.C.'s formation are based on those inequalities of economic power.

Kenya and Tanzania vs. Uganda

As one of the preferences accorded to it by virtue of Uganda being the least developed member of the E.A.C., Kampala was allowed to present a list of primary products that it could import from outside the Community without imposing the common external tariff. Kampala argued that duty-free imports of industrial inputs -- some of them semi-processed like cooking fat, petroleum, soap and materials used in steelmaking -- were essential to protect its less efficient producers temporarily from lower cost competitors in Kenya and Tanzania.

When Kampala presented its list that included 134 types of goods and 117 companies that would import them, Nairobi joined by Dar es Salaam refused to accept it, arguing that many of the companies did not exist at all and that others did not produce goods requiring those inputs. More importantly, Kampala's partners were unwilling to disadvantage their own producers by giving Ugandan competitors a cost advantage. Kenyan Trade and Industry Minister Mukhisa Kituyi stated plainly that "national interests also have to be involved in how we negotiate, how much more concession should be given to Uganda." Kampala responded by saying that if it had to impose duties on the inputs, which had not been taxed before Uganda joined the E.A.C., its manufacturing sector would suffer serious decline.

At the E.A.C. trade ministers' meeting, Kampala's list of companies was cut to 81, rather than the 57 demanded by Nairobi and Dar es Salaam, and there was reported unanimous agreement that a technical team from the E.A.C.'s secretariat would perform a new review of the inputs and enterprises. It is likely that the dispute will be resolved successfully because Kampala stands to benefit on the whole from the preferences that it already has and Nairobi's strategic interest is in maintaining the E.A.C., in which it expects to be the dominant partner.

Kenya and Uganda vs. Tanzania

In contrast to the dispute over Kampala's lists, the tensions between Dar es Salaam and Nairobi, which has Kampala's support, are deeper and more threatening to the Community, in part because similar conflicts brought down the original E.A.C. and the present dispute is not confined to a single issue.

Among the concerns complicating relations between Nairobi and Dar es Salaam are Nairobi's claims that Kenyan exports are being delayed from entering Tanzania, Nairobi's decision to suspend imposition of tariffs on external imports of pharmaceuticals, which has prompted Tanzanian business interests to threaten a legal suit aimed at protecting Tanzania's nascent pharmaceutical industry, Dar es Salaam's refusal to renew the work permit of a Kenyan media executive and its expulsion from Tanzania of two Kenyan editors of a media network, and Nairobi's charge that state-owned Tanzanian media are disseminating "hostile propaganda" against Kenya.

Behind the tensions is a growing sentiment in sectors of Tanzania's political class -- opposed by parts of the country's business community -- that Kenya's economic power threatens Tanzania's long-term interests. In addition, Tanzania's managers are fearful that they will be replaced by Kenyans, as Kenyan businesses penetrate Tanzania's economy. In August, Dar es Salaam delayed the collection of views from Tanzania's public on accelerating E.A.C. integration, pending forthcoming elections. At that time, there was considerable parliamentary resistance to strengthening the Community, based on the claim that Tanzania had been disadvantaged in the original E.A.C. and was likely to suffer the same fate in the new one.

E.A.C. skeptics in Tanzania probably aim to scuttle the Community. They see Kenya benefiting from it because of its more advanced development and Uganda gaining from its special privileges, with Tanzania the loser, despite the prospects opened up by the 35 percent rise in exports the country has experienced since the inception of the revived E.A.C. The presence of organized and formidable opposition to the E.A.C. in Tanzania is the greatest threat to the Community's success.

The Bottom Line

The disputes that have broken out in the E.A.C. so soon after its birth show the obstacles that less developed regions face in their efforts to achieve integration. All of the difficulties of trade relations in general are present in less developed regions, compounded by the added factor of less resilience of sectors disadvantaged by the dislocations that integration necessarily causes.

Look for the E.A.C. to lose momentum in the short run as Tanzania sorts out its domestic conflicts over its orientation to the Community.
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The Pentagon's Bid to Militarize Space

2005-09-12T02:28:00.000-07:00

Drafted By:Giuseppe Anzera

A series of Pentagon initiatives aimed at space militarization and at the creation of new types of armament -- capable of precisely striking small targets in every corner of the world and of neutralizing most of today's anti-aircraft defenses -- will likely result in a new power battlefield in the near future.

While the implementation of space weapons is likely to increase the capability gap between Washington and other powers at first, a broader vision reveals dangers involved in the move that could affect U.S. interests, for it will likely trigger off determined reactions by its competitors. Competitor states could successfully deploy a small number of low cost orbital weapons, thus forcing the U.S. to design an extremely expensive space defense system.

At the moment, a space weaponization policy may generate more troubles than advantages for Washington.

Washington's Turn Toward Space Militarization

The Pentagon's plans to militarize space have definitely emerged. In mid-May 2005, the U.S. Air Force formally asked President George W. Bush to issue a presidential directive that allows Washington to deploy defensive and offensive weapons into orbit. Formally, the new directive is necessary to replace a precedent decree (PDD-NSC-49 -- National Space Policy) issued by the Clinton administration which forbids the indiscriminate militarization of space. While the decree has not yet been issued, speculations over the Pentagon's move already hit the news.

After the 2002 unilateral U.S. withdrawal from the Anti-Ballistic Missile Treaty, worries were raised about Washington's possible start of such a program, for it could transform space into a new battlefield. The U.S. Air Force request, coupled with the April 2005 launch of the XSS-11 orbital micro-satellite, increased the concerns of observers and world powers. XSS-11 is, in fact, specifically designed to disturb other states' military/reconnaissance or communication satellites.

A discontinuance of U.S. traditional policy about the restricted (e.g. peaceful) use of space could engender a new arms race -- which appears economically and technologically challenging and way beyond many states' reach.

Global Strike and Rods from God

On the technological level, the Pentagon's planning is in the advanced stage: some projects -- aimed at space weaponization -- have already been in place for some time. Among the (partially known) Pentagon's new plans, the two most interesting projects are the "Global Strike" program and the "Rods from God" program. Global Strike involves the employment of military space planes capable of carrying about 500 kg (1100 lbs) of high-precision weapons (with a circular error probability less than 3 meters) with the primary use of striking enemy military bases and command and control facilities in any point of the world.

The main strength of military space planes is the ability to reach any spot on the globe within 45 minutes. This is a short period of time that could provide U.S. forces with a formidable quick reaction capability, as opposed to the enemy's subsequent inability to organize any effective defense. Such a weapon's primary target would be the enemy's strategic forces and -- according to U.S. Air Force sources widely quoted in the press -- the Pentagon is inclined to give priority to this project. One of the main reasons, these sources say, is that the Pentagon itself -- after spending more than US$100 billion -- has finally admitted its failure to create an infallible earth-based anti-missile system to protect the American soil from ballistic strikes.

The U.S. Air Force often underscores the space plane's wide operational spectrum. In fact, its utilization encompasses that of a strategic weapon as well as that of its defensive uses of neutralizing nuclear missiles; it would have the ability to target and eliminate militant and terrorist leaders. The space plane could also be employed to suppress long-range air defenses, thanks to its high mobility, hyper-fast deployment and its immunity from the defenses of its opponents. Other uses could be envisaged in the Integrated Air Defense System, as well as surveillance tasks. Moreover, space planes could be easily deployed to support the U.S. Army's rapid reaction force and units of Marines during power projection operations and redeployment phases.

"Rods from God" is the evolution of a 1980s program. Basically, it consists of orbiting platforms stocked with metal tungsten rods around 6.1 meters long (20 feet) and 30 cm (one foot) in diameter that could be satellite-guided to targets anywhere on the earth within minutes, for the rods would move at over 11,000 km/hr (6,835 mph). This weapon exploits kinetic energy to cause an explosion the same magnitude of that of an earth-penetrating nuclear weapon, but with no radioactive fall-out. The system would function due to two satellites, one of which would work as a communications platform, while the other would contain an arsenal of tungsten rods. Each of the satellites would be about seven meters long (23 feet).

However, serious problems would arise if the Pentagon begins the operational phase -- especially from a financial perspective. Some studies maintain that Rods from God could be fully operational in ten years. The targets of the rods would be much more restricted than those of Global Strike. Their main targets remains ballistic missiles stockpiled in hardened sites, or orbital devices and satellite systems deployed by other powers -- according to the counter-space operation doctrine. Rods from God can, however, be employed to strike targets in desert areas -- be they hardened sites or concentrated hostile forces.

Its devastating striking power does not allow such a weapon to be used for other missions, if unsustainable collateral damage is to be avoided.

Other projects -- which often look like a revisited version of former U.S. President Ronald Reagan's Strategic Defense Initiative's (S.D.I.) programs -- could also be undertaken, such as space mirrors satellites redirecting laser beams from Earth against any orbit or surface target and satellites that send out radio waves with a high range in power and breadth.

Problems

The White House will face several problems if it wants to pursue the ambitious project of space militarization consisting of both offensive and defensive weapons.

The first point is the political issue. International reactions to U.S. plans have already appeared: Russian Defense Minister Sergei Ivanov recently evoked an immediate reaction from Moscow, and serious consequences were threatened should an orbital weapon deployment be performed by Washington. Such a reaction could consist of a modified version of the SS-18 intercontinental ballistic missile, capable of putting into orbit a remarkable quantity of space vehicles -- which could even carry military nukes, thus making the U.S. planned intercepting effort much more difficult.

It is easy to imagine that space weaponization -- once in place -- could be employed as well by U.S. rivals at any occasion, as these latter will develop mutual strategic ties just like China and Russia are doing in Central Asia.

The second problem is economic. Orbital weapons -- as the Strategic Defense Initiative showed in the 1980s -- are extremely expensive. It has been estimated that a space defense system against weak ballistic missile strikes could cost between $220 billion and $1 trillion. A laser-based system to be used against ballistic missiles would cost about $100 million for each target.

For instance, the Future Imagery Architecture -- a project aimed at the implementation of new spy satellites which are vital to identify targets for space weapons -- has already reached a cost of US$25 billion. It is a legitimate question, therefore, whether Washington really needs to finance such projects in today's geostrategic context. Moreover, would these tools be cost-effective in relation to their real operational capability? The first question raises doubts and the second one remains, at the moment, without answer. Henceforth, such initiatives resemble more and more Reagan's S.D.I.

The third fundamental problem is of a strategic nature. The implications of space militarization are enormous, and its consequences can't be predicted. It is certain that -- in the short term -- U.S. financial and technological superiority would increase the already prominent gap in military power between Washington and the rest of the world. In addition, some of the new weapons could give the White House new effective tools to fight against symmetrical (states) and asymmetrical (terror networks) threats. However, in the long run, a military colonization of outer space could very well be started by other powers -- which would hardly tolerate Washington's quasi-private use of space.

The Clinton administration decided to take the opposite route and avoided international space militarization, as it considered a new front useless because of the U.S. military's overwhelming dominance on land, sea and air.

Moreover, the orbital deployment of offensive weapons -- even though unequivocally non-nuclear -- can be perilous for various reasons. First of all, the U.S. is currently obligated not to deploy atomic or W.M.D. space weapons, as it signed the 1967 Outer Space Treaty. Even if Rods of God is not a nuclear weapon, its impact power is near the magnitude of a nuke. Hence, it is not certain that the international community will consider it a conventional weapon, and a violation of the treaty could, therefore, be claimed. As a consequence, an indiscriminate race to space weaponization could begin -- involving the orbital deployment of W.M.D. and nuclear weapons. This latter scenario could result in a problem for the United States, a problem that its decision-makers in the 1960s strived to avoid at any cost.

Second, political consequences of a quasi-nuclear weapon should not be overlooked. If Rods of God will be used and other powers will perceive it as the equivalent of a nuclear strike, many states could change their perception of W.M.D. and nuclear weapons standards. A stark decrease in the traditional refrain from using nuclear bombs could then occur, thus changing the current strategy behind nuclear weapons: that of deterrence tools.

Conclusion

The road to space weaponization is hazardous. The current U.S. administration appears confident that it can handle the issue successfully. As usual, when a new category of weapons sees the light, it is not clear whether newcomers will suffer from perpetual disadvantage.

If other powers succeed in implementing low-cost orbital instruments that could endanger Washington's sophisticated space weapons, the U.S. could rapidly find itself in need of financing hyper-expensive programs designed to protect the country -- a situation which could make the Pentagon regret having opened the space front to begin with.
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The Modernization of the Chinese Navy

2005-09-12T01:36:00.000-07:00

Drafted By: Giuseppe Anzera

A number of advanced warships will gradually come into service in the Chinese People's Liberation Army Navy (P.L.A.N.) in the next two years. The bulk of these ships will belong to two new guided missile destroyer classes called 052B and 052C. The 052C will be fitted with an advanced integrated air defense system, supposedly similar to the U.S. Aegis phased-array radar display, with a high capability to engage multiple targets simultaneously.

Evolution of the Chinese Fleet

Chinese shipyards have already completed two 052C class ships, which are expected to be commissioned in 2005. It is probable that P.L.A.N. intends to bring at least six ships of this class into service, deploying them in the three main operative battle groups that form the bulk of Beijing's fleet. This strengthening of forces will constitute a notable improvement in the performance of China's high sea forces. The 052C class warship is equipped with an air defense system based on a sensor apparently similar to the Aegis device and equipped with an HQ9 surface-to-air missile (SAM), considered a long-range vertically launched missile with a 90 km range (56 miles).

The HQ9 will be installed in eight vertical launch system revolver-like stations (six forward, two aft), each with six missiles. Destroyers of this class will also have the capability to conduct long-range surface war missions using two kinds of surface-to-surface missiles (SSMs): the HN3 (a modern cruise missile with a range of 2500 km (1553 miles) capable of delivering a conventional or nuclear warhead) and the YJ12 (a supersonic missile with a range of 200 km (124 miles)). Also, if air defense will be the main duty of 052C class ships, the presence of a variable depth sonar array is expected to give them good anti-submarine warfare performance.

Deployment of this class is proceeding in parallel with the construction and acquisition of a number of new surface and submarine vessels. This emerging situation can suggest some foreign policy scenarios related to Beijing's moves in the next years.

In regards to China's surface fleet (presently consisting of 64 large combatant units: 21 destroyers and 43 frigates), for the next decade Beijing will be committed to the demanding process of replacing obsolete ships, that had for so long reduced the Chinese Navy to a mere coastal fleet, with more modern units. For this reason, P.L.A.N. continues to bring into service units of Russian Sovremenny class destroyers, while pursuing the construction of 052B and 052C class warships, in addition to the construction of a completely new ship, being built in China's Dalian shipyard, that is expected to be very large and loaded with heavy surface armament (probably similar to Russia's Slava class cruisers).

At the moment, the creation of an extensive ship-borne air force by building and deploying aircraft carriers does not seem to have priority in China. Beijing appears more interested in gaining time studying foreign equipment (as the case of the aircraft carrier Varyag, a former Soviet carrier initially acquired from Ukraine, which is badly deteriorated and only 70 percent completed in terms of becoming militarily operational) and then proceeding, in the future and without particular haste, to build its first domestically built aircraft carrier.

For its underwater fleet (presently consisting of 57 units: 51 diesel submarines (SS) and six nuclear powered attack submarines (SSN)), P.L.A.N. is following the same pattern of its surface forces. With significant help from Russia, P.L.A.N. is modernizing the diesel sub fleet as highlighted by the decision to acquire eight other Kilo class boats, following the first four-unit batch purchased during the 1990s; as for Sovremennys, the possibility of having and deploying top units (in their category) will enable the Chinese fleet to achieve a considerable upgrade in both operative effectiveness and technological standards (in particular in the sensor and weapon fields).

P.L.A.N., at the same time, is proceeding with the construction of diesel submarines based on domestic projects (Type 039 and 039A), which has been slowed down by a number of problems discovered in the planning phase. However, in the next few years, this process will give rise to the complete replacement of the large but ineffective diesel submarine force (packed with old Soviet-design vessels) with a modern and efficient diesel fleet. The building of the new SSN Type 93 class is proceeding in the same direction; these vessels, according to P.L.A.N.'s intentions, should allow a significant improvement in Chinese submarine warfare capabilities, especially if the rumors suggesting that the Type 93 class can perform like the Soviet Victor III class or even like the early U.S. Los Angeles class are confirmed.

It is important to note that construction of the new Type 094 nuclear powered ballistic missile class submarines (SSBN) is proceeding very slowly, even if China can now deploy one unit of this kind (Xia-class).

Regional Crisis and the Protection of Sea Lines of Communication

The naval construction plan as a whole indicates that the duties that P.L.A.N. will be called upon to tackle in the next few years will be the protection of sea lines of communication to keep open the "choke points" relevant to China's trade flow, and power projection in areas identified as vital for China's national interests. All these tasks coincide with China's anxiety to acquire and protect the necessary natural resources (especially oil) to sustain the growing energy requirements of its national industrial system. Increased dependence on overseas resources will bring Beijing to require a greater effort by Chinese naval forces to protect the trade flows and show the flag in ports of countries that are considered important trading partners.

Moreover, P.L.A.N. will be required to conduct long-range missions in the open sea to defend exclusive economic zones and to control areas with uncertain sovereignty, as in the case of the Spratley Islands. These isolated islands, situated in the South China Sea, are claimed by China, Malaysia, Indonesia, Vietnam and the Philippines, due principally to the rich oil deposits believed to be located there. The ships commissioned in P.L.A.N. will enable China to conduct missions of this kind, with the aim of deploying a fleet overwhelmingly superior to those of all other Asiatic countries (especially Taiwan) with the exception of the Indian and Japanese navies which Beijing can try, at least, to counterbalance.

The submarine fleet will have the same duties as surface vessels, but is also expected to be assigned the hard task of facing the "traditional" Taiwanese adversary and, supposedly, coping with U.S. battle groups. In fact, it appears that Beijing discarded the possibility of deploying a limited number of aircraft carriers (which would appear excessive in relation to other regional navies) since they would have little hope of prevailing in an engagement with U.S. naval forces. This explains why China's aircraft carrier planning and construction is slowing in pace. Indeed, Beijing now prefers a well-stocked fleet of diesel submarines and nuclear powered submarines to have the difficult role of exerting some deterrence against American ships in case of a crisis.

Following this path, China will rise to a respectable level of underwater power, partially repeating the Soviet strategy during the Cold War. However, unlike the past Soviet submarine fleet (essentially dedicated to attacking N.A.T.O. forces and protecting bastions full of SSBNs), Chinese submarine forces seem to be assigned the role of supporting surface forces -- in their attempts to control sea lines of communication, with the additional mission of trying to exert some form of counter-power against U.S. forces.

In this context, moreover, the Taiwan issue requires careful examination. In fact, the expansion and improvement of the Chinese submarine fleet, especially in diesel submarine numbers, can give Beijing an additional card to play against Taipei under the form of a submarine blockade. Such a blockade is potentially very hard to neutralize and cope with, even for Taiwan's respectable anti-submarine warfare forces; this strategy can exert stronger pressure than diplomatic threats, but is not comparable to a real attempt at invasion, hazardous and hard to carry out -- and also fraught with unforeseeable political and military consequences.

Conclusion

The Chinese fleet's evolution in the coming years suggests that P.L.A.N. will be essentially concerned with protecting sea trade with the aim of assuring an uninterrupted flow of energy resources to satisfy the needs most dependent on overseas resources and to safeguard sea lines of communication. The enlargement and modernization of the Chinese fleet will inevitably alarm the surrounding countries and other regional powers (such as India and Australia) and will oblige other states to renew their surface and submarine forces. However, it appears unlikely that P.L.A.N. can, or will, become a force with global projection (notably far behind the U.S. Navy's capabilities, or those of the Soviet Navy during the 1980s) in the next decade.

The chief missions that P.L.A.N. will be called upon to perform are eminently regional, such as power projection to support claims to areas of dubious sovereignty, but with rich subsoil resources (such as the Spratley Islands), to achieve the same operative capability as the more powerful Asian fleets, and ability to engage such a demanding adversary as the Taiwanese fleet (able to perform at high levels due to continuous acquisition of American equipment). In relation to U.S. Navy battle groups, P.L.A.N. can, at most, aim for the possibility of exerting some form of deterrence (especially through the use of submarine forces), thus refuting all those who, since the beginning of the twenty-first century, have imagined American and Chinese battle groups confronting one another to decide which state will rule over the Pacific Ocean.
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Economic Brief: U.S.-Canada Softwood Lumber Dispute

2005-09-08T04:41:00.000-07:00

Drafted By:Dr. Michael A. Weinstein

The persistence of protectionism in a period of a supposed drive for global free trade is nowhere better illustrated than by the chronic and increasingly bitter dispute between Ottawa and Washington over U.S. restrictions on imports of Canadian softwood lumber. While the conflict has had little visibility in the U.S. outside directly concerned interest groups, it has become a major issue for the broad Canadian public, awakening anti-U.S. attitudes and spurring sentiments of economic nationalism.

As, respectively, the largest producer and consumer of softwood lumber in the world, Canada and the U.S. have a natural symbiotic trading relationship in the product. Over the last ten years, Canada has claimed one-third of the U.S. softwood lumber market, with the exception of the period in 1995 and 1996, when there were no U.S. import restrictions and the share rose to 36 percent. Due to the boom in housing construction in the U.S., exports of Canadian softwood lumber to the U.S. rose from 18,698 million feet in 2000 to 20,950 million feet in 2004, and are on the way to setting a new record in 2005. Canada receives US$7.5 billion from the trade, accounting for 2.4 percent of its total exports of US$316 billion, of which energy and auto parts have the greatest share.

In Canada, there is a predictable unanimous judgment that there should be no restrictions on trade in lumber since there are no countervailing interests to contest that view. The picture is different in the U.S., where lumber importers, retailers and home builders form a coalition in favor of unrestricted trade, and higher cost U.S. lumber companies fight for continued protection.

The core of the dispute is the U.S. lumber companies' argument -- rejected by the Canadians -- that Canada unfairly subsidizes its lumber industry. In the U.S., most harvesting of timber is done on privately owned land, whereas, in Canada, 90 percent of the cutting takes place on public land. U.S. companies contend that the Canadian provinces subsidize their producers by charging artificially low cutting fees. With the support of members of the U.S. Congress from lumber producing states, particularly in the southeast and northwest, the Bush administration responded to industry pressure in 2002 by imposing tariffs averaging 20 percent on Canadian lumber. Ottawa retaliated by filing two dozen suits in trade arbitration bodies seeking judgments that the tariffs should be repealed and their accumulated proceeds be returned to Canadian companies.

Canada's Institutional Strategy Ends in Stalemate

Ottawa's shotgun strategy of pressing its case for relief through the maze of regional and international trade bodies that has proliferated since the fall of the Soviet Union took it into the dispute resolution mechanisms of the North American Free Trade Agreement (N.A.F.T.A.), the World Trade Organization (W.T.O.), the U.S. International Trade Commission (U.S.I.T.C.) and now the U.S. Court of International Trade (U.S.C.I.T.). For the most part, Ottawa won its legal battles, as Washington appealed rulings adverse to it along the line and refused to budge.

Ottawa suffered a blow in 2004 when the U.S.I.T.C., ruling in favor of Washington, accepted the U.S. lumber producers' argument that Canadian subsidies to its softwood lumber industry threatened to damage the U.S. industry. Continuing its fight, Ottawa won a major victory on August 10, 2005 when a N.A.F.T.A. panel -- the final court of appeal -- ruled that Canadian practices did not threaten U.S. lumber producers. To the consternation of Ottawa, Washington simply ignored the N.A.F.T.A. judgment and continued to fight its case in the W.T.O. Ottawa then broke off ongoing negotiations with Washington on the dispute.

The W.T.O. had previously ruled against Washington on the softwood lumber tariffs, saying that the U.S.I.T.C. decision "could not have been reached by an objective and unbiased investigating authority." On August 29, after receiving new evidence from Washington, the W.T.O. issued a preliminary ruling reversing its earlier judgment. Surprised and stalemated by the new W.T.O. ruling, Ottawa expressed its determination to appeal and to take its case to the U.S.C.I.T., which functions to settle discrepancies between N.A.F.T.A. and W.T.O. rulings. Meanwhile, Washington called for Ottawa to return to bilateral negotiations, which Washington hopes would lead to a stable agreement on managed trade such as the kind of quota system that had been tried in the past.

Canada Assesses its Options

The wrangling between Ottawa and Washington over softwood lumber would just be a normal localized trade dispute were it not for the imbalance between the great salience that it has in Canadian politics and its negligible importance in U.S. politics.

Traditionally dependent on the export of primary products for their prosperity, Canadians place trade issues high on their political agenda and their politicians respond to that priority. Washington's refusal to honor the N.A.F.T.A. panel's decision fueled growing anti-U.S. sentiment in the Canadian public and its political class, with parties across the ideological spectrum backing a hard line from Ottawa. The W.T.O. ruling provoked shock, opened up divisions among interests and precipitated a rethinking of the institutional strategy and a consideration of a wide range of other options.

Despairing of a victory for Ottawa, lumber interests in the Canadian west, which represent efficient producers, began to move toward the fallback position of managed trade, whereas less efficient eastern producers continued to call for a hard line. Ottawa promised to pursue its institutional strategy to the bitter end, as nationalist sentiment rose and calls came for retaliatory tariffs on California wine and Florida orange juice, the imposition of a tax on energy exports to the U.S. that would recoup the US$5 billion paid on the softwood tariffs, and outright Canadian withdrawal from N.A.F.T.A.

The Bottom Line

With 86 percent of Canada's total exports going to the U.S., the reconsideration of managed trade by the country's western lumber interests and the expected spike in demand for softwood lumber from rebuilding projects on the U.S. Gulf Coast in the wake of hurricane Katrina, it is unlikely at present that Ottawa will pursue its more drastic options and risk a trade war.

Yet Washington, which would like to contain and isolate the dispute, is now faced with the possibility that nationalist sentiment in Canada will provide an environment for escalating the dispute beyond its directly interested parties. Although they are currently superficial, the softwood lumber dispute has revealed cracks in Washington's primary trading bloc that will deepen unless they are patched.
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Economic Brief: Economic Nationalism

2005-09-08T04:26:00.000-07:00

Drafted By:Dr. Michael A. Weinstein

Since the emergence of globalized capitalist markets in the nineteenth century, the trade policies of states have cycled between support of liberalization and adherence to economic nationalism, depending on whether significant domestic interests are winning or losing in international competition.

The majority of economists who argue that free trade increases wealth in the long run and on the whole through the operation of comparative advantage also admit that in the short run some industries and regions are disadvantaged -- often severely -- by shifts in production to more efficient and innovative enterprises. The inevitability of winners and losers in trade competition opens the way for the latter to seek state protection and subsidies, either to allow them to mature into effective competitors or simply to survive.

Attempts to use the state to protect economic interests are normal, and success or failure is mainly dependent on the domestic balance of power, which in large advanced economies is determined by continual face-offs between winning and losing industries and sectors. More general shifts between liberalization and protectionism call into play public opinion, which can deepen and increase the scope of incipient tendencies.

Long the major supporter of trade liberalization in world forums, the United States has recently had to adjust to growing economic nationalism in the U.S. that is likely to result in a slowing and perhaps a reversal of the thrust toward liberalized global markets.

During the week of August 1, Washington found itself on the nationalist side of the trade spectrum when China National Offshore Oil Corporation (C.N.O.O.C.) withdrew its bid for U.S. oil company Unocal, citing "unprecedented political opposition," and Tokyo, acting within the guidelines of a World Trade Organization (W.T.O.) decision against Washington on steel tariffs, moved to impose punitive tariffs on some goods produced in the U.S. Although the Bush administration did not come down on the side of U.S. Congressional opponents of the C.N.O.O.C. bid and proponents of protecting the U.S. steel industry, it did nothing to resist the drift toward nationalism. [See: "Intelligence Brief: Unocal"]

C.N.O.O.C. Withdraws

C.N.O.O.C.'s bid to take over Unocal collapsed after both houses of the Republican-controlled Congress agreed to propose a bill that would require the departments of defense, energy and homeland security to investigate the bid before it was vetted through normal administrative procedures. The Congressional pressure, which promised to delay a successful C.N.O.O.C. takeover, was the result of a full-scale lobbying campaign by Unocal's other suitor -- Chevron -- that gained the support of security hawks as well as legislators in Chevron's constituencies, and spread to lawmakers playing to sentiments of economic nationalism.

The success of Chevron's strategy of throwing the viability of C.N.O.O.C.'s bid into question prompted Institutional Shareholder Services, a proxy advisory service, to announce on August 1 that Chevron's lower bid was "not unreasonable" in light of Congressional pressure which "opens the door for adverse developments that could place a C.N.O.O.C. bid in jeopardy." C.N.O.O.C. withdrew its offer the next day, clearing the way for Chevron's takeover.

