Saturday 30 March 2019

The North Block-RBI effect on Lok Sabha polls (Sunday Guardian)

By M D Nalapat

North Block has continued Chidambaram-era policies with increased gusto. India needs low interest rates, low taxes and low regulations for double digit growth.

Raghuram Rajan continued the damage done to the Indian economy by his predecessor, former Reserve Bank of India Governor Yaga Reddy. Apparently responding to suggestions from merchant bankers in wealthy countries, Reddy raised bank interest rates mercilessly, a toxic brew continued by Rajan, a Chicago School economist whom Narendra Modi, Arvind Kejriwal and Rahul Gandhi have separately praised on multiple occasions. Perhaps such admiration was because of the dimming of memory of the havoc that was caused to the poor and the middle class in South America and elsewhere by Chicago School economic theories being put into practice. Both Reddy and Rajan have immense respect for western economics, yet this has not reduced their enthusiasm for carrying out central bank policies that are the opposite of those seen in wealthy economies. In each of these, as also in fast-developing China, interest rates are kept low so as to increase investment, lower the costs of business, and spur consumption in the economy rather than the hoarding of private cash in banks. In contrast, arbitrage sharks from wealthy countries seek a policy of high interest rates in India, so that they can borrow dollars, pounds or euros in banks located in their headquarter country and deposit them in India so as to get the advantage of high interest rates. In India, even companies that have an “A” rating pay 10% and more in bank interest. The plight of weaker companies can therefore be imagined. Small wonder that the toxic economic policies of the Chidambaram era (that have been continued by North Block even after 26 May 2014) has led to Indian businesses being reduced to morphing as underpriced pickings for foreign funds such as Canada’s Brookfield. This group has recently invested both in a stressed New York property belonging to the Kushner family as well as—soon afterwards—in Westinghouse, a nuclear power company in the US that has, after its takeover by the fund, received a raft of orders, including from India and very soon, Saudi Arabia. It would of course be churlish to claim any link between (a) the rescue of Kushner’s skyscraper in New York (b) the acquisition at a low price of Westinghouse, a company that had a very skimpy order book when it was taken over and (c) the fact that it is now bloated with orders for its nuclear power plants.
Good intentions are of little value if the policies generated by such thoughts get formulated solely by officials and their lawyers and accountants. Entrepreneurial input is needed for efficacious policy. In the Insolvency & Bankruptcy Code of India (IBC) for example, which came into force about two years ago, it was thought that recovering the dues of an ailing business would (through the Code) be made as simple in India as it is in countries such as the US or the UK. Although around 12,000 cases have been filed under the IBC, as on date, less than 20 have actually been resolved. Under the restrictively designed Section 29A of the Code, promoters whose companies have become unviable (even if because of causes beyond their control) have been placed in the same category as those who have been delinquent in their responsibilities. If an individual is in charge of a company that holds a non-performing asset beyond a year, he or she now gets summarily excluded from any future link with the company, even if the role of such an individual within a company has been to mitigate the negative effects of deterioration in overall business conditions, including interest rates pegged at Reddy-Rajan levels. Clearly, the IBC has been drafted by individuals who have themselves not begun or run a company, but by those whose entire career has been in the bureaucracy. Lately, the one year period has been shortened to 180 days, after which the company is told to await its fate in the bankruptcy court. This when even three years is often too short a period in India for a business turnaround, given the pace at which government departments as well as the justice mechanism function. Let us not even talk about the Kafkaesque complexity that made it torture for companies big and small to carry out GST reporting and payments obligations. Even North Block has had to dilute some of its absurdly complex provisions because of widespread distress among those paying GST. A growing economy depends on a brisk circulation of money, and this was reduced substantially by the November 8, 2016 demonetisation. Another damper on availability of bank finance (apart from “phone banking” NPAs for which only the bank officers and not the politicians making the calls get caught) has been the wave of arrests of bank officials in a rising number of cases. It remains a mystery—among many—why Rs 12,000 crore worth of Vijay Mallya’s assets have been frozen by the Enforcement Directorate rather than used to repay his debts, as the frozen cash is much more than the money owed to banks that lent money to Kingfisher Airline. Fortunately for air passengers, the bureaucracy has not killed off Jet Airways in the manner it did Mallya’s pride turned folly.
Given the “Jail Them Now” signals coming out of the offices of the Central Vigilance Commissioner (CVC) and no doubt soon from the Lokpal, there is no guarantee that a bank manager sanctioning a loan or resolving the financial troubles of a faltering company will not lead to a visit and worse by the CBI even after a decade. Only a very courageous banker now dares to sanction loans in these days of cash famine when even profitable companies take nearly a year to pay suppliers of goods and services what is owed out of normal business.
There was a time not long ago when the telecom sector, for example, employed more than ten million people and counting. Around half of those jobs have been lost over the past decade, which saw the Supreme Court cancel nearly 200 telecom licences in a single decision. Whether it be Systema, Telenor, Aircel,RCom or Tata, they have all lost horrendous amounts of money in India because of a dizzying and ever changing maze of regulations. And telecom is not the only sector to have seen its employment totals shrink. The UPA-era destruction by P Chidambaram and his official accomplices of an Indian commodity exchange that had expanded into Dubai and Singapore caused a further loss of close to a million jobs. Despite Narendra Modi replacing Manmohan Singh, North Block has continued most Chidambaram-era policies with increased gusto. India needs low interest rates, low taxes and low regulations for double digit growth. If such RBI-North Block policies do not materialise and soon, there will be over a hundred million very upset youths roaming the streets of India within the term of the next government. Should Prime Minister Narendra Modi and the party he leads fall substantially short of a majority in the next Lok Sabha, he has only to stroll across the road from South Block to North Block to find out why.

