February 9, 2010

Sovereign debt fears trigger plunge in global markets

Sovereign debt fears trigger plunge in global markets

By Patrick O’Connor
WSWS.org
5 February 2010

Stock markets in the US, Europe and other regions plunged yesterday in response to growing fears over the size of sovereign debt in several countries. Greece is on the verge of national bankruptcy and international investors are sceptical about the government’s ability to implement the savage cuts to wages and social spending required to lower its deficit from 12.7 percent of gross domestic product to just 3 percent by 2012. Portugal and Spain face a similar situation.

Underlying the crisis in the eurozone is the question as to whether US capitalism can finance its mounting debts and remain solvent in the long term. On Wednesday, Moody’s Investors Service warned that America’s triple-A sovereign credit rating will soon come under pressure unless economic growth is higher than forecast, or the Obama administration moves to reduce the fiscal deficit by initiating new and deeper spending cuts. Moody’s warned that the current US debt trajectory was “clearly continuously upward”.

This year’s US budget deficit of nearly $1.6 trillion is equivalent to 10.6 percent of GDP, a record high since 1945. As a proportion of GDP, the US deficit is not far off Greece’s but is higher than Spain’s and twice the eurozone average. Only the dollar’s status as the world currency has so far prevented Washington from coming under the same pressures as Greece and other southern European countries.

Yesterday’s market decline began in Europe after European Central Bank President Jean-Claude Trichet issued what was reported as an “unusually stern warning” that other eurozone countries as well as Greece required “strong reforms” to cut their deficits. Spain’s leading share index closed 6 percent lower, Portuguese shares lost 5 percent, and the Greek index declined 3.3 percent. London’s FTSE100 finished down 2.2 percent to its lowest level since last November. The euro fell to a seven-month low against the dollar.

Yesterday’s sell-off on Wall Street was partially due to worse than expected employment data. Initial claims for jobless benefits rose last week, dampening expectations of any improvement in the official unemployment rate that is to be updated today. The Dow Jones index briefly fell below the 10,000 mark before closing at 10,002—2.6 percent lower. This was its worst one-day decline since April 2009. The Dow has lost 6.5 percent in the past fortnight. Other New York indexes also finished lower yesterday—the S&P 500 lost 3.1 percent and the Nasdaq 3 percent.

Asian markets were mostly lower. Japan’s Nikkei index was down 0.5 percent while China’s Shanghai Composite lost 0.3 percent.

A Barclays Capital spokesman said the European Union may need to invoke emergency treaty powers to guarantee Greek debt. “If not contained, this could result in a ‘Lehman-style’ tsunami spreading across much of the EU,” Barclays’ Julian Callow told the British Telegraph.

This threat underscores the reality that the measures taken in response to the 2008 financial crash—including unprecedented bank bailouts, coordinated global stimulus spending measures, and near-zero official interest rates in many economies—have only compounded the underlying contradictions that gave rise to the crisis. Moreover, the latest share market gyrations may point to the imminent winding back of the stimulatory fiscal and monetary policies that triggered something of a rebound in the financial sector’s fortunes over the past 10 months.

The International Monetary Fund recently warned governments that withdrawing emergency stimulus spending too soon risked triggering a “double dip” recession. “But if bond markets decide that sustained public spending and high deficits in some countries risk creating an unsustainable debt position, then they will take matters into their own hands,” a Wall Street Journal article noted. “Schroders on Wednesday became the latest big investor to warn that the debt markets are in no mood to forgive politicians who fail to grasp their concerns. Faced with this pressure from the markets, policy makers in highly indebted countries will face an unpalatable choice: cut voluntarily, and take the risk the recovery is damaged; or have cuts forced on them in the midst of a market crisis. They may not have long to make up their minds.”

This now applies to many of the world’s major economies. “The issue of sovereign debt dominated many discussions in the Davos World Economic Forum last week,” the Financial Times explained. “While much attention focussed on the fiscal crisis in Greece, considerable concern was also voiced about the outlook for countries such as the US and UK… At the heart of investor concerns is whether countries such as the US with its rising debt burdens has the political will, or the sense of consensus, to take decisive measures to cut debt.”

Put more directly, “investor concerns” centre on whether national governments are going to be able to ram through draconian cuts to public spending—including welfare support, social infrastructure, health, education, and public sector jobs and wages—in the face of overwhelming opposition within the population. The global financial elites are now being forced to take note of a new factor in the situation—the re-emergence of the class struggle, with the working class beginning to intervene in defence of its interests.

The Wall Street Journal yesterday noted that investors had initially welcomed the EU’s endorsement of the Greek government’s plan to slash the deficit, but the country’s bonds were promptly sold off again after trade unions announced that a general strike would be held on February 24.

One WSJ commentator, Paul Hannon, wrote a piece for the newspaper’s internet blog section titled “Is Greece Governable?” Bemoaning a lack of “obedience and sense of common purpose” among ordinary Greeks, Hannon equated “governability” with Prime Minister George Papandreou’s ability to crush resistance to his austerity drive. “Having questioned the governability of Greece, bond investors are now having the same doubts about some other countries with large budget deficits, which explains why the cost of insuring Portuguese government bonds against default has risen to a record high, and why investors are also selling Spanish government bonds,” the article continued.

Portuguese workers are reportedly staging their first protest against spending cuts today. The country’s minority social democratic government is in a major crisis, with opposition parties pressing a regional finance bill that could increase overall spending. Parliamentary Affairs Minister Jorge Lacao has warned that approval of the legislation “brings problems for governability”, adding that “what is at stake is the credibility of the Portuguese state at a time when it is absolutely indispensable that the state shows rigour in its public accounts”.

The question of “governability” is increasingly relevant to every advanced capitalist state, not just the most vulnerable eurozone economies, which have been dubbed the PIIGS (Portugal, Ireland, Italy, Greece, and Spain). That includes the US where unemployment is continuing to climb and the Obama administration is preparing massive inroads into social programs, including Social Security, Medicare and Medicaid.

http://www.wsws.org/articles/2010/feb2010/econ-f05.shtml

February 9, 2010

Euro under pressure as Greek crisis becomes a ‘huge game of chicken’

Euro under pressure as Greek crisis becomes a ‘huge game of chicken’

The euro faced renewed selling in foreign-exchange markets on Monday morning as doubts about the ability of Greece to cut its deficit heaped pressure on the single currency.

Telegraph.co.uk
08 Feb 2010

The euro fell more than half a cent against the dollar to $1.3630 in early trading and also weakened against sterling, though it had recovered by lunchtime. Analysts expect the currency to stay under pressure as long as uncertainty over whether Greece will need to turn to the European Union or the International Monetary Fund for a bail-out persists.

Greece’s spiralling deficit – estimated at 12.7pc of its gross domestic product last year – stands far beyond the 3pc threshold permitted by the rules of European Monetary Union (EMU) and has left the single currency facing its biggest challenge in its short history.

“The euro continues to feel the impact of escalating concerns over sovereign credit risk,” analysts at UBS said today.

Concern over the abillity of Greece to tackle its deficit spread last week to Spain and Portugal, which have both been hit hard by a severe downturn in the property and construction industries. The prospect of a sovereign debt crisis has been since by investors as a real risk in 2010 because of the fragile global recovery and the huge debts carried by some countries. The cost to the investor of buying insurance against a default by Greece, Spain and Portugal jumped last week, as stock markets across Europe fell.

“It’s going to take years to sort out the sovereign balance sheet issue,” Mohamed El-Erian, chief executive of Pimco, the world’s biggest bond fund manager, said today in Sydney. “Europe has become a huge game of chicken, whereby the Greeks are waiting for help from the outside and donors are waiting for Greece to take a step forward.”

Over the weekend, the world’s finance ministers moved to reassure investors that the problems in Greece and southern Europe can be contained. Speaking at the end of the G7 meeting in Canada, Tim Geithner, US treasury secretary, told reporters that his European counterparts had assured him that the crisis would be “managed with great care”.

“European authorities gave us a very comprehensive review of the programme now in place to address the challenges faced by the Greek economy,” Mr Geithner said.

While Greek finance minister George Papaconstantinou said the country would cut its deficit to the 3pc threshold allowed under European economic stability rules by 2012, from an estimated 12.7pc of GDP last year, concern remains whether the Greek public will be able to stomach the austerity measures required. European leaders will meet for crunch meeting in Brussels later this week on Greece.