The two most significant factors in C.N.O.O.C.'s failure were the intensity of Congressional opposition to its bid and the silence of the Bush administration throughout the fray. With powerful U.S. business interests on both sides of the issue, it is likely that the Congressional tilt to economic nationalism and the administration's acquiescence in it were fueled by the mobilization of popular sentiment against China over U.S. job losses, which made Congressional opposition to C.N.O.O.C.'s bid politically expedient and the administration's acquiescence in it politically prudent.

Tokyo Strikes Back

On August 3, Tokyo announced its imposition of punitive tariffs on a range of U.S. goods, including ball bearings and aircraft components, in retaliation for the failure of Congress to repeal the Byrd Amendment, which diverts the proceeds of U.S. tariffs placed on foreign steel that has been determined to have been dumped on the U.S. market directly to domestic U.S. steel producers.

Tokyo had argued successfully before the W.T.O. that the Byrd Amendment violated international trade agreements because it not only penalized Japanese producers, but also rewarded their U.S. competitors. Since the W.T.O. decision, the Bush administration has sought to have the Byrd Amendment repealed, but Congress has dragged its feet. As in the C.N.O.O.C. affair, powerful U.S. business interests are on both sides of the steel tariffs issue, with U.S. steel producers predictably in favor of keeping the Byrd Amendment in force and steel consuming industries in favor of its repeal.

In the case of the Byrd Amendment, the purely economic balance of power would seem to favor the forces for repeal, since steel consumers are more financially powerful and greater in number and political influence than steel producers. Organized as the Consuming Industries Trade Coalition, the consumer interests have made inroads in Congress, but have not achieved success. Their failure is another indication that sentiments of economic nationalism are providing added energy to protectionist interests, giving them victories on issues in which they would have lost or at least have had to compromise in climates of opinion more favorable to trade liberalization.

The Bottom Line

Signs of growing economic nationalism in the U.S. -- where mounting, though still inchoate, popular resistance to liberalization of global markets finds resonance in Congress -- do not portend a radical shift to protectionism, but a normalization of trade policy, in which internationalist and nationalist interests compete for influence in the state.

As rising economic powers throughout the world become more competitive, the U.S. is bound to lose comparative advantage in many industries, setting off moves for protection that will be opposed by industries that gain or maintain advantage.

Look for Washington to lose its role as leader in the drive for open markets and to become a player in a complex international system of markets that remain global but are hedged by restrictions and do not move in the direction of neo-liberal models of "free trade."

The greatest threat to normal bargaining that would set off a decisive tendency toward protectionism would be the mobilization of popular nationalist sentiment that political classes are unable to contain.
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Economic Brief: Textile Quotas

2005-09-08T04:19:00.000-07:00

Drafted By: Erich Marquardt,Dr. Michael A. Weinstein

On January 1, 2005, international quotas on the exports of developing countries ended. The termination of the quotas, which had been in place for 40 years and was long-awaited by retailers, gave China the opportunity to greatly increase its exports of textiles to the United States, the European Union, and other countries. Indeed, in the first six months of 2005, U.S. imports on Chinese-made clothing increased 97 percent from the previous year, totaling US$7.4 billion. The E.U., too, witnessed a sharp increase in Chinese textile imports. For instance, the E.U.'s trade deficit with China in 2004 was €78.9 billion; in the first six months of 2005, that number already stood at €46.3 billion.

The imports, which are in response to a strong demand for Chinese-made apparel by U.S. and European retailers, have triggered protectionist measures in the United States and the European Union, as the two developed powers react to complaints by their domestic textile producers and labor unions who are unable to handle the increased competition from China.

The Effects of China's Textile Imports

The increase in Chinese textile imports has a negative effect on U.S. and European textile producers. These producers cannot compete with the production capability of China due to that country's low employee wages and weak labor laws. The termination of the quotas has hurt their businesses since retailers increasingly turn to China for cheaper products, thus increasing their potential for profit.

U.S. and European labor unions are also against the termination of the quotas since textile workers in these developed countries are losing their jobs to the Chinese. The lack of labor regulations and the low wages in China make it impossible for U.S. and European textile workers to produce the same quantity at such reduced rates. For instance, U.S. textile companies and clothing manufacturers have argued that due to the termination of the quotas, 19 U.S. textile factories have closed down, and some 26,000 American workers have already lost their jobs.

On the other hand, American and European retailers argue that the quotas were responsible for higher consumer prices. The retail industry looked forward to the end of the quotas at the beginning of 2005 since it would give them the opportunity to purchase cheaper goods. However, the implementation of new quotas, or "safeguards," has put them in the same boat as before. Indeed, in Europe, the situation has become desperate since millions of dollars of Chinese apparel is being held up on the E.U.'s borders.

Washington Places Safeguards on China's Textile Imports

In May, the United States responded to the increase in imports by placing "safeguards" on imports where domestic industries were threatened. It announced that it was investigating some 20 Chinese products to decide whether import restrictions should be instituted.

Then, on September 1, after the initial failure of three-day bilateral trade talks with China in Beijing, the Bush administration announced that it would reinstitute quotas on two categories of Chinese clothing and textile imports: fabric made with synthetic filament threads (such as spandex), in addition to bras and other body-supporting undergarments.

The meeting ended in disagreement, as the U.S. and China could not agree on new import rules. U.S. Commerce Deputy Assistant Secretary Jim Leonard responded to the implementation of the new quotas, saying, "Today's announcement demonstrates this administration's commitment to leveling the playing field for U.S. industries by enforcing our trade agreements." The U.S. then threatened that while it would delay further safeguards until October 1, at that date it would also place safeguards on four other textile products: sweaters, dressing gowns, knit fabric, and wool pants unless agreement is reached with the Chinese.

These actions are also premised on U.S. concern over the 2004 gigantic US$162 billion trade deficit with China. This year the deficit with China is 32 percent above the 2004 level.

While the U.S. has historically been the prime promoter of free trade and the ending of international trade quotas, the magnitude of Chinese textile imports brought such domestic pressure on the administration that it responded with protectionist measures.

Brussels Blocks China's Textile Imports

The E.U. had placed its own quota limits on Chinese textile imports in June 2005. The E.U. instituted the limits for the same protectionist reasons that the U.S. did. The quotas limited Chinese textile imports to an 8-12.5 percent growth rate per year. France, Italy and Spain were especially forthright about the quotas since they all have large domestic textile industries. In addition, France has been steadily instituting more and more protectionist measures, also seen through its shielding of strategic industries from outside buyers. And Italy wants to protect its domestic manufacturers, such as Marzotto SpA.

Once the limits were announced, European retailers excessively ordered Chinese-made apparel in an effort to fill their shelves before the quota limit was met. However, the limit was reached so quickly that it resulted in much of the retail orders getting stopped on Europe's borders by E.U. trade officials.

Now, tens of millions of Chinese-made garments are sitting on Europe's borders. Retailers, concerned that the hold-up will leave their shelves empty and cause them to lose business, reacted strongly, putting pressure on the E.U. to rethink the quota restrictions.

It created such a controversy that E.U. Trade Commissioner Peter Mandelson announced that the E.U. was preparing to unblock some 75 million garments from the borders. Beijing's official state newspaper, the China Daily, commented on the decision on August 31, saying, "This trade fiasco demonstrates that protective measures, at best, are zero-sum games for those who resort to them."

In the first few days in September, the E.U. struggled to find a compromise solution where producers and retailers could be placated. Mandelson argued, "Every day [that the products] are held costs money for European businesses and member states. It is unfair to penalize importers in this way." Mandelson also said, "I urge member states to move with utmost rapidity to approve the Commission regulation and get the goods released."

On September 5, Brussels and Beijing found a solution to the dispute. The E.U. announced that it will overlook half of the blocked imports, while the other half will go toward the 2006 quotas. If the 25-member E.U. body approves the agreement, then the some 75 million Chinese-made garments will pass through the E.U.'s borders and make their way to retailers and consumers.

The Bottom Line

The imposition of import restrictions on Chinese textiles by Washington and Brussels is one of many recent instances of a growing tendency toward protectionism in wealthier countries that find their domestic industries threatened by lower cost producers in rising economic powers. Interest groups in the countries with advanced economies that are disadvantaged by competition can be expected to continue to mobilize as they suffer further losses. As they defend their sectoral interests, they will attempt to fan sentiments of economic nationalism within the general public.

As wealthier countries move to protect their industries from outside competition, it can damage the economic growth rates of developing states. For instance, the U.S. and E.U. textile restraints placed on Chinese imports has had ramifications for the Chinese workforce since demand for Chinese-made products has gone down, thus putting people out of work and potentially putting factories out of business, hampering the country's growth toward becoming a strong economic power.

The drive for global free trade, once championed by states with advanced economies, appears to be encountering an obstacle, if not a limit. Look for increasing difficulty in promoting relaxed trade restrictions -- particularly in the W.T.O. -- as governments are pressured to protect domestic interests. If trade disputes begin to spill over into broader relations among states, globalized trade itself could suffer declines and trade disputes could exacerbate and cause political and even military conflicts.
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Intelligence Brief: Moldova

2005-09-08T01:52:00.000-07:00

Drafted By:Federico Bordonaro

The Moldovan separatist state of Trans-Dniester is increasingly at the center of a major geopolitical battle between Russia and the E.U.-U.S. combine in Eastern Europe. Situated between Ukraine and Moldova, Trans-Dniester proclaimed its independence in 1992. Although formally dependent upon Chisinau, the region is actually controlled by Moscow, which maintains its 14th Division (over 1,400 troops) in the Trans-Dniestrian territory. Washington would like an "orange revolution" -- of the kind that recently occurred in Georgia and Ukraine -- to take place in the separatist state to expunge Russian influence there.

A Russia-Moldova quarrel is, therefore, inevitable. Behind the dispute, the battle for Eastern Europe is once again emerging.

Moldovan Geopolitical Issues

Moldova, an independent state since the collapse of the U.S.S.R., is actually the old czarist region of Bessarabia without its southern part -- Budjak, which is now part of Ukraine -- which once gave it access to the Black Sea. Trans-Dniester (the region east of the Dniester River) has a population of over 700,000, the majority of whom are of Ukrainian and Russian descent (whereas ethnic Moldovans speak a Romanian dialect). This separatist state raises permanent concerns among European diplomats both because of its destabilizing effects on Moldova and because it functions as a smuggling hub in Southeastern Europe.

After the fall of the Soviet Union, Chisinau and Kiev signed a treaty to regulate their disputes. Ukraine would renounce its claims to Trans-Dniester and Chisinau to Budjak. After the recent pro-Western turn in Ukraine, however, the Trans-Dniestrian state increased in geopolitical importance and in its potential destabilizing effect for Russian influence in Southeastern Europe.

Since its independence, Moldova has tried to follow the example of Romania by progressively matching the requested criteria for admission into the European Union. The European Union is perceived by Chisinau as the best guarantee against both Moscow's and Bucharest's hegemonic drives on its soil. Moreover, E.U. membership for the former Warsaw Pact states mean entry into N.A.T.O. Almost all the new elites in Eastern Europe consider that a double security guarantee (N.A.T.O. plus the E.U.) is the best solution for coping with regional threats.

As a consequence, a pro-E.U. Ukraine immediately formed a Western-oriented axis with Moldova to the detriment of Russian interests. Therefore, maintaining a solid grip on Trans-Dniester is Russia's strategy to avoid being expelled from the region.

Moscow's strategy has been to back Trans-Dniestrian President Igor Smirnov's request for national independence, rejecting the regional autonomy solution proposed by Chisinau. Russian decision-makers believe that an independent Trans-Dniester would be a solid Russian rampart against Western penetration.

As Ukraine borders Trans-Dniester, Kiev's new president Viktor Yushchenko and Moldovan President Vladimir Voronin formally asked the E.U. in June 2005 to help the two states collectively monitor the Ukrainian-Trans-Dniestrian frontier. This move infuriated Russian Foreign Minister Sergei Lavrov, who sees it as a maneuver to progressively wipe out Moscow's influence from Trans-Dniester.

On July 22, however, the Moldovan parliament voted a law intended to give Trans-Dniester a higher degree of autonomy. Chisinau hopes to pave the way for reconciliation with the separatist state without losing its sovereignty over it. By pursuing this strategy, it hopes to receive support from the European Union. In fact, although the current majority in Moldova is neo-communist, its policy is overtly pro-Western and aimed at joining the E.U.

Once again, as in the case of Ukraine in December 2004, the E.U. and the U.S. appear to be working together in Eastern Europe against fundamental Russian interests, whereas such cooperation is far more difficult on other issues such as Iraq. Brussels needs to secure the entire corridor from the Baltic Sea to the Black Sea, and cannot afford to inherit a potentially explosive conflict such as the Trans-Dniestrian issue (with Russian implication).

Henceforth, the Russo-Moldovan dispute is to be read also in light of the recent confrontation between a Russo-Belarusian combine against a Polish-inspired enhanced cooperation group formed by Lithuania, Poland, Ukraine and Georgia. These latter states, backed by the U.S., are working together to form a liberal "vertical axis" from the Baltic to the Black Sea in order to facilitate oil and gas transport from Kazakhstan and Caspian sources to Eastern and Northern Europe without passing through Belarus. [See: "The Poland-Belarus Controversy and the Battle for Eastern Europe"]

A pro-Western Moldova, integrated into the E.U. and with a settled Trans-Dniestrian conflict, would be of great help for such a regional project. Moreover, Moldovan stability is also in the interests of other European states such as Italy, whose small and medium-sized business enterprises have established important production and commercial ties with the former Soviet country.

The Bottom Line

After the battle for Ukraine, and the quarrels over Belarus, look for Moldova to be the next epicenter of the U.S.-Russia geopolitical conflict in Eastern Europe. Security and energy issues go hand in hand in the region, and a new setback in a traditionally pro-Moscow region would be disastrous for Russian President Vladimir Putin.

As parliamentary elections in Trans-Dniester approach -- scheduled for December 2005 -- the social split between pro-Moldovan and pro-independence citizens in the region is likely to worsen.

Independent of the election's outcome, expect the European Union to back Moldovan efforts to resolve the Trans-Dniestrian question, and the U.S. to seek to ensure that this process marks the end of Russian predominance in the region.
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The Fourth Round of Six-Party Talks

2005-09-06T03:31:00.000-07:00

Drafted By: Todd M. Walters

On July 26, 2005, the United States, Japan, China, Russia, South Korea, and North Korea convened the fourth round of Six-Party Talks in Beijing after a thirteen-month hiatus. Pyongyang's refusal to continue negotiations after the previous round of talks had left observers increasingly pessimistic about the prospects for reaching an agreement that would provide North Korea with security assurances and economic assistance in exchange for dismantlement of its nuclear programs. Contributing to this pessimism was Pyongyang's continuing nuclear brinksmanship, which included an official declaration that it possessed nuclear weapons in February 2005 and the shut down of its Yongbyon nuclear reactor -- a first step toward reprocessing spent fuel rods for plutonium extraction -- in April.

The Kim Jong-il regime in North Korea has declared that nuclear weapons are vital to ensure its security in light of what it sees as Washington's "hostile policy" towards it (a perception due in part to the Bush administration's characterization of North Korea as an "outpost of tyranny" and as a member of the "axis of evil"). While the United States is concerned with Pyongyang's human rights record and its threatening conventional force posture, among other issues, Washington's most immediate goal is preventing horizontal proliferation of fissile materials, nuclear technologies, and viable nuclear weapons from North Korea to other rogue states and terrorist groups.

Getting Pyongyang Back to the Table

Despite the tension between Washington and Pyongyang that seemed to skyrocket in the first half of 2005, the weeks leading up to the fourth round of talks saw subtle yet important shifts in the Bush administration's otherwise hard-line tactics, and a concurrent abatement in North Korean provocations. From the U.S. side, high-level government officials affirmed that there was no intention to invade North Korea, acknowledged its sovereignty, and committed to bilateral talks within the framework of the six-party process. President George W. Bush even began referring to the North Korean leader as "Mr. Kim," a small concession that was met with a remarkable degree of satisfaction in Pyongyang.

While these developments in U.S.-North Korea relations were crucial for reviving the Six-Party Talks, the respective roles of other parties -- particularly South Korea and China -- should not be overlooked. Seoul urged its northern neighbor to return to the talks during high-level meetings between the two Koreas in late June 2005 in which the parties agreed to seek a "peaceful resolution" to the nuclear crisis. Furthermore, in mid-July, Seoul put forth a specific proposal for economic aid -- including the provision of 2,000 megawatts of electricity and 500,000 tons of rice -- if Pyongyang agreed to dismantle its nuclear weapons programs.

For its part, China's commitment to a Korean peninsula free of nuclear weapons and to the six-party process itself is evident, as U.S. officials have acknowledged that Beijing applied pressure on its North Korean ally to get the Six-Party Talks back on track. In addition to its robust trade relationship with North Korea, Beijing also supplies it with substantial energy and food aid in order to preclude collapse of the reigning regime and the inevitable refugee crisis China would face should that occur. Ironically, while China's role in urging North Korea back to the talks has been encouraged by Washington, its motives for doing so include a desire to bolster the existing regime in Pyongyang to stave off greater U.S. influence on the Korean peninsula, in addition to its interest in being seen as an increasingly powerful political and diplomatic actor in Asia.

Even though Pyongyang's long-delayed return to the negotiating table was welcomed enthusiastically by the other five parties, the sanguinity would prove to be fleeting amid the persistence of competing interests, differing threat perceptions, and conflicting positions that were encountered as the fourth round of Six-Party Talks commenced.

The Return to Beijing

In the days before the talks formally began, several bilateral sessions were held among the parties, a meeting format that would dominate this round where large and unwieldy plenary sessions had been the norm in the past. On July 25, U.S. delegation chief Christopher Hill met with his North Korean counterpart Kim Kye Gwan in the first of what would be as many as nine hours of direct U.S.-North Korea face time. These bilateral sessions represent something of a middle ground between the two countries' previously opposed positions on the appropriate format for the talks.

Pyongyang has been calling for direct bilateral negotiations with Washington since the 1970s, when it sought a formal U.S.-North Korea peace treaty to replace the 1953 armistice that ended the Korean War. A bilateral forum with the United States, in the eyes of the Kim regime, would bolster North Korea's legitimacy on the world stage. The Bush administration has opposed bilateral negotiations with Pyongyang, opting instead to work within a multilateral framework that ensures the participation and assistance -- in both diplomatic and financial terms -- of other major players in Asia with a direct interest in the future of the Korean peninsula.

On July 26, the first official day of negotiations, each country presented its initial position. The U.S. delegation asserted that the proposal set forth during the third round of talks in June 2004 was still on the table. The terms of the offer would have Pyongyang first commit to dismantling all of its nuclear programs, followed by agreement on an implementation plan. There would then be a three-month preparatory period during which time Pyongyang would (1) freeze operations of all nuclear programs and provide a complete list of nuclear activities, (2) allow all existing fissile material to be secured and fuel rods to be monitored, and (3) permit open disclosure and dismantlement of all nuclear weapons, components, and centrifuge parts. These steps would have to include North Korea's declared plutonium programs in addition to its suspected uranium enrichment activities.

In return, the other five parties would (1) grant North Korea a provisional multilateral security assurance, (2) begin an investigation into its energy requirements, and (3) initiate discussions on lifting economic sanctions and removing North Korea from the U.S. List of State Sponsors of Terrorism. Furthermore, the June 2004 proposal stated that "non-U.S. parties would provide heavy fuel oil to [North Korea]" after agreement on the overall approach.

The North Korean delegation has repeatedly declared that this proposal requires them to make too many up-front concessions without comparable actions from the other five parties. While it remains unclear, it is likely that many of Pyongyang's objections to the specific terms of the U.S. offer remain unresolved. However, other fundamental discrepancies surfaced during the latest round of negotiations.

While the Six-Party Talks are focused on North Korea's nuclear programs, there are a host of other issues that persistently occlude agreement between Pyongyang and the other five parties, but also among the five parties themselves. Perhaps the most salient of these is the human rights record of the Kim Jong-il regime. International human rights groups have consistently cited the North Korean government as one of the most repressive and abusive in the world, and the passage of the North Korean Human Rights Act in 2004 demonstrated Washington's concern. But while the Bush administration has made clear that Pyongyang's failure to improve its human rights record would be a show-stopper toward full normalization of relations, it would not impede an agreement on the nuclear question.

Tokyo's preoccupation with the abduction of Japanese citizens by North Korean operatives in the 1970s and 1980s aligns it with Washington on human rights. However, Russia, China, and South Korea are adamantly opposed to introducing human rights in general, and the abduction issue in particular, into the Six-Party Talks. Thus, when Japan raised the abduction issue during the first few days in Beijing, attention was diverted away from North Korea's nuclear programs, and the fault lines that have traditionally pitted the United States and Japan against China, Russia, and South Korea since the beginning of the six-party endeavor were exposed.

These fault lines were further evinced by disagreement over North Korea's demand to maintain a peaceful nuclear energy program. Washington and Tokyo were fervently opposed to allowing Pyongyang to maintain such a program, considering its past record of diverting civilian nuclear technology to weapons and the fact that it withdrew from the Nuclear Non-Proliferation Treaty (N.P.T.) in January 2003. Having a peaceful nuclear program, even with international inspectors on the ground, would make it easier for North Korea to divert that program to build nuclear weapons.

Beijing, Moscow, and Seoul, on the other hand, agreed with Pyongyang that it should be allowed to operate a peaceful nuclear program. This point of contention seems to have been the primary obstacle to reaching agreement on the joint statement of principles proposed by China. Unique to the fourth round of talks, the aim of the joint statement is to establish general principles that all six parties can agree on as a first step toward a final agreement. It was reported that all parties except North Korea had agreed to the fourth and final draft put forth by Beijing.

After failing to reach agreement on the joint statement, the fourth round of Six-Party Talks adjourned for a recess, with plans for the delegations to return home for consultations. The talks were scheduled to resume August 29, but continuing disagreements during the recess have pushed that deadline back.

The Recess

In the weeks since the fourth round of talks adjourned, there have been developments that indicate progress is being made, and others that give cause for concern. On the negative side, Pyongyang has criticized the joint U.S.-South Korea military exercises focusing on Korean peninsula contingencies that began on August 22. While these annual exercises certainly do not strengthen Kim Jong-il's sense of security, his criticisms of them have become perfunctory, and thus do not signify a major setback for the Six-Party Talks.

Pyongyang has also denounced the Bush administration's appointment of Jay Lefkowitz as special envoy on human rights in North Korea. Even though Pyongyang sees this appointment as threatening, the establishment of a distinct government post focused on the issue should send a message to Pyongyang that the Six-Party Talks and the U.S. concern over human rights are ultimately separate matters.

Despite these difficulties, there are signs of a potential future agreement. Numerous meetings have occurred among the parties during the recess, including one between Washington and Seoul where an agreement "in principle" was reached on North Korea's right to peaceful nuclear energy. South Korean officials have stated that they will accept a peaceful nuclear energy program in North Korea at some time in the future, but only after Pyongyang completely dismantles its existing nuclear materials and facilities, rejoins the N.P.T., and accepts inspectors from the International Atomic Energy Agency.

While it remains unclear, there have been hints that Washington may be willing to accept this position when the Six-Party Talks reconvene. Most notably, Christopher Hill has indicated that North Korea's right to peaceful nuclear energy is a "theoretical, downstream" issue that will not be a stumbling block to an agreement. The final sticking point may revolve around the existing nuclear reactor at Yongbyon. North Korea could argue that this facility should be frozen, rather than completely dismantled, if it will have a right to peaceful nuclear energy in the future.

Conclusion

The latest reports suggest that the fourth round of Six-Party Talks will resume in mid-September, roughly three weeks later than originally planned. The disagreements over peaceful nuclear energy and other matters have persisted during the recess, even as the lines of communication were kept open between and among all parties. It remains to be seen whether a joint statement of principles -- let alone a final agreement on nuclear dismantlement -- can be reached in Beijing, but the next series of discussions should reveal clues as to whether North Korea has made a strategic decision to abandon nuclear weapons, or if its return to the talks was a tactic designed to appease the other parties and buy time for further nuclear development.
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Economic Brief: U.S.-Canada Softwood Lumber Dispute

2005-09-06T01:10:00.000-07:00

Drafted By: Dr. Michael A. Weinstein

The persistence of protectionism in a period of a supposed drive for global free trade is nowhere better illustrated than by the chronic and increasingly bitter dispute between Ottawa and Washington over U.S. restrictions on imports of Canadian softwood lumber. While the conflict has had little visibility in the U.S. outside directly concerned interest groups, it has become a major issue for the broad Canadian public, awakening anti-U.S. attitudes and spurring sentiments of economic nationalism.

As, respectively, the largest producer and consumer of softwood lumber in the world, Canada and the U.S. have a natural symbiotic trading relationship in the product. Over the last ten years, Canada has claimed one-third of the U.S. softwood lumber market, with the exception of the period in 1995 and 1996, when there were no U.S. import restrictions and the share rose to 36 percent. Due to the boom in housing construction in the U.S., exports of Canadian softwood lumber to the U.S. rose from 18,698 million feet in 2000 to 20,950 million feet in 2004, and are on the way to setting a new record in 2005. Canada receives US$7.5 billion from the trade, accounting for 2.4 percent of its total exports of US$316 billion, of which energy and auto parts have the greatest share.

In Canada, there is a predictable unanimous judgment that there should be no restrictions on trade in lumber since there are no countervailing interests to contest that view. The picture is different in the U.S., where lumber importers, retailers and home builders form a coalition in favor of unrestricted trade, and higher cost U.S. lumber companies fight for continued protection.

The core of the dispute is the U.S. lumber companies' argument -- rejected by the Canadians -- that Canada unfairly subsidizes its lumber industry. In the U.S., most harvesting of timber is done on privately owned land, whereas, in Canada, 90 percent of the cutting takes place on public land. U.S. companies contend that the Canadian provinces subsidize their producers by charging artificially low cutting fees. With the support of members of the U.S. Congress from lumber producing states, particularly in the southeast and northwest, the Bush administration responded to industry pressure in 2002 by imposing tariffs averaging 20 percent on Canadian lumber. Ottawa retaliated by filing two dozen suits in trade arbitration bodies seeking judgments that the tariffs should be repealed and their accumulated proceeds be returned to Canadian companies.

Canada's Institutional Strategy Ends in Stalemate

Ottawa's shotgun strategy of pressing its case for relief through the maze of regional and international trade bodies that has proliferated since the fall of the Soviet Union took it into the dispute resolution mechanisms of the North American Free Trade Agreement (N.A.F.T.A.), the World Trade Organization (W.T.O.), the U.S. International Trade Commission (U.S.I.T.C.) and now the U.S. Court of International Trade (U.S.C.I.T.). For the most part, Ottawa won its legal battles, as Washington appealed rulings adverse to it along the line and refused to budge.

Ottawa suffered a blow in 2004 when the U.S.I.T.C., ruling in favor of Washington, accepted the U.S. lumber producers' argument that Canadian subsidies to its softwood lumber industry threatened to damage the U.S. industry. Continuing its fight, Ottawa won a major victory on August 10, 2005 when a N.A.F.T.A. panel -- the final court of appeal -- ruled that Canadian practices did not threaten U.S. lumber producers. To the consternation of Ottawa, Washington simply ignored the N.A.F.T.A. judgment and continued to fight its case in the W.T.O. Ottawa then broke off ongoing negotiations with Washington on the dispute.

The W.T.O. had previously ruled against Washington on the softwood lumber tariffs, saying that the U.S.I.T.C. decision "could not have been reached by an objective and unbiased investigating authority." On August 29, after receiving new evidence from Washington, the W.T.O. issued a preliminary ruling reversing its earlier judgment. Surprised and stalemated by the new W.T.O. ruling, Ottawa expressed its determination to appeal and to take its case to the U.S.C.I.T., which functions to settle discrepancies between N.A.F.T.A. and W.T.O. rulings. Meanwhile, Washington called for Ottawa to return to bilateral negotiations, which Washington hopes would lead to a stable agreement on managed trade such as the kind of quota system that had been tried in the past.

Canada Assesses its Options

The wrangling between Ottawa and Washington over softwood lumber would just be a normal localized trade dispute were it not for the imbalance between the great salience that it has in Canadian politics and its negligible importance in U.S. politics.

Traditionally dependent on the export of primary products for their prosperity, Canadians place trade issues high on their political agenda and their politicians respond to that priority. Washington's refusal to honor the N.A.F.T.A. panel's decision fueled growing anti-U.S. sentiment in the Canadian public and its political class, with parties across the ideological spectrum backing a hard line from Ottawa. The W.T.O. ruling provoked shock, opened up divisions among interests and precipitated a rethinking of the institutional strategy and a consideration of a wide range of other options.