Saturday 23 March 2019

Forecasts of Opposition defeat are premature (Sunday Guardian)

By M D Nalapat

The 2019 verdict will as much be a verdict on the performance of North Block as it will be on the achievements of South Block.

The Congress Party seemed on the edge of irrelevance, if not extinction, after the Lok Sabha polls in 2014. During the poll campaign, there was a steady barrage of allegations of corruption against the top leaders of the UPA government. After the polls, it was expected that the country would before long witness a series of trials of the UPA grandees, in which they would face charges of misuse of office and the securing of illicit wealth. Such trials never took place, and not surprisingly. The new government handed over power to the civil service on a scale seldom seen in the country’s history. Civil servants have the primary responsibility for governance, acting under the directions of the Prime Minister’s Office. The Modi PMO is headed by the formidable duo of Ajit Doval and Nripendra Misra, both loyal to—and in sync with—Prime Minister Narendra Modi. Not surprisingly for the traditions of his cadre, Doval has relied overwhelmingly on the Indian Police Service (IPS) in matters relating to security and Misra on the Indian Administrative Service (IAS). While the UPA chaired by Sonia Gandhi involved civil society to an extent in the framing of policy, such division of responsibility (for policy analysis and discussion) between the civil service and civil society was dispensed with by Prime Minister Modi. Even in the appointment of the Lokpal, the only “lok” under consideration for membership in this latest of anti-corruption watchdogs has been the tiny fraction of the population comprising former members of the civil service and the higher judiciary. Entrusting even a few responsibilities within the governance mechanism to those outside this tiny subset of India’s 1.27 billion people was a leap too far for the present government, which has followed the example of its predecessor in filling even the Right to Information boards with those whose entire career has been marked by the keeping away from the public of information relating to the processes of governance. In other words, selections to RTI boards have been made from those who have spent their working lives in the executive and the judiciary. The public are, as usual, looking in from the outside, following the practice inherited from the days of the British colonial period and retained and added on to since the departure of the former colonial masters to the UK. As the very civil servants who assisted UPA grandees in their fund collection continued in office undisturbed by the change in the leadership of the Central government that took place on 26 May 2014, it is no surprise that none of the UPA grandees serially accused of serial wrongdoing by the BJP during the 2014 Lok Sabha campaign have had to spend a day in prison. Prosecuting them would have led to questions about the role of certain prominent civil servants in facilitating their activities. Today, to take just a single example, the absence of any prosecutorial action since 2014 against the DMK top tier by the present government (indeed, the post-2014 exoneration of DMK bigwigs including Dayanidhi Maran and A. Raja) could put that party in a position to (along with the Trinamool Congress, the Samajwadi Party and the Bahujan Samaj Party) make the difference between majority and minority status in the next Lok Sabha.
In the next Lok Sabha, it is as close to a certainty as is possible in politics that the Congress Party will emerge as the single largest party in the Lok Sabha after the BJP. Its regional allies would like the Congress Party to gain enough seats to ensure that a non-BJP government takes office, but would be almost as dismayed as the BJP were the Congress LS tally to cross 110 seats. Even if a generous portion of seats had been given by Congress to the BSP (if not the SP, whose influence in these states is slight), the Congress Party would have secured more seats in Rajasthan, Chhattisgarh and Madhya Pradesh than it eventually did, thereby not simply bruising the BJP, but humiliating it at the hustings, the way that took place during the Bihar Assembly polls. Given the reality of the threat that a BJP led by Narendra Modi would pose to the Congress were it to return to office, it would have made strategic sense to have cut a generous deal with the BSP and even allocated a few seats to the SP in the three states just mentioned, rather than enter into a situation where most of the votes secured through the charisma of Priyanka Gandhi will come from the SP-BSP rather than from the BJP kitty. There is logic in the attacks being made by ruling party campaigners against Rahul and Priyanka, for making them and not the rest of the opposition the main focus of negative attention (in states where there is no seat adjustment between 24 Akbar Road and other anti-BJP parties) will ensure that the Congress Party polls more anti-Modi votes at the expense of other anti-Modi parties. Prime Minister Modi has a mind and a memory that is remarkable for its depth and intensity, and it is likely that he has understood the error made through listening to those Union Cabinet colleagues who urged the PM to be “statesmanlike and not vindictive” and abstain from prosecuting UPA-era grandees, in the belief that they would never (at least in 2019) pose a threat to the BJP majority in the Lok Sabha. BJP rhetoric about hyper-graft during the UPA days is met by the retort that “nothing was proved over the last five years”, thereby considerably weakening the effectiveness of a line of attack that was central to CM Modi becoming PM Modi. The opposition parties, should they come to power, will not be as forgiving of the BJP in terms of enquires and prosecutions as the present ruling party has been of them during its term.
Modi is far and away the most popular leader in the country, but so was Atal Bihari Vajpayee when he battled Sonia Gandhi in 2004. The performance of North Block during the term of the present government has not been anything to write home about, although several of the officials who have so clumsily handled important responsibilities during this period have been given generous promotions. The 2019 verdict will as much be a verdict on the performance of North Block as it will be on the achievements of South Block, which is why it is too early to bring out the champagne in the BJP’s new headquarters.

Saturday 16 March 2019

Kim on course to resume nuclear tests after Trump’s Hanoi walkout (Sunday Guardian)

By M D Nalapat

The North Koreans claim that during the talks in Vietman, Donald Trump was ‘clearly not the person in command’ on the US side.

