Geopolitical thread

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Re: Geopolitical thread - 15

Postby renukb » 11 Oct 2008 15:40

Russia’s Monroe Doctrine
Cornered by NATO’s expansion, Moscow reasserts its imperial ambitions

By Fred Weir ... e_doctrine
Russia’s concern is that NATO is creating new dividing lines designed to isolate Russia from the European community. Russians are afraid they’ll wake up one morning and find themselves alone

By Pentagon standards, Russia’s lightning summer conflict with Georgia wasn’t much of a war.

There was no forced “regime change” and no “shock and awe,” merely a swift, armored thrust by Russia’s Vladikavkaz-based 58th army that dispersed an ill-advised Georgian military assault on the Moscow-protected statelet of South Ossetia. And though the Russian air force took undisputed control of the skies and targeted some aspects of Georgia’s infrastructure, there was no plan to systematically destroy it. The whole thing ended with an internationally brokered deal that secured the Russian army’s withdrawal to its pre-war positions and the insertion of European monitors to guarantee the peace.

But the Russian military’s first foray beyond its borders since the Soviet Union collapsed in 1991 has triggered political shock waves beyond the region, and threatens to bring on a chill in East-West relations to rival the worst days of the Cold War.

After almost two decades of retreat from the former USSR’s geopolitical positions, a resurgent, oil-rich Russia appears angry, resentful and unwilling to tolerate further expansion of NATO into its historic region.

That mood prefigures trouble ahead. Two ex-Soviet countries — Georgia and Ukraine — could join NATO’s Membership Action Program as early as December. Though that’s unlikely with many European states dubious, the Bush administration sent Vice President Dick Cheney to stiffen spines in the two NATO aspirant countries in early September.

“Russia’s actions are an affront to civilized standards and are completely unacceptable,” Cheney told journalists in Georgia’s capital, Tbilisi, without acknowledging that it was actually Georgia that opened hostilities by attacking South Ossetia, where 80 percent of the population carry Russian passports and are protected by Russian troops. “Brutality against a neighbor is simply the latest in a succession of troublesome and unhelpful actions by Russia,” Cheney added.

The thin red line
The original Cold War began with a series of Communist-backed coups in Eastern European countries that were occupied by the Red Army in World War II.

In 1948, Soviet leader Joseph Stalin launched a blockade to starve the Western allies out of their enclave in West Berlin. An American airlift broke the siege, followed by a series of dramatic measures, including the re-instatement of the draft by President Harry Truman. The next year, NATO was created to block further Soviet expansion.

Many Russian experts say things are like that today — only in reverse. The “color revolutions” in Georgia, Kyrgyzstan and Ukraine brought ardently pro-Western governments to power in countries that have close historic ties with Russia. After a decade that has seen NATO absorb all the former USSR’s Eastern European allies and the United States move to install strategic anti-missile weapons in Poland and the Czech Republic, Moscow has had enough.

Both Georgia and Ukraine have infuriated Russia by seeking a fast-track to NATO membership, with the backing of the Bush administration. Though their applications were postponed at the alliance’s Bucharest Summit in April, the issue is slated to re-emerge at a review session in December.

“There is a red line, where Russia cannot accept further pressure on its borders in its traditional geopolitical arena,” says Natalya Narochnitskaya, former deputy chair of the State Duma’s foreign relations commission and now an executive of the Moscow-based Institute for Democracy and Cooperation. “Ukraine becoming part of a hostile military bloc, and seeing NATO bases sprout in Russia’s historic heartland, is simply not something we can ever accept.”

Many Russian experts insist that Moscow doesn’t object to Ukraine’s independence, but would prefer to see it pledge neutrality and become a buffer between East and West, akin to Finland during the Cold War. Moscow objects to Ukraine joining NATO, a military alliance, but not to Ukraine’s economic or political cooperation with the West.

“Russia’s concern is that NATO is creating new dividing lines in Europe, which are designed to isolate and reject Russia from the European community of states,” says Tatiana Parkhalina, director of the independent Center for European Security Studies in Moscow. “Russians are afraid they’ll wake up one morning, and find themselves cornered and alone.”