Alistair Darling, the Chancellor, said that Greece must “stick to its plan” to solve its debt woes and would be “backed” by the eurozone. “We understand collectively that it’s in all our interests that countries return to good economic health as soon as they can,” he said.

At the G7 meeting:

• Jean-Claude Trichet, president of the European Central Bank, said: “We expect and we are confident that the Greek government will take all the decisions that will permit it to reach that goal.”

• Luxembourg Prime Minister Jean-Claude Juncker, the head of the Eurogroup of finance ministers, stressed that Spain and Portugal posed no risk to eurozone stability.

http://www.telegraph.co.uk/finance/financetopics/financialcrisis/7183610/Euro-under-pressure-as-Greek-crisis-becomes-a-huge-game-of-chicken.html

February 9, 2010

Greek Ouzo crisis escalates into global margin call as confidence ebbs

Greek Ouzo crisis escalates into global margin call as confidence ebbs
For the third time in 18 months the global financial system risks spinning out of control unless political leaders take immediate and radical action.

By Ambrose Evans-Pritchard
Telegraph.co.uk
07 Feb 2010

A driver stands near parked trucks on the road leading to the Kulata border crossing between Bulgaria and Greece. The roadblock was set up by farmes protesting higher taxes.

Flow data shows an abrupt withdrawal of German and Asian capital from Club Med debt markets. The EU’s refusal to offer Greece anything beyond stern words and a one-month deadline for harsher austerity – while admirable in one sense – is to misjudge how fast confidence is ebbing. Greece’s drama has already metastasised into a wider systemic crisis. The world risks a replay of the Lehman collapse if this runs unchecked, this time involving sovereign dominoes.

Barclays Capital says the net external liabilities of Greece are 87pc of GDP, or €208bn (£182bn). Spain is worse at 91pc (€950bn), and Portugal worse yet at 108pc (€177bn); Ireland is 68pc (€123bn), Italy is 23pc, (€347bn). Add East Europe’s bubble and foreign debts top €2 trillion.

The scale matches America’s sub-prime/Alt-A adventure and assorted CDOs and SIVS of the Greenspan fling. The parallels are closer than Europe cares to admit. Just as Benelux funds and German Landesbanken bought subprime debt for high yield with AAA gloss, they bought Spanish Cedulas because these too had a safe gloss – even though Spain’s property boom broke world records. They thought EMU had eliminated risk: it merely switched exchange risk into credit risk.

A fat chunk of Club Med debt has to be rolled over soon. Capital Economics said the share of state debt maturing this year is even higher in Spain (17pc) than in Greece (12pc), though Spain’s Achilles’ Heel is mortgage debt.

The risk is the EMU version of Mexico’s Tequila crisis or Asia’s crisis in 1998. This Ouzo crisis is coming to a head just as tougher bank rules cause German lenders to restrict loans, and it touches on the most neuralgic issue of our day: that governments themselves are running low. Britain, France, Japan, and the US are all vulnerable. All must retrench. The great “reflation trade” of 2009 is over.

Far from containing the crisis, Europe’s response recalls the Lehman/AIG events of 2008 when Brussels sat frozen, and Germany dragged its feet. On that occasion France took charge, in the nick of time.

Today’s events will not wait. The rocketing cost of (CDS) default insurance on Iberian debt speaks for itself. Lisbon retreated from a €500m bond issue last week, even before the government lost a crucial finance vote. Can Athens raise money at all on viable terms?

There are echoes of early 2009 when East Europe blew up, with contagion hitting global bourses, commodities, and iTraxx credit indices. That episode was halted by the G20 deal to triple the IMF’s fire-fighting fund to $750bn. The odd twist today is that Greece cannot turn to the IMF because that offends EMU pride, yet no other help is on offer because the EU has no fiscal authority. Greece lies prostrate between two stools.

Both the City and Brussels seem certain that Europe will conjure a rescue, crossing the Rubicon towards fiscal federalism and a debt union. The emergency aid clause of Article 122 is on everybody’s lips. Insiders talk of a “Eurobond”.

On balance, such a rescue is likely. Yet leaving aside whether North Europe can afford to guarantee Club Med debt – or whether a bail-out pollutes more countries, as HBOS polluted Lloyds – there is one overwhelming fact missing from the debate: Germany has not endorsed any such rescue.

Jurgen Stark, Germany’s champion at the European Central Bank, said markets are “deluding themselves” if they think others will pay to save Greece. He shot down Article 122, saying Athens was responsible for its own mess.

Bundesbank chief Axel Weber said it would be “politically impossible” to ask taxpayers to bail out a profligate state. Both the finance and economy ministers have forsworn a rescue. Die Welt has called for Greek withdrawal from the euro.

I cannot judge how much is brinkmanship, pressure to make Club Med sweat. But I remember vividly lunching with the British prime minister’s economic adviser in August 1992 and being told that Germany would soon rescue sterling in the Exchange Rate Mechanism by cutting rates. Such was the self-deception of the British elite. Anybody following German politics – such as George Soros– knew it was nonsense.

Germany is harder to read today. The euro is a giant step beyond the ERM. Yet there are powerful counter-currents. Germany’s constitutional court issued a crushing put-down of EU pretensions last June, ruling that the sovereign states are “Masters of the Treaties” and that EU bodies lack democratic legitimacy.

So if you are betting that Germany must forever more efface itself for the European Project, be careful. Berlin hawks might prefer to lance the Club Med boil sooner rather than later.

http://www.telegraph.co.uk/finance/comment/ambroseevans_pritchard/7182739/Greek-Ouzo-crisis-escalates-into-global-margin-call-as-confidence-ebbs.html

February 9, 2010

Will the US Meet Its Waterloo in Afghanistan and Iraq?

Will the US Meet Its Waterloo in Afghanistan and Iraq?
2nd Anuradha Ghandy Memorial Lecture

By Dr. Jan Myrdal
Global Research
February 9, 2010

St Xavier’s College, Mumbai

Dear friends!

I am deeply honoured by being invited to hold this memorial lecture in honour of the late Anuradhu Ghandy, a great Indian revolutionary and intellectual.

At present, the US is waging two wars in West and Central Asia. In both of them the US have clear economic and strategic goals. A third war, one against Iran seems to be looming – the faithful British ally Blair mentioned Iran 58 times during the Chilcot testimony last week. As all these wars are directed against and conducted in Muslim countries they also take on the colour of what Huntington called Wars of Cultures.

This in itself is dangerous. These wars are becoming a factor in the rising tide of ethnical and religious contradictions. In Europe it is evident that the sharpened conflict about jobs and housing in the economic crisis between immigrants from Asia and Africa and local populations are being given religious and racial colouring by different reactionary groups.

The US seems to have learned from the British how to use and develop such contradictions in order to try to secure their own rule. They now develop the conflict between Shi’a and Sunni in Iraq like the British developed the conflicts in Cyprus, Palestine and South Asia (Bengal!).

Possibly also with the same historically tragic long term results.

In both Iraq and Afghanistan the people have had to pay heavily -both materially and in dead and wounded – for the US war. At the same time it has proved impossible for the US and their more or less willing allies to gain a clear victory despite the fact that they have managed to install themselves militarily in the oil rich Iraq.

But what is generally important is that what is called the “War on Terror” has led to the militarisation of both the US and its allies; the long range effect in our countries has been the rise of modern police states. Even my own country – Sweden – has as a result seen the deterioration of traditional legal and civic rights.

But that the US and its empire in the longer run is doomed to failure is evident. No tree grows up into heaven. The US is a paper tiger, as Mao put it. It will follow the road of other world empires. The Roman and Spanish – and British. But that is a very general statement, it does not say when and how that empire will come to its end. But if it does so by meeting a Waterloo is another question., It is of course possible that its end will be of the Waterloo kind; a defeat like that of Napoleon by a coalition of powers. That is possible. Washington is after all waging its present wars on credit.

If China, The European Union, the Gulf states refused to finance the present wars of the United States any longer then they would stop.

It would be as turning the ignition key in a car. But even if these powers are getting reluctant they are much too afraid of the resulting financial meltdown; you could say that the US is blackmailing them to continue financing its wars by threatening suicide!

Already in the war against Iraq it was difficult for the US to get its European allies like France and Germany to become willing allies.

Today with the continuing war against Afghanistan there are new and increasing signs of tension. The European Union is beginning to act as if it has its own agenda in the Afghan war. China is showing increasing signs of uneasiness. China Daily published an interesting article by Han Dongping “Say no to NATO use of the Wahan Corridor” on January 15th. Even if the paper stated that the opinions expressed do not necessarily reflect those of the China Daily” the publication indicates that they are not contrary to the opinion of the Chinese government.