Beijing: North Korea’s leader, Supreme Commander Kim Jong Un, may order fresh nuclear tests and missile launches as a consequence of his interaction with US President Donald J. Trump in Hanoi. The manner in which Trump conducted the meeting was, in the view of the other side, wholly different from the businesslike and confident manner the New York billionaire had shown in his earlier Singapore summit with Kim. This time around, the US President was clearly a “prisoner of the gangster group led by (NSA) Bolton and (Secretary of State) Pompeo”, according to the DPRK side. Discussions at a location in Northeast Asia with those familiar with the thinking of the leadership core of the Democratic People’s Republic of Korea (DPRK) have made it clear that trust within North Korea’s key policymakers is diminishing in the ability—if not as yet the willingness—of President Donald J. Trump of the United States to “sincerely negotiate an agreement with Pyongyang that meets the DPRK’s conditions” of (1) assured regime survival over the long term, and (2) a green light to all countries to initiate unrestricted inbound and outbound trade, investment and commercial flows with Pyongyang.
According to these individuals, the Donald Trump who met with DPRK Supreme Commander Kim Jong Un in Hanoi was visibly different from the “much more confident and assured man” who met with Kim in Singapore. This time around, the US President was “clearly not the person in command” on the US side, and during the course of the talks, was “completely reliant” on cues made over to him by his “Cold War associates”, in contrast to Trump at the Singapore summit, “who took his own decisions”. It needs to be mentioned that in the view of the North Korean leadership core, almost all the official associates of Trump adhere to Cold War views and seek to “tempt and mislead” the Supreme Commander of North Korea into taking what the US side has demanded “for the past 40 years”, which is to make concessions that would permanently incapacitate the ability of the DPRK to have any nuclear-related program, including that relating to non-military uses. They said that such a de-nuclearization could “only evolve on a regional basis and over a period of time sufficient to build complete trust between the US and North Korean sides”. It is not possible “in the arrogant hurry (that US officials demanded in Hanoi of the DPRK) through the mouth of President Trump”.
According to the interlocutors spoken to at the Northeast Asian location, the US position at the Hanoi talks (as articulated by the 45th President of the world’s most powerful country) was that Supreme Commander Kim should “blindly follow the wishes of Washington” and that only after he obeyed could any discussion on matching US steps take place. They added that “the US side was evasive and unclear about the road map, if any, for corresponding concessions on their side”, which gave rise to the suspicion that “all that they wanted was to trick North Korea into (unilaterally) abandoning its most effective deterrent against aggression and getting only honeyed words from President Trump and vague promises from his official associates in return”.
While the abrupt “walking away” of President Trump from the negotiating and even the mealtime table at Hanoi surprised the globe, key elements close to the leadership core of the DPRK see the manoeuvre as “pre-planned” and designed as an attempt to “humiliate the leadership (of North Korea) before the international community”. The Presidential snub came at a time when, in the North Korean view, Supreme Commander Kim was “attracting tens of millions of admirers all over the world every month for his steadfast commitment to a permanent peace on the Korean peninsula in line with the wishes of the noble Korean nation”. Unlike at the Singapore meeting, “when President Trump paid great attention to the ideas expressed by Supreme Commander Kim”, President Trump in Hanoi seemed “not even to want to listen to the DPRK leadership, but simply repeated over and over that he (Trump) should be trusted and his wishes obeyed immediately, because (in his view) he was a man who all his life had kept his word”. Trump “over and over” said that the North Korean side should obey the wishes of the US delegation by repeating, in effect, what Saddam Hussein and later Muammar Gaddafi had agreed to in Iraq and Libya earlier. President Trump wanted the US view to prevail “in order to dazzle his people with the sacrifice of the safety of the Korean people, while not caring about the harsh impact on the noble people should the nuclear defensive systems so painfully created by them over several decades be surrendered”, and that too “without any clear and enforceable plan” from the US side about how and when they would ensure that the “irreplaceable conditions” (of regime survival and freedom of operation within the international trading system) be made operational. On the contrary, the US side was “vague and evasive” about the steps they would take in response to acceptance of their demands, talking only in “generalities and in sugary formulae without specific action plans and time frames”. In contrast, the US side had “well-thought out timeframes and action plans that they wanted the DPRK to accept and to immediately begin implementing”.
During the nearly two dozen discussions that have taken place with different elements of the US and the North Korean side over the past eleven months, it was obvious that “none of the associates of President Trump have given up their repeatedly stated desire to force the end of the DPRK popular regime led by the wise hand of the Supreme Commander” and get it replaced with a “puppet government led by traitors to the noble Korean people” that Washington would fully control. To the shock of the delegation from Pyongyang, the US side acted as though South Korea “had zero power to take independent decisions”, and that Washington would decide “all such matters on behalf of Seoul”. In fact, the US side claimed in conversation that “no country, including China and Russia, would dare to disregard the sanctions imposed on the DPRK through the United Nations Security Council”, and that the noble Korean people would “starve to death unless the leadership core surrendered to US demands”. Such “inhuman thought” created “grave doubts” in the North Korean side about the “sincerity of the US side to negotiate an agreement that met the minimum conditions” set by the DPRK leadership for any agreement on regional de-nuclearization.