Despairing of a victory for Ottawa, lumber interests in the Canadian west, which represent efficient producers, began to move toward the fallback position of managed trade, whereas less efficient eastern producers continued to call for a hard line. Ottawa promised to pursue its institutional strategy to the bitter end, as nationalist sentiment rose and calls came for retaliatory tariffs on California wine and Florida orange juice, the imposition of a tax on energy exports to the U.S. that would recoup the US$5 billion paid on the softwood tariffs, and outright Canadian withdrawal from N.A.F.T.A.

The Bottom Line

With 86 percent of Canada's total exports going to the U.S., the reconsideration of managed trade by the country's western lumber interests and the expected spike in demand for softwood lumber from rebuilding projects on the U.S. Gulf Coast in the wake of hurricane Katrina, it is unlikely at present that Ottawa will pursue its more drastic options and risk a trade war.

Yet Washington, which would like to contain and isolate the dispute, is now faced with the possibility that nationalist sentiment in Canada will provide an environment for escalating the dispute beyond its directly interested parties. Although they are currently superficial, the softwood lumber dispute has revealed cracks in Washington's primary trading bloc that will deepen unless they are patched.
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URL:www.pinr.com

Intelligence Brief: China's Energy Acquisitions

2005-09-03T01:43:00.000-07:00

Drafted By: Erich Marquardt

China's biggest state-owned oil company, China National Petroleum Corporation (C.N.P.C.), said on August 22 that it would pay US$4.18 billion for the acquisition of PetroKazakhstan, a Canadian oil company that also trades in New York. The Canadian company has large oil reserves in Kazakhstan.

If the purchase is approved, it will be China's biggest foreign acquisition yet. Indeed, it is more than twice the price of what China's Lenovo Group paid for IBM's personal computer business.

C.N.P.C. agreed to pay $55 in cash for each share of the company. Furthermore, it agreed to pay $76 million for the creation of a spin-off company led by the current chief executive of PetroKazakhstan, Bernard F. Isautier. If the C.N.P.C. offer is accepted, the deal will go before PetroKazakhstan's shareholders in the first half of October. The deal must then be approved by two-thirds of the company's shareholders. A clause, however, has been worked into the deal that if PetroKazakhstan accepts a higher offer than what C.N.P.C. bid, it will pay a $125 million penalty to C.N.P.C.

The purchase of PetroKazakhstan will go hand-in-hand with China's construction of a 988 kilometer (614 miles) oil pipeline that runs from Atasu, Kazakhstan to Alashankou, China; the oil control earned through the purchase of PetroKazakhstan will partly fill this pipeline and help to satiate China's growing thirst for oil. In the words of PINR analyst Dr. Michael A. Weinstein, "In order to achieve its goal of transforming China into a comprehensive world power, Beijing must have secure access to raw materials in markets that have become increasingly competitive and tight, due in great part to China's growth."

Chinese companies have been scouring the market for foreign acquisitions, seen through the Lenovo Group purchase, the failed China National Offshore Oil Corporation bid for Unocal, the failed Haier America Trading bid for Maytag, the current bid on PetroKazakhstan, in addition to numerous smaller bids.

India and China Square-Off

India's state-owned Oil and Natural Gas Corporation (O.N.G.C.) first bid on PetroKazakhstan, offering $3.9 billion. It is not clear whether O.N.G.C. will try to top the C.N.P.C. bid, but, as of now, this is considered unlikely.

India and China, the world's most populated countries, are in a flurry of activity to purchase energy assets since both of their economies are achieving tremendous growth, boosting their demand for energy. Additionally, as they become more dependent on energy, they become more vulnerable to energy disruption. By acquiring foreign energy assets, India and China will be in a better position to secure their energy stability, especially when buying influence in energy stakes near their borders.

For instance, India imports 70 percent of its oil; China imports about 40 percent. As their demand for energy grows, so will their need for imports. These needs are behind the two countries' drive for energy acquisitions. Indeed, it was behind China's attempt to purchase U.S. energy company Unocal, offering $18.5 billion. Unocal accepted a rival bid by Chevron after the Chinese bid created an uproar in the U.S. Congress and revealed the trend toward economic nationalism inside the U.S. [See: "Intelligence Brief: Economic Nationalism"]

While both India and China are competing over energy acquisitions, there has also been talk of cooperation. While the United States has been courting India to act as a strategic ally in the region -- to the dismay of China -- New Delhi has not yet committed to this role. Throughout the Cold War, the country stood as an important Soviet ally, and is presently wary of U.S. support of its major rival, Pakistan. While it has shared tense relations with China due to the 1962 border war, its relations with Beijing have improved in recent years. Its current foreign policy has been to maintain good relations with China, while reaping any benefits to be had by improving relations with the United States. [See: "Courting New Delhi: Washington and Beijing Compete for Influence"]

For instance, Indian Petroleum Minister Mani Shankar Aiyar recently explained that "China and India [need] to adopt a collaborative approach in bidding…whenever possible." Aiyar explained that energy companies from the two countries will "cooperate" and "compete," depending on the situation. "Hopefully," Aiyar explained, "we will cooperate more than we compete." Near the end of the year, Aiyar will visit China and at this time there are expectations that oil giants from the two countries will draft memorandums of understanding in order to foster relations between them.

The Role of Russia

Both India and China have improved relations with Russia, an oil exporter and a neighbor to both countries. The three huge states have an interest in stabilizing the countries of Central Asia that lie among them. Russia wants to prevent parts of its own territory from breaking away, and to prevent unfriendly regimes taking power in the former Soviet states while India and China want to exploit the region's energy resources and realize that political stability is necessary for this end. Additionally, Beijing has to remain vigilant over its potentially separatist-minded Xinjiang region. [See: "China's Xinjiang Region: An Area of Strategic Interest"]

Furthermore, all three countries -- but especially China and Russia -- recognize the potentially destabilizing effect that the United States has in the region. A number of colored revolutions, often inspired by the West, have upset the power structure in the region. Both China and Russia seem to agree that a change in the status quo is not desired, and that if both countries lean on the former Soviet states, it will produce favorable results. This logic explains why the Shanghai Cooperation Organization (S.C.O.) -- which is led by Russia and China, and makes up the former Soviet states -- released a statement calling for the withdrawal of U.S. troops from the region. India holds observer status in the S.C.O. [See: "The 'Great Game' Heats Up in Central Asia"]

Nevertheless, this cooperation does not mean that China and Russia are forming a united bloc in the region. It is true that their interests overlap when it comes to limiting Washington's influence in Central Asia. Russia also acts as a source of military equipment and energy supplies for China and, on the other side of that, China acts as a wealthy patron of Moscow's wares. However, they are not united on all matters of foreign policy and security arrangements, although this state of affairs could certainly change in the future.

The Bottom Line

China's recent energy acquisitions display the country's concern over its energy assets. Beijing will encourage its companies to continue to acquire foreign energy firms in strategic industries that Beijing wishes to influence and control. This is why Chinese firms have been showing much interest in the energy resources of Central Asia and the Caspian Sea region.

Indeed, PetroChina President Jiang Jiemin -- whose parent company is C.N.P.C. -- announced that due to its 36 percent jump in earnings during the first half of 2005, "overseas acquisition is our major strategy." Therefore, as China continues its economic growth, expect it to continue to encourage its companies to acquire foreign energy assets; furthermore, expect the Chinese government to attempt to stabilize the areas where its vital pipelines cross. Beijing will also attempt to keep good relations with India since China's current overall strategy is to minimize conflict so its growth as a power is not derailed. [See: "China's Geostrategy: Playing a Waiting Game"]
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A Simple Libertarian Argument Against Unrestricted Immigration and Open Borders

2005-09-01T08:24:00.000-07:00

by N. Stephan Kinsella

To own means one has the right to control a given resource. Ownership is distinct from mere possession or actual control; it is the right to control. (On the nature of ownership, see Hans-Hermann Hoppe’s A Theory of Socialism and Capitalism, chs. 1, 2, esp. pp. 5–6, 8–18, discussing notions of scarcity, aggression, property, norms, and justification, and ch. 9, esp. pp. 130–145; also links in this post.)

As H.L.A. Hart argued, the question of what the law is, is different from the question of whether a particular law is moral or just. We can distinguish the way things are from the way things should be. Fact and norm, is and ought, are different things. When we speak of the actual state of affairs, we are talking about actual or legal ownership, and the positive, legal right to control a resource.

What I am getting at is that the state does own many resources, even if (as I and other anarcho-libertarians believe) the state has no natural or moral right to own these things. Nonetheless the state does own some resources – roads, ports, buildings and facilities, military bases, etc. We can allow that a road, for example, is actually, or legally, owned by the state, while also recognizing that the "real" owners are the taxpayers or previous expropriated owners of the land who are entitled to it. This poses no conceptual problem: there is no conflict between the proposition that the taxpayers have a moral or natural right to the land, i.e. they should have the (legal) right to control it; and the assertion that the state has the actual positive or legal right to control the land. The state is the legal owner; but this legal ownership is unjustified, because it amounts to continuing trespass by the state against property "really" owned (normatively or morally) by certain victims of the state (e.g., taxpayers or the resource's previous owners).

The point here is the state does (legally) own resources which are "really" owned by others. As libertarians, we can view this situation as the state holding property on behalf of the real owners, as a sort of uninvited caretaker.

Now my contention is that given the existence of significant public property in a certain country, it is not necessarily unlibertarian for immigration to be restricted by means of usage-rules established on public property by the state-owner.

Consider this case. I live in a small independent city, which has about 10,000 residents. It is very small and dense, and smack-dab in the middle of Houston, which has 4 million people. Our City has a public pool a few blocks from my house. As a resident of the City (and hence a taxpayer) I am entitled to use the pool for a very small fee – say, $2 per visit. Nonresidents – outsiders – may use the pool too, but they pay three times as much: $6 per visit.

Now let's say that as a libertarian I would rather the pool be privatized, or sold and the proceeds returned to those who have been victimized to found or maintain it – the taxpayers, or residents, of this City. This would be a type of restitution for the crime committed against them. Alternatively, if the land for the pool had been expropriated, the owner ought to be paid restitution. Etc. The point is that given a government theft, taking, or trespass, it is better, other things being equal, for the victims to receive restitution; and more restitution is better than a smaller, insufficient amount.

But restitution need not be made only in dollars. It can be made by providing other value or benefits to the victims. One such benefit to me is the ability to use a nice, uncrowded, local pool for a cheap price. It is arguably better, even more libertarian, for the City to discriminate against outsiders. If it did not, the pool would be overrun by outsiders seeking cheap swimming. It would be virtually worthless to me and most of my fellow residents of the City if there were no rules on entry, or no discrimination against outsiders. The rule set on the usage of this property by its caretaker-owner, the City, is a reasonable one – one that the owner of a private pool might adopt, and also one that generates more restitution for the victims of the City's aggression, than a less discriminatory rule would.

This example illustrates the general point that when the state assumes ownership of a resource, then it has to establish some rules as to the resource's usage. This is what it means to own something: to be able to determine how the thing is used. Coming back to immigration, let’s take the case of the federal government as owner-caretaker of an extensive network of public roads and other facilities. If the feds adopted a rule that only citizens and certain invited outsiders are permitted to use these resources, this would in effect radically restrict immigration. Even if private property owners were not prohibited from inviting whomever they wish onto their own property, the guest would have a hard time getting there, or leaving, without using, say, the public roads. So merely prohibiting non-citizens from using public property would be one means of establishing de facto immigration restrictions. It need not literally prohibit private property owners from having illegal immigrants on their property. It need only prevent them from using the roads or ports – which it owns.

It seems to me establishing rules as to how public roads are to be used is not inherently unlibertarian. Even libertarians who say the state has no right to make any rules at all regarding property it possesses – even speed limits etc. – really advocate the following rule: allow anyone to use it, and/or return it to the people. This is a way of using a piece of property. But most libertarians don't seem to have a principled opposition to the very idea of rule-setting itself. Sure, the state should not own a sports stadium or road, but so long as it does, it is not inherently unlibertarian for the state-owner to promulgate and enforce some rules regarding usage of the resource. A road may have speed limits; a stadium or museum may charge an entrance fee; the sheriff's office and the courthouse might have locks on the doors preventing anyone but employees from entering.

Advocates of open-borders/unrestricted immigration are simply those who prefer a certain rule of usage be issued by the feds: that anyone at all may use federal roads, ports, etc. Whereas other citizens have a different preference: they prefer that the feds not allow everyone, but only some people. By having the latter rule, obviously, a version of immigration restriction could be established de facto.

Now I am not so far arguing for the latter rule. I am simply noting that it is not necessarily unlibertarian, as the open-borders types want to maintain. They urge that the illegitimate owner-caretaker of public property use it in this way; others want it used another way. We all agree the rule that really should be adopted is: return the property to private hands. Where we differ is on what second-best rule is more libertarian, or more preferred. Is one second-best rule more clearly libertarian than the other? It seems to me that one useful way to compare alternative rules is to examine the restitution that would be provided by various usage-rules. A rule that generates more restitution for more people is, other things being equal, probably preferable to other rules.

In the case of federal highways, for example, most citizens currently get a benefit from being able to use roads. Is it "worth" the cost of being taxed to maintain the roads, or to pay for compensation fees paid to expropriated or bought-out property owners, or the associated liberty violations? No. But given a rights violation, some restitution is better than none. If the feds announced tomorrow that no rules at all applied to the federal highways, the utility of the roads to most people would fall dramatically, meaning that restitution has decreased. The resource would be wasted. If the feds announced tomorrow that no one could use the roads except the military, then again, this would reduce overall restitution. Some more reasonable rule in between would obviously generate a more respectable amount of restitution than either extreme.

Is there an "optimal" rule that leads to "optimal" restitution? Most certainly not. Private property is the only way to objectively and efficiently allocate capital. But some rules are better than others; and one reasonable rule of thumb used to judge the validity of a given usage rule for a publicly owned resource is to ask whether a private owner of a similar resource might adopt a similar rule; or to compare the amount and types of restitution corresponding to alternative usage-rules. And since it is impossible for the state to adopt a rule that perfectly satisfies all citizens – this is one problem with having public property in the first place – then, other things being equal, a rule that is favored by the overwhelming majority may be viewed as providing "more" overall restitution than one that is favored only by a few people.

Given these considerations, it seems obvious to me that, just as my neighborhood pool discriminates against outsiders, and just as a private pool also does this, so the state owner-caretaker of federal property might also establish rules that discriminate against some immigrants. It is obvious that the overwhelming majority of citizens do not want open borders; which means almost every American taxpayer would prefer that public property not be open to everyone. It is also clear that given federal anti-discrimination laws, providing unlimited access to public roads is tantamount to forced integration, has Hoppe has argued (1, 2). This cost is yet another reason why most Americans would prefer not to have public property open to all with no discrimination or restrictions. Given that values are subjective, using property to cater to the subjective preferences of the vast majority would seem to be one way of achieving a more substantial degree of restitution.

What are my own personal preferences? Well, I would prefer the public property be returned as restitution to the victims and the mafia called the state disbanded. Barring that, so long as they hold property rightfully "owned" by me and others to whom the state owes damages/restitution, I would prefer property they own to be used only for peaceful purposes of the type that would exist in the free market (can any libertarian seriously deny that it's objectively better for the state to build a library or park on public property than an IRS office or chemical weapons factory?). I would prefer rules to be set regarding the usage of these resources so that they are not wasted, and so as to act in a reasonable manner like private owners would, and to maximize restitution. So far, I think my "preferences" are the only libertarian ones possible.

But what actual rules should we prefer? Here I think we start to veer from libertarianism into the realm of personal preference. I would not want the feds to allow any and all comers onto federal property, for the reasons mentioned above – I believe it would reduce the utility of public property, and impose costs (such as forced integration). In any event, even if this were now my own preference, I have to admit 99% of my fellow taxpayers would simply prefer some immigration restrictions, and therefore probably would prefer some kinds of rules of the road that discriminate against outsiders – given this preference, which does not seem per se unlibertarian – it is obvious that far more restitution is made overall if such rules are enacted.

Libertarians who righteously assume that their open borders view is the only principled one can only maintain this stance if they argue that the state should not ever establish any rules on property it asserts ownership of. Once they grant that some rules should be set, then they can not assume that discriminatory rules are automatically unlibertarian; all rules are "discriminatory." And I do not personally believe it can be convincingly argued that there should be no rules on public property, because this would result in significant costs to citizens who are victimized enough. It cannot be a libertarian requirement to add injury to injury; libertarianism is about vindicating and defending the victim, not about victimizing him further.

September 1, 2005

*Stephan Kinsella is an attorney in Houston. His website is www.StephanKinsella.com

URL:http://www.lewrockwell.com/kinsella/kinsella18.html

Hiroshima and Gene Callahan

2005-09-01T08:19:00.000-07:00

by Bob Murphy

Those who are ignorant of history are condemned to repeat it; that’s why I foolishly formed an entangling alliance (officially dubbed the "Anarchist Irish Drinking Club") with one Gene Callahan. Consequently, I have now twice been dragged into a devastating conflict with writers from National Review Online, as I am treaty-bound to defend Gene whenever he starts a war with these folks. (Long-time LRC readers may recall my inexcusable violations of the Geneva Convention during the first encounter with Jonah Goldberg.) The present hostilities concern Gene’s critique of Victor Davis Hanson’s defense of Truman’s decision to use the atomic bomb, a critique to which Hanson has recently responded.

Hanson feels Gene is being paranoid and absurd: "[I] am derided as a lover of war for suggesting that the United States, when it goes to war against fascists, should defeat them, insist on their unconditional surrender, and stay on to promote democratic reconstruction."

Well, yes and no. If by insist Hanson had meant something such as, "continue to shoot Japanese troops in the field," then I don’t think Gene would have devoted an article to Hanson. But no, when Hanson thinks the US was perfectly justified in "insisting" on unconditional surrender, one of the means of persuasion was incinerating tens of thousands of civilians. In Gene’s own words: "So what justified unleashing the A-bomb on the world and melting a large city along with its unfortunate inhabitants?"

Hanson claims that "Callahan ignores the fact that the bomb ended, not perpetuated ‘eternal’ war, abruptly saving millions of casualties on both sides." Again, not really. Gene certainly didn’t ignore this claim – he spent several paragraphs attacking it. The atomic bomb only saved millions of lives if the only other option were an infantry invasion of the mainland; but Gene’s point was that other options should have been considered. And I don’t see how Hanson can claim that the bomb ended "‘eternal’ war." By using that adjective in quotation marks, Hanson is alluding to the peacenik complaint that the war hawks are always urging us into one conflict after another. Well, isn’t that precisely what happened? The atomic bombing of Hiroshima has utterly failed to end war. (In case you’re not following me: Not even Charlie Sheen would argue that Japan is still fighting the US. Yes, that war is over. So those worrying about "eternal war" are talking about the fact that the US is just about always blowing up some foreigners.)

Next Hanson dismisses Gene’s third option of a negotiated peace: "[Callahan] forgets that the allies much earlier had tried a negotiated, rather than unconditional surrender…and got Hitler and another war later as thanks." Yes, that’s definitely one way to look at it. But it is equally valid to point out that Hanson forgets that the Allies who killed hundreds of thousands of admittedly innocent people thought that they were thereby liberating half of Europe from a mass murdering dictator, and got Stalin and a Cold War later as thanks.

While discussing Gene’s alleged inability to make sound moral distinctions, Hanson makes the following odd remark: "In such a world of relativism it makes no difference who starts wars, much less whether they are fought by fascists or democracies." Now here is one point where I truly disagree with Hanson’s moral position (and not just his interpretation of history). In the context of Gene’s critique, no it doesn’t matter whether the deeds are ordered by an elite group or sanctioned by majority opinion. (Let us overlook the fact that in practice, the distinction is hardly crisp: Even dictatorships ultimately rest on public opinion, and FDR was not exactly a mere conduit of the American General Will when it came to foreign policy, nor was he afraid to control subjects who retained nominal ownership of their property – i.e. the mark of a fascist.) Whether you use the Ten Commandments or Just War theory, it is simply unacceptable to kill hundreds of thousands of civilians to elicit particular terms from an enemy. Whether such mass murder is carried out by a democratically elected government doesn’t change this fact.

Finally, Hanson is simply stunned that Gene could equate the methods of Truman with those of bin Laden. Gene had said, "Note that this sort of thinking is exactly how Osama bin Laden justifies striking civilian targets…" Hanson replies, "Ponder that: Dropping a bomb on the headquarters of the Japanese 2nd Army to force a military cabal to surrender during a war they started that was taking 250,000 Asian lives a month is the same as blowing up an office building full of civilians at a time of peace" (italics original).

Yes, Mr. Hanson, they are the same, in the sense that they are both examples of killing noncombatants to achieve a military outcome; that was Gene’s whole point. But Hanson’s incredulity reveals his failure to at least understand what motivates current American enemies. The average Arab in the Middle East certainly would not have said that his country was at peace with the US on September 10, 2001. Our forces covered the globe, and could perform "peacetime" operations (such as sending cruise missiles to blow up a pharmaceutical plant during the Monica Lewinsky hearings) with impunity.

Furthermore, as every Al Qaeda recruit undoubtedly knows, Madeleine Albright didn’t even bother denying charges that the American and British blockade of Iraq (post-Desert Storm) had killed 500,000 Iraqi children. So if it’s okay for the Allies to firebomb Tokyo and Dresden, and nuke Hiroshima and Nagasaki (operations in which plenty of tall commercial buildings – and relatively few military targets – were destroyed), then it’s a bit silly to be so scandalized by the widespread acceptance in the Arab world of such tactics. Does Hanson really not see that an Iraqi could understandably look at over a hundred thousand foreign troops (who had toppled the previous government and bombed the heck out of several major cities) as, well, an occupying power?

In conclusion, I want to say that Victor Davis Hanson certainly knows more military history than I do; I would never dare suggest otherwise. But his response to Gene Callahan demonstrates that he is apparently incapable of even getting inside the head of someone who doesn’t take George Bush at his word. Because of this, I’m not so sure Hanson is a good person to be making recommendations for how to deal with the terrorist threat to Americans.

September 1, 2005

*Bob Murphy has a PhD in economics from New York University, and is the author of Minerva. See his personal website at BobMurphy.net

*http://www.lewrockwell.com/murphy/murphy97.html

Origins of the Species Neo-Con

2005-09-01T08:06:00.000-07:00

by Roger Morris

Tracking the genealogy of the cabal of neo-conservatives who have so disastrously dominated foreign policy under George W. Bush, journalists have followed a political bloodline back to the 1960s, to cold war pamphleteers like Irving Kristol and Norman Podhoretz, and – more respectably if also more tenuously – to the postwar University of Chicago political theorist Leo Strauss.

As so often with the neo-cons, however, there is less there than meets the eye, especially in finding any serious intellectual content in the rise of men like the former Deputy Defense Secretary and now World Bank president Paul Wolfowitz or UN Ambassador-designate John Bolton.

Whatever their other derivation, the genus also traces to more banal, seedier origins, curling back through closed-door politics where so much of U.S. history happens. The neo-con coup d'état after 9/11, the war on Iraq, the fear and loathing as foreign policy – all that and more started as well nearly seventy years ago in the wooded curving inlets and gentle fog of the far Northwest.

Nineteen thirty-eight was the year Henry Martin Jackson, an ambitious 26-year-old Democrat fresh out of the University of Washington Law School, was elected prosecuting attorney for Snohomish County along the shore of Puget Sound north of Seattle. As usual, few outside Washington state noticed the obscure local vote. But it launched a fateful political career, and ultimately led to the U.S. invasion and bloody occupation of Iraq.

Jackson rose rapidly from the courthouse in his hometown Everett. Making a name for himself chasing San Juan Island-skirting bootleggers and lumberjack camp gamblers, he shot on to Congress in 1940. He served five terms in the House, broken by a stint as a World War II GI, and by 1952, had gained the Senate, where "Scoop," as he was called from his days as a paperboy and cub reporter, became a national force.

A middle-of-the-road, pro-labor Democrat on domestic issues and an early champion of environmental causes, Jackson was chairman for nearly two decades of the Interior Committee (later Energy and Natural Resources) and sat on the Government Operations Committee and Joint Committee on Atomic Energy – all major fiefdoms in dispensing federal money and wielding influence in politics and policy. One of Capitol Hill's more vigorous legislators, he was a main author and driving force of the legislation creating the Environmental Protection Agency, major wilderness preservation and other landmark acts. With another local prosecutor raised to Senate power, Seattle's Warren Magnuson, Jackson also saw to it that generous appropriations and contracts were sluiced to his home state. "Scoop" especially would be known scathingly in congressional corridors as the "Senator from Boeing" for being on-call to the increasingly powerful, increasingly corrupt corporate giant.

But it was in national security that Jackson's impact was deepest. The hawks' hawk, he was to the right of many in both parties. Not even the massive retaliation strategy and roving CIA interventions of the Eisenhower '50s were tough enough for him. Perched on the mighty Armed Services Committee as well as his other bases of power, he went on over the next decade to goad the Kennedy and Johnson administrations, urging the Vietnam War, fatter military budgets, stronger support of Israel in the Middle East and a more aggressive foreign policy in general.

It was then, 40 years ago, that Jackson began to be linked directly, if furtively, to some of the uglier and little-known origins of the war on Iraq. Overseeing the CIA's "black budget" for covert operations and interventions from a subcommittee of Armed Services, he was one of a handful of senators who gave a nod to two U.S.-backed coups in Iraq, one in 1963 and again in 1968. Those plots brought Saddam Hussein to power amid bloodbaths in which the CIA, exacting the price for its support, handed Saddam and his Baath Party cohorts lists of supposed anti-U.S. Iraqis to be killed.

The result was the systematic murder of several hundred and as many as several thousand people, in which Saddam himself participated. Whatever the toll, accounts agree that CIA killing lists comprised much of Iraq's young educated elite – doctors, teachers, technicians, lawyers and other professionals as well as military officers and political figures – Iraqis who would not be there to oppose Saddam's growing tyranny over ensuing years or to help rebuild or govern Iraq, as the United States now hopes to do, after the current war.

By 1969, Jackson was so prominent in military and national security affairs, and so at odds on those issues with many in his own party, that newly elected Republican Richard Nixon thought to name the Washington Democrat his secretary of defense, though the senator declined the job.

But Snohomish County's favorite son coveted the White House himself and was soon a sharp critic of Nixon's arms control and détente. Added to his cold warring was even greater zeal for Israel, a certainty that the United States should endorse the Israelis' own hard line – absorbing the West Bank after its conquest in the 1967 Middle East War, the long-term subjugation of Palestine and an abiding hostility to Iraq and other Arab states.

As Jackson grew nationally prominent, he attracted the inevitable ambitious staffers and partisans boarding his coattails to advance both their own hawkish views and themselves. Among them was a recent graduate of the University of Southern California who was fanatic about amassing and projecting U.S. power, especially on behalf of Israel, and not least about his own strategic genius. The young New Yorker named Richard Perle became Jackson's chief assistant from 1969 to 1980.

I saw these origins firsthand working in the Senate in the early '70s after resigning from Henry Kissinger's National Security Council staff over the invasion of Cambodia. Seen from the inside, Jackson's Senate heft was considerable. Though a relatively small, unprepossessing figure as politicians go, he usually did his homework, could be incisive about important details his colleagues let slip and struck a shrewd balance between conviction and expedience. Much of his Capitol Hill power derived from his unique role, which he played well, as a northern Democrat with solid labor backing and other party credentials yet whose hard-line international view drew the support of many Republicans and the most conservative Southerners on either side of the aisle.

His belligerence also exerted – as it still does, of course – an extortionist pull on Democrats deathly afraid of appearing "weak" on national defense or in standing up to the Russians or anyone else. There was no question that "Scoop," albeit very much a half-educated provincial from the mountains and straits of the far northwest corner of the continental United States, shrewdly caught the unease and reflexive combativeness of much of America in dealing with a planet we knew, and know, so little despite our power. Still, in the '70s, a more worldly post-Vietnam moderation and sensibility in the leadership of both parties appeared to have passed Jackson by, leaving his chauvinism and foreign policy animus marginal, sometimes looking a bit crazed.

As for Perle, he was a pear-shaped, slightly fish-eyed man of self-consciously affected locution, the too-hungry, too-sly and too-toadying aide familiar in bureaucracies public and private. His views were patently uninformed, and he wore his conference-room warrior's zealotry no more gracefully than his expensive blue pinstriped suits. It seemed obvious that the bellicose policies he and Jackson embodied were not only wrong for America, but would also usher Israel into the ruinous isolation I and other admirers of its brave people most feared. "Scoop" & Co. would remain, I assumed, an extremist fringe.