But still I don’t think that such a Waterloo ending of the US empire is imminent. A repetition of the Soviet breakup after the military defeat in Afghanistan would of course be possible. The internal economic and social difficulties and conflicts in the ever more deeply divided United States are great. But still, they might not be as acute as those of the Soviet Union twenty years ago when the defeat in a relatively minor war triggered a total collapse of the system.

There is instead another Napoleonic example of an empire nearing it send. The US empire is now getting involved in its “Spanish War”.

It was the Spanish war that signalled the end of the Napoleonic empire.

For the first time the army of Napoleon got bogged down in un-
winnable war. A war against a people in arms. As it dragged on it sapped the power of the undefeatable French army. The situation of the French forces in Spain are not unlike those of the US forces in Afghanistan.

A militarily superior army is met by a popular resistance by poorly armed peasants. (There are great differences of course – the role of Great Britain for instance.) The war becomes unwinnable. The costs (a million dollars a year for each US soldier in Afghanistan) mount and the war becomes ever more cruel while the results are not to be seen.

But there is also another lesson to be learned from the Spanish war of Napoleon. He had installed his brother as king of Spain. The policies of that king were officially liberal in the Napoleonic sense. For example the hated inquisition was abolished. But this did not endear the French occupation to the poor peasants. One could say that the Spanish people preferred the inquisition to the officially liberal French occupiers.

In their propaganda the US is in Afghanistan to help the Afghan people.

That is the normal verbiage of colonialism and imperialism. I remember when Mussolini was going to attack Ethiopia. It was the first such war I remember following on the radio. In the League of Nations his diplomats declared that Italy was waging this war in order to liberate the people from slavery and feudalism.

Of course Haile Selassie was a feudal monarch and official slavery had only just been abolished but certainly still existed. But I remember my parents laughing at Mussolini. His propaganda was fake. His troops were not there to liberate the people but for the loot to themselves and an empire to Mussolini.

Today it seems according to some Swedish politicians that the US forces, the NATO forces and the Swedish soldiers sent to Afghanistan are there to liberate the women of Afghanistan.

When some friends on the left side in politics begin to talk about liberating the women of Afghanistan from the Taliban I remind them first of how the Spanish peasants preferred the inquisition to the French occupiers and then point out that if they want to send Swedish soldiers abroad to liberate women there are other more suitable targets. The Swedish state does not allow men to buy women. Those who do are punished. But in Germany prostitution is legal. Hamburg on the other side of the Baltic is one of the large and legal prostitution centres of Europe. The German state takes much revenue in taxes from the Hamburg brothels. (Many of the women working in these brothels are trafficked from Africa, Asia, Eastern Europe.) Sweden could of course send its army, navy and air force to Hamburg in an attempt to liberate these unfortunate prostitutes from the tax paying brothels of Hamburg.

But we do not. Instead we send our soldiers to Afghanistan where they are to liberate Afghan women side by side with brothel keepers from Germany.

Up to now I have been discussing this fifth Afghan war from outside.

As if the interesting question was how much the war costs to the US (and to NATO and the European Union). But the real question is of course that it is a war against Afghanistan and its people. For me that is the main question. Not only in general but because I have a great feeling for the country and the people. It is now more than fifty years ago I and my wife came driving to Afghanistan in July 1958.

We were young, we were poor, we then travelled all around in Afghanistan that year and the next. We even drove up the Wakhan Corridor and up the Kunar valley to the Bashgul valley in Kafiristan.

Our small car was like donkey. The reason we got all these travel permits was simple: “You are from a small neutral country.” Britishers and Americans did not get them.

Even if we travelled in border areas where there was some tribal fighting we were always protected by the pushtun tribal tradition.

Unarmed travellers are guests. Of course we were unarmed. If we had carried arms we would have been regarded as enemies. I know some who did. They disappeared. They had not shown respect.

We travelled all around the country, stayed in big cities like Kabul (where we had a small house) and Herat, in robats high up in the mountains as with black tent nomads. The Afghans were always friendly, my wife and I never met a harsh word. Everybody was helpful. We often had punctures (16 in one day – in 1959 when our tires were bad) the truck drivers then always stopped and asked if we needed help. It was a partly tribal, partly feudal society but if you were from a small neutral country, behaved in a polite way and showed respect people were friendly, helpful and polite to you.

This is not the Afghanistan you meet in British travellers tales but it is the Afghanistan we met in the fifties and seventies when we were living there. I then also wrote two books on Afghanistan that are in their sixth edition now and sold through the Swedish association “Afghanistan Solidaritet”.

I have wanted to say this as this war for me is not just any war but a war against people I know and who are close to me. These last two Afghan wars have been barbaric. My anger is so strong that I can feel the taste of blood in my mouth when I see TV pictures of US marines, Swedish mercenaries or NATO soldiers in Afghanistan and my deepest personal feeling then is that the only good foreign soldier on Afghan soil is a dead one. But that is a personal feeling that I have to repress in order to be useful in the solidarity work.

Because in this war the international solidarity with the Afghan people is needed. I know that the Afghans will defend their land and people as they always have done. This fifth Afghan war is as horrible as the first barbaric three British wars and the fourth Russian one. The international solidarity is necessary not only in order to see to it that the price the Afghan people this time when the US empire is conducting the war will not be unbearably high but also for our own sake. As long as we can not stop our states participating in such a war we are both responsible for the cruelty to the Afghan people and at the same time our possibilities to change our own society are lessened.

The solidarity movement is not a political movement for the sake of others but for our own sake.

In Germany, Great Britain, Sweden and most of Western Europe a growing opinion – a majority in most cases – are demanding the withdrawal of forces from Afghanistan. This is creating increasing difficulties for the European governments taking part in the war. If we can strengthen this then it will become increasingly difficult for our governments to continue this war against the Afghan people.

In Sweden we founded a solidarity movement when the fourth war began.

It had to carry through a great struggle with false leftist groups trying to support the occupation policies of the then Soviet Union. We at that time discussed a principal question that had been central in European politics since the French revolution; the impossibility of carrying the revolution to others on bayonettes. In that Robespierre was right and Danton has been proved wrong! There was at that time areal left wing movement in Afghanistan but it was drenched by Soviet troops.

As the movement for Afghanistan grew in Sweden during that war time it also evolved into a state supported NGO organising schools and hospitals in the post-Soviet era in Afghanistan.

With the US war against Afghanistan it tended to follow the Swedish government line (not surprising as it was the state that paid it).

What then had to be built up was a new and growing movement based on the demand that all foreign troops should leave Afghanistan: “Afghanistan Solidaritet”.

We work together with other organizations with discussions, meetings, exhibitions, demonstrations and our own magazine. “Afghanistan Nu”.

It is not a sectarian organisation The former Swedish minister of defense and speaker of the parliament Thage G. Peterson who took the initiative to the appeal for calling home the Swedish force from Afghanistan is one of its most prominent members and activists.

Together with other social democratic politicians and prominent diplomats he demands that Sweden should return to its traditional foreign policy. “As a minister of defense I would not have allowed Swedish armed forces to be used in this way.”

The Swedish political situation is very labile. The elections this fall now seem to result in a change of government. Against the present conservative led government stands a coalition of the Social Democrats, the “Greens” and the “Left”. The party chairman of the “Left” has just declared that he will stand by the demand to take home the troops even if the elections will result in a change of government with the “Left” entering the new government.

If we are able to succeed in this work and change at least the Swedish participation in the Afghan war that could be a help to the Afghan people. Let us hope!

Jan Myrdal is a prominent and distinguished Swedish author.

© Copyright Jan Myrdal, Global Research, 2010

February 8, 2010

Towards a Russia -China -Iran Military Alliance?

Towards a Russia -China -Iran Military Alliance?
Will Iran become a full member of the Shanghai Cooperation Organization?

By Flynt Leverett and Hillary Mann Leverett
The Race for Iran
2010-02-05

The new secretary general of the Shanghai Cooperation Organization (SCO), Muratbek Sansyzbayevich Imanaliev, said at a news conference in Beijing earlier this week that the conflict in Afghanistan and expanding the SCO’s members to include Iran and Pakistan were the top issues on the SCO’s agenda in 2010. Certainly, these issues are likely to dominate preparation for the SCO’s annual summit, which will take place in Tashkent, Uzbekistan sometime this coming summer.