According to the individuals spoken to from a Northeast Asian location, all that the North Korean side asked in Hanoi was to “permit their compatriots in the South as well as fraternal countries such as the Russian Federation and the People’s Republic of China, to have trade and commercial links with the DPRK without fear of US retaliation”. They added that this was all that was requested in exchange for “verifiable and substantial measures that would be concurrently get taken by the DPRK towards de-nuclearization” of the Korean peninsula. However, the US position, as articulated by President Trump, was that “the DPRK should first surrender and then the US side would decide what rewards should be given for such life-changing and permanent concessions”. Also, the US side was firm that it was expected that China, Russia and South Korea must obey Washington and impose “gangster sanctions on the Korean people”. Unlike during the Singapore meeting, when President Trump was more attentive to the other point of view and seemed less guided by his associates, in Hanoi he kept “repeating the same formulas that had been talked about by his associates earlier in their discussions (with the North Korean side) and which had already been rejected as inadequate”. Trump in Hanoi seemed much less interested in a genuine negotiation and remained focused on “insisting on his point of view and on his conditions being unconditionally and immediately accepted”. Only the “polite nature of Supreme Commander Kim Jong Un and the innate culture of the noble Korean people ensured that at no stage was the Supreme Commander unfriendly or disrespectful to the much older US President”, who was clearly in the “mental grip of Cold War associates and was no longer free to express or to implement his own ideas” the way he did during the Singapore meeting between the two leaders.
While there was a casual mention of an offer of a meeting in Washington later in the year, it was made clear both by Trump as well as separately by his associates that “this would be a surrender ceremony, and that before the visit, the process of eliminating DPRK’s main defensive systems should begin”. When the Supreme Commander made it clear that “national honour would not permit such a one-sided deal”, President Trump declared “in a tutored manner” that the conference was over and that “he was returning to Washington immediately”. It was clear that the US President was “only following the script written out for him by the Cold Warriors that filled his team”, and that he “no longer had either the will or the ability to come to a decision on his own that was fair to both sides and not a surrender”. The North Korean side became aware of the change in President Trump since the previous meeting. The earlier “decisiveness and autonomy of thought and suggestions for action” that the President of the US had in past meetings and communications was “totally absent” in Hanoi from the start.
“Honour intact and preserving his steel will”, Supreme Commander Kim Jong Un returned to headquarters after the Hanoi summit and immediately afterwards convened successive meetings of the core leadership of North Korea. What the decisions were at such meetings was not indicated, but there seems a possibility that the North Korean side has given up hopes of a mutually agreed compromise, at least during the period when a weakened President Trump is in office. If this be so, they are likely to resume the development of “nuclear defensive systems”, including a hydrogen device, that the leadership core believes would insulate them from the possibility of attack by the US and the country they loathe even more than they do the US, which is Japan. In contrast, there is substantial goodwill within Pyongyang for South Korea and its people. According to the interlocutors spoken to, the manner in which the US side talked of South Korea, as though it were a “slave state that had no right to take its own decisions”, shocked the DPRK delegation. The expectation in Pyongyang is that “the noble spirit of the Korean people will rise within the (South Korean) leadership and ensure that the two sides cooperate with each other and build stronger and stronger bonds so that the entire peninsula benefits”.
However, the question in Pyongyang is the extent to which the Moon Jae-In government can withstand pressure from the Trump administration to retain the harsh sanctions regime that is in place on the DPRK. The attitude of China and Russia will be crucial. If Moscow and Beijing refuse to participate in what is described by the sources spoken to as “collective punishment by the US government of the Korean people for their refusal to surrender when they did not even after the 1950s’ war with the US”, a South Korea under the current leadership may follow the example of Beijing and Moscow, and should Washington object, may begin to adopt a “non-aligned” posture in the emerging Cold War 2.0 between the Russia-China axis and the US-led alliance, the key component of which in East Asia is Japan, the target of much of North Korea’s nuclear offensive systems.
The perception of a US President so weakened by the viciously personal attacks on him and his family members that he has lost all freedom of manoeuvre does not entirely fit such moves by Trump as his repeated efforts at getting funding for a border wall that has the ability to prevent illegal crossings only in a Hollywood movie. What seems clear is that the leadership in Pyongyang, in its decision to enter into substantive talks with the US side, relied on the “businessman realism” of Donald Trump and his power as the Chief Executive of the US “leading the majority party” to ensure a “fair” agreement that would have a “mutually acceptable timetable involving corresponding and simultaneous measures by both sides, rather than any unilateral concession” by the DPRK. The loss of a Republican majority in the US House of Representatives and the toll that the Mueller-Cohen circus is having on the Trump Presidency seem to have diluted the earlier confidence in Pyongyang that President Trump had not just the intention, but the power to agree to and to implement on the US side what the leadership core in North Korea considers a fair deal. They attribute his insistence on “unconditional surrender” at Hanoi as being caused by his growing political weakness, leading to the US Head of State coming completely under the influence of individuals such as National Security Advisor John Bolton and Secretary of State Mike Pompeo, who in his earlier avatar as Director CIA is known by the DPRK leadership core to have worked on “plots for regime beheading” and encouraging a meltdown in North Korea. It has been noted by the “shrewd and far-seeing mind of the Supreme Commander” that neither Bolton nor Pompeo has expressed “any regret” for their longstanding position that the leadership core in Pyongyang needed to be eliminated through all or any available means. In the view of the DPRK leadership core, such a “lack of remorse” indicates that their “secret intention is to work towards a removal of the leadership while professing good intentions in the talks”.
Overall, it would seem a difficult task to once again persuade the North Korean side to believe in the possibility of what they consider a “fair” agreement meeting the two pre-conditions (regime survival and freedom to trade) that are “not negotiable”. After the Hanoi meeting that was cut short by the US side, the probability is for the DPRK to develop and to exhibit more lethal nuclear and missile “defence” capabilities, so as to make the US acknowledge the reality of a nuclear North Korea and stand aside while those countries that seek good relations with Pyongyang (principally South Korea) develop mutually beneficial linkages in, what this writer had, in a talk in the National Assembly at Seoul, termed a “Bright Sunshine Policy” towards North Korea.