How wrong I was.

Jackson, of course, never got the White House. With big pro-Israeli money though stolid style, he lost the presidential nomination in 1976 to Jimmy Carter, who offered a fresh face in the national weariness in the wake of the Watergate scandal. But when Jackson died seven years later back in Everett, ending more than four decades on the national scene, he had spawned a cult following. With the lavishly financed and much-propagandized neo-conservatives first taking power under President Reagan, and then at the senior levels under a new and ignorant George W. Bush, their throwback foreign policy was, and is, "Scoop" Jackson warmed over – the red, white and blue, bombs-away dawn of an old era.

For his part, Perle missed a long-coveted chance to make presidential policy when Jackson stumbled in 1976. But the aide promptly moved on to the next coattails in classic, if banal, Washington, D.C., style. Relentlessly levering the system he learned under Jackson, he cultivated the media, courted politicians in both parties and used old allies in the ever more politically potent pro-Israeli and military-industrial lobbies. By the Reagan '80s, he was an assistant secretary of defense, veteran of the now-venerated Jackson tradition of military expansion and a self-promoted strategist for a Republican president as comfortably as for a Democratic senator.

Whatever "Scoop" Jackson's mix of political principle and opportunism, Perle's politics were largely himself. And in time-honored Washington tradition, on the way up Perle gathered his own disciples among similarly grasping men – Wolfowitz, Under-Secretary of Defense for Policy Douglas Feith and others who would go on themselves in the same fashion to become key officials in the current administration, and who gathered their own coterie from assorted Reagan regime and Capitol Hill right-wing hacks such as Bolton. Like Perle, who was appointed in 2001 to chair the Bush Administration's influential Defense Policy Board, they were all longtime advocates, years before the Sept. 11 attacks, of pre-emptive American military invasions in Iraq and elsewhere and of implicit, if not open, support for the expansionist and repressive policies of their right-wing counterparts in Israel. Their concerted influence was decisive in going to war in Iraq.

Grown wealthy in the revolving door between government and corporate plunder, Perle drew notoriety briefly in 2003 not only for his intimate ties to Israel but also for his connections to companies standing to profit obscenely from the war he'd mongered. When Michigan Congressman John Conyers Jr. and Senator Carl Levin began to prod Defense Secretary Donald Rumsfeld about the disreputable dealings, Perle angrily resigned from the chairmanship of the board, though he continued to sit as a full-fledged member of the pivotal body. It was a fleeting glimpse of the cronyism, conflict-of-interest, loyalty-for-sale and general political-intellectual corruption of the neo-cons in Perle's lineage.

It was also – history's nice irony – just the kind of disgrace young "Scoop" Jackson might once have prosecuted up in Snohomish County.

September 1, 2005

*Roger Morris was Senior Staff on the National Security Council under both Presidents Lyndon Johnson and Richard Nixon, until resigning over the invasion of Cambodia. Morris is the author of Partners in Power: the Clintons and Their America and with Sally Denton The Money and the Power: the Making of Las Vegas. He is completing Shadows of the Eagle, a history of US policy and covert interventions in the Middle East and South Asia over the past half-century, forthcoming from Alfred Knopf.

*This article originally appeared on the Green Institute GP360 web site.

God Help You When the Government Does

2005-09-01T07:50:00.000-07:00

by Becky Akers

The only thing worse than Katrina's devastating destruction is Leviathan's horrific "help."

The day after the hurricane, Louisiana's Governor Kathleen Blanco ordered New Orleans evacuated – again. Yep, folks facing a flood several fathoms deep without electricity, potable water, or food are too stupid to leave on their own. Good thing the Nanny Kate tells them what to do.

Nanny's sending buses, boats and helicopters after all the silly little citizens who didn't know enough to come in out of the rain. These "refugees," as the Associated Press calls them, will be taken to shelters across the state. Some of these, such as cruise ships and mobile home parks, are private property that the Federal Emergency Management Agency [FEMA] is commandeering: apparently, their owners escaped Katrina only to be ravaged by FEMA. The bureaucracy also plans to erect hundreds of tents, ignoring both the wet ground and campers' comfort. It may even house citizens aboard its "floating dormitories," the boats on which FEMA quarters its minions while they run around getting in the refugees' way.

Whatever happened to bunking in with friends and families? I've experienced several hurricanes; on hearing that an especially dangerous one was heading my way, my first thought would be: "Time to visit Dad."

For sure I wouldn't trust either Nanny or the fiendish FEMA to host me. It's a shock that anyone does, given the conditions at prisons and public schools.

But folks busy raising families and earning money to pay taxes haven't the time to analyze Leviathan's propaganda. Such harried people make ripe pickings for the state. They entrusted themselves to "authorities" at the start of this disaster, perhaps reasoning that a government powerful enough to "protect" Iraq from Saddam could "protect" them from Katrina.

That "protection" immediately turned on them. It began with tactics similar to those used in Iraq. Refugees were searched for drugs, alcohol and weapons before they were admitted to New Orleans' Superdome. Presumably, those found with contraband during this unconstitutional frisk sheltered at New Orleans' jail instead.

That might have been a blessing, actually. The Superdome, built in 1980, has not aged gracefully. It also lost power, depriving the 20,000 people trapped inside of lights and air-conditioning at the height of a Southern summer. High winds tore holes in the roof, flooding the place with torrential rain and sending residents scurrying for the upper levels. One man fell from there and died. Toilets overflowed, as did trash containers. Little food or water could be had. In short, Nanny's miserable hospitality probably violated the Geneva Convention, let alone simple humanity.

General Ralph Lupin of the National Guard whined, "We're doing everything we can to keep these people comfortable. We're doing our best. It's not getting any better, but we're trying not to let it get any worse." Alas, running hotels and restaurants isn't easy, though entrepreneurs make it look that way every day. Their skills provide clean beds and rooms, private baths, delicious meals – all the miracles that Leviathan desperately longs to reproduce. And can't. Nor ever will.

Meanwhile, the refugees tire of the state's abuse. Yet they can't go home because National Guardsmen are preventing anyone from escaping the Superdome.

That's right. Citizens of the supposedly free United States, folks who have committed no crimes, who are, in fact, pitiful victims of a natural disaster, are being held against their will by the very entity that promised to "help" them. But fear not: General Lupin understands. "I know people want to leave," he said, "but they can't leave." Yo, Ralph, what's your legal justification for that breathtaking diktat? You ever heard of habeas corpus and due process?

Apparently not. Instead, our man Ralph blames the kidnapping of 20,000 people on Katrina. "There's three feet of water around the Superdome."

I'm a tiny woman, not even five feet tall. Three feet of water reaches a bit above my waist. It might not even wet the hips on adults of average height. If the choice is wading away or suffering in the sweltering Superdome, most of us would probably roll up our pants and go. Yet the state has usurped that decision for those caught in its clutches. Then it pretends that it's mere water, not troops training guns on disarmed citizens, imprisoning folks.

Funny that the city's so flooded folks can't depart the Superdome, yet looters roam the streets. Gangs plunder unmolested. "In some cases," AP reported, "the looting was in full view of police and National Guardsmen." Leviathan is egregiously, utterly, criminally failing at one of its only Constitutional duties. But that's not how the media describe it. Rather, they call it "anarchy." Right. Anarchy doesn't force people to abandon their homes and businesses. Nor does it compel them to surrender their weapons before imprisoning them in "untenable" emergency shelters, as Nanny Kate herself characterized them.

Naturally, Nanny's trying to excuse the state's ineptitude: "We don't like looters one bit," – unless, of course, they work for the tax department – "but first and foremost is search and rescue." Might I ask where the Constitution authorizes "search and rescue"? Ditto for the boondoggle known as FEMA.

Katrina's tragic toll in lives and property is still being counted. But we can rejoice that there are some things no hurricane, however powerful, can destroy: resourcefulness, independence, liberty.

It takes Leviathan to devour those.

September 1, 2005

*Becky Akers writes primarily about the American Revolution

URL:http://www.lewrockwell.com/akers/akers16.html

Intelligence Brief: Uzbekistan-C.I.S.

2005-09-01T07:26:00.000-07:00

Drafted By: Dr. Michael A. Weinstein

During the week of August 22, Washington and Moscow suffered setbacks in the pursuit of their respective and conflicting geostrategic aims in the contested region of Central Asia.

Registering a decision made by Tashkent on July 29 to evict the U.S. military from its base in Karshi-Khanabad, Uzbekistan's Senate unanimously approved the expulsion on August 26 in a session rife with complaints about Washington's relations with Tashkent. The loss of Karshi-Khanabad throws into question Washington's grand strategy of planting bases throughout an arc from East Africa to East Asia with the purpose of checking Islamic revolution and containing Moscow's and Beijing's regional ambitions.

Signaling the collapse of Moscow's goal of regaining its influence over the successor states of the Soviet Union through the Commonwealth of Independent States (C.I.S.), the August 26 summit meeting of the C.I.S. was the first one to take place without a prior consensus on a statement of principles or even an agenda due to the inroads made by Washington and Brussels in Moscow's "near abroad" in the wake of the pro-Western regime changes in Georgia and Ukraine. As Tbilisi and Kiev shift their allegiances, Moscow has lost any of its hopes that the C.I.S. might eventually evolve into a strong strategic and economic alliance along the lines of N.A.T.O. and the E.U.

The mixed picture presented by the base eviction and the failed C.I.S. summit reveals a new stage in the "great game," in which Washington and Brussels contend for spheres of influence in the Eurasian borderlands. Until recently, the borderland states had pursued dual-track foreign policies, seeking to cultivate positive relations with both sides and to play each off against the other. Now the lines have begun to harden, as the borderland states are constrained to make choices among power centers. The shakeout is far from complete, but it is clearly underway.

Uzbekistan

Long in the making, the eviction of the U.S. from Karshi-Khanabad is the result of Washington's calculation -- reached after a struggle between the U.S. Defense and State Departments -- that Uzbekistan's authoritarian regime led by President Islam Karimov is not stable in the long run, that it should be pressured on its human rights violations and that opposition to it should be nurtured. In 2004, Washington canceled aid to Tashkent on the basis of its human rights record, precipitating a tilt by Karimov toward Moscow and Beijing.

Washington-Tashkent relations reached a crisis point after the Karimov regime's violent suppression of a rebellion in the city of Andijan on May 13, 2005 when Washington joined Brussels in calling for an independent investigation of the incident, and Moscow and Beijing backed Karimov. Rejecting the demand for an independent investigation, Tashkent retaliated against Washington on June 16 by restricting U.S. flights out of Karshi-Khanabad. At that time, Tashkent denied that the restrictions were actuated by Washington's response to the Andijan incident and said that Washington "knew" the unspecified reasons for them.

Those reasons -- or rationalizations -- were on full display at the August 26 Senate session, where legislators said that the base was responsible for environmental pollution in the surrounding area, that Washington had failed to reimburse Tashkent for the US$168 million it had spent on infrastructure to support the base, that the justification for the base -- support of U.S. military operations in Afghanistan -- was no longer valid, and, most importantly, that Washington is backing regime change in Uzbekistan and that the presence of U.S. military forces in the country encourages Islamic "terrorism" rather than diminishes it. According to Russian analyst Stanislav Oriovsky, Washington's decision in early August to fund "democracy" projects throughout Central Asia was crucial in creating a united front in favor of eviction among Uzbekistan's political class.

With its eviction from Karshi-Khanabad now certain, Washington attempted to regroup by sending General John Abizaid to Turkmenistan and Tajikistan to discuss military cooperation. Those efforts are unlikely to bear significant fruit in the near term, if at all.

C.I.S.

Having chosen to abandon its dual-track foreign policy, Tashkent finds itself in the embrace of a Moscow that is reevaluating its approach to its near abroad. The pro-Western Rose Revolution in Georgia and Orange Revolution in Ukraine have so severely divided the C.I.S. that it can no longer function to project a coherent policy, but is, at best, a forum for discussion. In response to the new situation, Moscow pushed for "reform" of the C.I.S., renouncing any efforts to restore a sphere of influence.

Moscow's moderation failed to produce its desired result, as Tbilisi and Kiev refused to sign on to a common program, and Tashkent, which wanted a coherent policy statement, reportedly sought to cancel the meeting altogether. As a result, the only substantive result of the summit was approval of a protocol on cooperation among the C.I.S. states centered on resolving border disputes and curbing illegal migration and "terrorism and extremism." In a confession of failure, Russian President Vladimir Putin proposed that the C.I.S. form a working group that would promote integration of member states consistent with their "shared interests and national foreign policy priorities," and would be composed of a "group of sages."

As Tbilisi and Kiev move to form an alternative Commonwealth of Democratic Choice, including Black Sea, Caspian and Baltic states, the future of the C.I.S. as anything more than a shell is in doubt. Moscow is likely to retrench, turn its attention to the Shanghai Cooperation Organization where it is allied with Beijing in a more promising structure, and to concentrate on strengthening bilateral ties with the allies it has left in its near abroad, such as Belarus, Armenia, Uzbekistan and Tajikistan.

The Bottom Line

The eviction of the U.S. from Karshi-Khanabad and the failure of Moscow to "reform" the C.I.S. register shifts in the balance of power that redistribute advantages in the great game and portend a hardening of lines between the contestants.

Washington seems willing to sacrifice its presence in Uzbekistan in favor of a policy of encouraging the kind of regime change that has occurred in Georgia, Ukraine and, to a lesser extent, in Kyrgyzstan, which remains disputed territory. Moscow seems unable to formulate a coherent response to its loss of influence in its near abroad and faces credibility problems even with its remaining allies, who doubt its ability to function as a protector.

At present, Moscow has lost more than Washington and will seek ways to retrench. Washington will gamble on the longer-term weaknesses of the regimes that remain in Moscow's camp, attempting to walk a fine line between undermining them and avoiding their outright hostility.
*****
URL:http://www.pinr.com

Iraq: Democracy or Disintegration?

2005-08-31T02:10:00.000-07:00

by Jim Lobe

One day after the formal presentation by a majority of Iraq's elected leaders of their proposed constitution, opinions here and in Baghdad appeared divided over whether the draft would lead to greater democracy or the virtual, if not actual, disintegration of the country.

While U.S. officials predictably put the most positive spin on the charter, which will now be submitted to the Iraqi electorate for a vote Oct. 15, other analysts warned that its provisions for regional autonomy would hasten the country's descent into a sectarian civil war that could eventually draw in neighboring states.

"I do not believe in this division between Shia and Sunni and Muslims and Christians and Arabs and Kurds," the secretary-general of the Arab League, Amr Moussa, told BBC Monday. "I find in this a true recipe for chaos and perhaps a catastrophe in Iraq and around it."

Still others argued that the language regarding the special place of Islam and Islamic law in the constitution may worsen the plight of religious minorities, particularly Christians, and women, despite repeated pledges by the administration of U.S. President George W. Bush that women's and minority rights were among Washington's highest priorities in Iraq.

"Religious minorities as well as women will suffer under Iraq's proposed constitutional architecture," asserted Nina Shea, the director of Freedom House's Center for Religious Freedom and the vice-chair of the quasi-governmental U.S. Commission on International Religious Freedom, in an article published by the right-wing National Review online.

"We fear greatly that this and other provisions are the opening wedge for the imposition of a regime of group rights, which are anathema to secure individual rights and protections – a recipe for wider civil strife based on narrow identity politics," she and co-author Tom Cullinan wrote in reference to the constitution's replacement of civil law on personal status by religious law.

The fate of the new constitution, which was delayed by two weeks of sometimes frantic but ultimately unsuccessful U.S. efforts to get Sunni representatives to sign on, remains uncertain.

Under current law, the constitution is automatically rejected if two-thirds of voters in any three of Iraq's 18 provinces vote against it on Oct. 15. That provision was originally designed by U.S. officials to reassure Kurds, which have big majorities in three northern provinces, that they could effectively veto any charter that did not provide them with significant autonomy.

As drafted, the new constitution indeed guarantees that autonomy to the Kurds and, more significantly, establishes the groundwork for offering it to as many as nine provinces in the overwhelmingly Shia south.

But that arrangement is anathema to many in the Sunni community who favor a strong central government if, for no other reason, than the Sunni heartland has few natural resources compared to the oil and gas industries based in both the north and the south.

The Sunnis, who are believed to make up about 20 percent of Iraq's total population of about 25 million, hold overwhelming majorities in two western provinces and a smaller majority in a third and thus, ironically, could conceivably single-handedly defeat the charter in the October referendum.

In addition, however, Moqtada Sadr, the young Shi'ite cleric whose Mehdi paramilitary forces have recently flexed their muscles against rival Shi'ite militias, has also indicated strong opposition to the constitution, which he has reportedly called part of an "Iranian plot" to assert control over the southern part of the country through the region's largest political party, the Supreme Council for Islamic Revolution in Iraq (SCIRI), and its Iranian-trained militia, the Badr Organization.

Sadr's popularity in teeming Sadr City in Baghdad, combined with the large Sunni population in the capital, could deliver Baghdad province by the requisite margin into the "no" column come Oct. 15, thus assuring the charter's rejection.

Some analysts in and out of the administration argue that the possibility of the constitution's rejection may be a blessing because it may encourage more Sunnis to participate in the political process, if only to assure the charter's defeat in the referendum.

Since the Jan. 30 elections, persuading the Sunnis to participate in the process has been a top priority for a Bush administration that, guided by its military commanders, has become increasingly persuaded that the war in Iraq has no military solution.

Indeed, the visit earlier this month to Baghdad by Secretary of State Condoleezza Rice, as well as Thursday's telephone call by Bush to SCIRI leader Abdul Aziz al-Hakim, were aimed above all at persuading him to compromise with the Sunni leadership.

If the constitution is defeated in the referendum, Fareed Zakaria, former Foreign Affairs managing editor and editor of Newsweek International, told ABC News' This Week Sunday, "Sunnis [will] have demonstrated that they have real power. And they'll be reincorporated. That … is the good-news scenario."

"The bad-case scenario," he went on, "they're not able to defeat it. … [Then the Sunnis] retain all the alienation, all the antipathy, and forge ahead not defeating it peacefully, but defeating it the way they're trying now, which is violently and through civil war."

Indeed, some believe that the way in which the Sunnis were marginalized in the constitution-drafting process – as well as the charter's provisions on regional autonomy and against the participation of former Ba'athist officials in government – may already have served to fuel the insurgency.

For several weeks, the Sunni leaders have argued that they only joined the drafting process – at the risk of assassination by insurgents who have opposed their participation – on the understanding that a consensus document would be the result, only to be sidelined in the last two weeks by deal-making between the Kurds and Shi'ites.

Indeed, many analysts, including administration officials, predicted that insurgent violence was likely to intensify, while one Sunni delegate, Husain al-Falluji, told reporters that the constitution was a recipe for Iraq's violent partition that would "serve American interests."

While some U.S. officials dismissed such remarks as posturing by Sunni leaders who were cowed by the insurgency and do not represent their community anyway (despite having been hand-picked by the U.S. embassy), in fact, calls for partitioning Iraq have been growing louder in Washington, notably among some neoconservatives.

In a widely-noted column in the Los Angeles Times last week, former Justice Department official John Yoo, now with the American Enterprise Institute, argued that the administration was "spending blood and treasure to preserve a country that no longer makes sense as a state."

"[T]he U.S. might get closer to its goals in the Middle East," he wrote, "if everyone would jettison the fiction of a unified, single Iraq."

August 31, 2005

*Jim Lobe is Inter Press Service's correspondent in Washington, DC.

URL:http://www.lewrockwell.com/ips/lobe236.html

The Implications of Iraq's Proposed Constitution

2005-08-30T23:47:00.000-07:00

Drafted By: Adam Wolfe

On August 15, Iraq's constitutional drafting committee failed to meet its deadline to deliver a constitution to the National Assembly, which then extended the deadline by one week. The following week, a draft constitution was submitted but only on the condition that negotiations would continue for another three days. This third deadline came and went without agreement. Finally, on August 27, the final draft of the constitution was delivered to the National Assembly without the approval of the 15 Sunni Arab committee members, and without a vote.

The failure to win the Sunni committee members' support weakens the prospects for bringing stability to Iraq in the near term, potentially laying the groundwork for civil war. The constitution's embrace of federalism seems to destroy any illusions of a strong, centralized government emerging in Baghdad, and, if approved on October 15, could lead to the further fracturing of Iraq along sectarian lines and could strengthen the insurgency due to widespread Sunni Arab rejection.

Any intensification of the insurgency would affect negatively the interests of the United States. Domestic pressure is growing for the Bush administration to begin a limited withdrawal of troops from the conflict; U.S. forces are overextended, which limits Washington's capability to threaten intervention effectively elsewhere. An intensification of the insurgency will make it difficult for the United States to pull its troops out of Iraq since Baghdad's current security forces are not capable of adequately handling the ongoing guerrilla campaign.

What the Constitution Means for Iraq's Future

Many issues proved highly contentious during the constitutional negotiations, but most were resolved by August 25. According to Article Two of the proposed constitution, Islam will be "a basic source" for the law -- a compromise between religious Shi'a Arabs who wanted Islam to be the fundamental source of law and secular-minded Iraqis who would have preferred a more diminished role for religion. This compromise will also allow clerics to sit on the country's Supreme Court, but not as a majority. Protections for women's rights, religious freedom and democratic principles were added, though it is not clear whether they will trump Islamic law when in conflict.

A bargain of sorts was also reached on the sharing of oil revenues. Iraq's existing oil fields sit in the northern region controlled by the Sunni Kurds and in the Shi'a-dominated south. Sunni Arabs feared that language in the proposed constitution would allow the Kurds and Shi'a to control the revenues generated by the oil fields. Article 110 proposes that all revenue generated by existing operations will be distributed fairly based on the population of each province. However, the language is vague and stipulates that those regions neglected by "the former regime" -- the Shi'a and Kurdish areas -- will be allowed a disproportionate share of the revenue for an undeclared period of time. This compromise did little to assuage Sunni Arab concerns over federalism.

Federalism became the major sticking point when pious Shi'a proposed a system that would allow for a province to link up with other provinces to form a federal region -- with greater autonomy from the central government -- merely through a referendum by simple majority. It was expected that the Kurds would maintain the autonomy of the region they control in the north, but this provision proved indigestible to the Sunni Arabs. Some of the Shi'a negotiators imagined that the provinces in the south, sitting on some of Iraq's major oil fields, could link-up to form a "super" region. Their Kurdish counterparts allowed this language to be inserted because it will strengthen their claim to Kirkuk, which under the Transitional Administrative Law for Iraq (T.A.L.) will likely be absorbed into their autonomous zone anyway.

The Sunni Arabs believed that the main Shi'a negotiators were laying the groundwork to break up Iraq along sectarian lines, leaving them with the oil-free regions. Secular Shi'a argued that this would allow Iran to establish a toehold in southern Iraq, as many of the region's leaders will be drawn from the forces that fought on the Iran side of the Iraq-Iran war. The pious Shi'a and Kurdish negotiators bent slightly on these issues, but no compromise with their Sunni Arab counterparts was struck.

The other major point of contention for the Sunni Arab negotiators was the de-Ba'athification policy. Article 132 calls for a continuation of the removal of ex-Ba'ath Party members from government posts during the transition to a new government. Sunni Arabs argue that this had no place in the constitution since it addresses a period of time before the constitution will come into effect. Also, an absolute majority in the Council of Representatives is necessary to end the de-Ba'athification policy, something the Sunni Arabs simply will never be able to deliver. This language was slightly adjusted in response to Sunni Arab requests, but remains part of the document.

While the national assembly did not vote on the draft constitution, it will be put to referendum on October 15. As the second deadline passed, Shi'a and Kurdish negotiators worked out the final details without the input of the 15 Sunni Arab members. When presented with the final document, the Sunnis rejected the text and forced yet another delay. Ignoring previous statements about Iraqi sovereignty, Washington became intimately involved in the final days of the negotiations and pushed for a compromise but also approved of the locking out of the Sunni Arabs. U.S. President George W. Bush personally called Abdul Aziz al-Hakim, a cleric and the leader of the Supreme Council for the Islamic Revolution in Iraq (S.C.I.R.I.), to lobby for a compromise. In the end, the constitution was delivered without Sunni Arab approval.

Everything now depends on October 15. The U.S. has scaled back its ambitions in Iraq and believes the constitution's approval will greatly determine the timeline on which troops can be withdrawn. The run up to the referendum will see an increase in sectarian rhetoric and perhaps an increase in violence as insurgents attempt to derail the vote. It is taken for granted that the Kurdish north and Shi'a south will cast their votes for the constitution. What is less certain is how the center of the country will respond.

Looking Beyond October 15

The prospects for Iraq's future now largely rest on the Sunni Arab reaction to the constitution. Whether or not Sunnis participate in the October 15 referendum, and whether or not their participation has an effect on its passage, will be of extreme importance. There are several possible scenarios that Sunni Arab participation could take, some more probable than others. In the unlikely prospect that Sunni Arabs turn out for the referendum in decent numbers and approve of the text, the insurgency will lose its most potent domestic base of support; the U.S. plan to hand off the responsibilities of containing the insurgency could then continue on its proposed course. Though this would have little effect on the jihadist insurgents, it could undermine the Ba'athist insurgency.

In the more likely case that Sunni Arabs stay away from the polls in October and the constitution gains approval without their participation, the insurgency will likely continue unabated, as the central government will find it difficult to project its power into regions that reject its authority. In the previous elections, Sunni Arabs largely did not participate because of threats of violence by jihadist and Ba'athist insurgents. While some of the Sunni Arab groups who previously argued against participation seem to have changed course and now advocate voting down the constitution, the insurgents' threats may prevent any substantial uptick in Sunni turnout.

This would likely prevent any significant Sunni Arab participation and would strengthen the trend toward federalism based on sectarian lines that the proposed constitution allows. A weak central government dominated by regional governments could eventually lead to the dismantling of Iraq along sectarian lines -- a prospect that the Sunni Arab-dominated central region, which lacks the oil fields of the Kurdish north and Shi'a south, would violently reject.

Another likely possibility is that Sunni Arabs will turn out for the referendum but fail to muster the two-thirds majority in three provinces necessary to defeat the constitution's approval. If this scenario plays out, it is highly unlikely that the Sunni population would participate in the newly formed Iraqi state, and the insurgency would find an expanded base of support in the Sunni rejection. Reuters quoted a Sunni Arab delegate as saying, "If they pass the constitution, then the rebellion will reach its peak." While Sunni Arab non-participation on the referendum, if passed, could eventually lead to civil war, Sunni participation that fails to alter the outcome could lead to the immediate outbreak of such a situation.

The T.A.L. outlines the course of action if the constitution is defeated in October. The government will be dissolved and replaced by a new assembly to be elected no later than December 15. The new assembly would have another year to draft a second constitution, of which the T.A.L. does not lay out a process for passage. This option may be the best-case scenario for bringing the Sunni population into the political process, but that would depend on the Shi'a-Kurdish reaction. Potentially, Sunni Arab rejection of the constitution could harden the fault lines between the Kurdish-Shi'a alliance and the Sunni Arab leaders that they still view as oppressors. No group has been above using violence up to this point, but, to varying degrees, they have maintained the political tract as the main avenue to resolve their differences. It is possible that Sunni Arab rejection will encourage Shi'a and Kurdish groups to use force to resolve the differences, leading to civil war.

Sunni Arabs have majorities in three provinces, but it seems unlikely that they would be able to generate a two-thirds majority in Nineveh, where there is a large Kurdish population. The Shi'a-Kurdish decision to send the constitution to referendum without the support of the Sunni Arab leadership was made on the assumption that the Sunnis will be unable to defeat the measure. The possibility that the Baghdad province could join in opposition to the referendum seems to be the biggest gamble to the Shi'a-Kurdish proposal. If it is defeated, the U.S.-led coalition will need to fill in the void left by the dissolved government if a singular Iraqi state is to be maintained, necessitating the delay of current withdrawal plans.

No matter the outcome on October 15, rebellious Shi'a leader Moqtada al-Sadr seems poised to reap the benefits of the referendum. When al-Sadr's followers attempted to reopen his office in Najaf on August 23, the Badr Corps, the armed faction of S.C.I.R.I., a rival Shi'a group, blocked them. The violence quickly spread to several other cities, including Baghdad, and Prime Minster Ibrahim Jaafari took to the airwaves to plead for peace, with little effect. Only when al-Sadr ordered it did the violence come to an end. This demonstration of power is important to note because al-Sadr, repeatedly declared "marginalized" by U.S. officials, is emerging as a bridge between Sunni Arab insurgents and nationalistic Shi'a in his rejections of the trend toward federalism advanced by the proposed constitution.