The SCO was founded in 2001 by six original members: Russia and China along with Kazakhstan, Kyrgyzstan, Tajikistan, and Uzbekistan. Formally, the SCO was created to institutionalize the founding members’ ongoing cooperation on border security, counterterrorism, and fighting extremist and separatist activism, as well as for economic cooperation. More broadly, the SCO has established itself as an increasingly important factor in Central Asian affairs, Sino-Russian relations, and the formation of an international “coalition”—loosely organized around Beijing and Moscow—opposed to what its members see as excessive U.S. unilateralism.

In 2004, Mongolia became the first state to receive observer status in the SCO; in 2005, Iran, India, and Pakistan were also granted observer status in the SCO. If one includes the populations and territorial extent of the four observer states along with those of the six core members, the SCO has become the world’s largest regional security organization, in terms of the number of people and the amount of territory it covers. Among other things, the inclusion of Iran, India, and Pakistan as observers significantly expands the SCO’s already considerable latent potential to exert influence over the development and marketing of Central Asia’s oil and gas resources.

Over the past three years, Russia has pushed for Iran to be accorded full membership in the SCO. China has quietly resisted this push. In public, Chinese officials say only that the issue needs to be studied, as a formal mechanism through which the SCO can bring in new members does not currently exist. In private, Chinese officials say that including Iran would change the character and function of the SCO in important ways. In particular, Iranian membership would make it harder for Beijing to insist, as it regularly does, that the SCO is not an alliance directed against any specific country—e.g., the United States.

It is not clear that Beijing is ready to endorse full membership for Iran in the SCO. But, as Andrei Ibanov, a Russian analyst, wrote this week in China’s Global Times, Beijing’s heightened strategic standing “allows it a more direct role in advancing its national interests faster than ever”. And, as we have pointed out repeatedly on this blog and elsewhere, since 2007, China has become more assertive in advancing its perceived interests vis-à-vis Iran, even as U.S. pressure on Beijing to take a tougher line against Tehran intensifies. We certainly expect that trend to continue.

In this context, Ibanov argues that

“China’s best move, particularly as the leader of the SCO, would be to encourage and facilitate the acceptance of Iran’s membership into the pact quickly before a new round of sanctions are imposed. Doing so would not only add strength to China’s ability to access Iran’s energy sources, it would also very seriously dampen any unilateral moves, whether sanctions or missiles aimed at Iran and its nuclear facilities.”

Two years ago, a general in the People’s Liberation Army intelligence branch told us in Beijing that China would agree to full Iranian membership in the SCO “only if the United States forced its hand”. Given the Obama Administration’s gratuitous antagonism of China, over Iran and other issues, it will be interesting to see whether Beijing is more open to the prospect of full SCO membership for the Islamic Republic.

On the Obama Administration’s approach to China, we were surprised to find ourselves in rather strong agreement with a recent Op Ed on this subject in The Wall Street Journal by George Gilder, an intellectual darling of conservative and neoconservative Republicans for many years. We disagree with Gilder on many subjects, particularly with regard to the Middle East. But his Op Ed, entitled “Why Antagonize China?”, contains passages of real insight:

It started last June in Beijing when U.S. Treasury Secretary Timothy Geithner lectured Chinese Premier Wen Jiaboa, who recoiled like a man cornered by a crank at a cocktail party. Mr. Geithner was haranguing the Chinese on…the need for a Chinese dollar devaluation, on which one can scarcely imagine that he can persuade Chinese holders of a trillion dollars of reserves. This week in a meeting with Senate Democrats, President Obama continued to fret about the dollar being too strong against the yuan at a time when most of the world’s investors fear that the Chinese will act on his words and crash the dollar…

Yes, the Chinese are needlessly aggressive in missile deployments against Taiwan, but there is absolutely no prospect of a successful U.S. defense of that country. Sending them $6 billion of new weapons is a needless provocation against China that does nothing valuable for the defense of the U.S. or Taiwan…

[But] a foreign policy of serious people at a time of crisis will recognize that the current Chinese regime is the best we can expect from that country. The Chinese revitalization of Asian capitalism remains the most important positive event in the world in the last 30 years. Not only did it release a billion people from penury and oppression but it transformed China from a communist enemy of the U.S. into a now indispensable capitalist partner. It is ironic that liberals who once welcomed appeasement of the monstrous regime of Mao Zedong now become openly bellicose at various murky incidents of Internet hacking…

The U.S. is as dependent on China for its economic and military health and economic growth as China is dependent on the U.S. for its key markets, reserve finance, and global capitalist trading regime.

It is self-destructive folly to sacrifice this core synergy at the heart of global capitalism in order to gain concessions on global warming, dollar weakening, or Internet politics.

How many enemies do we need?

How many indeed. This blog is, in many respects, dedicated to the proposition that the United States does not need the Islamic Republic as an enemy. It is a disturbing sign of how far off the track the Obama Administration’s foreign policy has gone that both the Leveretts and George Gilder feel compelled to point out just how dangerous it could be for the United States to turn China into an enemy.

© Copyright Flynt Leverett , The Race for Iran, 2010

http://globalresearch.ca/index.php?context=va&aid=17471

February 8, 2010

Pakistan’s military sets Afghan terms

Pakistan’s military sets Afghan terms

By Syed Saleem Shahzad
Asia Times
February 9, 2010

ISLAMABAD – With the United States striving hard to establish dialogue with the Taliban, Asia Times Online sources privy to the Pakistan military establishment reveal that the army has clearly spelled out that Washington must make sure any Indian involvement does not go beyond development work in Afghanistan and that Delhi plays no part in any overall strategy concerning Afghanistan.

The United States has said that it wants to reach out to second- and third-tier Taliban and, in doing so, exert pressure on the top Taliban leaders to seek reconciliation. Instead, Pakistan has emphasized that it is necessary to talk to Taliban leader Mullah Omar and his appointed representatives.

At the same time, Pakistan has rejected US proposals for the balkanization of Afghanistan, by which it was proposed to appoint an autonomous controlling authority for southeastern and southwestern Afghanistan – the Pashtun-majority areas.

The Pakistani military has also given assurances that US officials will be granted visas, but, unlike previously, they will not be allowed visas on arrival. Further, for the first time, Pakistan has clearly refused to mount operations against the Sirajuddin Haqqani network, as well as that of his ally, Hafiz Gul Bahadur, as they are not hostile towards Pakistan.

At this important juncture of the American-led war in Afghanistan, Washington desperately needs Pakistan’s support, as it did after the September 11, 2001, attacks on the US to stage the invasion of Afghanistan.

Pakistan’s demands were relayed in recent encounters with US officials by, among others, the chairman of the joint chiefs of staff committee, General Tariq Majid; the chief of army staff, General Ashfaq Parvez Kiani; and the director general of the Inter-Services Intelligence (ISI), Lieutenant General Ahmad Shuja Pasha. The US officials included visiting Defense Secretary Robert Gates and General Stanley McChrystal, the top commander in Afghanistan. Majid also set out Pakistan’s position at a recent North Atlantic Treaty Organization (NATO) meeting in Brussels.

A straight-forward encounter
In the years following the invasion on Afghanistan in October 2001, Pakistan was frequently accused of duplicity in the US-led “war on terror”, even though it provided extensive logistical support. This included bases for the US Air Force to carry out strikes in landlocked Afghanistan, transit routes for NATO supplies (now flowing freely again), collaboration with US intelligence agencies to arrest top al-Qaeda members, and military operations in the Pakistani tribal areas against pro-Taliban militants.

Yet the Americans still believed that Pakistan’s support was half-hearted and that it tacitly supported the Taliban. One reason for this belief was Pakistan’s opposition in principle from the beginning to the war on the Taliban. Former president Pervez Musharraf consistently urged the Americans to engage the Taliban in a political process.

In the early days of the conflict, the Americans were not interested in any form of reconciliation with the Taliban as the regime had been toppled in a matter of months and its leaders were holed up in the mountains straddling Pakistan and Afghanistan: Washington had no reason to talk to such losers.

Nine years on, the situation has changed dramatically. The American war machine is under siege and huge swathes of Afghanistan are either under direct Taliban control or heavily influenced by the militants.

The US and its allies are still game for a fight, though. In a matter of days, thousands of coalition and Afghan troops are expected to try to take back Marjah in Helmand province in one of the biggest offensives of the war. It will be the first major operation since US President Barack Obama announced last year that 30,000 additional troops would be sent to Afghanistan. (Pakistan has made its opposition to this surge clear to the US.)