China risking its own interests for Pak GHQ (Sunday Guardian)

By M D Nalapat

Beijing’s unhelpful stance on Azhar runs the risk of upsetting commercial ties between China and India.

It was ten years ago that China, prodded by the military in Pakistan, first placed a hold on the UN Security Council’s 1267 Sanctions Committee doing the obvious and declaring Masood Azhar as a global terrorist subject to international sanctions. Last month’s Pulwama attack, accepted as being his doing by Azhar himself, has created a mood in India that will no longer watch the government confine itself to platitudinal expressions of regret and concern at China’s solicitude for Masood Azhar. They ask for action, and an obvious target for those unhappy with Beijing’s support for Azhar would be telecom exports to India, which are in the $50 billion range this year in a total trade of over $100 billion. Of this, the surplus of exports over imports of China is $60 billion this year. Under Prime Minister Narendra Modi, both India-China trade as well as China’s trade surplus with India has reached levels that are high and rising. In a situation where Chinese telecom manufacturers are facing protectionist measures from the US and from an increasing list of other countries, India has been an exception. Given the anger in India over China’s latest blocking of the move by all other UNSC members to designate Azhar as a global terrorist, Prime Minister Modi faces substantial criticism for being “soft on China”, and there is a clamour from within his own party to place restrictions on Chinese telecom imports into India on security grounds. The argument given by those asking for a complete ban on Chinese telecom products and services into India is that the industry is vital for internal security, and that by once again blocking efforts by the global community to assist India by taking a tough line against a self-acknowledged terrorist of long standing, China has shown that it continues to follow the wishes of the Pakistan military even when that force has been seeking to engulf India in chaos through resort to terrorism.
During 2009, 2016 and 2017, there were zero consequences from India for China’s blocking of UNSC action through a technical hold. This time around, the Government of India will earn the tag of being as careless about national security challenges as the A.B. Vajpayee and Manmohan Singh governments were, unless action gets initiated against Chinese trade with India. Only two countries support Pakistan over Azhar, and these are Turkey and China. As a consequence, an argument is being made by China-sceptics that normal commercial dealings with that country in telecom products carry a security risk. The post-Pulwama support shown by China to the Pakistan military and its terrorist associate crossed a red line on 13 March. Public anger at this move by China has surprised the Lutyens Zone, which is habituated to ignoring the harm done to India by other countries and refusing to retaliate in return. After the Azhar slap at the UNSC, Prime Minister Modi will be under pressure to retaliate, just as he did after the Pulwama massacre, fortunately with the backing of the major opposition parties, including the Congress Party led by Rahul Gandhi, all of whom are calling for a strong response by Modi to China’s latest veto on UNSC action against Azhar.
Beijing’s unhelpful stance on Azhar runs the risk of upsetting commercial ties between China and India. Trade is good for both countries. Even though the $100 billion figure seems large, in reality the potential of trade between the two countries that together hold 2.7 billion people is around $300 billion. Of this, India’s imports from China could be $200 billion and its exports $100 billion, comprising items such as services, Information Technology and pharmaceuticals. besides the raw materials that have thus far dominated this country’s exports to the other. Greater cultural contact between China and India would be good for both sides, with Chinese movie starts acting in Bollywood, Tollywood and other productions, and Indian actors and actresses acting in Chinese movies. Music, dance and other forms of entertainment could be made mutually popular, especially if television channels in both countries screen each other’s wares. Overall, there is no substantive cause for any type of conflict between the two most populous countries on the globe, provided China is on India’s side in the matter of cross-border terror.
The reason why GHQ Rawalpindi seeks to protect Azhar is obvious. It has put into operation a plan to make parts of Jammu & Kashmir another Taliban Afghanistan, and in such a transformation, the Jaish e Mohammed (JeM) has been given the lead role. Azhar, who was released in 1999 by the Vajpayee government, is therefore a prized asset of the Pakistan military. The surprise is that the hold of GHQ Rawalpindi over the decision-making process in Beijing is so strong that China repeatedly sacrifices its own interests in order to bat for a terrorist at the UNSC. Beijing has so misunderstood the post-Pulwama mood in India as to believe that this time as well its backing for GHQ Rawalpindi against India will as usual get overlooked, barring a few statements from the MEA. After GHQ Rawalpindi began its latest drive in 2015 to convert parts of Kashmir into an Afghanistan-style cauldron of violence to the detriment of the people living there, terror attacks planned by it and carried out by local recruits have become more and more audacious. Only a very strong response by India on any backing for such moves can retrieve the situation. After the latest technical hold on declaring Azhar a global terrorist, the option of placing curbs on China’s telecom exports to India is becoming an option that may be difficult for those looking only at corporate bottom lines to resist for much longer.
In 1971, Prime Minister Indira Gandhi through D.P. Dhar formed an alliance with the USSR that gave her the backstop needed to take on the Pakistan army. In the same way, India now needs to establish a close military alliance with the US. This would give Delhi the flexibility needed to take on Pakistan’s military once again as was done in 1971. Decisions such as the purchase of the S-400 system from Russia, or the delay in signing the third India-US foundation defence agreement, make no sense in the present geopolitical context. Of the two global superpowers, China has clearly declined to move away from its embrace of Pakistan. That leaves only the US as a superpower partner. The latest Chinese decision on Masood Azhar at the UNSC makes imperative the need to demonstrate that such a move cannot any more be followed by “business as usual”, especially in fields vital to security such as energy, infrastructure and telecom. China may soon learn that choices involve costs, and that by supporting the GHQ Rawalpindi terror machine against India, Beijing is putting at risk what is potentially its largest market in Asia.

Saturday 9 March 2019

Iran and Taiwan: Two crises waiting to happen (Sunday Guardian)

By M D Nalapat

Mutual peeling away of Taiwan-related ambiguity by the PRC and the US points to the rising risk of a cross-strait confrontation between the two superpowers.