Eastern promises
In the wake of the Georgian war, Russia has moved to shore up its small local security alliance, the seven-member Collective Security Treaty Organization, comprised of Armenia, Belarus, Kazakhstan, Kyrgyzstan, Russia, Tajikistan and Uzbekistan. It is also eyeing greater military cooperation with the Shanghai Cooperation Organization, an assembly of former Soviet Central Asian states, plus China, and includes India and Iran as observers.

“The danger is that Russia will transfer its allegiances eastward and become an adjunct of China,” says Dmitri Trenin, a foreign policy expert at the Carnegie Center in Moscow. “No one wants this, but events are taking on a harsh logic of their own.”

In statements in August and September, Russian President Dmitri Medvedev spelled out a Russian version of the Monroe Doctrine, warning that Moscow will intervene to protect its citizens and business interests, particularly in the “near abroad,” meaning the former Soviet Union.

“The events in South Ossetia showed that Russia will not allow anyone to infringe upon the lives and dignity of its citizens, that Russia is a state to be, from now on, reckoned with,” Medvedev told a gathering of regional leaders in September.

In moves that appear calculated to revive old sensitivities in Washington, the Kremlin has put out feelers to former Soviet allies, such as Cuba and Syria, and new clients like Venezuela. In July, a Russian delegation led by Deputy Prime Minister Igor Sechin visited Havana to explore rebuiding Soviet-era economic and security ties.

A month later, Medvedev discussed sophisticated arms sales and the possibility of the Russian Navy using former Soviet port facilities at Tartus, on the Mediterranean, when Syrian President Bashar al-Assad came calling at the Kremlin.

Meanwhile, Moscow newspapers have reported similar discussions with Vietnam about using the former Soviet naval base at Cam Ranh Bay. The Russian Foreign Ministry expressed “deep satisfaction” recently when another old Soviet friend, Nicaraguan President Daniel Ortega, became the first foreign leader to extend diplomatic recognition to South Ossetia and the other breakaway Georgian territory, Abkhazia.

In September, two Cold War-era Tu-160 strategic bombers were sent to Venezuela. They were expected to be followed by a Russian naval task force in November, including the giant nuclear-powered guided missile cruiser Peter the Great, which will hold war games with Venezuelan ships in the Caribbean. Few experts believe that Moscow is really trying to revive the former Soviet alliance system, but many say that events are developing a dangerous momentum of their own.

“American foreign policy is overburdened with too many engagements just now, and its resources have proven not to be unlimited,” says Narochnitskaya. “It is time for Washington to stop and re-think the whole idea of pushing NATO into the former Soviet sphere, before things start to get really out of hand.”

Many Russians argue that the roots of today’s growing East-West rift lie in the West’s failure to work with Russia to re-imagine global security architecture following the USSR’s collapse, analogous to the way the victorious powers after WWII responded to a similar geopolitical watershed by developing the United Nations and a whole new set of world institutions.

Confidantes of former Soviet President Mikhail Gorbachev allege that U.S. leaders reneged on pledges to build a “new world order” after Soviet troops withdrew from Eastern Europe and the military alliance, the Warsaw pact, was disbanded.

“Gorbachev made deep concessions to the West to break out … of the arms race, but later, when Russia was going through a painful economic transition and we needed support, the West turned away,” says Andrei Grachev, a Kremlin adviser and Gorbachev’s presidential spokesman at the time. “Despite promises that had been given to us, the West decided to use [Russia’s weakness and economic turmoil] to expand NATO to the East. The anti-Western moods in Russian society today can be explained by the fact that the West treated Russia as a vanquished enemy,” rather than a potential partner, he says.

Though it’s natural to think in terms of the last war when trouble looms, some Russian experts say the Cold War is the wrong analogy to use as Moscow and Washington head into deeper confrontation.

“Russia today is a capitalist country and part of the world economy,” says Boris Kagarlitsky, director of the Institute of Globalization and Social Movements in Moscow. “Indeed, that’s what’s causing all the trouble. The desire to globalize is a tremendous stimulus to conflict; it’s a myth that capitalist countries don’t go to war over territory, markets and resources. They’re using Cold War rhetoric, on both sides, to sell these new rivalries in a familiar package. But this is a new, and more dangerous world.” 