However, it is widely acknowledged that the big push is aimed primarily at softening up the Taliban, rather than defeating them in the field, and that talks remain the only viable path to peace.

Just as the US has over the years changed its thinking on Afghanistan, given the realities on the ground, it has revised its opinion on Pakistan.

About two years ago, the administration of George W Bush became convinced that a coalition government comprising secular and liberal political parties would handle the “war on terror” more effectively than Pakistan’s security apparatus, such as that ruled over by Musharraf, a general.

However, although such a secular government emerged after Musharraf stepped down in August 2008, it has not lived up to expectations. It has not won credibility among the masses due to economic mismanagement, the mishandling of a judicial crisis and the failure to adopt a straightforward policy against militancy.

By the end of 2009, the coalition government of President Asif Ali Zardari was riven with political in-fighting and there were large ethnic riots in the port city of Karachi, mainly between two pro-American political parties.

It was evident that political players were in no position to handle the sensitive issues relating to fighting the “war on terror”, and in a short time all decision-making concerning security issues passed on to the military. Although militants have not been conclusively defeated in Pakistan, the military has waged several big operations in the tribal areas.

From the US perspective, more important is the rapport that has been established between US and Pakistan military leaders; even US Secretary of State Hillary Clinton indicated on a visit to Pakistan that the White House favored dealing directly with the military establishment on issues concerning the Taliban and al-Qaeda.

Kiani has explained to the US that while the Pakistani army – and Kiani himself – are essentially strategically India-centric, they will work in partnership with the Americans to help the US win the war in Afghanistan. Pakistan sees the next phase of this as the eradication of terrorism and militancy from the region and the incorporation of the majority Pashtun population of Afghanistan, which supports Taliban, fully into the political process.

A friendship of two armies
Kiani is scheduled to retire in November, while ISI chief Pasha is due to leave office in March. Zardari’s government is preparing to promote officers with whom it could work, that is, who would listen the government.

The president of the National Defense University, Lieutenant General Muhammad Yousuf, and the Corps Commander Gujranwala, Lieutenant General Nadeem Taj, are the most-discussed candidates in President House for the position of chief of army staff.

Zardari has also indicated his intention to revive the position of national security advisor to be filled by a retired four-star general to control the ISI.

The government is making all efforts to take Washington into its trust, but according to insiders it is having little success. On the other hand, the military establishment is heavily engaged in day-to-day business with the Americans to tackle the military and political issues involved in finding a solution to the Afghan insurgency. If Pakistan’s political government tries to bypass the military, it might face serious embarrassment.

Washington apparently supports the idea of extending Pasha’s term for another year – Kiani would take that decision, whether or not Zardari approved. As for Kiani, he has been heard to say that his position “is not an issue at the moment”.

Pakistan has once again emerged as vitally important to the US in dealing with Afghanistan, from securing NATO’s supply lines to cutting off the supplies of the Taliban and getting them to the negotiating table. Washington is apparently ready to sacrifice its political allies in Pakistan and work directly with the military to achieve these goals.

Syed Saleem Shahzad is Asia Times Online’s Pakistan Bureau Chief. He can be reached at saleem_shahzad2002@yahoo.com

(Copyright 2010 Asia Times Online (Holdings) Ltd. All rights reserved.

http://www.atimes.com/atimes/South_Asia/LB09Df03.html

February 8, 2010

India-Pakistan thaw key to Afghan peace

India-Pakistan thaw key to Afghan peace

By Siddharth Srivastava
Asia Times
February 9, 2010

NEW DELHI – India has proposed the first high-level bilateral talks with Pakistan since their peace process broke down following the terrorist attack on Mumbai in November 2008.

New Delhi and Islamabad are still working on an agenda for meetings expected in late February, but they are likely to address long-stalled issues such as the divided Himalayan territory of Kashmir, joint anti-terror efforts and shared water resources.

The offer of talks comes despite Islamabad not meeting New Delhi’s demands after the Mumbai attack that Pakistan convict those behind the November 26, 2008, atrocity, which left up to 173 dead, and crack down on any terrorism cells and infrastructure in Pakistan aimed against India.

Delhi had repeatedly warned Islamabad that another major militant strike in India would provoke a strong reaction, since the Lashkar-e-Taiba militant group responsible for the Mumbai attack planned it on Pakistan soil.

The talks were proposed last Friday following a meeting between Pakistan’s High Commissioner to India, Shahid Malik, and Indian Foreign Secretary Nirupama Rao. Pakistan has called for a broader “composite dialogue”, which also means inclusion of Kashmir as one of the main topics of discussion.

Indian Foreign Minister S M Krishna has said the first step towards engaging with Pakistan will be a high-profile visit by Home Minister P Chidambaram, the first by an Indian minister since the November ‘08 attack, to Islamabad later this month.

“Chidambaram will get a chance to have very useful exchanges with his counterparts and other leaders in Pakistan,” Krishna said. In a sign of India’s intentions to bring about a thaw in relations, he added that “India should be quite satisfied with Pakistan taking a few steps to investigate the Mumbai attack”.

Chidambaram was appointed home minister in the wake of the strikes, and he has since headed internal efforts to put in place a better intelligence and security structure.

America has responded positively to the Indian proposal. “This is a welcome move,” said Assistant Secretary of State for Public Affairs PJ Crowley. “We are supportive of dialogue among India, Pakistan and Afghanistan as a key component of moving ahead and achieving a stable region.”

Washington’s focus has shifted to the western frontiers of Pakistan, where al-Qaeda and the Taliban are thought to have their biggest base, and the US is keen for simmering India-Pakistan relations to cool.

This would enable a redeployment of the massive Pakistani troop presence on its eastern borders with India to the Afghan front, possibly paving the way for a reduced American military presence in Afghanistan. However, it is unclear if the proposed India-Pakistan talks have come at the prodding of Washington.

Pakistani Prime Minister Yousaf Raza Gilani said in a recent interview that the peace process should be resumed and not be held hostage to fallout from the Mumbai attack. Islamabad has indicated that is it amenable to using Indian evidence against the plotters of the attack, and has accepted that the small boats used were launched from Karachi.

There are larger geopolitical factors in play, particularly America’s involvement in Afghanistan.

India’s offer of talks can be seen in the context of global powers endorsing in London last month a US-backed Afghan plan to seek reconciliation with the Taliban. Pakistan is expected to play a big role in this, especially in persuading the fundamentalist group to come to the negotiating table.

Pakistan will continue to remain a crucial cog in America’s “war on terror” and be a continued recipient of increased military aid. For now, Islamabad has also managed to keep out the influence of India in brokering any deal with the Taliban.

Delhi wants to have a say in Afghanistan, a role that Pakistan has kept for itself until now, with the backing of some Muslim majority nations.

While direct military involvement in Afghanistan remains unfeasible (for now at least) due to domestic concerns, India’s civilian involvement is only expected to grow.

Indian involvement in Afghanistan opens trade opportunities with nations in the Middle East that are rich in natural resources. India imports the bulk of its gas from Qatar and has been looking at sourcing energy resources from Iran, though attempts via the Iran-Pakistan-India gas pipeline have been stalled by American tensions with Tehran over its nuclear program.

India has also been looking at the prospects of an undersea pipeline from Qatar, which could loop through Iran at some future date. Indian firms have also mapped out big plans to invest in Iran’s gas rich South Pars fields.

Given the security and transit issues that India has with Pakistan, particularly through volatile Balochistan province, Afghanistan could prove to be a transit point for India’s energy sources as well as somewhere it can limit the influence of Islamabad.

Siddharth Srivastava is a journalist based in New Delhi. He can be reached at sidsri@yahoo.com.

(Copyright 2010 Asia Times Online (Holdings) Ltd. All rights reserved.

http://www.atimes.com/atimes/South_Asia/LB09Df04.html

February 8, 2010

Israeli case for war with Syria – and Lebanon

Israeli case for war with Syria – and Lebanon

By Sami Moubayed
Asia Times
February 9, 2010

DAMASCUS – The Middle East seemed to snowball into crisis last week, as war threats were fired back and forth between Syria and Israel. Israeli Foreign Minister Avigdor Lieberman triggered the conflict on Thursday by saying that if war were to break out, the Syrians would lose, prompting Foreign Minister Walid al-Mouallem to respond that Israeli cities would not be spared by Syria.

He described the Israelis as “thugs” and said that a new regional war would kill whatever chances there were of returning to the peace process. Syrian Prime Minister Mohammad Naji Otari made similar statements, saying that Israel would live to regret a war with Syria, while Israeli Defense Minister Ehud Barak told his troops to prepare for war with Damascus should peace efforts fail.