TAIPEI: If an international news channel is to be believed, Prime Minister “Bibi” Netanyahu of Israel has warned that his navy could soon move to prevent oil exports from Iran from reaching markets such as India, South Korea and Japan. It is impossible to close access through the Persian Gulf to Iran and keep the blockade limited to that country. The clerical regime in Teheran (as distinct from the lay establishment headed by President Hassan Rouhani) has both the means as well as the will to ensure that oil exports from other nearby countries too will get blocked through that passageway, a situation that could immediately double and treble oil prices to the detriment of the global economy. The Prime Minister of Israel, assuming that he is serious about seeking to block all exports of oil from Iran, will expect that the United States and Saudi Arabia will back him in such an enterprise. Unfortunately for him, the coming together of two friends of Iran—Russia and China—has resulted in another powerful military alliance being formed that is arrayed against select US strategic objectives (such as the emasculation of Iran). The potential for a major conflict is therefore far from absent. The Iranian military and security system is likely to respond to US-Israel-KSA moves not only by conventional means, but through the use of asymmetric methods, especially within the Gulf Cooperation Council (GCC), a grouping in which substantial Iran-responsive networks are embedded. Fresh fronts are likely to get launched against Israel via Lebanon, Syria and parts of Palestinian territory. Although President Hassan Rouhani and Foreign Minister Javad Zarief of Iran are trying to convince the rest of the country’s leadership that the nuclear deal, or JCPOA, is still alive after the deathblows landed on it by Donald Trump, it is unlikely that many will fail to reach the conclusion that only a nuclear deterrent has the heft needed to protect Khameini’s Iran from going the way of Saddam’s Iraq or Gaddafi’s Libya. Just as Boltonesque US demands have almost certainly resulted in North Korea resuming work on developing and testing a hydrogen device as well as missiles capable of reaching the US east coast, it is likely that Iran will before long resume its march towards nuclear capability at an accelerated pace, to make up for the time lost through trusting the NATO powers to adhere to not just the letter but the spirit of the JCPOA. The US has abandoned both, the Europeans the latter. While North Korea seems to have crossed a deterrence threshold, thereby ensuring that military action against it would inflict unacceptable harm on Japan and Guam at the least, Iran is some way away from such immunity. Because of the hiatus in Teheran’s development of nuclear capability caused by the JCPOA negotiations and signing, the clerical regime in Iran is still vulnerable to an all-out military strike by the US and Israel, although such an attack is likely to generate side effects that are more toxic to the security of Israel than prevails at present. However, just as George W. Bush thought about Iraq in 2003, “Bibi” Netanyahu may believe that divine forces are on his side during a conflict with Iran, and this may lead to him pressing the long-threatened war trigger, especially once assured of US participation.
Another fuse waiting to be lit is across both sides of the Taiwan Straits. For decades, a deliberate ambiguity about the indefinite future course of events helped ensure that nothing more lethal than missile-rattling or warship cruises take place. However, the most powerful Chinese leader since Mao Zedong early this year removed all ambiguity about Beijing’s operative plans for Taiwan. Xi Jinping has made it explicit that the “1992 Consensus” (embodying the fiction that while there is one China, both sides of the strait have different interpretations about the concept) cannot mark an indefinite pause, or indeed two different interpretations. The “1992 Consensus” must in a relatively brief period be followed by the absorption of Taiwan into the People’s Republic of China in a variation of Deng Xiaoping’s “One Country Two Systems” Hong Kong model. Under the Xi formulation, at best, Taipei can expect a “One Country Three Systems” solution, but cannot for much longer avoid merger with the PRC.
On the US side, there has been since the 1980s a corresponding ambiguity about the security status of Taiwan vis-a-vis what is still the world’s most lethal military. The Taiwan Relations Act does not explicitly make mandatory a US military response in the event of an armed attack on Taiwan by the PRC, nor thus far has Taipei been designated a US ally on the lines of Tokyo, Seoul and (despite Rodrigo Duterte) Manila. That is changing. A sprawling US “representative office”, complete with uniformed military guards, will soon open for business in Taipei, and it is likely that high level visits on both sides will begin, even before the next Taiwanese presidential election early next year. As yet unacknowledged in public, Taiwan seems on the way to becoming a defence and security ally of the US. This will be as part of the “First Island Chain”,which is intended to keep the PRC from accessing the eastern waters of the Indo-Pacific unimpeded. Driven by the imperative of regime survival in Taiwan, the DPP, under the shrewd and feisty Tsai Ing-wen, seems on course to strengthen US-Taiwan defence linkages in a second term enough as to remove any ambiguity about Washington’s response to a PRC invasion of the island. Clearly, the calculation in both Washington as well as Taipei is that such a development would take away the appetite in Beijing for initiating a cross-strait conflict. This mutual peeling away of Taiwan-related ambiguity by both the PRC as well as the US draws attention to the rising risk of a cross-strait confrontation between the two superpowers, which are now explicitly foes of each other in the manner that the US earlier was with the USSR
Should the JCPOA with Iran melt down formally as it already has in practice; should Netanyahu form a ruling coalition of even more hardline elements than presently after the Israeli election and move against Teheran; and should the PRC accelerate its drive to absorb Taiwan, a step that is likely to meet with kinetic resistance from Washington, the world will move into still more “interesting” times.

Saturday 2 March 2019

Pakistan army alarmed by change in India’s response to terror (Sunday Guardian)

By M D Nalapat

With the IAF strikes, uncertainty has been brought into the operational planning matrix of GHQ Rawalpindi’s asymmetric war on India.