Fred Weir is a Moscow correspondent for In These Times and regular contributor to the Christian Science Monitor, the London Independent, Canadian Press and the South China Morning Post. He is the co-author of Revolution from Above: The Demise of the Soviet System.

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Re: Geopolitical thread - 15

Postby renukb » 11 Oct 2008 15:44

What are Russians afraid of? After Georgia war, Russia seems to have softened a lot and they behave like scared goat... scattered...repeatedly Asking the west to accomodate them as if there is no life without them...and Frequently testing Missiles...Appears that Russia has been pressed hard by back door diplomacy aftermath of Georgia war by the US lead west.

Russia test-fires ballistic missile to mid-Pacific ... HA20081011

MURMANSK, Russia (Reuters) - Russia carried out the first test launch on Saturday of a strategic missile that reached the equator in the Pacific Ocean, a navy spokesman said.

The spokesman said the Sineva missile was launched from the nuclear-powered submarine, Tula, based in the Arctic Barents Sea during military exercises observed by President Dmitry Medvedev.

"For the first time in the history of the Russian Navy the target of the missile was in an equatorial part of the Pacific Ocean rather than the Kura testing ground on the Kamchatka Peninsula," he said.

The spokesman did not specify the area where Russia's newest missile landed. The Sineva missile was introduced into Russia's arsenal last year.

"The area where the dummy warhead landed is legally part of an open sea and the area was closed to navigation and flights at the time of the exercise," he said.

Medvedev's predecessor Vladimir Putin made the revival of the armed forces, neglected for around 10 years after the fall of the Soviet Union, a symbol of Russia's resurgence.

Russia's strategic bombers have restarted regular patrols over the Atlantic Ocean irking NATO and a group of the Northern Fleet ships is on its way to the Caribbean to take part in joint exercises with U.S. foe Venezuela.

(Writing by Oleg Shchedrov; editing by Elizabeth Piper)

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Re: Geopolitical thread - 15

Postby Philip » 11 Oct 2008 15:52

RB,Russia believed the US/NATO after the Cold War was declared over nd drastically doiwnsized their military assets,including that of strategic bombers and SSBNs,but the US continued to develop newer more deadly and precise missiles and warheads.Apart from thyat the steayd advance upto Russia's borders by NATO was meant to "cage the Bear" forever.Unfortunately for the hawks in the west,a ne Russian leader,Vladimir Putin took over from the boozed up lot like Yeltsin and the oligarchs were brought to heel.Ruyssia is now attempting to make up for lost time and modernise its armed forces especially its strategic command.

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Re: Geopolitical thread - 15

Postby renukb » 11 Oct 2008 16:05

If Russians are conducting military excercises closer to US shores using Venezuela Cuba etc... The US is lpaying it right in the Soviet land!

Latvia discussing new military exercises with US ... AD93O5A200

Philip, Makes sense but then I believe that it is time for Russians to test a few more new nuke designs as well. Russianas need to court their OLD allies, share and support them build an alliance like NATO... Russia alone will be struggling ...forever... Europeans will never accept a Russia in the current form... They will probably accept a de-nuked powerless Russia. By showing intent to work with US and EU, Russians are running behind the myths. The US strategy of divide and conquer of ex ussr and current Russia will not stop, unless Russians show the intent to use and drop Nukes on adversaries. If Russians are not thinking this way, I pity, that Russia will not be in the same mould in the next 20 years...they will be further divided.

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Re: Geopolitical thread - 15

Postby renukb » 11 Oct 2008 16:30

Putin: US image damaged forever over economy woes ... AD93N6OBG1

"Trust in the United States as the leader of the free world and the free economy, and confidence in Wall Street as the center of that trust, has been damaged, I believe, forever," Putin said. "There will be no return to the previous situation."

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Re: Geopolitical thread - 15

Postby rocky » 11 Oct 2008 18:34

Canada's Parliamentary Budget Officer released a report on the 9th of October on the war costs in Afghanistan. Apparently, all three authors are desis!