Nationalist Shi'a fear that religious Shi'a, who fought on the Iran side in the Iraq-Iran war, would dominate a southern autonomous region and find al-Sadr's proposal of a strong centralized government attractive. Some secular-minded Shi'a might also find themselves in an alliance-of-interests with al-Sadr as October 15 approaches. Sunni rejectionists are aligned with him on the issue and al-Sadr has signed most of the Sunni Association of Muslim Scholars' declarations since January 2005.

The Sunni Arab leaders may be able to deliver sufficient majorities in the Anbar and Salahuddin provinces to defeat the constitution, but they will need al-Sadr's help to deliver Baghdad, a province in itself. Even if this scenario does not play out, the referendum is likely to find many malcontents, and al-Sadr seems poised to lead them. Whether his leadership will be within the government or against it depends on how the vote plays out. [See: "After Winning Concessions, Al-Sadr Tries His Hand at Diplomacy"]

Conclusion

The future of Iraq will largely be determined by the Sunni Arab reaction to the referendum on October 15. There are several scenarios that could quickly lead to civil war or to the break-up of Iraq along sectarian lines. The constitution does not propose a strong central government; it opts for a federal system instead. It is the Sunni Arab assumption that this is designed to deprive them of their share of the country's oil wealth. However, even if Sunni Arab concerns are addressed, a future Iraqi state without a strong center might, in time, lead to the break-up of its geographical integrity.
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Growing Signs of Unrest in the Maldives

2005-08-30T03:59:00.000-07:00

Drafted By: Dr. Sudha Ramachandran

The Maldivian government's use of excessive force in mid-August to quell demonstrations by opposition activists demanding democratic reforms indicates that its commitment to establishing multi-party democracy in the country remains weak. There is a danger that its foot dragging on democratic reform and the suppression of its secular-moderate opponents could clear the way for assertion of hard-line Islamists in the country.

The Anti-Government Protests

Anti-government demonstrations calling for Maldivian President Maumoon Abdul Gayoom's resignation and fresh elections turned violent when police used tear gas, electric batons and water cannons to disperse the protestors. Dozens of members of the opposition Maldivian Democratic Party (M.D.P.) were taken into custody.

What has further fueled anger against the government is that the arrest of M.D.P. activists preceded the riots. M.D.P. chairman Mohamed Nasheed, a vocal critic of Gayoom, was arrested even before the protests turned violent. According to Maldivian media sources, on August 12 "Nasheed and three other M.D.P. members were seated all by themselves in the Republican Square when the riot squad came and dragged them away. There were no other M.D.P. protesters participating in the event."

The current crackdown has dashed hopes raised in June 2005 when the government took some tentative steps towards the setting up of a multi-party democracy. The government promised to have in place before the end of 2005 a full-fledged democratic system. It lifted the ban on political parties.

Background of Current Unrest

Better known for its emerald green waters and white sandy beaches, the Maldives -- an archipelago of 1,192 tiny coral islands scattered around 850 kilometers (528 miles) across the equator to the southwest of India -- has appeared in international news more in relation to climate and environmental issues rather than political ones. This seemingly serene archipelago now appears to be slipping toward political turmoil. Violent confrontation between authorities and the public is growing in frequency.

Unprecedented anti-government riots rocked the Maldives capital, Male, in September 2003. The violent protests were a spontaneous response to a prison riot in which at least three inmates were shot dead by jail authorities. It emerged that the prison riot was triggered by the death of an inmate following torture by the police.

In August 2004, pro-democracy demonstrations shook Male once again. The government responded with an iron hand. Almost a hundred people were jailed and a state of emergency was declared in the country.

Torture and government repression is not new to the Maldives. Scores of opponents of the government are said to be languishing in jails. The Maldives' police force, the National Security Service (N.S.S.), is known to intimidate opponents of the regime. As Amnesty International observed following the violent events of 2003, "The killing of at least three prisoners by the N.S.S. and the injury of a dozen more in Maafushi Prison is only the latest chapter in a catalogue of human rights violations in the country by N.S.S. personnel who function under the president's command."

What is new to the Maldives, however, is the public and violent articulation of anti-government anger. The violent protests witnessed on the streets of Male in 2003 and 2004 were unprecedented.

The recent periodic eruptions of violent anti-government protests are a reflection of a deeper malaise in Maldivian society. There is little political choice and no scope for articulation of dissent. Gayoom, who has been the Maldives' president since 1978, dominates the archipelago's political scene. He is currently in his sixth five-year term; each of these terms has been endorsed by the Maldivian people in a yes-no referendum. And while Gayoom has averaged a 90 percent endorsement in these referendums, in effect, the electorate had little choice. They were presented with a single candidate chosen by the Majlis, or parliament. While political activity was allowed, political parties were banned until June 2005.

Under Gayoom's rule, the Maldives has witnessed remarkable economic growth -- with a per capita income of US$2400, it has become South Asia's most prosperous country -- and relative political stability. But this, his opponents would argue, has been achieved at a very heavy price -- at the cost of individual freedoms. Suppression of dissent and public protest, crackdown on political opponents, muzzling of the local media and blocking of all reformist websites has ensured that challenge to Gayoom is quickly contained.

While the government has been successful in crushing dissent locally, it has not been able to control the sprouting of political opposition to Gayoom's rule overseas. Until recently, the opposition M.D.P. functioned from abroad. The government has been able to do little to silence articulation of dissent on the Internet.

For many Maldivians, the biggest obstacle to democratic reforms is Gayoom himself. They are not all supporters of the M.D.P. However, many see the M.D.P. as the only viable party that can oust Gayoom.

That organized political opposition to Gayoom is growing was reflected in the recent parliamentary election, where "independent" candidates backed by the M.D.P. did well. Of the 36 candidates that the M.D.P. openly endorsed for the 42 contested seats, 18 were elected -- a considerable achievement for a party that was banned at that time.

In June 2004, Gayoom signaled interest in enacting a broad package of constitutional reform. He announced plans to amend the constitution to allow for a multi-party, pluralistic democracy, direct presidential elections, changes in the separation of powers, the creation of a Supreme Court, elimination of the appointment by the president of members of the Majlis, in addition to other changes. Events that followed this announcement last year -- the crackdown on opponents of the government and the heavy-handed response to public protests -- signaled the government was not sincere about the reforms.

The Islamist Factor
The Gayoom government has sought to silence international criticism of its crackdown on reformists by suggesting that Islamists, disguised as democrats, are trying to overthrow the government, and that they will use an opening up of the political system and an introduction of a multi-party system to overthrow the government and impose a narrow version of Islam imported from abroad.

Indeed, there are Islamists among those protesting against the Gayoom regime. In fact, in a bid to counter government propaganda that they are backed by Christian missionaries (the pro-democracy movement has considerable support among expatriates in the West, Amnesty International and some British parliamentarians but there is no evidence that the M.D.P. is backed by Christian missionaries), secular opponents of the Gayoom regime have involved Islamists in their anti-Gayoom campaign. In the process, an anti-Gayoom coalition of convenience between secular and Islamist activists is gathering strength.

Maldivians are Sunni Muslims, and adherence to Islam -- the state religion since the 12th century -- is required for citizenship. Historically, Islam has played an important role in the daily lives of the people. Yet, its practice here has been rather liberal as people have followed a tolerant version of Islam. Women never covered their heads, interaction between men and women was allowed and arranged marriages, practiced in most Islamic societies, have never been the norm.

This has changed in recent years. There has been a perceptible slide towards conservatism in Maldives and the influence of Islamist extremists has grown slowly but steadily.

Part of the reason for the growth of Islamist extremism lies with Gayoom. Some of his policies appear to have contributed not only to the assertion of Islamists but also to the importing of more radical Islamic values from abroad.

Outward signs of a more conservative version of Islam, such as wearing the full hijab or a long beard, are increasingly visible in the Maldives today. It appears that intimidation of women has resulted in more women wearing the hijab today.

So how serious is the threat posed by hard-line Islamists?

Hard-line Islamists have formed the Adhaalaath Party. While it has some backing in the outer atolls, its support in Male remains limited. Maldivians believe that extremists are a minority in their society and that their society is far too liberal to conform to extremist diktats. Mass support for hard-line Islamists might be limited at this juncture but they have politically organized themselves. Weakening the M.D.P. will clear the opposition space for the hardliners to occupy.

India's Role
India, which after Sri Lanka is the Maldives' closest neighbor and is Gayoom's biggest backer (in 1988 India sent its troops to counter a coup against Gayoom), is "not yet alarmed about developments in the archipelago but is closely watching the situation."

While India does not seem overly concerned with Maldivian Islamist extremists -- Indian officials say that they are by and large free from pan-Islamist ideas of jihad, at least so far -- there is a sense that political instability in the Maldives could make it a "safe nest" for jihadis from other countries, especially Pakistan.

Gayoom has managed to convince India, the Chinese and the Americans that he is the bulwark against Islamist extremism in the Maldives. Sections in the Indian establishment accept this claim. India's dilemma in dealing with the situation in the Maldives stems from the fact that while Gayoom has been a good friend of India, it recognizes the need for more democratization in the Maldives if bloody confrontation is to be avoided. But putting pressure on Gayoom could result in him turning to the Chinese or Pakistanis. His ties with China seem to be improving and India is wary of a Chinese presence at its southern doorstep. It is likely, therefore, that while backing Gayoom, India will nudge him towards reform.

Conclusion

If the government stonewalls on the issue of reforms or persists with responding harshly to dissent, anti-government protests could turn militant in demand and methods. By blocking democratic channels of protest and articulation of dissent, the government is in danger of legitimizing the use of violence to express demands and address grievances.

Following the violent August confrontations, the government insisted that it remains committed to reform. In an apparent conciliatory gesture, it appointed "key dissident" Gasim Ibrahim as its new finance minister. Ibrahim, a former member of the M.D.P., was among those arrested after last year's riots. But few Maldivians are convinced by such gestures. They point out that Gasim Ibrahim was fostered by Gayoom's wife's family and that he was hardly a dissident.

It will be important to note how Gayoom proceeds. One option is to address the crisis by opening democratic channels for dissent, a development Gayoom believes could weaken his power. On the other hand, if Gayoom drags his feet on reform, crushes the secular moderates, possibly empowering Islamists in the process, it may create a situation that could explode into violence.
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Intelligence Brief: Aqaba Attack

2005-08-30T02:55:00.000-07:00

Drafted By: Erich Marquardt

The August 19, 2005 attack on two U.S. warships at the port of Aqaba in Jordan raises concern that the ongoing insurgency in Iraq could, in the future, have a destabilizing effect on the region. Jordanian intelligence believes that the main perpetrators of the attack had come over the border from Iraq, smuggling weapons in a vehicle. The attack raises the specter of future attacks by militants who are veterans of the insurgency in Iraq, similar to the way that fighters involved in the Afghan struggle against the Soviet Union joined together to take on select Muslim rulers and the countries that supported them.

Attempted Attack on U.S. Warships in Jordan

On August 22, Jordanian authorities arrested Mohammed Hassan Abdullah al-Sihly, a Syrian whom they believe was heavily involved in planning the August 19 attacks. Authorities think that the other three came across the border from Iraq. Two of the three were thought to be al-Sihli's sons and the third was the possible ringleader of the attacks, an Iraqi known as Mohammed Hamid Hussein. The three from Iraq apparently used forged identification documents to make their way into Jordan from the al-Karameh border crossing with Iraq.

In addition, authorities think that a Jordanian blacksmith may have assisted the militants in organizing the attack by having a role in the setup of the rocket launches that would be used to target the U.S. warships.

It is believed that the men smuggled seven Katyusha rockets from Iraq into Amman in a Mercedes equipped with an additional gas tank, which was used to hide the rockets. Once in Jordan, the militants rented a flat about eight kilometers (five miles) from the port of Aqaba.

On the day of the attack, three Katyusha rockets were launched at two U.S. military warships that were at the port, the USS Kearsarge and the USS Ashland. The rockets overshot the warships, hitting a Jordanian military warehouse and killing its guard; another rocket landed in Eilat in Israel, but did not cause any major casualties. While the rockets missed the U.S. warships, it was a very close call and could have caused a lot of damage to the U.S. ships, and also would have grabbed major media attention.

Since the launching of the rockets was controlled by a timing device, the militants were able to be removed from the scene when the attack was executed. Because of this, the three Iraqis were able to leave Jordan and escape into Iraq.

Attack Directed from Guerrillas in Iraq

But the key moment of the investigation came when authorities stated that the cell was directed by an unknown insurgent group in Iraq. The Jordanian government concluded that the militants were "in constant touch with their organization in Iraq during preparation for the attack."

In an Internet statement, the Brigades of the Martyr Abdullah Azzam immediately claimed responsibility for the attacks; however, it is not clear whether the organization actually had a role. The group has laid claim to attacks in the past such as the July 2005 attacks in Sharm al-Sheikh Egypt that killed more than 80 people.

Then, on August 23, Al-Qaeda in Iraq -- which is led by Abu Musab al-Zarqawi -- claimed that it had perpetrated the attack. The Internet claim of responsiblity read, "God has enabled your brothers in the military wing of Qaeda in Iraq to plan for the Aqaba invasion a while ago. After finishing the preparations and deciding on the targets, your brothers launched the attacks." Al-Zarqawi, who is the United States' second most wanted terrorist, is originally from Jordan and is wanted by officials there.

The Bottom Line

While Jordanian authorities investigate which group was responsible for the attack, the importance of the incident was that it involved militants who originated in Iraq. In the past, Islamist militants have used their military experience in a country to achieve their political and strategic objectives. In Afghanistan, veterans from the insurgency against the Soviet Union later formed various militant groups, the most prominent being al-Qaeda.

The prolonged failure to stabilize Iraq will result in members of the insurgency using their military experience to land political and strategic blows in countries neighboring Iraq. These blows could be aimed at the United States -- as seen in the Aqaba attacks -- or at governments that regularly suppress Islamists, such as in Saudi Arabia and Egypt.
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The Big Lie--They're Fighting for Our Freedom

2005-08-27T03:31:00.000-07:00

by Robert L. Johnson

Listening to Bush supporters who have come out to oppose Camp Casey and its
creator, Cindy Sheehan, it becomes painfully obvious how well a big lie
really works on the minds of millions. Some of them have lost family members in the
unnecessary war in Iraq that the neocons and Bush started. They can't bring
themselves to see reality--that their loved ones did not die for American
freedom but were instead used as pawns by the politicians and the powerful Israeli
lobby group American Israel Public Affairs Committee. For many people, it's
hard to admit when you are wrong, especially when the cost of being wrong is so
high.

It's much easier to believe the government and the big lies they tell
and that the media protects.

The plutocrats who run the democracies of the world are great at lying. They
have fine tuned it to an abhorrent art. They are so skillful at lying, their
lies have become common knowledge to many millions of people. One good
example is the big lie itself. When a person hears the phrase "the big lie," they
usually think of Adolf Hitler. They regurgitate what has been fed into them:
Hitler said in his book he uses big lies to control people and to gain and
maintain power.

In fact, Hitler wrote that the average person is more
likely to believe a big lie than a small one because they themselves are prone to tell a small white lie but not a big lie. He then went on to condemn the practice
and blamed the Jews and Marxists for using the big lie technique. The fact that
the plutocrats have used this particular lie so successfully for so long that
people don't even realize that Hitler was actually condemning the practice,
demonstrates the power of the big lie technique and why the plutocrats still
use it.

When George W. Bush wanted to start the war in Iraq, he had to come up with
a big lie. He would not be able to get people's support if he told them the
truth, that he wanted to be reelected, and in a close election like he was
facing, every vote counted, so he was going to win some favor and votes in
the Jewish community by wiping out Israel's enemy, Iraq. (A

Central America's Street Gangs Are Drawn into the World of Geopolitics

2005-08-26T03:59:00.000-07:00

Drafted By: Adam Wolfe

Over the course of the past year, the Bush administration has begun to shift its focus in Latin America away from asymmetrical threats, such as terrorism, and toward the more traditional power politics of the region: containing the left-leaning governments bent on curtailing Washington's influence in the region. Threats previously espoused by the administration -- Hezbollah's presence in the tri-border region and in Chile, Venezuela's Margarita Island serving as a terrorist resort and Islamic groups working with the drug traffickers in the region -- have all seemingly been knocked down in their threat level in public declarations. However, in Central America, Washington is getting serious about a problem it helped to create -- and not simply because the region's street gangs and vast criminal networks are making their presence known in the United States.

While media reports, often fueled by some in the Bush administration, have focused on the possibility of al-Qaeda tapping into the criminal networks controlled by the gangs, this threat seems overstated for the time being. However, the street gangs represent an opportunity Washington is likely to exploit in the region. Even as Washington adopts a traditional power politics stance in Latin America, it can be expected that it will use Central America's gang problem to deepen its influence in the region through joint initiatives and training programs, in part designed to block Venezuela's attempts to put a rift between the region and Washington.

A U.S. Export: L.A.'s Gangs in Central America

Central America's gang problem largely can be traced back to policy decisions made in the United States in the mid-1990s. There was a shift in the mid-1990s at the local and federal level toward deporting immigrants who had committed crimes or had a criminal record in the United States. While this helped continue the trend toward decreased street violence in U.S. cities, it left Central America vulnerable to a new community with few ties to the region but bound together by their gang affiliations.

A 1996 change to U.S. immigration law declared that non-citizens, and in some cases foreign-born citizens, sentenced to one or more years in prison could be repatriated to their country of origin. The immigration rules also barred U.S. officials from disclosing the deportees' criminal background in many cases. In 1996, around 38,000 people were deported on these grounds, and by 2003 the number reached nearly 80,000. However, the U.S. does not track the number of deportees suspected of having gang affiliations.

This new initiative was most pronounced in Los Angeles County, where the 18th Street Gang and Mara Salvatrucha (MS-13) were active. After gang members were arrested, their time in the U.S. penitentiary system served as a "finishing school" for criminal activity. Then they were deported to their countries of origin with little or no warning about their backgrounds for the governments on the receiving end of the arrangement.

Once the gangs arrived in Honduras, El Salvador, Guatemala, Nicaragua, Panama and Mexico, they quickly put the lessons learned in prison to work. The numbers are difficult to pin down, but estimates put the number of active gang members in Central America and Mexico at over 100,000. In El Salvador (population 6.7 million) there are more than10,000 core gang members, and 15 municipalities have been, or are, controlled by gangs.

In Honduras (population 6.9 million) the number of gang members may be over 40,000 and the murder rate is 154 per 100,000 (compared to 70 per 100,000 in Colombia, which is still dealing with a civil war). MS-13 and Mara 18 (M-18, formed by members of Los Angeles' 18th Street Gang) overwhelmed the local governments who were often unaware of the problem that they had been handed.

MS-13 and M-18 are often involved in turf battles that dislodge local populations and have overwhelmed the states' ability to contain the problem. In November 2002, Guatemala's Anti-Narcotics Operations Department was dismantled after it was discovered that 320 officers were on the gangs' payrolls. The "get tough" approach and "zero tolerance" laws adopted by Honduras starting in 2001 led to overcapacities in prisons and frequent prison riots. This also encouraged the gangs to respond with random acts of violence as a means of protest. The recent prison riots in Guatemala that left some 31 dead demonstrate that the region's governments have yet to hit upon a better method to contain the problem.

MS-13 and M-18 expanded their operations into Mexico and then the U.S, where they have set up lucrative operations smuggling people and drugs across the border. Police in northern Virginia have estimated that there are 2,500 gang members, largely MS-13, in the greater-Washington region, which has the second-largest Salvadoran population after Los Angeles. Washington's initial response was largely incoherent because of a lack clarity of which departments within the newly created Department of Homeland Security and the Justice Department would lead the operations designed to prevent the gang infiltration.

In January 2005, an F.B.I. task force was created to deal with MS-13 and Washington announced it would begin to inform Central American states about the criminal records of more deportees. While many local police departments have worked in cooperation with their counterparts in Central America, this move marked a shift toward greater cooperation at the federal level. This shift did not come about simply because of the MS-13 and M-18 operations within and on the border of the U.S.; instead, geopolitical realities helped guide Washington's hand.

The Greater Turf War in Central America

The U.S.' signing of C.A.F.T.A. may have helped to solidify El Salvador, Guatemala, Honduras and Nicaragua's ties to Washington (as well as Panama as an associate), but the pending agreement remains controversial at best in the region. In order to deflect some of this criticism, the C.A.F.T.A. states may be tempted to align themselves closer to Venezuela and Cuba, the countries at the helm of the growing discontent with Washington in Latin America. Caracas and Havana are making great strides to ensure that there will be no shortage of opportunities for the Central American governments to embrace.

The high price of oil on the global market has allowed Venezuela to move beyond the San Jose Agreement, originally signed in 1980, in which Venezuela and Mexico provide discounted oil to Central American and Caribbean states, in its use of petroleum as a diplomatic tool. Caracas demonstrated the value of this diplomatic chip at the recent Association of Caribbean States meeting, where the C.A.F.T.A. states stood alone in their defense of Washington's policies in the region. [See: "Intelligence Brief: Caribbean Spheres of Influence"]

In another diplomatic move aimed at securing support from the Central American governments, on August 22 Venezuelan President Hugo Chavez and Cuban President Fidel Castro handed out diplomas to the first graduating class of the Latin American Medical School funded by Cuba, which Chavez has said he would replicate in his country. Several hundred of the new doctors will return to their Central American homelands to practice medicine. Central American governments are also looking at importing Cuba's education policies, an initiative that resonates with the public in ways that a free-trade agreement simply cannot. [See: "Venezuela's Hugo Chavez Makes His Bid for a Bolivarian Revolution"]

Where Caracas and Havana are making inroads in Central America, Washington will move to suture any loss of support by funding popular initiatives designed to strengthen the friendly governments there. One such initiative is likely to be cooperation in tackling the region's burgeoning gang problem.

In a June meeting of the region's presidents in Honduras, Guatemalan President Oscar Berger proposed that a regional, "rapid response" force be created to take on the gang problem in Central America. The leaders have embraced the idea of forming a multilateral force to take on the street gangs, but they are of the shared opinion that it could not function without Washington's involvement.

U.S. Deputy Assistant Secretary of State Dan Fisk, at a press conference following the talks in Honduras, said, "We want to strengthen defense mechanisms, especially in terms of gangs." However, Washington was slow to involve itself directly in the "rapid response" force, in order to avoid being perceived as funding a military force designed to subdue the Central American population. Still, similar initiatives are likely to be adopted. For example, the U.S. plans to fund a law enforcement academy in El Salvador to train officials from across the region in anti-gang techniques. The weak judicial systems and police forces in Central America are likely to be reinforced by Washington, in exchange for cooperation on intelligence about the gangs' activities.

The F.B.I. task force created to deal with MS-13 in early 2005 indicates that Washington will focus on law enforcement in its handling of the region's gang problem, while giving less priority to the social factors that have allowed the gangs to proliferate. The weakness of this approach is that it fails to address the environment that fosters the gang problem. For example, a recent study by the International Organization for Migration claims only five percent of youth gang members in Honduras are linked to organized crime. A comprehensive approach would provide incentives to discourage those youths who identify with the gangs from becoming active members in their criminal networks. However, Washington has not publicly addressed any programs aimed at curbing the gang problem through social initiatives.

Conclusion

The incentives for Washington to initiate an anti-gang program in Central America are clear; however, this has been the case for several years now. One of the main reasons that Washington is beginning to give the problem a greater priority is to prevent Venezuela and Cuba from making inroads into its "near abroad." This approach may help to strengthen the Washington-friendly governments in Central America, and, unlike free trade agreements, the benefits of such an initiative will be tangible to the local populations. Should Washington take the lead in fighting Central America's gang problem and fail, it will allow Venezuela and Cuba to gain influence in the region. However, declining to take the lead may only hasten such a power shift.
*****

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Intelligence Brief: French Energy Policy

2005-08-25T02:40:00.000-07:00

Drafted By: Federico Bordonaro

French Prime Minister Dominique de Villepin held an important speech on August 16, 2005. Apart from addressing his projects to tackle unemployment, he explained to citizens why the present oil crisis is destined to last and, more importantly, he briefly illustrated the new French energy policy. The importance of this speech is two-fold.

First, de Villepin is launching a strategy aimed at energy independence (involving the state's intervention in the national economy), which appears to be in line with his Gaullist legacy. Second, he never mentioned in his speech launching a common European energy policy.

These facts signal that the effects of France's rejection of the E.U. Constitutional Treaty are having a deep impact on the country's politics, and that sovereignist discourse is being incorporated by the neo-Gaullist majority. Therefore, we now see a shift in Paris' industrial policy -- although along well-known Gaullist lines -- which makes the formation of an authentic European political union even more difficult. [See: "The Rise of French Pro-Sovereignty Movements and their Geopolitical Consequences"]

De Villepin's Speech and France's Energy Policy

Speaking at Matignon, de Villepin announced that his government is preparing a series of new measures for this fall aimed at spurring economic growth. He recalled with confidence some recent positive economic data as evidence that the economy is back on a more favorable growth trend. The French prime minister did not provide details of the program, but said it would include targeted spending of revenues generated from the government's privatization projects.

In order to fight unemployment, which is around ten percent and considered unacceptable by most of the public, de Villepin introduced in June 2005 a tough measure: employers will be allowed to fire new staff without justification at any time during an initial two-year period of their hiring. This decision sharply contrasts with traditional French labor guarantees, and it means that the neo-liberal agenda pushed by Interior Minister Nicolas Sarkozy is growing in influence and popular reception.

Summarizing the head of government's speech, the daily newspaper Le Monde said the challenge for de Villepin is creating a vast, industrial and commercial re-specialization of French products, while cutting taxes for small and medium enterprises.

However, the core of de Villepin's speech was, undoubtedly, on energy security.

He explicitly warned citizens that the oil crisis -- and the subsequent high oil prices -- will last for a long time. Oil reserves appear fragile in front of growing demands from old and new great powers such as China and India, and the political tensions in the Middle East will continue for the foreseeable future.

He continued, arguing that France's energy security is a vital stake for present and future generations. Recalling the political strategy of former President Charles de Gaulle, de Villepin stressed the fact that French national energy production covers now 50 percent of France's needs -- compared with only 20 percent in 1973. Such a figure, he said, is encouraging but not enough, and needs to be expanded.

Other important issues, de Villepin continued, are sustainable development and the fight against global warming, which are in the heart of the July 13, 2005 energy policy law that fixes the energy policy's orientations.

National energy independence and technological innovation -- aimed at diversifying energy sources -- are at the core of de Villepin's strategy. This echoes a long run French struggle to ensure its energy security and to open new scenarios for tomorrow's energy acquisition. De Villepin announced three pillars upon which the project will be carried on. The first of these pillars is massive investment in energy policy, beginning with the oil sector.

In line with this, the prime minister called for French oil company Total, and other companies, to invest in more refining capacity. Total, he said, must contribute in an equitable way to the preparation of the future. Such an explicit call from a government for a big corporation to increase its role in national policy also signals the revival of "economic patriotism," advocated by increasingly influential politicians such as the U.M.P. exponent Bernard Carayon.

Concerning nuclear power, de Villepin mentioned the present day's situation where nuclear power plants function as a strong pillar in France's energy production, and called for starting a nuclear strategy of the future -- with new generations of nuclear power plants to be implemented. Given Paris' importance in the European energy market, we can expect nuclear power to be re-launched on a continental scale -- also on the basis of growing energy needs from Central and Eastern European countries.

The second pillar, continued de Villepin, will be that of renewable energy, a field in which Paris ranks among the most advanced countries. Hydroelectricity and bio-fuels in particular were evoked as the right assets to develop together with nuclear power so that France will not become totally dependent on atomic energy to satisfy its electricity needs.

The third pillar will be energy savings. Again, the government will actively take part in this game with taxation, reinforcing tax credits that already exist and promoting renewable energy assets, low-consumption cars, solar energy heaters, etc.

The Bottom Line

Politically, the Matignon speech is obviously very important, as France's industrial orientations for the future are clearly defined. However, such a project could have decisive geopolitical consequences. Contrary to many previous government communications, this one makes no mention of Europeanist rhetoric or of Franco-German centrality. It is, instead, plainly French.

On a geoeconomic level, we can expect important consequences if such a program is achieved successfully. Total's competitors will be very interested in the company's involvement in France's energy security strategy since this could strengthen Total's leverage in global economic markets. Moreover, oil producers and investors will carefully observe Paris' implementation of alternative energy sources.