New Delhi: Early in the morning of 26 February, Indian Air Force (IAF) aircraft launched a precision strike on a Jaish e Mohammad (JeM) training camp in Balakot (Khyber-Pakhtunkhwa) in Pakistan. Previously, the camp had been used by the Hizbul Mujahideen, and had several structures designed to accommodate students, classes and terror instructors. It gets visited repeatedly by Masood Azhar, who was given a second stint in terrorism through his release by the Atal Bihari Vajpayee government in 1999, as also his family and associates. Situated on the banks of the Kunar river, terror trainees were given instructions in escape through water, by trainers, many of whom had previously served in the Pakistan army or were on leave from the institution that controls the Pakistan state. Training under “Daura-e-Khaas” rules was imparted, in which expertise was honed in field tactics, weapons handling, ways of ambushing security convoys (as was carried out in Pulwama), making and concealing improvised explosive devices (IEDs) and equipping vehicles for suicide missions. A high priority was given to survival tactics, especially at high altitudes and in hyper-stress conditions. At least three hours would be spent each day on indoctrination into Wahhabi tenets that stressed the “inevitable takeover of the planet” by followers of the same creed that members of ISIS subscribe to, and which is entirely different from Islam, a religion that has peace, compassion and beneficence at the core of its values. As images of the strike taken from onboard cameras have not so far been released by the IAF, the GHQ Rawalpindi spin machine has been having an unobstructed run claiming that only “empty ground” was hit by precision strikes that used laser-guided, almost fail-safe systems to lock onto their designated targets. The strikes were not condemned by either of the two superpowers, the United States or (surprisingly) China, and every aircraft reached home safely, thereby keeping to what may be termed the “Doval rules” of engagement, which mandate (1) zero losses on our side in combat, and (2) zero collateral damage in the target zone. It is presumed that the latter condition was met as well during the brief operation. The former certainly was.
With the week’s precision strikes by the IAF on terror targets in the vicinity of Balakot, uncertainty has for the first time since 1971 been brought into the operational planning matrix of GHQ Rawalpindi’s asymmetric war on India. The assumption that Pakistan’s nuclear capability would prevent a cross-border conventional response by the Indian military to Pakistan-inspired terror attacks within India (principally in Jammu & Kashmir) has become obsolete. In the past, the “international community” (read the US and the European Union) would lean on India to moderate its response to terror attacks, rather than focus on Pakistan beyond a few words of concern. Prime Minister Narendra Modi has set a precedent, which is that India’s response to a Pakistan-inspired mass terror attack could be even more asymmetric than another iteration of GHQ Rawalpindi’s 1980s-origin game plan to enervate the Indian economy and cause societal fissures to widen within the world’s greatest democracy. It is, after all, not Kashmir that is the root cause of Indo-Pakistan tensions but the Pakistan army itself. Even were that terror-supporting force to be handed over Kashmir, GHQ’s non-conventional war on India would continue until this country became weak enough for it to midwife another vivisection on the 1947 Jinnah design agreed to by Jawaharlal Nehru and Vallabhbhai Patel. It is difficult to understand what the overall global strategy of the governance mechanism of the Indian state has been over the years, but the goals of GHQ Rawalpindi are transparent. They are to ensure that:
(a) The army remains supreme within the governance system of Pakistan.
(b) Afghanistan be brought back to the satellite status it had under the Taliban.
(c) Keep Kashmir and where possible other insurgencies on the boil so that the armed forces of the Republic of India lack the strength to repeat a 1971 through a conventional war.
(d) Ensure that Pakistan remains India’s external obsession so that possible synergy with other parts of the world does not get effectively tapped for the betterment of the country and its 1.3 billion people.
(e) Milk China and the US to the maximum extent possible through doing odd jobs for both and making available land, people and resources for Washington and Beijing to use as both respectively deem fit.
(f) Use the Pakistan army’s Zia-origin fealty to Wahhabism to ensure financial and other support from Wahhabi networks and regimes across the world and profess to be sincere followers of genuine Islam to non-Wahhabi Muslim majority countries so that they may collectively support Pakistan and (directly or indirectly) participate in its efforts at separating Kashmir from the rest of India, an outcome that GHQ Rawalpindi is convinced will mark the beginning of the second disintegration of India, the first being in the post-World War II period, when a UK, piqued by the what it saw as a tilt towards of the Axis powers of the Congress Party, began removing large areas of land from the control of New Delhi, ending with the 1947 partition that created Pakistan.
Given that it is the chemistry and core objectives of GHQ Rawalpindi that are the cause of that institution’s hostility towards India, it has been (and remains) a waste of time to expend effort on “solutions to the Kashmir problem”, as even if a solution that meets the requirements of GHQ Rawalpindi be accepted by a government in India, the basic motivation for hostility would not go away, but would express itself in some other form and over another cause after an interval of time. The only solution to Indo-Pakistan tensions would be the recovery of civilian authority over the military in Pakistan, a situation that presently is clearly beyond the reach of the people of that country unless major powers step in to assist them to get their freedom from an overpowering and predatory military. This will require silent, separate and systematic work by a combination of countries that are the victims of Pakistan-inspired terror groups, nations that would include those not friendly to each other, such as the US and Iran, together with Afghanistan. Given the disconnect between the People’s Republic of China (PRC) and Wahhabi schools of thought and activity, Beijing will, hopefully, in the future join the effort at ensuing that Pakistan becomes not an “army with a state” but another of the numerous states with an army. A strategy of precision strikes against terror camps set up by GHQ Rawalpindi has become complicated since 2003, when as a consequence of the fear of a US strike on such bases in Pakistan, many were shifted from the countryside to locations within or close to cities. This was to ensure better camouflage against detection from aerial and space platforms, as well as to deter bombing plans out of concern for the substantial collateral damage, which would ensue were such camps to be hit with bombs or missiles. A long-term solution to the security problem posed by the Pakistan army has to be based not only on a robust military response to terror attacks, but the formulation and actioning of a hidden long-term Counter-Terrorism (CT) strategy based on energising domestic opposition to the militarist ethno-centric state that Pakistan has become. Vacant covert space needs to be filled with a comprehensive strategy designed to cause faultlines to develop that would weaken the ability of the military to force the rest of the country to be its accomplices in GHQ Rawalpindi’s destabilisation efforts regionally, targeting Iran, Afghanistan and India.