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Re: Geopolitical thread - 15

Postby kshirin » 11 Oct 2008 21:31

Parag Khanna's book Second World is full of dire predictions regarding US decline and European promise (he counts Europe's periphery as contributing the vast missing hordes -only European Achilles' (sp?) heel being demographic), so that I had to balance it immediately by reading Zakaria's book, but his recommendation for a G3 (US+EU+China) coming from an Indian is strange, since he does not seems to realise how dangerously inimical to our interests such a coalition would be - hope he is proven wrong in our lifetimes with India trumping China to this group.

Why the US, Europe and China Need a 'G-3'
By Parag Khanna
(DER SPIEGEL 7.10.2008)

The current multipolar world resembles a three-legged stool with the United States, the European Union, and China being the dominant "imperial" powers. But only when there exists a viable balance of power can the stool be stable -- and a new global order emerge.

It is inter-imperial relations -- not international or inter-civilizational -- that shape the world. America, Europe, and China are not only unique empires, they are exceptional in their expansionism. These three powers together increasingly command the world economy, form the largest trading blocs, and set rules for the rest of the world to follow. They lead by example, and by treaty. Each represents its own mode of diplomacy: For America it is coalition; Europe touts consensus; and China's style is consultative. The United States offers military and regime protection and aid; Europe offers deep reform and economic association with its union, and China offers full-service, conditionality free relationships.

But at the same time, it is hard to overestimate the fluidity of the early 21st-century landscape: America vacillates between shunning and embracing the international community, the Chinese politburo remains a black box, and the European Union cautiously exercises strategic leverage. But we must also consider that America may not be able to afford its excessive consumption, nor Europe its expansion, nor China its environmental and social burdens. All three superpowers might retrench if they are unable to maintain present commitments or if blending with their peripheries proves too cumbersome.

Then there are the many swing states of the "second world" that complicate the picture drastically: energy-giant Russia, aspiring India, and technological juggernaut Japan. Beyond these three major states, there are those with a strong anti-imperial mindset. In a world of alignments, not alliances, their imperial networks or spheres of influence increasingly overlap, with other countries multi-aligning: balancing and bandwagoning in order to gain economic assistance from one power, military aid from another, and trade ties with the third. In addition to playing the dominant powers off one another, countries like Venezuela, Iran, Kazakhstan, Libya, and Malaysia will continue to focus as much on building ties among themselves as with Washington, Brussels, or Beijing. Not only will these countries take the best of what each superpower offers to achieve their own vision of success, they will also partner directly with one another in order to extract oil reserves, share intelligence, combat terrorism, reduce poverty, implement capital controls, and build modern infrastructure. They will use their sovereign wealth to buy Western banks, ports, and other strategic assets. Their regional groups will continue to construct their own economic zones, development banks, peacekeeping forces, and criminal courts. Airline connections have sprouted to connect Arabs, South Americans, and East Asians directly to one another.

How will global governance be affected by this unprecedented and complex geopolitical landscape? As America's claims to exceptionalism wane, other powers quite rightly want their place in (or as) the sun, to be the world's Ordnungsmacht. For the first time in history, there exists a multipolar and multicivilizational world of three distinct superpowers competing on a planet of shrinking resources. For each, mere raison d'état has become raison du système: The extension of their core rationality and vision of order constitutes the highest morality. The more America considers itself exceptional, the more its rivals will seek to advance their own exceptionalism at America's expense. China feels it upholds the burden of maintaining tenets of international law like sovereignty and noninterference, while Europe's approach to world order transcends the interstate system altogether. Each in its own way undermines the international architecture of global governance, eroding the fiction that laws and institutions alone can restrain imperial competition.

A Damaged Security Architecture

Institutions of global governance must reflect the underlying geopolitical foundation in order to retain credibility and legitimacy. Other states might have continued to support the imperfect United Nations as a common forum for authoritative global diplomacy if the United States had, but its negligence of the United Nations gave others the excuse to do the same. The United States is more responsible than any other country for creating the post-World War II international architecture, but it is now doing as much as any other country to undermine it. Double standards and legal isolationism have undone America's exemplary record of promoting human rights, and unsanctioned preemptive war has undermined the authority of the UN Security Council. When superpower interests collide, the United Nations has proven to be as catastrophically irrelevant as the League of Nations.