De Villepin will nonetheless have to effectively and rapidly tackle unemployment concerns and to revitalize the G.D.P. at home. Otherwise, he will hardly obtain the needed support to implement his broader policy. In 2007, general elections are scheduled in France, and the neo-Gaullist candidate (who may run in the presidential elections) will face strong competitors, such as the neo-liberal Nicolas Sarkozy and (to a lesser extent) the sovereignist hard-liner Philippe de Villiers and the socialists François Hollande and Laurent Fabius.

However, if de Villepin succeeds, it could portend the beginning of a more independent French foreign policy, less attached to the Franco-German axis, possibly opening the way to a "variable geometry Europe" similar to that advocated by pro-sovereignty intellectuals and politicians like de Villiers, although without this latter's sovereignist and anti-E.U. rhetoric.
*****
URL:http://www.pinr.com

Venezuela's Hugo Chavez Makes His Bid for a Bolivarian Revolution

2005-08-24T04:13:00.000-07:00

Report Drafted By:Dr. Michael A. Weinstein 04 April 2005

Throughout the first three months of 2005, the chronic verbal jousting between Washington and Venezuela's "populist" regime led by President Hugo Chavez ratcheted up in intensity, with Chavez threatening to cut off oil exports to the United States if Washington moved to destabilize his rule, and Washington declaring that it was pursuing a policy to "contain" him.

The latest round of rhetorical conflict began in January, when recently appointed U.S. Secretary of State Condoleezza Rice said that the Chavez regime was a "negative influence" in the Western Hemisphere. With power passing to the State Department, Washington has woken up to threats to its perceived interests around the world, threats that had been festering since the Iraq intervention diverted attention from them. Despite the fact that Iraq continues to be an obstacle to fresh initiatives, Washington has decided to move to restore its global influence, including in South America, where left and center-left governments have taken control in the southern cone and where a cycle of political instability has taken hold in the Andes.

Washington sees Chavez to be its greatest problem in South America, because he is the most radically leftist regional leader and the only one offering a clearly alternative and opposed model to Washington's scenario of a Free Trade Area of the Americas (F.T.A.A.) composed of market democracies led by the United States.

At the same time that Washington has become more assertive, Chavez has sensed an opportunity to implement his vision of a united South America that acts in accordance with its own interests, independent of Washington, and a "new socialist society" based on cooperatives that would eliminate poverty and subordinate private business to broader social aims. Although the "Bolivarian" vision is utopian -- and Chavez knows it -- it provides a framework for more practicable policies that put him on a collision course with Washington.

The tensions between Washington and Caracas reflect Chavez's judgment that the hemispheric balance of power has shifted against the United States and that Washington is not in a position to stop him from acting against its wishes. Since it is not clear that Chavez is correct, the conflict between Caracas and Washington has become a test of their relative influence in South America.

Chavez has espoused and attempted to implement his Bolivarian revolution since his election as Venezuela's president in 1998, but his progress was hindered by economic distress caused by depressed oil prices that led to severe domestic social conflict culminating in an unsuccessful coup attempt against him in April 2002 that was tacitly supported by Washington, and a widespread general strike in December of that year in which the state oil company P.D.V.S.A. was shut down.

Having weathered the attacks against his regime, Chavez's fortunes changed as the price of oil began its recent rise, general economic conditions improved and state coffers were replenished with funds that could be allocated to social programs, military expenditures and diplomatic initiatives. With the domestic opposition against him dispersed and demoralized after a referendum to recall him in August 2004 was defeated by 59 percent of voters, Chavez also felt free to consolidate power by taking greater control over the communications media and pursuing land reform, renegotiation of energy contracts with foreign oil companies, and diversion of oil revenues to infrastructure and social programs, and a military build up.

Oil is the basis of Chavez's power. The world's fifth-largest crude oil exporter, Venezuela sells 60 percent of its output to the United States, accounting for 15 percent of the latter's petroleum imports. The Venezuelan state also has a major stake in refining and distribution in the United States through its ownership of Citgo. The recent high oil prices provided the stimulus for Venezuela's economy to grow by 17.3 percent in 2004, leading to a decrease in unemployment from 17 percent in early 2004 to 14 percent in February 2005.

U.S. dependence on Venezuelan oil puts a damper on any moves by Washington to destabilize Chavez's regime, but it also makes regime change in Caracas an ultimate aim for Washington. Chavez is aware of Washington's predicament and seeks to exploit it. Washington responds with efforts at damage control.

The Bolivarian Vision

With the exception of Cuban President Fidel Castro, with whom he cultivates friendly ties, Chavez is the only Latin American leader who stands for a model of development that deviates significantly from the broad Western consensus on market democracy, including its more competitive Anglo-American form and its more welfare-oriented continental European variant. More than the demagogue, vague populist and aspirant to a Castro-style dictatorship that his opponents in Venezuela, Washington and the U.S. press make him out to be, Chavez is a visionary attempting to consummate a social revolution in his country that will put into place a "new socialism" based on cooperativism and participation of all sectors of society in managing local affairs, and will transform Venezuela into as self-sufficient and developed a state as possible -- a "small major power," as he calls it.

Inspired by the continentalist liberator of South America from Spanish rule, Simon Bolivar, Chavez's Bolivarian revolution is neither an old-fashioned systematic modern ideology like Castro's Communism, nor the kind of ad hoc expedient appeal to the poor and disadvantaged familiar in Latin American populism; instead, it is something in between and with a distinctiveness of its own -- a set of broad principles and goals around which to mobilize Venezuelan society that reflects adaptation to the country's economic underdevelopment and its sharp social divisions -- especially between rich and poor.

Like any other political vision -- for example, the polity of market democracies in a globalized world advanced by his competitors -- Chavez's Bolivarism falls short in practice and might be impracticable altogether, yet it provides relatively coherent direction for national policy, does not seem to be simply a rationalization for power and -- if even moderately successful -- would constitute a concrete alternative to capitalist market democracy. Chavez appears to be serious and resistant to being bought off, which is why Washington perceives him as a special threat.

In common with many of the ideologies that have emerged in the post-Soviet era, Bolivarism is an eclectic combination of tendencies that were normally kept apart in the great struggles of modern politics. At its center, Chavez's vision, like Bolivar's, is continentalist, projecting the scenario of a unified South America composed of cooperating states that form an independent power bloc in the world and do not follow U.S. leadership. Yet Chavez is also an ardent nationalist, defending Venezuelan sovereignty and concentrating his efforts at change on transforming the country's society. His nationalism and continentalism are reconciled by the hope that by creating a cooperativist society in Venezuela, the country will provide a successful example for other states to emulate.

Chavez's domestic model -- a "new socialism" -- is an eclectic mixture of state intervention in the economy, tolerance of an independent private business sector, mobilization of society through a revolutionary party that penetrates every community, yet tolerates political opposition and adheres to constitutional procedures. The model includes "participative democracy" at the local level that focuses on "endogenous development" projects that bring the various sectors of society together in pursuit of common purposes, yet are energized by "Bolivarian circles" composed of his supporters, a dose of Catholic "liberation theology" that emphasizes preference for the poor, and an overarching nationalism that provides the rationale for patience and sacrifice on the parts of the conflicting interests that constitute the entire program.

To call Chavez a "populist" and leave the matter there dismissively -- as his opponents consistently do -- is a mistake. Instead, Bolivarism is a complex vision that is riddled with tensions, yet provides a basis for institutional development and a framework for particular policies. The primary tension is between social mobilization through state intervention, a revolutionary party, and the network of Bolivarian circles along with the tolerance of a private business sector, political opposition and inclusion of civil society at the local level, all of which are capable of running counter to mobilization.

The balance between mobilization and inclusion is shaky and susceptible to falling toward the Castro-style dictatorship that Chavez's opponents foresee or toward the deadlock and disorder that broke out in 2002. Success in implementing the vision depends on a steady stream of funds from high oil prices, enabling Chavez to improve the conditions of the poor, who form his base, and to keep the more advantaged interests at bay.

Former Venezuelan diplomat Sadio Garavini Di Turno notes that there are "three Venezuelas": the pro-Chavez sectors, the intransigent opposition, and those in between who voted for Chavez in 1998, were disaffected and joined the opposition in 2002, and returned to support him in the 2004 referendum when they became frustrated by civil strife, the economy improved, and Chavez's development "missions" began to bear some fruit. Di Turno anticipates that Chavez will again disaffect the middle third by being unable to carry through his revolution and urges the opposition parties to unite and offer a credible program "to channel this disappointment."

It is far from clear that Di Turno is correct that Chavez will fail and set off another cycle of instability. If the price of oil remains high and enough development projects are successful, leading to an improvement in the standard of living for the poor -- who compose approximately half of Venezuela's population -- Chavez's parallel institutions might begin to take root and alter the social system.

Bolivarism is a compromise formation adapted to a deeply divided society, but unlike other experiments to promote social change through social mobilization in underdeveloped countries, it is fueled by wealth and not dependent on foreign patrons. It remains to be seen whether Chavez will be able to keep the middle third of the Venezuelan public acquiescent. Facing an election in 2006, he knows that he must move rapidly to demonstrate progress and consolidate his power. He is doing so aggressively on all fronts, having declared 2005 "the year of the productive economy," in which Venezuela will make its "leap forward."

Oil Policy

If Chavez is to effect his Bolivarian revolution, Venezuela must keep pumping enough oil to finance it. On the surface, his prospects seem to be promising. The country has the largest proven oil reserves in the Western Hemisphere (78 billion barrels) and the largest in the world (300 billion barrels) if the super-heavy crude in the Orinoco tar belt is included. The Venezuelan state also owns significant downstream refining and distribution assets through Houston-based Citgo. The Citgo refineries are specially adapted to process Venezuela's heavy crude and its chain of service stations in the United States markets the output.

Beneath the surface, there are problems. In the aftermath of the 2002 strike, which dried up oil exports for two months, Chavez fired 18,000 oil workers, temporarily paralyzing P.D.V.S.A. Although production recovered, it has not reached the peak of 3.5 million barrels a day recorded in 1997 and analysts dispute the government's current figure of 3.2 million barrels a day, estimating the actual amount to be 2.6 million.

The lagging production figures reflect depletion of Venezuela's developed oil fields and insufficient investment in developing new ones. With profits estimated at $6.5 billion for 2004, P.D.V.S.A. claims to be investing $5 billion a year in development and exploration, with the goal of bringing production up to 4.9 million barrels a day by 2010. Yet Chavez is also estimated to be diverting $4 billion a year of the oil profits to finance the Bolivarian revolution, leading analysts to posit an investment shortfall that can only be made up by foreign investors.

Faced with the conflicting demands of expanding oil production and funding the Bolivarian revolution, Chavez has moved to extract more money from foreign producers operating in Venezuela. In October 2004, he raised the royalty tax on companies working in the Orinoco belt from one percent to 16.6 percent. All the affected companies except Exxon Mobil have acquiesced in the tax hike so far. Exxon Mobil, which argues that the original low tax compensates it for its capital investment, has succeeded in getting the government to enter talks with it on the issue, but Venezuelan Oil Minister Rafael Rodriguez insists that the tax hike will not be rolled back. Under a law passed in 2001, new projects will have a royalty rate of 30 percent, which does not seem to have discouraged investors in the short term (for example, on March 31, ChevronTexaco announced plans to pursue joint development in the Orinoco belt with P.D.V.S.A.).

As a longer term growth strategy that has geostrategic implications, Chavez has moved aggressively to diversify the market for Venezuelan oil and the sources of investment for its oil industry. Caracas has signed energy agreements with Beijing and Brasilia, and is negotiating with New Delhi. Chavez's plan is to deal government-to-government, rather than with private firms, and to make Venezuela less dependent on exports to the U.S. and on private investment. He also wants to see a cooperative energy agreement be made in South America to create a complex -- Petrosur -- uniting all state hydrocarbons companies in the region, with the goal of excluding the big multinational oil companies from energy development.

Chavez's diversification strategy is still in its early stages. In its favor is the escalating demand for oil in South and East Asia, and the aspiration of Brazil to be a regional power. On the downside, Venezuela's potential new markets do not presently have the capacity to refine its heavy crude, and pipelines and shipping routes for moving the oil east do not exist or are inefficient. For the moment, Venezuela remains dependent on the U.S. market and that is not likely to change in the short to medium term. Nonetheless, Washington is studying alternatives to Venezuelan imports because of Chavez's threats to cut off supplies to the U.S. if Washington attempts to destabilize his regime or tries to assassinate him, as he suspects it intends to do. Chavez has stated repeatedly that he wants to sell oil to the U.S. and Rodriguez has reassured Washington that Venezuela's new markets would be served only by expanded production.

It is not yet clear how much substance lies behind Chavez's oil policies. Will the higher royalty fees and requirements that P.D.V.S.A. have a majority stake in development projects discourage investment? Will supply and refining problems in the new markets be resolved? Chavez's domestic critics claim that he will not be able to rectify the investment shortfall and that production will stagnate. The administration responds that production is high and that there is no investment shortfall.

In reality, the picture is mixed: there is strong demand for Venezuelan oil and efforts to expand supply have an unknown probability of success. The grand design of south-south cooperation and of Petrosur remain visions, yet emerging regional powers are eager to stake out positions in Venezuela's energy sector. How quickly development proceeds -- if it does at all -- will determine whether Chavez will be able to continue to finance the Bolivarian revolution and avoid the scenarios of a slide into dictatorship or a breakdown of his rule through renewed civil disorder.

Conclusion

Given the uncertain future of Venezuela's oil industry -- at least in the short term -- it is far too early to predict with confidence the degree of success that Chavez will achieve in realizing his vision. With the rise in oil prices a relatively recent trend, he is still in the deal-making phase and in the early stages of social development and military expansion. Acting on all fronts, he is forging agreements with Russia, Brazil and Spain to supply the Venezuelan military with aircraft, naval vessels and 100,000 assault rifles; instituting stricter press controls; expropriating land for distribution to peasants; buying public debt from Argentina; making security arrangements with Brazil; moving to gain access to currency reserves held by the central bank; organizing citizen defense forces; starting up agricultural and industrial development projects in Venezuela's hinterland; and cutting energy deals with China, India, Russia and Brazil.

Although Chavez's flurry of activity -- all undertaken in the past several months -- might simply be scattered initiatives rather than a set of synergistic policies, it has awakened Washington's concern and opposition. In particular, Washington has attempted, without success, to stop the arms deals, and has expressed concern over press restrictions, as have international human rights organizations. In its moves to "contain" the Bolivarian revolution, Washington has not been able to gain the support it desires from other interested powers, each of which has interests in cultivating good relations with Caracas.

Chavez is making his move. It is possible that he has bitten off more than he can chew, but there is also a chance that his Bolivarian revolution will gather momentum. Whatever the future holds, the political situation in Venezuela bears close watching, as the only major effort to implement an alternative model to the dominant neo-liberalism unfolds.
*****
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The Malacca Straits and the Threat of Maritime Terrorism

2005-08-24T02:36:00.000-07:00

Drafted By: Catherine Zara Raymond

On August 1, 2005, the foreign ministers of the three littoral states of Indonesia, Malaysia and Singapore met to discuss maritime safety and security in the Malacca Straits. They concluded their talks with a stronger commitment to addressing comprehensively the issue of maritime security, including the threats of piracy, armed robbery and terrorism. The meeting marked the recognition by the littoral states that much remains to be done in terms of improving the safety and security of the Malacca Straits.

The situation became all the more urgent following the recent decision by Lloyd's Market Association's Joint War Committee to declare the Malacca Straits an area that is in jeopardy of "war, strikes, terrorism and related perils." The decision to add the Straits of Malacca to the Committee's list of high-risk areas was taken following recommendations by the private defense consultants, Aegis Defence Services, who are said to have carried out risk assessments on the area. Others on the list are countries such as Iraq, Somalia and Lebanon. Although the Committee has a purely advisory role, the result of this declaration could be dramatically higher insurance costs for the many thousands of ships that transit the Straits on an annual basis.

The Aegis report stated that due to the fact that there had been an intensification of the weaponry and techniques used by the pirates in the Straits, they are now largely indistinguishable from terrorists. In addition, it stated that the Straits are a target for terrorism. The report cited a statement by al-Qaeda leader Osama bin Laden in which he spoke about hitting enemy countries through their economies. It also highlighted Jemaah Islamiyah's (J.I.) past interest in the traffic passing through the Straits. [See: "The Threat of Al-Qaeda and the Islamic Revolutionary Movement"]

The Straits of Malacca: A High-Risk Zone?

A terrorist attack in this economically strategic waterway would certainly have the potential to cause large-scale economic impact, not just regionally but on a global scale. The waterway is transited by about 60,000 ships each year, and approximately one third of the world's trade and half of the world's oil pass through the Straits on their way to countries such as China and Japan.

However, both the littoral states and ship owners around the world have expressed their concern over whether the decision by the Joint War Committee is justified. In a joint statement, the foreign ministers of the littoral states urged the Committee to "review its risk assessment accordingly." The ministers expressed their regret that the decision was taken without their consultation and failed to take into account their existing efforts to deal with the threats to safety and security in the Straits. The Federation of A.S.E.A.N. Shipowners' Association declared that the decision was "misguided."

While the reaction by the littoral states and ship owners may to some extent be warranted given the lack of evidence pointing to an immediate threat from maritime terrorism, completely ruling out the possibility of an attack taking place would be an incorrect assessment. A terrorist attack in the Straits may have a low probability of occurring but the impact of such an attack could be very high.

It is important to point out that the threat of international terrorism still casts its shadow over the region. Despite a series of arrests, the J.I. network remains resilient and is expected to strike again. The suicide bombing at the Australian Embassy in Jakarta on September 9, 2004, which killed some 11 people and injured more than 180, is certainly proof of this.

As mentioned in the Aegis report, J.I. has planned attacks against naval vessels in the region. Fears of a J.I. attack were renewed after U.S. intelligence passed on warnings about a plot to hijack a vessel in the region's waterways. The warnings, issued in September 2004, stated that activists from J.I. had been discussing plans to seize a vessel with the assistance of local pirates.

Other terrorist attacks attributed to J.I. are: the Christmas Eve bombings of churches in Indonesia in 2000, which killed some 19 people, the October 12, 2002 Bali suicide attack that killed around 200 people, mostly Western tourists including approximately 88 Australians, in a nightclub, and the Marriott Hotel bombing in Jakarta that killed around 12 people on August 5, 2003.

The Philippines continues to be a haven for terrorist activity, with evidence of terrorist training camps on the Philippine island of Mindanao and growing cooperation between J.I. and the two Philippine Muslim insurgency groups -- the Moro Islamic Liberation Front (M.I.L.F.) and the Abu Sayyaf Group (A.S.G.).

Both M.I.L.F. and A.S.G. have carried out previous maritime terrorist attacks. One such attack by M.I.L.F. took place on a busy seaport in Davao City, in the Philippines, in April 2003. Around seventeen people were killed in the attack. The group also carried out attacks on Philippine shipping, mainly placing bombs on domestic inter-island ferries being used to transport members of the Armed Forces of the Philippines and Christians to and from Mindanao. On February 27, 2004, A.S.G. carried out a suicide bombing on the M/V Superferry 14 shortly after it left Manila Bay, killing more than 100 people. This attack resulted in the greatest number of deaths since the Bali bombing,

It is clear from the militant groups operating in the region that there is an interest in attacking maritime targets. Whether or not they have the capability to conduct a spectacular attack on shipping in the Straits remains to be seen.

A Terrorism-Piracy Nexus?

One of the specific criticisms leveled at the Aegis report was its failure to distinguish clearly between piracy and terrorism. While piracy in the Straits of Malacca has been taking place on a regular basis for the last decade, there is little or no evidence to suggest that pirates are forming links with international or regional terrorist groups, such as al-Qaeda or J.I., in order to carry out a devastating attack on a maritime target. The only suspected link between piracy and terrorism in the Malacca Straits is the employment of pirate tactics by the separatist group known as the Free Aceh Movement (G.A.M.).

Since the 1970s, G.A.M. has been fighting a separatist war against the Indonesian government with the aim of creating an independent Islamic kingdom in the province of Aceh. The group is said to finance its terrorist activities partly through sea piracy and smuggling. These are not, strictly speaking, acts of maritime terrorism. It has been well documented that terrorist groups have resorted to criminal activities in order to generate funds for their political campaigns. However, these criminal acts are not in themselves acts of terrorism. Therefore, the threat of maritime piracy must not be labeled as a terrorism risk. [See: "Examining the Threats to Indonesia's National Interests"]

Conclusion

While it is important to distinguish between the pirate attacks taking place in the Straits and acts of terrorism, what these pirate attacks demonstrate is that the vessels transiting the Straits are highly vulnerable to a breach in their security. Pirates regularly hijack tankers in order to steal the cargo or kidnap crewmembers. If terrorists were able to take over a tanker carrying highly hazardous chemical cargo, the implications could be disastrous. The unpredictability of terrorism makes it hard to carry out accurate risk assessments. However, as can be seen from the evidence presented above, the threat from maritime terrorism is a clear possibility in the Straits of Malacca.
*****
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Angela Merkel's Forecasted Win and Germany's Foreign Policy

2005-08-23T03:10:00.000-07:00

Report Drafted By:Federico Bordonaro 13 July 2005

German Chancellor Gerhard Schroeder asked for and obtained early political elections on July 1. The polls, originally scheduled for 2006, are now to be held on September 18, 2005. Schroeder's move comes after the protracted German economic crisis has severely damaged his own credibility and popularity -- which he had been able to restore in 2002 during the Iraq crisis by choosing not to take part in the U.S.-led intervention there. Surveys in June and July 2005, however, indicate that Schroeder's opponent, Christian Democratic Union (C.D.U.) candidate Angela Merkel, now has the upper hand and has an advantage of almost 20 points over the Social Democratic Party (S.P.D.) leader. Forecasts about her possible pro-U.S. turn in foreign policy have already started to make the rounds.

Merkel's Background

If elected, Merkel will be the first Eastern German political leader of the post-Nazi era. For cultural and psychological reasons, this fact should not be underestimated, as former East Germany's Christian Democrats regard the United States with high esteem and consider Russia the main threat to German security. Moreover, after seven years of Social Democratic rule and economic decline, Merkel's generation of politicians appears to have added to their traditional views a stronger free market preference and often refer to the British and Irish social model with admiration. The German "Rhine capitalism" -- or "social market economy" -- model has lost support, regardless of what the real causes of this impasse may be. Angela Merkel embodies a new kind of moderate right in Europe -- as French Interior Minister Nicolas Sarkozy does in France -- integrating with the Christian Democratic ideals a fascination with the Anglo-Saxon economic and social model.

This fact is coupled with Merkel's irritation towards Schroeder's steadfast opposition to a greater German role in Iraq. Many sources have reported how the C.D.U. candidate expressed her positive views on U.S. President George W. Bush's Middle East policy when she met American officials in the United States. As a result, some observers predict a complete reversal of Schroeder's foreign policy once Merkel is elected.

Schroeder's Complex Foreign Policy

German foreign policy in the Schroeder era has been somewhat complex in nature. Schroeder's generation can be considered the first to step away from the traditional guilt-complex born by every German chancellor since the Third Reich. Elected at a time of growing difficulties for the once universally admired German economy, and faced with the challenges of the post-reunification era and the E.U. enlargement process, Schroeder has tried to reaffirm Berlin's strong pro-European inclination while progressively seeking more independence on the world stage.

Two vitally important historical and systematic facts have been at work in this policy. First of all, after Germany's reunification and the turn of the new century, Berlin's geopolitical self-perception is very different from that of the Cold War era. Germany is no longer a country "under guardianship," and its moves need no longer be justified all the time. Secondly, at a time of overwhelming U.S. power and influence, all regional players need to increase their relative power by seeking differentiated strategies such as building political unions or strategic partnerships, while avoiding direct challenges to Washington's status. [See: "Great and Medium Powers in the Age of Unipolarity"]

These aspects are clearly reflected in Schroeder's strategy. On the one hand, his perception of the Franco-German combine is much more pragmatic and less ideological than that of his predecessors. Germany is increasingly freeing itself from the need to present itself as the good Europeanist pupil of Paris. Accordingly, the fact of the two countries' common position on the Iraq crisis was due far more to Berlin's geopolitical interests than to any plan of shared sovereignty with France.

On the other hand, Schroeder's administration did try to mitigate its conflict with Washington -- by regularly seeking to re-launch the Transatlantic relationship, as in February 2004, or by sending GSG-9 special forces to Kuwait to help the Americans -- while at the same time seeking out Russia as a strategic commercial and energy partner. This latter move was accentuated in 2004 as the E.U.'s enlargement clearly complicated Germany's plans to expand its influence in Eastern and Southeastern Europe.

Along with the general lines of a political era marked by American unilateralism and hyperpower and the rise of China, under Schroeder's leadership Germany tried to pursue its national interests in multilateral organizations -- for example, by trying to occupy the key offices in the E.U. -- while starting bilateral cooperation in the commercial, energy and technology spheres with Russia, India and China.

Misled by the European geopolitical rift in the face of the Iraq crisis in 2002-2003, most observers failed to understand the relative independence shown by Germany in the last three years, concentrating instead upon "Franco-German opposition" to the United States. That opposition -- which certainly did exist -- was not the result of a consistent, global Franco-German policy. This conclusion can be drawn from analyzing Germany's discrete, but obvious, support for Putin even during the political turbulence of 2004 in Russia, and from the French stand against Syria in the 2005 Lebanon crisis. In both cases, Berlin and Paris seemed to act on their own. In addition, even though the overall situation is still unsettled, Germany proposed to Moscow the building of a new pipeline to the Baltic Sea which would allow Russia to sell its oil to Berlin without passing through Ukraine; France, on the other hand, appears to be increasingly tightening its energy ties with Kiev.

Furthermore, the fragmentation of the French political landscape -- which contributed to the May 29 rejection of the E.U. Constitutional Treaty -- has probably played a role in complicating the pursuit of an authentic common, coordinated Franco-German foreign policy.

As a result of systematic, historical and incidental reasons, the Franco-German combine during the Schroeder years underwent a transformation. While it still remains one of the pillars of the E.U., it certainly appears diluted in the enlarged Europe, hardly capable of being the engine of the aimed political union.

Notwithstanding this differentiated strategy, Berlin's role in the world in the last few years has often been perceived as primarily anti-American, or at least as steadily opposed to Bush's grand strategy. Apparently, even though U.S. operations in Iraq are facing formidable difficulties, American influence in world affairs has made it difficult for Schroeder not to appear isolated because of his anti-war decision.

However, when all is said and done, if Schroeder's bid for re-election fails next September, the cause will not lie so much in his ambitious and often misunderstood foreign policy, but instead in elites' dissatisfaction with his economic policy and popular resentment against his (moderate) reforms.

Merkel's Inclinations and Geopolitical Constraints

Assuming that Merkel will capitalize on Schroeder's weaknesses, the fundamental question will be whether the new chancellor will attempt a dramatic turnabout in Germany's foreign policy. Such a move will prove very difficult and only a mild turn should be expected.

Geopolitics does, in fact, have its constraints. Although supporters of a strong Transatlantic relationship based upon U.S.-German partnership are still common in Berlin, Schroeder's years have laid the foundations for a relatively autonomous German foreign policy. Powerful decision makers who gather at Bertelsmann Foundation meetings -- coming from the German economic, financial and political elites -- have made it clear that Berlin's place in the world is to be sought in accordance, not in (even mild) opposition to the United States. Angela Merkel seems the right chancellor for these powerbrokers.

However, in a world characterized by geoeconomic and geopolitical competition, Germany cannot refrain from taking advantage of Russia's, India's and China's quest for strategic partnership in the energy and high-technology domains. Merkel's best possible outcome would be to rebalance Germany's role, so that Berlin's quest for power and security would not be perceived as an obstacle to a friendly relationship with Washington. This is, in fact, is U.S. Secretary of State Condoleezza Rice's hope as well. But for this to be realized, a higher degree of coordination between the German and American foreign policies is necessary. Accordingly, Berlin's agenda will probably focus on taking the lead in Europe in harmony with Washington, promoting a liberal and federal European order profitable to both German and U.S. economic and diplomatic interests. Berlin's attempt to gain a seat as permanent member in the U.N. Security Council will probably be enhanced by such a posture.

However, this raises the question of the struggle for influence in Eastern and Southeastern Europe. Germany and the U.S. are both interested in extending their economic interests in the former Socialist countries. France and Britain are also strong regional players whose role in the E.U. can't be overlooked. Finally, Russia itself, although its influence is declining, won't lose its chances to have a say in the Black Sea and Balkans regions. If Merkel intends to be the champion of German interests in the enlarged Europe, she will have to strike an extremely difficult balance between the pursuit of German plans and partnership with the U.S. -- at a time of Washington's "unipolar moment."