Prime Minister Narendra Modi, who hails from a state known for its globally competitive trading community, has had the advantage of the status of India as the lead buyer of defence and other equipment and materiel (such as mobile telephone systems and petroproducts) from key countries. Such trade has helped ensure that wide international support has been given to the retaliatory moves that Modi has now initiated against the Pakistan military’s terror auxiliaries. Such a broad base of global support for India played a role in GHQ Rawalpindi’s decision—articulated through Prime Minister Imran Khan for GHQ to escape flak from hardline elements in the army as well as terror auxiliaries who sought to keep Wing Commander Abhinandan Varthaman in custody.
Both Iran as well as Israel have been cultivated by Prime Minister Modi and External Affairs Minister Sushma Swaraj. In the 50th year of the setting up of the Organisation of Islamic Cooperation (OIC), Pakistan failed to achieve what it had succeeded at then, which was to exclude India from a group whose senior permanent officials have been cultivated by the ISI across the years. Standing firm against GHQ-inspired blackmail articulated through the Pakistan Foreign Minister, the UAE stood by its decision to invite External Affairs Minister Swaraj to the OIC meeting, which took place in the midst of India-Pakistan tensions and which was boycotted in protest by Pakistan’s Foreign Minister, who was not missed. EAM Swaraj gave a sensitive speech that drew on the millennia of relations between several member states of the OIC and India. The only country that has adopted a stand that is wholly in favour of Islamabad and against New Delhi is Turkey, which seems to have abandoned its Kemalist roots in favour of Wahhabism at a time when Crown Prince Mohammad bin Salman of the Kingdom of Saudi Arabia is moving his hugely influential country away from that philosophy and its restrictive mindset. Both the UAE as well as Saudi Arabia are showing themselves to be friends in need to India, unlike in the days of the IC 814 hijack, when both had a visible tilt towards Pakistan in the matter of dealing with the fallout of what is known as the Kandahar hijack and security debacle. Credit needs to be given to Prime Minister Modi and EAM Swaraj for being able to get a wide base of support (including from China) for a stronger line on GHQ Rawalpindi than India has witnessed for a long while.
Overall, Opposition parties led by the Congress Party have backed the new strong line against Pakistan. Rahul Gandhi has apparently silenced those in his party who reflexively mouth platitudes about Pakistan whenever there are Indo-Pakistan tensions. Such elements have repeatedly in the past handed over through their Pakistan-excusing statements an electoral advantage to the BJP, as took place in the midst of the Gujarat Assembly polls.
The carnage and wreckage of Pulwama indicate, yet again, that the Lutyens Zone policy of pandering to separatist impulses in Kashmir has not worked. Measures that are discriminatory in nature (such as Article 370) need to be removed from the Constitution of India. There is a small and pampered core of de facto Pakistanis living in Kashmir, almost all of whom are in plain sight. India needs to follow the example set by the US, Saudi Arabia and the UK in ensuring that citizenship be revoked in the case of those proven to be harmfully disloyal to the country. Such individuals should be granted their wish to become citizens of Pakistan and sent to live in that country. Fresh terror attacks by groups that have been indoctrinated from the other side of the border need to be met with further precision strikes across the border. Missile and nuclear capability needs to be enhanced, while offers of transfer of production facilities of frontline aircraft (such as the latest F-16s) need to be acted on, as also the signing of the remaining Foundation Defence Agreement with the US. Should Beijing continue on what seems a post-Pulwama trajectory of not intervening to shore up GHQ Rawalpindi in the event of tensions and hostilities with India, Chinese cell phone manufacturers may  be given freedom to fully compete in the Indian market but only if there is broad daylight between Beijing and the terror-supporting army in Pakistan.  Both the GCC as well as Iran should find in India a ready buyer for their petroproduct exports, while trade with Russia needs to expand, but move away from defence into other sectors.
A major problem with the Lutyens Zone is the absence of follow up of initiatives. Just as the battle against ISI-sponsored networks in Punjab was won in the 1990s through decisive action by dedicated security professionals, the war on such networks operating in Kashmir should be conducted in a coldly rational manner and without the sentimentalism and lack of realism within the policy establishment that has caused the bleed in Kashmir, a state with a gifted people, by the forces of terror for decades. An entire generation of youth has through defective policies centred on Wahabbi appeasement grown up in the Valley not knowing anything except conflict. Before more get Wahhabised and weaponised, they need to be shown through much more effective information transmission as well as alternative study and work opportunities that those from across the border who seek to beguile them are the enemies of the peace they seek as citizens of the world’s next superpower. In such a context, those in other parts of India who seek to do harm or be abusive to Kashmiri youth in other parts of the country act as the “useful idiots” of the ISI. Similarly, whatever rights are enjoyed by Kashmiris in the rest of India should be enjoyed by all citizens of the world’s most populous democracy in the state of Jammu & Kashmir.
26 February 2019 must represent not a one-off but a paradigm shift uninfluenced by the Lutyens Zone’s lack of realism and overload of sentimentalism. Political parties need to come together so that terror in Kashmir gets extinguished the way it has been in Punjab.