Trying to defuse the crisis, Israeli Prime Minister Benjamin Netanyahu said on Sunday that war was not imminent. Speaking at his weekly cabinet meeting, Netanyahu said that Israel desired peace “with all its neighbors”, adding, “We did it with Egypt and Jordan, and we want to achieve similar agreements with the Palestinians and the Syrians. I hope that we are on the brink of renewing negotiations with the Palestinians, and we are open to renewing the process with the Syrians as well.”

A quick read through Middle East history proves that when such talk flows back and forth through the mass media, the chances of a real war are actually very low. Countries in a permanent state of war do not inform one another before attacking, preferring to surprise their enemy during combat, rather than give them an early warning, as was the case during the October war of 1973.

If a Syrian-Israeli war is on nobody’s agenda, why have war drums been beating for the past week?

One reason is that hardliners in the Netanyahu cabinet like Lieberman, who have no faith in the peace process, would like to see Israel go to war with a traditional enemy such as Syria. They blame Syria for many of Israel’s misfortunes and its losses both in the Lebanon war of 2006 and the Gaza war of 2008-2009.

Lieberman, who has little say in matters of both peace and war, feels increasingly sidelined by Netanyahu and Barak, the two men who effectively handle Israel’s foreign relations, although Lieberman remains officially foreign minister. All the same, Lieberman’s hardline policies place Israel on a dangerous collision course with the entire Arab neighborhood. Wiser and more experienced Israeli statesmen, like President Shimon Peres and the prime minister, certainly do not want war with Syria, knowing how painful it would be to have Syrian missiles landing on Israeli cities.

They realize that such a war would enrage regional heavyweights like Saudi Arabia, Iran and Turkey, isolating Israel in the international community. The Israeli state has still not recovered from the very bad publicity it got from the United Nations-mandated Goldstone Report, which accused the Israel Defense Forces – along with Hamas – of war crimes in Gaza in 2008. It is one thing to justify a war against non-state players like Hezbollah and Hamas, peddling an argument that can easily sell with the Israeli public, but completely different to do so with a powerful regional heavyweight like Syria.

Another reason the war rhetoric surfaced links directly to Lebanon. For months, the world has watched threats go back and forth between Israel and Hezbollah. Many believed that the war of 2006 was not over, given that none of Israel’s declared objectives had been achieved. Israel promised to liberate two soldiers captured by Hezbollah and then exterminate the Lebanese group, which has been a thorn in Israel’s side since 1982.

Not only did Israel fail in all of the above, but far from being weakened, Hezbollah emerged from 2006 stronger than before, both in terms of popularity on the Arab and Muslim street, and in terms of military might. It won all of its contested seats in the 2009 parliamentary elections and got all that it wanted in the cabinet of Prime Minister Saad al-Hariri, forming a strong representation with its ally, the Free Patriotic Movement of General Michel Aoun.

Netanyahu, who is a strong advocate of war with Iran, cannot tolerate the existence of Hezbollah. Such a powerful player in the Middle East, so independent from US control and so dangerous to the state of Israel, is a nightmare for the Israeli public. By not winning in 2006, many Israelis believe that Israel lost the war with Hezbollah.

In 1973, Israeli prime minister Golda Meir was forced to resign, not for losing a war against Syria and Egypt, but simply for not winning. The same applied to ex-Israeli prime minister Ehud Barak, who failed to win the war either in Lebanon in 2006 or in Gaza in 2008. Netanyahu needs another round with Lebanon to right the wrongs done to the military under his predecessor. Not only would that empower him domestically and in the international community, it would also make him stronger in any peace talks forced on him by the United States.

Top officials in Israel have therefore been itching for a new war with Lebanon. They let off a trial balloon to see how Hezbollah would react to threats and received a very aggressive response from Hezbollah leader Hassan Nasrallah, who in thundering back-to-back speeches repeated earlier threats that he was willing to strike at “Haifa and beyond Haifa”, referring to the northern Israeli port city.

Within Israel itself there is a widespread belief that there should be another war with Hezbollah soon. There are fears, however, that the time is not ripe, not knowing how Iran would react if such a conflict erupted, realizing as well that the US is not too enthusiastic about such an adventure, with its troops still grounded in Iraq and Afghanistan. Therefore, to divert attention from the potentially explosive situation on the borders with Lebanon, top Israeli officials decided to fire empty threats at the Syrians – never really convinced, however, that they wanted or were capable of a new war with Damascus.

Having that said, nobody can rule out the possibility of another war with Lebanon, which many analysts are predicting might happen this summer. War with Syria, however, would be too dangerous for Israel and too costly for the entire Middle East.

Sami Moubayed is editor-in-chief of Forward Magazine.

(Copyright 2010 Asia Times Online (Holdings) Ltd. All rights reserved.

http://www.atimes.com/atimes/Middle_East/LB09Ak02.html

February 8, 2010

Dangerous steps in Iran’s nuclear dance

Dangerous steps in Iran’s nuclear dance

By Kaveh L Afrasiabi
Asia Times
February 9, 2010

Days after announcing that Iran was willing to send its low-enriched uranium for further processing abroad, President Mahmud Ahmadinejad told the country’s Atomic Energy Agency to begin the enrichment process in the country. However, Ahmadinejad emphasized that Iran was still open to a “fuel-for-fuel” option.

The US and its allies now face a dilemma: they can go ahead with the fuel swap, or allow Iran to come near to the threshold of “weapons-capable” uranium enrichment – 20%. On October 1, the International Atomic Energy Agency proposed a plan under which Iran would send the bulk of its low-enriched uranium to a third country to be further enriched, then shipped back to Iran for use in a medical research reactor in Tehran. Should the West choose the fuel-swap option, it will likely need to accept less than the 1,200 kilograms of uranium originally stipulated by the (IAEA) plan and give Tehran guarantees of delivery.

Ahmadinejad’s two statements – on February 2 accepting the fuel swap, then on Sunday telling Iran’s nuclear agency to itself enrich the nuclear fuel for theTehran research reactor – seem contradictory. But from Tehran’s standpoint, one complements the other.

Above all, the aim is to increase Iran’s bargaining ability with respect to the IAEA-proposed deal. The net effect, some in Iran hope, will be to pressure the West to demonstrate a greater degree of flexibility and revise its present stubborn approach – of “either or”, to paraphrase Iran’s envoy to the United Nations, Mohammad Khazaee.

A number of foreign policy experts in Tehran were surprised at the lukewarm reaction to Ahmadinejad’s fuel offer in the West, recalling United States President Barack Obama’s enthusiastic endorsement of the deal last October. By signaling Iran’s determination to produce the nuclear fuel at home, Ahmadinejad may add fresh fuel to a US-led drive for greater sanctions on Iran.

On Saturday, Iranian Foreign Minister Manouchehr Mottaki met with the chief of the United Nations’ nuclear watchdog agency, Yukiya Amano, at the Munich Security Conference. But on Sunday, US Defense Secretary Robert Gates called for the international community to coordinate sanctions and pressure on Iran.

Ahmadinejad’s order to enrich nuclear fuel domestically is a gamble that may backfire with China and Russia, which had welcomed his earlier announcement regarding the fuel swap. To reassure the rest of the world that Ahmadinejad’s initial offer was sincere, Iran will need to make a formal approach to the IAEA.

A sticking point may be Iranian insistence on a “simultaneous exchange” of nuclear fuel within Iranian territory. This was reiterated by Iran’s ambassador to Moscow, who has openly dismissed Western media reports that Ahmadinejad had consented to a “four or five months” time gap between export and import of the enriched uranium. (See Iran launches new phase in nuclear crisis, Asia Times Online, February 5, 2010).

The ultimate aim of Ahmadinejad’s intricate, dualistic diplomacy appears to be to secure the best deal for Iran. But this also raises the issue of Iran’s stark choices, since the nuclear fuel for the Tehran medical research reactor will soon run out, affecting the operation of some 200 hospitals which rely on its radioisotopes for cancer patients.

“Iran’s biggest challenge is technological because of some recent problems with the centrifuges [necessary for enriching uranium],” said a Tehran policy expert on the condition of anonymity. “If somehow Iran succeeds in meeting this challenge, then it would be cheaper, more efficient, and of course better for the country’s long-term interest not to be dependent on foreign sources.”