Moreover, if German voters who are to choose Merkel want a halt to further enlargement of the E.U. -- especially with regard to Turkey -- this will complicate the matter even more. The E.U.'s enlargement to Romania, Bulgaria and Turkey itself is on Washington's agenda. So eventually, the harmonization of a pro-U.S. turn with the pursuit of German interests will prove a hard task for the expected new chancellor.

Conclusion

Although Schroeder's skill in electoral campaigning is well known in Germany and abroad, Merkel's win in September appears probable. In the face of the current German crisis, the new chancellor will be obliged to launch a foreign policy entirely compatible with her main domestic goal of reviving German economic power. In other words, she will seek good relations abroad while working hard at home. Accordingly, expect Merkel to propose a balanced geopolitical mix aimed at discrete leadership, consisting of three main points.

First, she will be careful not to create friction with the United States, and to upgrade Germany's role in a revisited Transatlantic relationship -- making Berlin the chief continental U.S. partner as in the Kohl years. Second, she will try to reinforce German influence in Europe while taking care not to treat the E.U.'s newcomers as small or unimportant countries, thus seeking to moderate their strong pro-British orientation. Gaining the Eastern countries' confidence is vital if Germany is to promote full E.U. enlargement toward the Black Sea and beyond. Third, although Berlin will continue its energy and trade cooperation with Moscow, Merkel is likely to be far more cautious than Schroeder on the issue of promoting multipolarity or opposition to Washington's goals in the Middle East and Central Asia together with Russia, in order to avoid upsetting Washington.
*****
URL:http://www.pinr.com/report.php?ac=view_report&report_id=326

Intelligence Brief: Rumsfeld Visits Paraguay and Peru

2005-08-23T02:15:00.000-07:00

Drafted By: Dr. Michael A. Weinstein

In an attempt to reverse the cycle of instability that has erupted in the Andean states of South America and that continues to intensify, U.S. Secretary of Defense Donald Rumsfeld visited Paraguay and Peru on August 16-18.

The pressing reason for Rumsfeld's trip is the deterioration -- from Washington's viewpoint -- of the political situation in Bolivia, where President Carlos Mesa resigned earlier in the summer after the country was torn apart by autonomy movements in its relatively prosperous south and mass populist direct action in its poverty stricken north. Washington's primary concern is the escalating support for Evo Morales, the charismatic leader whose base among the northern coca growers has widened to include significant portions of Bolivia's indigenous majority and whose Movement Toward Socialism, which falls in line with the cooperativist ideology of Venezuela's President Hugo Chavez, commands the most significant bloc in the Bolivian Congress. [See: "Intelligence Brief: Bolivia"]

Washington, which has accused Caracas and Havana of lending support to Morales, fears that populist movements opposed to its strategic aims now have a genuine chance to come to power in the Andean states and institute socialist economic models in place of neo-liberal capitalist free trade, thereby excluding U.S. influence in the region. Although Bolivia is the proximate threat, Peru and Ecuador are also experiencing increasing instability from populist pressures. In Peru, three coca-growing regions have passed ordinances permitting free cultivation of the crop, and, in Ecuador, protestors in the country's oil-rich Amazon region have occupied petroleum facilities -- cutting off the flow of crude oil -- to advance their demands that transnational oil companies increase their spending on infrastructure improvements and social programs.

The overriding aim of Rumsfeld's trip to Paraguay and Peru, where he met with the countries' presidents and defense officials, was to persuade them to increase military cooperation with Washington and to create a coalition geared to isolating Caracas in the hemisphere. Subsidiary goals were to encourage Asuncion's crackdown on smuggling, the drug trade and financial support for Middle Eastern Islamist groups operating in Paraguay's region bordering Brazil and Argentina, and to bolster Lima's commitment to curb coca production for export. The present strategic importance of Paraguay and Peru for Washington is enhanced by the fact that they border Bolivia.

Rumsfeld's attempt at military diplomacy represents a shift in Washington's policy toward Caracas that had been restrained after Chavez survived a U.S.-supported coup in 2002. Despite deteriorating relations between Washington and Caracas -- evidenced by Chavez's suspension of military and drug enforcement cooperation with the U.S. -- the policy of restraint might have continued had it not been for Andean instability. Already stymied in its efforts to create a hemispheric trading bloc dominated by the U.S., Washington now faces the possibility of more hostile regimes in the hemisphere. [See: "Venezuela's Hugo Chavez Makes His Bid for a Bolivarian Revolution"]

Judging by the results of his visits, Rumsfeld failed to make headway for Washington's aims in Asuncion and Lima, where he met with counter-agendas and demands that Washington will be unlikely able to fulfill.

Paraguay

Paraguay, which accepts U.S. military aid to modernize its army and hosts a U.S. military mission devoted to civil affairs and to helping the country in its efforts to police the tri-border region, presented the most favorable opportunity for expanding Washington's influence in South America. Asuncion, however, is not firmly in Washington's camp; President Nicanor Duarte Frutos pursues a dual-track foreign policy dedicated to maintaining cooperative relations with Washington, but also committed to integrating into the Mercosur trading bloc, led by Brazil, which competes with U.S. designs for hemispheric trade. The southern cone states composing Mercosur have been unwilling to follow Washington's call to isolate Caracas, and Rumsfeld was unable to drive a wedge into that stance in Asuncion.

Rumsfeld's visit to Paraguay was preceded by rumors that he would push Duarte to allow the U.S. to have a permanent military base in the country for the purpose of "monitoring" Mercosur. After his talks with Rumsfeld, Duarte made it clear that "no world power is going to install any military base in Paraguay." He added that "Latin America has to integrate, form a power bloc without any kind of prejudices or exclusionary visions." Having shown his resistance to isolating Caracas, Duarte concluded by posing a counter-agenda to Washington's, calling on the U.S. to expand its markets for Paraguay's organic sugar, deregulate its markets for meat, and lower its tariffs on garments.

In Asuncion's view, Washington is welcome to keep helping Paraguay modernize its military, but deeper ties will have to be paid for with economic concessions.

Peru

In Peru, Rumsfeld could not hope for movement toward support of Washington's aims. The country's president, Alejandro Toledo, has suffered an implosion of credibility, with his approval rating at eight percent, after a wave of corruption and sex scandals that have inspired an outbreak of regionalism. Faced with a fractious Congress, Peru's prime minister and cabinet resigned the week before Rumsfeld's visit after Toledo made an unpopular appointment in order to shore up support from a small party. Having refused to accept a U.S. troop presence in Peru unless Washington accedes to the jurisdiction of the International Criminal Court, Lima had the cover to resist deepening military ties with Washington.

Following the pattern set by Duarte, Toledo stressed that the focus of his talks with Rumsfeld was not strategic, but economic. Lima wants Washington to conclude a promised free trade agreement with it, claiming that progress on the coca problem depends on opening up markets in the U.S. for alternative crops. In addition, Lima says that it cannot make progress against coca production and trafficking unless Washington provides it with more money. Statements following the talks did not mention isolating Caracas, and Rumsfeld failed to address Lima's trade and aid agenda. Although Toledo has been pro-Washington, his political position is too weak and Peru's political class is too divided for Lima to make any major policy shifts.

The Bottom Line

Washington's efforts to reverse the cycle of instability in the Andes and the attendant rise of populist movements, and to form a coalition to isolate Caracas, met with failure in Asuncion and Lima, where economic demands trumped strategic concerns. [See: "Cycle of Instability in the Andes: Bolivia, Ecuador and Peru"]

Look for Washington to face increasing difficulties in achieving its strategic aims in South America, as even governments that are willing to cooperate with the U.S. raise the economic price for strategic support and are drawn closer to emerging power blocs in the region that compete with Washington. Given domestic pressures in the U.S., Washington will not have the ability to pay the price demanded by states that it has deemed its potential allies.
*****
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'The 'Great Game' Heats Up in Central Asia

2005-08-22T06:36:00.000-07:00

Report Drafted By:Adam Wolfe

Russia and China delivered a one-two punch to Washington's ambitions in Central Asia on the eve of the G8 summit with a joint statement on "international order" followed by a meeting of the Shanghai Cooperation Organization (S.C.O.) that was hostile to U.S. interests. While this combination was not enough to knock the U.S. out of the region, it was the most forceful challenge to U.S. interests in Central Asia since the invasion of Afghanistan in 2001. [See: "Intelligence Brief: Shanghai Cooperation Organization"]

Seeking to prevent any further damage to Washington's position in the "Great Game," last week U.S. Secretary of Defense Donald Rumsfeld traveled to the region to shore up support for maintaining its bilateral agreements with the key players. This was followed by Uzbekistan announcing a deadline for U.S. withdrawal from a military base in its territory. These moves indicate that even though fighting in Afghanistan has yet to cool down, the traditional power politics of Central Asia are heating up.

China and Russia Coordinate Their Central Asian Policies

Before the S.C.O. meeting, Russia's and China's leaders met at the Kremlin on July 1 to discuss their goals in Central Asia and to discuss the upcoming G8 summit. The meeting signaled a shift toward greater cooperation between the two states, completely solved their long-standing border disputes from the legal perspective, and laid the foundation for greater integration of their state-controlled oil companies and banking sectors. One reason that the atmosphere in the Kremlin was so unusually amiable was the perception that a shared threat loomed larger than their differences in policy goals; that threat was Washington's role in Central Asia.

The "Joint Statement of the People's Republic of China and the Russian Federation Regarding the International Order of the 21st Century," signed by Chinese President Hu Jintao and Russian President Vladimir Putin on July 2, addresses U.S. hegemony in several less-than-oblique passages. The text emphasizes "non-interference in internal affairs," "mutual respect" for other nations' "sovereignty," and stresses the role of "multipolarity" in dealing with conflicts.

In a passage aimed at Washington's perceived encroachment in Central Asia, the document states, "The peoples of all countries should be allowed to decide the affairs of their own countries, and world affairs should be decided through dialogue and consultation on a multilateral and collective basis. The international community should thoroughly renounce the mentality of confrontation and alignment, should not pursue the right to monopolize or dominate world affairs, and should not divide countries into a leading camp and a subordinate camp." This last statement could also easily be read as a preemptive dismissal of the G8 on the eve of the Scotland meeting. Though Russia is now a member and China an observer of the grouping, they feel that the organization is dominated by the West's agenda.

This dismissal of Western-style multilateralism is further expanded in a passing broadside aimed at the World Bank and the I.M.F. and their emphasis on reform in exchange for aid or loans: "The international community should establish an economic and trade regime that is comprehensive and widely accepted and that operates through the means of holding negotiations on an equal footing, discarding the practice of applying pressure and sanctions to coerce unilateral economic concessions, and bringing into play the roles of global and regional multilateral organizations and mechanisms."

Beijing and Moscow resent the West demanding economic reforms before further integrating China and Russia into the existing globalization power structures. They wish to present an alternative marketplace for developing countries to sell their goods -- one that does not tie economic access to reform or transparency. China has been able to successfully use the widely expected expansion of its domestic market to sell this alternative source of revenue to countries irked by the I.M.F. or World Bank, from South America to Africa. Now it hopes to further cement such a relationship with the states of Central Asia.

In the joint statement, China and Russia sent a clear message to the other members of the S.C.O. -- Washington poses a threat to Central Asia's sovereignty; China and Russia can offer a similar economic and security package, only it will be designed to preserve the current status quo not to encourage market economies or democratic reforms. Fearing future waves of "color" revolutions in the region, these states were eager to receive this message.

A Bigger and Stronger S.C.O.

On July 5, the members of the S.C.O. -- China, Russia, Uzbekistan, Kazakhstan, Kyrgyzstan and Tajikistan -- met in Astana, Kazakhstan to discuss the changing political situation in Central Asia. While previous meetings focused nearly exclusively on the "three evil forces" -- terrorism, separatism and extremism -- and were dominated by China's desire to control the Uighur population in its Xinjiang region and protect its access to energy resources, this meeting demonstrated that the organization, which represents nearly 50 percent of the world's population when including states with observer status, desires to be a serious force in international affairs. This can be seen in the granting of observer status to India (at Russia's request), Pakistan (at China's insistence) and Iran (to the delight of all members).

The environment of the S.C.O. meeting was most influenced by the reaction to Uzbekistan's violent suppression of the May rebellion in Andijan. Western criticism of Uzbek President Islam Karimov's tactics brought to the surface the fears that the clan-based governments of Central Asia might fall in a wave of "color" revolutions, similar to that of Ukraine's "orange" revolution. Russia and China provided blanket support for Karimov after the suppression, while Washington could only offer nuanced criticism, fearing that intense criticism of Karimov would result in the loss of access to the Karshi-Khanabad air base, or K2, used to support U.S. operations in Afghanistan; nevertheless, the loss of this base now appears a likely scenario.

Washington's criticism was enough to spread fear throughout the ruling clans of Central Asia that the U.S. is engaged in covert operations to undermine or overthrow the current ruling regimes. This fear does not even escape Kyrgyzstan's subsequently elected government -- which swept into power in a similar manner as Ukraine's government -- because its support still rests on a shaky foundation of clan alliances.

In this environment, the S.C.O. sought to limit Washington's presence in the region -- Uzbekistan, Kazakhstan, Kyrgyzstan and Tajikistan shifted their support to China and Russia in order to protect their sovereignty from U.S. meddling. The joint declaration issued at the end of the summit took aim at Washington by rejecting attempts at "monopolizing or dominating international affairs" and insisting on "non-interference in the internal affairs of sovereign states." The members further urged the U.S.-led forces in Afghanistan to declare a timetable for withdrawal from Afghanistan and the Uzbek and Kyrgyz bases in the region that were established to support the Afghan operations. The Central Asian states see it in their interests to fill the power vacuum that the withdrawals would create with that of China and Russia, which they believe would better ensure the longevity of their regimes.

Top U.S. General Richard B. Myers summed up Washington's interpretation of the shift in blunt terms: "It looks to me like two very large countries were trying to bully some smaller countries." Ten days later, Rumsfeld landed in Kyrgyzstan to ensure that the world's only superpower wasn't elbowed out of the region.

Washington Pushes Back

The U.S. secretary of defense's visit to Kyrgyzstan and Tajikistan was aimed at shoring up support for the continuation of the U.S. military presence in each country, which was successful at least for the mid-term. Kyrgyzstan hosts a U.S. military base at the Manas air base, and Tajikistan offers the U.S. military and N.A.T.O. fly-over rights and hosts a small contingent of French soldiers involved in Afghan operations. French Defense Minister Michèle Alliot-Marie was in Dushanbe on July 21 to firm up that arrangement. Notably, Rumsfeld did not visit Uzbekistan, the other S.C.O. member-state that hosts a U.S. military base. Whether his absence was the result of an Uzbek request or a calculation of Washington's, it demonstrated how the U.S. plans to address the shifting power relations in the region.

Washington has approached Central Asia on bilateral terms, never treating the S.C.O. members as a bloc. In terms of leverage in the relations, this shifts the fulcrum to Washington's advantage. China and Russia encourage the S.C.O. states to act multilaterally in an effort to limit Washington's reach. Rumsfeld's trip demonstrated Washington's ability to act bilaterally with Kyrgyzstan, which has a newly elected government and has yet to congeal its foreign policy fully, and with Tajikistan, which has traditionally been the S.C.O. member that follows a balanced approach with its foreign suitors.

Recently, the relations between Uzbekistan and Kyrgyzstan have shown the strengths of Washington's bilateral approach. When more than 500 Uzbeks crossed over into Kyrgyzstan following the crushing of protesters in Andijan, Kyrgyzstan initially reacted in step with the Uzbek government. Eighty-seven Uzbek refugees were sent back, prompting outrage from the U.N. and Washington. This led to negotiations between the U.N. and officials in Kyrgyzstan, which, by Washington's design, left out any avenue for input from Uzbekistan. On July 29, a plane with 440 Uzbek refugees left Kyrgyzstan for Romania. This demonstrated Washington's ability to influence directly the geopolitics of Central Asia only a few weeks after the united front presented by the S.C.O. called for a U.S. withdrawal.

However, in dealing with Karimov's government in Uzbekistan, Washington's bilateral approach is no longer effective, in part because of its success in Kyrgyzstan. The Uzbek suspicion of Washington's involvement in the Kyrgyzstan revolution and uprising in Andijan has caused Karimov to throw his government's support behind China's and Russia's vision for the region. As such, the same day that the plane carried refugees out of Kyrgyzstan, Uzbekistan asked Washington to leave the K2 air base within 180 days. The immediate reaction from Washington was to hold back on sending a high-level representative to renegotiate the arrangement while waiting for things to "cool down."

This seems to suggest that the U.S. is leaning toward the future goal of regime change in Uzbekistan and is willing to sacrifice the air base if necessary. This does not mean that Washington will cut off all relations with Uzbekistan, but if it becomes apparent that future negotiations will not lead to an extension of the air base use agreement, Washington can be expected to pursue further bilateral agreements with the other governments in Central Asia to isolate Karimov's government.

Conclusion

Beijing, Moscow and Washington are once again using Central Asia, the setting for the "Great Game" between Tsarist Russia and Victorian England more than 150 years ago, as their game board in a region rarely neglected by the world's great powers. In the contemporary version of the game, Washington approaches each state bilaterally, offering incentives to support the operations in Afghanistan while undermining the consensus put forth at the recent S.C.O. meeting.

China and Russia are acting in tandem to shore up support for S.C.O. policies by offering blanket support for the current regimes and implicitly calling attention to U.S.-led efforts to undermine their governments. The states hosting the game board will continue to swing their support from China and Russia to the U.S., and back again, so long as they keep their hold on power. The past month has seen a flurry of activity in the Great Game, and it can be expected that things will not cool down anytime soon.
*****
URL:http://www.pinr.com/report.php?ac=view_report&report_id=339

Shanghai bloc expands reach

2005-08-22T06:12:00.000-07:00

By Raza Naqvi
THE WASHINGTON TIMES
August 20, 2005

An alliance of six Central Asian nations has emerged as a serious contender in the geopolitics of the region, posing a direct challenge to President Bush's push for democratic reform among the area's authoritarian states.

Dominated by China and Russia, the Shanghai Cooperation Organization (SCO) also is seen by regional specialists as a vehicle for reviving the Great Game struggle for supremacy that dominated politics in the regions in the 19th century and during the Cold War.

"The SCO has always been conceived of as a way for countering American influence in the region," said Stephen Blank, a professor of national security affairs at the U.S. Army War College.

The SCO powers "have gotten a lot more apprehensive about [U.S.] bases and about the Bush democratization policy," he said.

The Sino-Russian drive to mold the SCO into an effective regional force comes as the one-time Cold War rivals are also intensifying bilateral ties, capped by an unprecedented joint military exercise that began Thursday.

At its most recent summit last month in Astana, Kazakhstan, the SCO -- which includes Russia, China, Tajikistan, Kazakhstan, Kyrgyzstan and Uzbekistan -- made its most assertive statement to date, demanding a timetable for American troops to pull out of strategic military bases in Uzbekistan and Kyrgyzstan that were set up to support the 2001-2002 war in Afghanistan.

"Considering the active phase of the military antiterrorist operation in Afghanistan has finished, [SCO] member-states ... consider it essential that the relevant participants in the antiterrorist coalition set deadlines on the temporary use" of air bases in Uzbekistan, the declaration said.

The bases were logistical hubs for U.S. military operations in Afghanistan and are still essential supply posts for the region.

The SCO also is expanding its reach in other ways.

India, Pakistan and -- most worrying for the United States -- Iran also were invited as observers to the Astana summit. Pakistan attended at China's request, while Russia extended the invitation to India. Iranian officials came by mutual agreement.

"I would guess that this is a demonstration of diplomatic support by China in the first place and Russia in the second," said Robert Cutler, research fellow at the Institute for European and Russian Studies at Carleton College in Minnesota. "And since the SCO is concerned with promoting economic cooperation, China would see an opportunity for cooperation with Iran."

But "China and Russia did not invite Iran to intimidate the United States," he added.

There are growing signs that Russia and China are using the organization to re-establish their influence in the region, reviving the Great Game in which Russia, the United States and regional powers vied for influence in Eurasia.

The statement of the SCO summit was the most palpable signal of the organization's changing role in the region.

Mr. Cutler said China was the "motivating force" behind the push to enhance the SCO's clout. The alliance got its start in the late 1990s as a way to ease regional tensions and resolve border disputes.

When Uzbekistan joined the "Shanghai Five" in 2001, the alliance already was turning its attention to joint anti-terrorist and political cooperation in the post-September 11 world.

"It was a Chinese diplomatic initiative that gave it the traction to turn into something broader than simple border demarcations," Mr. Cutler said. "As time has gone on, Russia has also seen it in its interest" to use the SCO for exercising its influence in Central Asia.

The U.S. presence, massively increased with the Afghan war and its aftermath, "scrambled things up," he added.

On July 2, just prior to the Astana summit, Russian President Vladimir Putin and Chinese President Hu Jintao issued a joint statement on the "international order of the 21st century," a declaration widely seen as a veiled warning about unchecked American power in Central Asia and beyond.

"The peoples of all countries should be allowed to decide the affairs of their own countries, and world affairs should be decided through dialogue and consultation on a multilateral and collective basis," the statement said in part.

"The international community should thoroughly renounce the mentality of confrontation and alignment, should not pursue the right to monopolize or dominate world affairs, and should not divide countries into a leading camp and a subordinate camp," it said.

According to the Internet-based Power and Interest News Report (www.pinr.com), the two presidents signed the statement out of a "perception that a shared threat loomed larger than their [own] differences in policy goals; that threat was Washington's role in Central Asia."

Russia and China this week began an unprecedented joint military exercise conducted in part close to the Korean Peninsula. "Peace Mission 2005," involves Russian fighter planes and paratroopers, China's nuclear submarine fleet and approximately 10,000 troops in total.

U.S. officials say they do not see the exercises as hostile to American interests, but Pentagon officials add they will be watching the exercises very closely.

Since the end of the SCO summit last month, Uzbekistan, the newest member of the bloc, has essentially evicted U.S. forces from its Karshi-Khanabad base, a base that played a pivotal role in the U.S.-led Afghan campaign. More recently, the base had been used as a supply transit point for humanitarian aid into northern Afghanistan.

Uzbek President Islam Karimov's decision to end the U.S. base accord is seen as the culmination of deteriorating relations with Washington following the U.S.-backed democratic revolutions in Georgia and Ukraine that overthrew pro-Moscow governments.

According to analysts, Mr. Karimov suspected an American hand in the 2003 ouster of President Eduard Shevardnadze of Georgia and fears the Bush administration is encouraging similar democratic revolutions elsewhere around the Russian periphery.

"It's a reasonable assertion that Karimov would see these changes in the region as implements of U.S. policy," Mr. Cutler said. "These uprisings were probably encouraged and equipped by the U.S. government or related [private groups]."

Prior to the political upheavals in Georgia, Ukraine and Kyrgyzstan, both Uzbekistan and Kazakhstan had been pursuing pro-U.S. policies to boost economic and political cooperation.

However, both Mr. Karimov and Kazakh President Nursultan Nazarbayev have shifted course, feeling threatened by U.S. calls for democratic reforms in the region.

The SCO, regional analysts say, provides both leaders with diplomatic cover and the backing of Russia and China, neither of whom has embraced the U.S. drive for reform.

Still, despite setbacks in Uzbekistan, the United States maintains a strong foothold in the region, enhanced by Defense Secretary Donald H. Rumsfeld's recent visit to Kyrgyzstan, Tajikistan and Turkmenistan.

Kyrgyzstan, the site of the second largest U.S. base in Central Asia, told Mr. Rumsfeld last month that U.S. forces were welcome to stay as long as Washington deemed necessary. New President Kurmanbek Bakiyev appeared eager to balance good ties with Washington with his country's overtures to Russia and China through the SCO.

In a number of Central Asian countries, it is the democratic opposition which is the strongest supporter of continued U.S. ties and the most skeptical of the SCO's agenda.

Opposition leaders from Kazakhstan and Azerbaijan, another Central Asian authoritarian state under pressure to reform, have stressed the need for a force to "counterbalance" Russian and Chinese influence in the region.

"To us, American troops in the region are a guarantee of security," said Asim Mollazade, founder of the Democratic Reforms Party of Azerbaijan, during a recent Washington visit. "The United States gave us support in our fight for independence against the Soviets and now they are supporting us in our democratic aspirations."

Alikhan Baimenov, a democratic opposition leader in Kazakhstan, was more even more emphatic.

"A U.S. withdrawal from Central Asia will give Russia a chance to move in," he said. "They have their own interests."
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URL:http://www.washingtontimes.com/world/20050819-105943-8448r.htm

Al-Qaeda's Proliferating Ideology

2005-08-22T05:34:00.000-07:00

Drafted By: Erich Marquardt

The July 7, 2005 attacks in London served as reminders that there is no end in sight to the current campaign by Islamists against the United States and its allies. The attacks were committed by British citizens, some of whom were raised in the country. This fact is important since it displays how segments of the British Muslim population became so alienated by British foreign policy that they contributed to al-Qaeda leader Osama bin Laden's movement against the United States and its allies.

Furthermore, the strikes came after similar attacks in Madrid, where on May 11, 2004, 191 people were killed and over 600 wounded when ten bombs were detonated on the city's train line. Spain has held many suspects in these attacks; some are Moroccan, others Tunisian, but all Muslim.

If attacks such as these continue, it will mark al-Qaeda's success at listing an accurate set of grievances against the West that many Muslims share. By exploiting those that agree with this set of grievances, al-Qaeda is bound to organize, and, more importantly, inspire segments of the Muslim population to take violent action against the U.S. and its allies. [See: "The Threat of Al-Qaeda and the Islamic Revolutionary Movement"]

Implications of the London Attacks

The July 7 attacks in London were coordinated effectively, with multiple militants exploding four bombs within an hour's time frame. Three of the bombs struck underground trains, while the last bomb destroyed one of London's trademark double-decker busses. The attacks occurred in downtown London and sent a message to many governments that similar style incidents could occur anywhere. The attacks left some 50 dead and hundreds injured. Abu Hafs al-Masri Brigades, an Islamist group that was formed in 2001, claimed responsibility for the actions. [See: "Intelligence Brief: Islamist Terrorism in Europe"]

Two weeks after the July 7 attacks, Muslim militants targeted London's transportation system again -- the Brigades also claimed responsibility for these attacks. Where the July 7 militants succeeded, the July 21 militants failed. The July 21 attacks targeted the London transportation system yet none of the bombs detonated properly and there were no serious casualties. Indeed, one of the suspects, Hussain Osman -- also known as Hamdi Issac -- argues that the July 21 attacks were merely "copycat" attacks intended to foment fear and panic, but not to actually kill anyone.

London investigators have also not been able to uncover any connection between the July 7 attackers -- who are believed to have died in the attacks -- and the July 21 attackers. The July 7 attackers, for instance, were of Pakistani descent, while the July 21 attackers were African. Investigators have not ruled out a connection yet. More importantly, investigators believe that the two groups of militants had no organizational relationship with al-Qaeda. This development, if it is true, further highlights how bin Laden's rhetoric has emboldened Muslims across the world who agree with his argument of the need for a "defensive jihad" against the U.S. and its allies. [See: "The Threat of Al-Qaeda and the Islamic Revolutionary Movement"]

If there were no organizational ties to al-Qaeda, the London attacks signify the difficulties in preventing such acts in the future since there is no one group to infiltrate and eliminate. For instance, while the latest attacks were claimed by the Brigades, it is not clear whether the organization had any real role in the operations.

Abu Hafs al-Masri Brigades

The Brigades were formed in 2001 after the death of al-Qaeda leader Abu Hafs al-Masri -- known as Muhammad Atef -- in Afghanistan; the organization's title also bears his name. Their first attributed attack occurred on March 9, 2004, when two suicide bombers detonated themselves in Istanbul, killing one person and injuring five others. Then, on May 11, 2004, the group claimed responsibility for the terror attack on Madrid's transportation system, where 191 people were killed and over 600 wounded when ten bombs were detonated on the train line. The Brigades claimed that the strike was in response to Spain's military support of the U.S.-led occupation in Iraq.

However, it is not clear how involved the Brigades were in all of these incidents; indeed, many of its claims have been proven false. For instance, the organization claimed responsibility for the August 5, 2004 bombing of the Marriott Hotel in Jakarta, in addition to the power blackout in August 2003 that affected the northeast United States; both claims turned out to be false. Because of these inconsistencies, it is possible that a figure within the organization lays claim to attacks that the group had no role in, simply to promote the notion that the organization is an organized and lethal force.

The veracity of the Brigades' claims are important, considering that after the London attacks the organization released a statement giving Italy, Denmark and the Netherlands an August 15 deadline to withdraw troops from Iraq. Failure to meet the deadline, the organization argued, would result in assaults on these countries by Islamist militants. This deadline has concerned Italy greatly, since the country fears that its support for the U.S.-led war in Iraq has made it a high target for Islamists.