This argument makes sense, according to Western nuclear experts who point out that under present arrangements, Iran loses some 50% of a key isotope due to decay during shipment, and it costs a lot more to import than to produce locally.

The best option may be a “multi-nationalization” of Iran’s enrichment activity, meaning that the nation’s whole fuel cycle is based on a regional or multi-national approach, something that Iran’s officials have repeatedly welcomed.

In the coming days, sources in Tehran tell the author, Iran is likely to give its final response on the IAEA-proposed deal to the IAEA, and this might explain the behind-the-scenes meeting of Mottaki and IAEA chief Amano in Munich, which culminated in an optimistic statement from Mottaki.

“We discussed and exchanged views about a wide range of issues … We also exchanged views about the proposal that is on the table. I tried to explain the views of the Islamic republic of Iran for the director general,” said Mottaki.

It is unlikely that Mottaki would be up-beat if there was no momentum behind the deal, since the foreign minister’s reputation would no doubt suffer.

However, the biggest question mark hangs over Washington’s commitment to the fuel deal. Obama was enthusiastic about it four months ago, but since then a powerful chorus of voices – including some from within the Obama administration – has been raised against it. Secretary of State Hillary Clinton never displayed any genuine interest in the fuel swap, though she accused Iran of walking away from a good deal.

The threat of Iran embarking on its own enrichment drive may be just what Washington’s hawks need to accept the fuel-swap option. If they do not, and continue with military threats and coercive diplomacy, then they may have to deal with the unwanted consequences of escalating the Iran nuclear crisis at a time when the US – already bogged down in two of Iran’s neighbors – can ill afford such a prospect.

At a recent presentation to the US Congress, Dennis Blair, the head of US intelligence, said Iran had probably not yet decided to build nuclear weapons and was open to diplomatic influence from the West. That is a keen observation, and the US needs to take into consideration the ramifications of pushing Iran into a corner.

In other words, the US will likely prefer to strike a bargain with Iran than go to war with it. After all, Iran would not be breaching international obligations under the nuclear Non-Proliferation Treaty if it were to produce its own nuclear fuel for the Tehran reactor. Several other nations, such as Canada, import weapons-grade uranium for their research reactors.

“People in the West forget that Iran continues to have the plutonium that the US delivered to Iran in the late 1960s for this reactor in Tehran that is under IAEA safeguards. Iran’s record, which shows it has not misused this … is under appreciated,” the Tehran expert said.

Indeed, Tehran has been in possession of weapons-capable resources for many years without any report of diversion to weapons purposes, so why is there concern now? The answer may lie less with Iran’s nuclear intentions but with a US desire for power projection in the Middle East and Persian Gulf.

Kaveh L Afrasiabi, PhD, is the author of After Khomeini: New Directions in Iran’s Foreign Policy (Westview Press) . For his Wikipedia entry, click here. His latest book, Reading In Iran Foreign Policy After September 11 (BookSurge Publishing , October 23, 2008) is now available.

(Copyright 2010 Asia Times Online (Holdings) Ltd. All rights reserved.

http://www.atimes.com/atimes/Middle_East/LB09Ak01.html

February 8, 2010

Operation Breakfast Redux

Operation Breakfast Redux
Could Pakistan 2010 Go the Way of Cambodia 1969?

By Pratap Chatterjee
TomDispatch.com
February 7, 2010

Sitting in air-conditioned comfort, cans of Coke and 7-Up within reach as they watched their screens, the ground controllers gave the order to strike under the cover of darkness. There had been no declaration of war. No advance warning, nothing, in fact, that would have alerted the “enemy” to the sudden, unprecedented bombing raids. The secret computer-guided strikes were authorized by the chairman of the Joint Chiefs of Staff, just weeks after a new American president entered the Oval Office. They represented an effort to wipe out the enemy’s central headquarters whose location intelligence experts claimed to have pinpointed just across the border from the war-torn land where tens of thousands of American troops were fighting daily.

In remote villages where no reporters dared to go, far from the battlefields where Americans were dying, who knew whether the bombs that rained from the night sky had killed high-level insurgents or innocent civilians? For 14 months the raids continued and, after each one was completed, the commander of the bombing crews was instructed to relay a one-sentence message: “The ball game is over.”

The campaign was called “Operation Breakfast,” and, while it may sound like the CIA’s present air campaign over Pakistan, it wasn’t. You need to turn the clock back to another American war, four decades earlier, to March 18, 1969, to be exact. The target was an area of Cambodia known as the Fish Hook that jutted into South Vietnam, and Operation Breakfast would be but the first of dozens of top secret bombing raids. Later ones were named “Lunch,” “Snack,” and “Supper,” and they went under the collective label “Menu.” They were authorized by President Richard Nixon and were meant to destroy a (non-existent) “Bamboo Pentagon,” a central headquarters in the Cambodian borderlands where North Vietnamese communists were supposedly orchestrating raids deep into South Vietnam.

Like President Obama today, Nixon had come to power promising stability in an age of unrest and with a vague plan to bringing peace to a nation at war. On the day he was sworn in, he read from the Biblical book of Isaiah: “They shall beat their swords into plowshares, and their spears into pruning hooks.” He also spoke of transforming Washington’s bitter partisan politics into a new age of unity: “We cannot learn from one another until we stop shouting at one another, until we speak quietly enough so that our words can be heard as well as our voices.”

Return to the Killing Fields

In recent years, many commentators and pundits have resorted to “the Vietnam analogy,” comparing first the American war in Iraq and now in Afghanistan to the Vietnam War. Despite a number of similarities, the analogy disintegrates quickly enough if you consider that U.S. military campaigns in post-invasion Afghanistan and Iraq against small forces of lightly-armed insurgents bear little resemblance to the large-scale war that Presidents Lyndon B. Johnson and Richard Nixon waged against both southern revolutionary guerrillas and the military of North Vietnamese leader Ho Chi Minh, who commanded a real army, with the backing of, and supplies from, the Soviet Union and China.

A more provocative — and perhaps more ominous — analogy today might be between the CIA’s escalating drone war in the contemporary Pakistani tribal borderlands and Richard Nixon’s secret bombing campaign against the Cambodian equivalent. To briefly recapitulate that ancient history: In the late 1960s, Cambodia was ruled by a “neutralist” king, Norodom Sihanouk, leading a weak government that had little relevance to its poor and barely educated citizens. In its borderlands, largely beyond its control, the North Vietnamese and Vietcong found “sanctuaries.”

Sihanouk, helpless to do anything, looked the other way. In the meantime, sheltered by local villagers in distant areas of rural Cambodia was a small insurgent group, little-known communist fundamentalists who called themselves the Khmer Rouge. (Think of them as the 1970s equivalent of the Pakistani Taliban who have settled into the wild borderlands of that country largely beyond the control of the Pakistani government.) They were then weak and incapable of challenging Sihanouk — until, that is, those secret bombing raids by American B-52s began. As these intensified in the summer of 1969, areas of the country began to destabilize (helped on in 1970 by a U.S.-encouraged military coup in the capital Phnom Penh), and the Khmer Rouge began to gain strength.

You know the grim end of that old story.

Forty years, almost to the day, after Operation Breakfast began, I traveled to the town of Snuol, close to where the American bombs once fell. It is a quiet town, no longer remote, as modern roads and Chinese-led timber companies have systematically cut down the jungle that once sheltered anti-government rebels. I went in search of anyone who remembered the bombing raids, only to discover that few there were old enough to have been alive at the time, largely because the Khmer Rouge executed as much as a quarter of the total Cambodian population after they took power in 1975.

Eventually, a 15-minute ride out of town, I found an old soldier living by himself in a simple one-room house adorned with pictures of the old king, Sihanouk. His name was Kong Kan and he had first moved to the nearby town of Memot in 1960. A little further away, I ran into three more old men, Choenung Klou, Keo Long, and Hoe Huy, who had gathered at a newly built temple to chat.

All of them remembered the massive 1969 B-52 raids vividly and the arrival of U.S. troops the following year. “We thought the Americans had come to help us,” said Choenung Klou. “But then they left and the [South] Vietnamese soldiers who came with them destroyed the villages and raped the women.”

He had no love for the North Vietnamese communists either. “They would stay at people’s houses, take our hammocks and food. We didn’t like them and we were afraid of them.”

Caught between two Vietnamese armies and with American planes carpet-bombing the countryside, increasing numbers of Cambodians soon came to believe that the Khmer Rouge, who were their countrymen, might help them. Like the Taliban of today, many of the Khmer Rouge were, in fact, teenaged villagers who had responded, under the pressure of war and disruption, to the distant call of an inspirational ideology and joined the resistance in the jungles.