Concern in Italy

Italians fear that members of their own Muslim population could follow al-Qaeda's ideology and launch an attack on Italian soil. On July 12, for instance, the Italian military intelligence agency S.I.S.M.I. released an alarming report where it stated that some 300 Islamist suicide fighters successfully reached Iraq from other countries -- three of them were proven to have come from Italy. This knowledge is concerning and embarrassing for the Italian government, for it sheds doubt on Rome's ability to combat internal militants since it cannot even prevent them from leaving Italy to fight in Iraq.

However, even if the Brigades does not have the operational capacity that it proclaims, Italy's support of the U.S. still makes it a target for other Islamist militants, and the government is aware of this. The success of the July 7 London attacks, and even the fear caused by the failed July 21 attacks, prodded Rome to action, and in recent days it has taken serious measures against potential Islamists within its borders.

On August 15, Italian police announced that more than 100 suspected Islamists had been arrested, and that Rome would expel hundreds more; the action is part of Italy's anti-terror sweep that is now possible due to legislation passed after the London attacks giving the Italian police more power. According to the Italian Interior Ministry, police targeted "Islamic gathering places: call centers, Internet points, Islamic butcher shops and money transfer business."

The ministry also stated that it ordered over 700 people to leave Italy for violating immigration laws. Also on August 15, the ministry stated that its current intelligence can "confirm that an elevated risk for a terrorist attack in our country remains." As the September 11, 2001 anniversary draws near, the Italian government is being extra vigilant in case militants are planning to launch an attack on that day in order to tie special significance to their actions.

Denmark and the Netherlands

Denmark is also a country on the Brigades' hit list. Some 500 Danish troops are in Iraq fighting alongside U.S.-led forces. Islam is now the second largest religion in Denmark, making up about five percent of the population.

In recent weeks, Danish police have been very visible in the country's capital, Copenhagen, and have been especially vigilant in protecting the city's public transportation system.

While it has not responded with the same vigor as Rome, Copenhagen has taken action against some Muslim extremist groups. Just recently, for instance, Fadi Abdullatif, spokesman for the Danish wing of Hizb ut-Tahrir -- a radical Islamist group -- was arrested due to his threats against the Danish government. Such rhetoric was seen in a Hizb ut-Tahrir handout, distributed in Denmark, that said, "So, travel to help your brothers in Fallujah and exterminate your rulers if they block your way."

The Netherlands was also threatened with the August 15 deadline. However, the Netherlands withdrew its troops even before the threat was levied. Nevertheless, the country feels that it could be next in an attack, especially since it has large Moroccan and Turkish communities that have not been completely integrated with Dutch society.

Conclusion

It is difficult to draw conclusions regarding the Islamic revolutionary movement. A logical assessment is that U.S. military operations against al-Qaeda in Afghanistan scattered an already relatively primitive organization. Continued U.S. vigilance in that country and elsewhere will make it difficult for al-Qaeda to orchestrate any large-scale attacks against the United States, or even its major European allies.

Yet, because of al-Qaeda's attractive ideology, similar attacks such as those that occurred in London and Madrid, in addition to those that have been executed in other capitals around the world, will continue. In these cases, militant individuals or Muslim war veterans will be drawn together to undertake the planning and execution of attacks against the interests of the U.S. and its allies. These individuals and groups may have no organizational relationship with al-Qaeda, but agree with bin Laden's rhetoric against the West and are willing to use violence to further this goal.

While it is possible to prevent al-Qaeda from developing into a larger and more sophisticated organization, it is less possible to prevent small-scale attacks from unknown and unidentified militants who develop plans to attack the West with the motive being equal to a religious and political grievance. Preventing these attacks will require the creation of a security state, a possibility that is not likely in Western countries. Of course, as long as vigilance remains high, it is also unlikely that Muslim militants will be able to execute a massive and sustained terror campaign. However, such knowledge is not especially reassuring to the West as it only takes one lucky and well-placed strike to cause a major catastrophe.
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URL:http://www.pinr.com

Pakistan: a Geopolitical Crux

2005-08-20T05:36:00.000-07:00

Drafted By: Federico Bordonaro

Two recent events have increased Pakistan's already remarkable geopolitical importance. The first was an ambitious and complex geostrategic move by India -- Pakistan's main geopolitical rival -- consisting in a two-fold strategic partnership with China and the United States. Such an initiative by New Delhi, aimed at enhancing India's role as the Indian Ocean's central power, amplifies Islamabad's security concerns regarding its adversary's strategy. The second event was the wave of terrorist attacks which struck London on July 7 and July 21: Scotland Yard rapidly identified some of the perpetrators as British Muslims of Pakistani descent. [See: "India's Project Seabird and the Indian Ocean's Balance of Power"]

Islamabad's Perilous Game in the Post-9/11 International Context

Pakistan's policy is nowadays perceived in a paradoxical way. On the one hand, its regime is considered by diplomats and scholars to be among the most pro-American due to President Pervez Musharraf's official commitment to tackling al-Qaeda and assisting U.S. operations in Afghanistan. On the other hand, its society is regarded as one of the greatest hotbeds of Islamic radicalism, spreading terrorist ideology around the Muslim world. Islamabad is still the only Muslim power to possess a nuclear weapon, which, together with its flourishing demography and Islamic schools' activities, gives it the status of a regional great power.

At a time of China's rise as a global power, the somewhat fragile balance in Islamabad's political and military milieus is to be carefully monitored. Analysts know that both Pakistan's army and its intelligence agency, the I.S.I., are less than monolithic in their support of the current administration. A strategic partnership with Beijing, consisting in defense technology sharing, is allegedly the preferred option for some influential Pakistani decision-makers.

Musharraf's position is similar to that of Egyptian President Hosni Mubarak: a pragmatic statesman who aligns with the U.S. notwithstanding the presence of a permanent radical opposition, of a fundamentalist character, deeply rooted in society. Cracking down on religious institutions and political movements that solidly backed al-Qaeda had been Musharraf's card for staying in power with U.S. support after September 11, 2001. It is clear that the terrorist attacks against Britain have put once again an enormous pressure on the Pakistani government.

Reacting to allegations about the possible involvement of some Pakistani citizens in the July 22 Sharm el-Sheikh bombing, Musharraf declared on July 25 that al-Qaeda has been eradicated from the country following Islamabad's anti-terror policy. However, both the U.S. and the E.U. member-states are showing growing concern about Pakistan's inability to effectively tackle terror cells' activities. One of the most worrisome aspects of the problem, Western intelligence agencies say, is that some European citizens of Pakistani descent apparently maintain very close relations with their ancestral home-country's radical elements, being said to flock back to their country of origin to receive extremist indoctrination and, possibly, terrorist training. Moreover, some of the most radical imams in Europe are also suspected of furthering al-Qaedaist interests using the local mosque as a training facility.

Although the United States seems to be willing to continue promoting a balance of power in the South Asian region by enhancing cooperation in security and defense policies with both India and Pakistan, the Bush administration is increasingly worried about Islamist activities in Pakistan's north-western tribal region of Waziristan, and also about growing Sino-Pakistani military cooperation -- leading to Chinese use of the Gwadar naval base in the Arabian Sea. [See: "India's Project Seabird and the Indian Ocean's Balance of Power"]

On June 15, Pakistani military sources said that U.S. forces killed 24 pro-Taliban militants on Pakistani territory. This seems to show that Washington is determined not to leave the task of fighting Islamist militants to Pakistani forces alone. However, it entails a clear violation of Pakistan's national sovereignty, despite the good relations between Washington and Islamabad. This fact, coupled with the U.S. perception of India as the more important military regional partner -- given the U.S.-China rivalry -- could complicate, if not jeopardize, the future of the U.S.-Pakistan relationship.

Pakistan's Geopolitical Cycles and Constants

Our decade's conflictual international landscape could very likely mark the beginning of Pakistan's third geopolitical cycle, characterized by a much more fluid, unsettled system of alliances and strategic partnerships. The first cycle was in place during the 1947-71 period when the country incorporated today's Bangladesh (formerly Eastern Pakistan) and was integrated into the U.S.-led geopolitical system devised to contain the U.S.S.R.'s drive toward the Indian Ocean. A Moscow-Delhi axis then rivaled with a Washington-Islamabad counter-combine.

After the 1971 war and the subsequent separation of Bangladesh, Pakistan's geopolitical balance turned toward the Middle East, and a second cycle began. However, the country continued to serve as an indispensable strategic ally for Washington, for in 1978-79 the concomitant Iranian revolution and Russian invasion of Afghanistan put Islamabad in the ideal position to function as a geostrategic counterbalance to Moscow and Tehran.

This latter period consolidated a U.S.-Pakistan-China triangle directed against Moscow-New Delhi-Tehran. Two major events started to change this context in the 1990s: the end of the Soviet empire and China's rise as an ambitious global power. As Washington aggressively and pre-emptively contained a resurgent Russia by means of continuous N.A.T.O. expansion and the promotion of its geostrategic and economic interests in Central Asian countries, the Moscow-New Delhi axis soon appeared to be less dangerous for the U.S. On the contrary, both the Pentagon and the American business community started to look at China's rise with growing concern.

These developments inspired a U.S. pro-India turn in the late 1990s, a shift which is consolidating in our days. However, a strong U.S.-Pakistan relationship was still in place at the beginning of the 21st century. But a quick look at Pakistan's internal geopolitics will better clarify the current imbroglio, and reveal why a third cycle could be starting.

Born in 1947 as a result of the British de-colonization of India, Pakistan rapidly found itself in a volatile environment. Whereas the conflict over Kashmir is without a doubt the most serious geopolitical controversy opposing Islamabad to New Delhi, Pakistani political geography was and is a source of internal instability. Punjabis traditionally dominate the country's political life and the history of other ethnic groups such as Balochis, Sindhis, and Pashtuns is inextricably linked to that of Iran, India, and Afghanistan. In this mosaic, Islamic radicalism often functions as an identity-catalyst, thus juxtaposing itself to the more traditional nationalism. As a result of the Islamist grip on society, moreover, secular leaders like General Musharraf are regarded by many citizens as mere pawns of foreign powers (i.e. the United States in the present phase).

This social context can fuel the fire of international terrorist cells. As Pakistan has been a nuclear power since 1998, an Islamist regime in Islamabad is considered to be an unacceptable risk by the U.S., India, and their allies. Moreover, the end of the Cold War and the current systemic transition from a U.S.-dominated unipolar phase to a proto-multipolar one prevents Islamabad from finding a fixed set of alliances. [See: "The Coming World Realignment"]

The U.S., China and Iran, but also the Shanghai Cooperation Organization (S.C.O.) countries (which recently gave Islamabad the status of observer), are all interested in various types of partnership with Pakistan. Nonetheless, they are also ready to contain it and to try to control its unstable political landscape. A third geopolitical cycle could very well be the most dangerous one for Pakistan, precisely because the new era gives Islamabad many different options for re-orienting its foreign policy, while simultaneously having to cope with social unrest -- a dynamic that could end up in an explosive combination.

An Uncertain Future

The geopolitical future of Pakistan looks uncertain. The first big question is the evolution of Musharraf's relations with Washington. The main variables here are the Islamist activities in Waziristan -- connected with al-Qaeda and Taliban militants -- and the new U.S.-India defense cooperation, which is likely to worry Islamabad.

In addition, India's rise as a modern military power in the Indian Ocean and New Delhi's balanced diplomatic initiative with both Beijing and Washington is likely to diminish Pakistan's relative power in the Arabian Sea, thus triggering off a new arms race in the naval and aeronautic fields. [See: "India's Project Seabird and the Indian Ocean's Balance of Power"]

On the other hand, Pakistan could soon become a major player in the Central Asia geopolitical game. A geographic issue will be decisive here: both Tajikistan and Uzbekistan lack any sea access. Consequently, Pakistani harbors on the Indian Ocean could very well function as outlets for the new Central Asian energy routes -- a major stake which attracts the interest and investments of not only China and Russia, but also of Western powers.

Beijing, as mentioned, already enjoys Islamabad's permission to use the Arabian Sea naval base of Gwadar. Hence, a renewal of Sino-Pakistani strategic partnership appears likely for both energy and military security reasons.

In a more grave perspective, Islamabad's know-how in nuclear technology could potentially function as a pillar of a hostile North Korea-Pakistan-Iran "nuclear axis" directed against the U.S. and its allies.

Conclusion

Given the recent increase in Islamist terrorist activities -- which directly involve Pakistani radical circles -- and the country's inner political instability, Islamabad's position emerges as one of the world's decisive geopolitical pivots. At a time of intense competition between Washington and Beijing, coupled with India's rise as a regional power, Pakistan occupies a geostrategic space open to dangerous developments.

A U.S.-India axis could endanger the role of Islamabad as a decisive Washington ally in the region, and this will be even more true if the U.S. administration perceives that Musharraf's commitment in the "war on terrorism" is unsatisfactory. Should that occur, the likelihood of U.S. direct intervention in Waziristan would become stronger. Such a move, however, might not only destabilize Pakistan even further -- hence opening the question of an early Musharraf succession -- but would likely cause a further deterioration of Sino-American relations.
*****
URL:http://www.pinr.com

''Intelligence Brief: Unocal''

2005-08-19T08:44:00.000-07:00

Drafted By:Dr. Michael A. Weinstein 19 July 2005

During the week of July 11, the bidding war between U.S.-based oil giant Chevron and the Chinese National Offshore Oil Corporation (C.N.O.O.C.) for control of U.S. oil company Unocal heated up, with both adversaries mounting major public relations and lobbying campaigns, and U.S. Congressional opposition to a C.N.O.O.C. takeover ratcheting up to a fever pitch. [See: "Intelligence Brief: China"]

Until C.N.O.O.C. weighed in with an unsolicited $18.5 billion cash offer, it appeared that Chevron's $16.6 billion bid for Unocal would face clear sailing. The Chevron acquisition had already gained approval from Unocal's board, pending an August 10 stockholder vote, but C.N.O.O.C.'s intervention sent the deal off course. At a July 17 meeting, Unocal's board rejected C.N.O.O.C.'s offer in its present form, but the decision was not final. Analysts believe that Unocal's board is trying to play the two sides off against one another, seeking to get the adversaries to raise their bids.

Although Unocal accounts for only 0.23 percent of world oil production and 0.3 percent of U.S. consumption, the company has 1.75 billion barrels of reserves, 980 million of which are in Asia and 447 million of which are in the U.S. Unocal is particularly attractive to C.N.O.O.C. and to China's government, which owns 70 percent of C.N.O.O.C., because of the Asian reserves, which are located in Indonesia, Myanmar and Thailand. As the global oil industry consolidates and competition for reserves becomes more intense, Chevron sees Unocal -- a California neighbor -- as a prime strategic acquisition.

Neither of the adversaries seems willing to give way and, having been placed on the defensive, Chevron has politicized the conflict, exerting pressure in the U.S. Congress on a broad front to ban the C.N.O.O.C. takeover outright or to delay it sufficiently to persuade Unocal shareholders to accept Chevron's offer, which already has regulatory approval. Chevron's lobbying effort, which has met with impressive success, has been countered by a similar C.N.O.O.C. campaign. Vice Chairman of Chevron, Peter J. Robinson, openly admits trying to turn the company's conflict with C.N.O.O.C. into a "geopolitical" issue. C.N.O.O.C. strives to interpret the bidding war as simply an ordinary business deal.

Despite the Congressional outcry, the Bush administration has remained neutral in the Unocal dispute, promising that C.N.O.O.C.'s bid -- if it is accepted -- will be reviewed by the Committee on Foreign Investment in the U.S., which vets foreign takeovers of U.S. companies on security grounds. The administration's silence reflects the conflicting interests at play in Washington's global economic policy, which the Unocal fight has highlighted.

Globalization or Economic Nationalism

In its attempt to portray its conflict with C.N.O.O.C. as a geopolitical issue, Chevron has brought to the fore the increasingly difficult decisions faced by Washington in responding to the rise of China's economic power. Writing in U.S. News and World Report, Matthew Benjamin has summarized the problem succinctly: "Essentially, the United States and its politicians are learning that globalization is not pain free."

Sino-U.S. relations are among the most complex bilateral ties in the world and are marked by subtle patterns of dependency, interdependence, competition, cooperation and conflict. Up until the Unocal dispute, economic relations between the two great powers had achieved a highly unstable equilibrium based on Chinese exploitation of the U.S. market for its exports in return for China buying U.S. debt. That tacit bargain had already come under stress through the loss of U.S. manufacturing jobs to China, ballooning Chinese textile exports, alleged Chinese violations of intellectual property rights of U.S. companies, technological transfers and mounting opposition to the low currency valuation of China's yuan relative to the U.S. dollar.

Resistance in the U.S. to the domestic impact of China's growing strength has crystallized around the Unocal dispute because C.N.O.O.C.'s bid is the most serious instance of recent Chinese moves to acquire U.S. assets rather than simply to fund its debt. The recent rise in the price of oil and the high probability that elevated price levels will persist has made energy a sensitive political issue in the U.S. By going to Congress, Chevron has succeeded in making Unocal a strategic issue.

Finding access points in every Congressional committee concerned with foreign trade, resources and military security, Chevron's campaign culminated on July 13 at a hearing of the House Armed Services Committee at which congressmen favorable to Chevron joined with anti-Beijing defense hawks to commit to introducing a bill blocking a C.N.O.O.C. takeover. Linking fears that Beijing might use its acquisitions to disrupt the U.S. economy and the arguments that U.S. energy companies are barred from buying Chinese firms and that Beijing's financing of C.N.O.O.C.'s bid with low-interest loans violates fair trade principles, Congressional opposition to the bid spread beyond its original base in California to include every region.

The wave of economic nationalism set in motion by Chevron's lobbying carries with it the long term possibility that U.S. resistance to asset acquisition might place foreign investments of U.S. corporations in jeopardy, stalling or even reversing economic globalization. Analysts agree that C.N.O.O.C.'s bid, which follows Lenovo's acquisition of IBM's personal computer business and Haier's bid for Maytag, will be repeated by many more efforts by Chinese firms to acquire U.S. assets. As time goes on Washington will be increasingly forced to choose between globalization and nationalism.

The Bottom Line

Whether or not C.N.O.O.C. succeeds in making an offer generous enough to persuade Unocal's shareholders to acquiesce in a takeover, the bidding war has brought to the surface an underlying strain of economic nationalism in the U.S. that is unlikely to abate. As interests in the U.S. are affected adversely by Chinese economic initiatives, the alliance between those interests and anti-Beijing security hawks will strengthen, placing strains on Washington's support of globalized investment markets.

Look for a series of difficult decisions on asset acquisition to emerge in the years ahead that will significantly determine the future of globalization and the shape of Sino-U.S. relations.
*****
URL:http://www.pinr.com/report.php?ac=view_report&report_id=329

The 'Great Game' Heats Up in Central Asia

2005-08-19T06:32:00.000-07:00

Drafted By: Adam Wolfe

Russia and China delivered a one-two punch to Washington's ambitions in Central Asia on the eve of the G8 summit with a joint statement on "international order" followed by a meeting of the Shanghai Cooperation Organization (S.C.O.) that was hostile to U.S. interests. While this combination was not enough to knock the U.S. out of the region, it was the most forceful challenge to U.S. interests in Central Asia since the invasion of Afghanistan in 2001. [See: "Intelligence Brief: Shanghai Cooperation Organization"]

Seeking to prevent any further damage to Washington's position in the "Great Game," last week U.S. Secretary of Defense Donald Rumsfeld traveled to the region to shore up support for maintaining its bilateral agreements with the key players. This was followed by Uzbekistan announcing a deadline for U.S. withdrawal from a military base in its territory. These moves indicate that even though fighting in Afghanistan has yet to cool down, the traditional power politics of Central Asia are heating up.

China and Russia Coordinate Their Central Asian Policies

Before the S.C.O. meeting, Russia's and China's leaders met at the Kremlin on July 1 to discuss their goals in Central Asia and the upcoming G8 summit. The meeting signaled a shift toward greater cooperation between the two states, completely solved their long-standing border disputes from the legal perspective, and laid the foundation for greater integration of their state-controlled oil companies and banking sectors. One reason that the atmosphere in the Kremlin was so unusually amiable was the perception that a shared threat loomed larger than their differences in policy goals; that threat was Washington's role in Central Asia.

The "Joint Statement of the People's Republic of China and the Russian Federation Regarding the International Order of the 21st Century," signed by Chinese President Hu Jintao and Russian President Vladimir Putin on July 2, addresses U.S. hegemony in several less-than-oblique passages. The text emphasizes "non-interference in internal affairs," "mutual respect" for other nations' "sovereignty," and stresses the role of "multipolarity" in dealing with conflicts.

In a passage aimed at Washington's perceived encroachment in Central Asia, the document states, "The peoples of all countries should be allowed to decide the affairs of their own countries, and world affairs should be decided through dialogue and consultation on a multilateral and collective basis. The international community should thoroughly renounce the mentality of confrontation and alignment, should not pursue the right to monopolize or dominate world affairs, and should not divide countries into a leading camp and a subordinate camp." This last statement could also easily be read as a preemptive dismissal of the G8 on the eve of the Scotland meeting. Though Russia is now a member and China an observer of the grouping, they feel that the organization is dominated by the West's agenda.

This dismissal of Western-style multilateralism is further expanded in a passing broadside aimed at the World Bank and the I.M.F. and their emphasis on reform in exchange for aid or loans: "The international community should establish an economic and trade regime that is comprehensive and widely accepted and that operates through the means of holding negotiations on an equal footing, discarding the practice of applying pressure and sanctions to coerce unilateral economic concessions, and bringing into play the roles of global and regional multilateral organizations and mechanisms."

Beijing and Moscow resent the West demanding economic reforms before further integrating China and Russia into the existing globalization power structures. They wish to present an alternative marketplace for developing countries to sell their goods -- one that does not tie economic access to reform or transparency. China has been able to successfully use the widely expected expansion of its domestic market to sell this alternative source of revenue to countries irked by the I.M.F. or World Bank, from South America to Africa. Now it hopes to further cement such a relationship with the states of Central Asia.

In the joint statement, China and Russia sent a clear message to the other members of the S.C.O. -- Washington poses a threat to Central Asia's sovereignty; China and Russia can offer a similar economic and security package, only it will be designed to preserve the current status quo not to encourage market economies or democratic reforms. Fearing future waves of "color" revolutions in the region, these states were eager to receive this message.

A Bigger and Stronger S.C.O.

On July 5, the members of the S.C.O. -- China, Russia, Uzbekistan, Kazakhstan, Kyrgyzstan and Tajikistan -- met in Astana, Kazakhstan to discuss the changing political situation in Central Asia. While previous meetings focused nearly exclusively on the "three evil forces" -- terrorism, separatism and extremism -- and were dominated by China's desire to control the Uighur population in its Xinjiang region and protect its access to energy resources, this meeting demonstrated that the organization, which represents nearly 50 percent of the world's population, desires to be a serious force in international affairs. This can be seen in the granting of observer status to India (at Russia's request), Pakistan (at China's insistence) and Iran (to the delight of all members).

The environment of the S.C.O. meeting was most influenced by the reaction to Uzbekistan's violent suppression of the May rebellion in Andijan. Western criticism of Uzbek President Islam Karimov's tactics brought to the surface the fears that the clan-based governments of Central Asia might fall in a wave of "color" revolutions, similar to that of Ukraine's "orange" revolution. Russia and China provided blanket support for Karimov after the suppression, while Washington could only offer nuanced criticism, fearing that intense criticism of Karimov would result in the loss of access to the Karshi-Khanabad air base, or K2, used to support U.S. operations in Afghanistan; nevertheless, the loss of this base now appears a likely scenario.

Washington's criticism was enough to spread fear throughout the ruling clans of Central Asia that the U.S. is engaged in covert operations to undermine or overthrow the current ruling regimes. This fear does not even escape Kyrgyzstan's subsequently elected government -- which swept into power in a similar manner as Ukraine's government -- because its support still rests on a shaky foundation of clan alliances.

In this environment, the S.C.O. sought to limit Washington's presence in the region -- Uzbekistan, Kazakhstan, Kyrgyzstan and Tajikistan shifted their support to China and Russia in order to protect their sovereignty from U.S. meddling. The joint declaration issued at the end of the summit took aim at Washington by rejecting attempts at "monopolizing or dominating international affairs" and insisting on "non-interference in the internal affairs of sovereign states." The members further urged the U.S.-led forces in Afghanistan to declare a timetable for withdrawal from Afghanistan and the Uzbek and Kyrgyz bases in the region that were established to support the Afghan operations. The Central Asian states see it in their interests to fill the power vacuum that the withdrawals would create with that of China and Russia, which they believe would better ensure the longevity of their regimes.

Top U.S. General Richard B. Myers summed up Washington's interpretation of the shift in blunt terms: "It looks to me like two very large countries were trying to bully some smaller countries." Ten days later, Rumsfeld landed in Kyrgyzstan to ensure that the world's only superpower wasn't elbowed out of the region.

Washington Pushes Back

The U.S. secretary of defense's visit to Kyrgyzstan and Tajikistan was aimed at shoring up support for the continuation of the U.S. military presence in each country, which was successful at least for the mid-term. Kyrgyzstan hosts a U.S. military base at the Manas air base, and Tajikistan offers the U.S. military and N.A.T.O. fly-over rights and hosts a small contingent of French soldiers involved in Afghan operations. French Defense Minister Michèle Alliot-Marie was in Dushanbe on July 21 to firm up that arrangement. Notably, Rumsfeld did not visit Uzbekistan, the other S.C.O. member-state that hosts a U.S. military base. Whether his absence was the result of an Uzbek request or a calculation of Washington's, it demonstrated how the U.S. plans to address the shifting power relations in the region.

Washington has approached Central Asia on bilateral terms, never treating the S.C.O. members as a bloc. In terms of leverage in the relations, this shifts the fulcrum to Washington's advantage. China and Russia encourage the S.C.O. states to act multilaterally in an effort to limit Washington's reach. Rumsfeld's trip demonstrated Washington's ability to act bilaterally with Kyrgyzstan, which has a newly elected government and has yet to fully congeal its foreign policy, and Tajikistan, which has traditionally been the S.C.O. member that follows a balanced approach with its foreign suitors.

Recently, the relations between Uzbekistan and Kyrgyzstan have shown the strengths of Washington's bilateral approach. When over 500 Uzbeks crossed over into Kyrgyzstan following the crushing of protesters in Andijan, Kyrgyzstan initially reacted instep with the Uzbek government. Eighty-seven Uzbek refugees were sent back, prompting outrage from the U.N. and Washington. This led to negotiations between the U.N. and officials in Kyrgyzstan, which, by Washington's design, left out any avenue for input from Uzbekistan. On July 29, a plane with 440 Uzbek refugees left Kyrgyzstan for Romania. This demonstrated Washington's ability to directly influence the geopolitics of Central Asia only a few weeks after the united front presented by the S.C.O. called for a U.S. withdrawal.

However, in dealing with Karimov's government in Uzbekistan, Washington's bilateral approach is no longer effective, in part because of its success in Kyrgyzstan. The Uzbek suspicion of Washington's involvement in the Kyrgyzstan revolution and uprising in Andijan has caused Karimov to throw his government's support behind China's and Russia's vision for the region. As such, the same day that the plane carried refugees out of Kyrgyzstan, Uzbekistan asked Washington to leave the K2 air base within 180 days. The immediate reaction from Washington was to hold back on sending a high-level representative to renegotiate the arrangement while waiting for things to "cool down."

This seems to suggest that the U.S. is leaning toward the future goal of regime change in Uzbekistan and is willing to sacrifice the air base if necessary. This does not mean that Washington will cut off all relations with Uzbekistan, but if it becomes apparent that future negotiations will not lead to an extension of the air base use agreement, Washington can be expected to pursue further bilateral agreements with the other governments in Central Asia to isolate Karimov's government.

Conclusion

Beijing, Moscow and Washington are once again using Central Asia, the setting for the "Great Game" between Tsarist Russia and Victorian England over 150 years ago, as their game board in a region rarely neglected by the world's great powers. In the contemporary version of the game, Washington approaches each state bilaterally, offering incentives to support the operations in Afghanistan while undermining the consensus put forth at the recent S.C.O. meeting.

China and Russia are acting in tandem to shore up support for S.C.O. policies by offering blanket support for the current regimes and implicitly calling attention to U.S.-led efforts to undermine their governments. The states hosting the game board will continue to swing their support from China and Russia to the U.S., and back again, so long as they keep their hold on power. The past month has seen a flurry of activity in the Great Game, and it can be expected that things will not cool down anytime soon.
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