“If you ask me why I joined the Khmer Rouge, the main reason is because of the American invasion,” Hun Sen, the current prime minister of Cambodia, has said. “If there was no invasion, by now, I would be a pilot or a professor.”

Six years after the bombings of Cambodia began, shortly after the last helicopter lifted off the U.S. embassy in Saigon and the flow of military aid to the crumbling government of Cambodia stopped, a reign of terror took hold in the capital, Phnom Penh.

The Khmer Rouge left the jungles and entered the capital where they began a systemic genocide against city dwellers and anyone who was educated. They vowed to restart history at Year Zero, a new era in which much of the past became irrelevant. Some two million people are believed to have died from executions, starvation, and forced labor in the camps established by the Angkar leadership of the Khmer Rouge commanded by Pol Pot.

Unraveling Pakistan

Could the same thing happen in Pakistan today? A new American president was ordering escalating drone attacks, in a country where no war has been declared, at the moment when I flew from Cambodia across South Asia to Afghanistan, so this question loomed large in my mind. Both there and just across the border, Operation Breakfast seems to be repeating itself.

In the Afghan capital, Kabul, I met earnest aid workers who drank late into the night in places like L’Atmosphere, a foreigner-only bar that could easily have doubled as a movie set for Saigon in the 1960s. Like modern-day equivalents of Graham Greene’s “quiet American,” these “consultants” describe a Third Way that is neither Western nor fundamentalist Islam.

At the very same time, CIA analysts in distant Virginia are using pilot-less drones and satellite technology to order strikes against supposed terrorist headquarters across the border in Pakistan. They are not so unlike the military men who watched radar screens in South Vietnam in the 1960s as the Cambodian air raids went on.

In 2009, on the orders of President Obama, the U.S. unloaded more missiles and bombs on Pakistan than President Bush did in the years of his secret drone war, and the strikes have been accelerating in number and intensity. By this January, there was a drone attack almost every other day. Even if, this time around, no one is using the code phrase, “the ball game is over,” Washington continually hails success after success, terrorist leader after terrorist leader killed, implying that something approaching victory could be somewhere just over the horizon.

As in the 1960s in Cambodia, these strikes are, in actuality, having a devastating, destabilizing effect in Pakistan, not just on the targeted communities, but on public consciousness throughout the region. An article in the January 23rd New York Times indicated that the fury over these attacks has even spread into Pakistan’s military establishment which, in a manner similar to Sihanouk in the 1960s, knows its limits in its tribal borderlands and is publicly uneasy about U.S. air strikes which undermine the country’s sovereignty. “Are you with us or against us?” the newspaper quoted a senior Pakistani military officer demanding of Secretary of Defense Robert Gates when he spoke last month at Pakistan’s National Defense University.

Even pro-American Prime Minister Yousuf Raza Gilani has spoken out publicly against drone strikes. Of one such attack, he recently told reporters, “We strongly condemn this attack and the government will raise this issue at [the] diplomatic level.”

Despite the public displays of outrage, however, the American strikes have undoubtedly been tacitly approved at the highest levels of the Pakistani government because of that country’s inability to control militants in its tribal borderlands. Similarly, Sihanouk finally looked the other way after the U.S. provided secret papers, code-named Vesuvius, as proof that the Vietnamese were operating from his country.

While most Democratic and Republican hawks have praised the growing drone war in the skies over Pakistan, some experts in the U.S. are starting to express worries about them (even if they don’t have the Cambodian analogy in mind). For example, John Arquilla, a professor of defense analysis at the Naval Postgraduate School who frequently advises the military, says that an expansion of the drone strikes “might even spark a social revolution in Pakistan.”

Indeed, even General David Petraeus, head of U.S. Central Command, wrote in a secret assessment on May 27, 2009: “Anti-U.S. sentiment has already been increasing in Pakistan… especially in regard to cross-border and reported drone strikes, which Pakistanis perceive to cause unacceptable civilian casualties.” Quoting local polls, he wrote: “35 percent [of Pakistanis] say they do not support U.S. strikes into Pakistan, even if they are coordinated with the GOP [government of Pakistan] and the Pakistan Military ahead of time.”

The Pakistani Army has, in fact, launched several significant operations against the Pakistani Taliban in Swat and in South Waziristan, just as Sihanouk initially ordered the Cambodian military to attack the Khmer Rouge and suppress peasant rebellions in Battambang Province. Again like Sihanouk in the late 1960s, however, the Pakistanis have balked at more comprehensive assaults on the Taliban, and especially on the Afghan Taliban using the border areas as “sanctuaries.”

The New Jihadists

What happens next is the $64 million question. Most Pakistani experts dismiss any suggestion that the Taliban has widespread support in their country, but it must be remembered that the Khmer Rouge was a fringe group with no more than 4,000 fighters at the time that Operation Breakfast began.

And if Cambodia’s history is any guide to the future, the drone strikes do not have to create a groundswell for revolution. They only have to begin to destabilize Pakistan as would, for instance, the threatened spread of such strikes into the already unsettled province of Baluchistan, or any future American ground incursions into the country. A few charismatic intellectuals like Khmer Rouge leader Pol Pot always have the possibility of taking it from there, rallying angry and unemployed youth to create an infrastructure for disruptive change.

Despite often repeated claims by both the Bush and Obama administrations that the drone raids are smashing al-Qaeda’s intellectual leadership, more and more educated and disenchanted young men from around the world seem to be rallying to the fundamentalist cause.

Some have struck directly at American targets like Umar Farouk Abdulmutallab, the 23-year-old Nigerian who attempted to blow up a Detroit-bound plane on Christmas Day 2009, and Dr. Humam Khalil Abu Mulal al-Balawi, the 32-year-old Jordanian double agent and suicide bomber who killed seven CIA operatives at a military base in Khost, southern Afghanistan, five days later.

Some have even been U.S.-born, like Anwar al-Awlaki, the 38-year-old Islamic preacher from New Mexico who has moved to Yemen; Adam Pearlman, a 32-year-old Southern Californian and al-Qaeda spokesman now known as “Azzam the American,” who reportedly lives somewhere in the Afghan-Pakistan border regions; and Omar Hammami, the 25-year-old Syrian-American from Alabama believed to be an al-Shabaab leader in Somalia.

Like the Khmer Rouge before them, these new jihadists display no remorse for killing innocent civilians. “One of the sad truths I have come to see is that for this kind of mass violence, you don’t need monsters,” says Craig Etcheson, author of After the Killing Fields and founder of the Documentation Center of Cambodia. “Ordinary people will do just fine. This thing lives in all of us.”

Even King Sihanouk, who had once ordered raids against the Khmer Rouge, eventually agreed to support them after he had been overthrown in a coup and was living in exile in China. Could the same thing happen to Pakistani politicians if they fall from grace and U.S. backing?

What threw Sihanouk’s fragile government into serious disarray — other than his own eccentricity and self-absorption — was the devastating spillover of Nixon’s war in Vietnam into Cambodia’s border regions. It finally brought the Khmer Rouge to power.

Pakistan 2010, with its enormous modern military and industrialized base, is hardly impoverished Cambodia 1969. Nonetheless, in that now ancient history lies both a potential analogy and a cautionary tale. Beware secret air wars that promise success and yet wreak havoc in lands that are not even enemy nations.

When his war plans were questioned, Nixon pressed ahead, despite a growing public distaste for his war. A similar dynamic seems to be underway today. In 1970, after Operation Breakfast was revealed by the New York Times, Nixon told his top military and national security aides: “We cannot sit here and let the enemy believe that Cambodia is our last gasp.”

Had he refrained first from launching Operation Breakfast and then from supping on the whole “menu,” some historians like Etcheson believe a genocide would have been averted. It would be a sad day if the drone strikes, along with the endless war that the Obama administration has inherited and that is now spilling over ever more devastatingly into Pakistan, were to create a new class of fundamentalists who actually had the capacity to seize power.

Pratap Chatterjee is a freelance journalist and senior editor at CorpWatch who has traveled extensively in Afghanistan and Iraq. He has written two books about the war on terror, Iraq, Inc. (Seven Stories Press, 2004) and Halliburton’s Army (Nation Books, 2009). For more information on Nixon’s secret campaign, he recommends Sideshow: Kissinger, Nixon and the Destruction of Cambodia by William Shawcross. (Simon and Schuster, 1979)

Copyright 2010 Pratap Chatterjee

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