The United Nations only has the power ascribed to it by the dominant states -- and at this point that is very little. The United Nations is not viewed by any of the three superpowers as an overarching governance mechanism but as a forum in which to posture and, most importantly, block the others. It was never a central actor in geopolitical affairs, but instead has always been a stage. The United Nations is a place for consultation and joint declarations, but it is not where decisions are actually made. The United Nations operates at the mercy of the great powers and their budgets. The less they have in common in their approach to the world, the less they will use it. The United Nations has had many major humanitarian successes, from peacekeeping to providing food and medical aid around the world. It has created a democracy fund, increased its peacekeeping forces, and established a human rights council, but its standards for these will only matter where the superpowers do not bother to intervene -- mostly in the Third World.

As stealthy, globalized escalations continue among the great powers undeterred by global governance norms, the potential for conflict grows: resource competition in the Caspian and South China seas, terrorism with nuclear weapons, an attack in the Gulf of Aden or the Straits of Malacca. The uncertain alignments of lesser but still substantial powers such as Russia, Japan, and India could also cause escalation. Furthermore, America's foreign lenders could pull the plug to undermine its grand strategy, sparking economic turmoil, political acrimony, and military tension. War brings profit to the military-industrial complex and is always supported by the large patriotic camps on all sides. Yet the notion of a Sino-US rivalry to lead the world is also premature and simplistic for in the event of their conflict, Europe would be the winner as capital would flee to its sanctuaries.

These great tensions are being played out in the world today as each superpower strives to attain the most advantageous position for itself, while none are powerful enough to dictate the system by itself. Global stability thus rests between the bookends the French philosopher Raymond Aron identified as "peace by law" and "peace by empire," the former toothless and the latter prone to excess.

Historically, successive iterations of balance of power and collective security doctrines have evolved from justifying war for strategic advantage into building systems to avoid it, with the post-Napoleonic Concert of Europe as the first of the modern era. Because it followed rules, it was itself something of a societal system. Even where these attempts at creating a stable world order have failed -- including the League of Nations after World War I -- systemic learning takes place in which states (particularly democracies) internalize the lessons of the past into their institutions to prevent history from repeating itself. The English economic historian Arnold Toynbee viewed history as progressive rather than purely cyclical, a wheel that not only turns around and around but also moves forward such that Civilization could become civilized. Yet empires and superpowers usually promise peace but bring wars.

Part 2: How Could the Next World War be Averted?

A Tripartite Coalition of Powers

How could the next world war be averted? There does exist a tripartite coalition that could engineer the triumph of globalization over geopolitics: The American working class supports Chinese workers by shopping at Wal-Mart, while its upper class spends on European cars and luxury items; both Europe and China buy American technology; and America's General Motors and Boeing and Europe's Airbus can attribute much of their profits to reduced costs derived from production in -- and sales to -- China. Capital markets allow for endless profit for all rather than a zero-sum competition. Furthermore, the "cult of the offensive" does not dominate military strategy today. In an age of nuclear weaponry, few believe that initiating conflict entails quick victory with minimal loss. Never has historian A.J.P. Taylor's adage been more true: If the goal of being a great power is to be able to fight a great war, the only way to remain a great power is not to fight one. The damage done to oneself through conflict has never been higher than in today's integrated world.

One approach to a solution is to think of the tripolar world as a stool. With two legs it cannot stand long; with three it can be stable. The three-legged US-EU-China stool is currently wobbling, and the new global strategy for the current turn of the geopolitical wheel is "equilibrium." Equilibrium is dynamic, hence more difficult to keep in balance than the unchallenged hegemony of a single hegemon, but it nonetheless represents the next evolutionary stage beyond the laws of anarchy and balance of power. Equilibrium also inspires a more progressive psychology and vocabulary: The "multipolar" order rising powers seek is not the same as the "multilateral" order that is required to manage it in practice. Similarly, the idea of "checks and balances" connotes cautious reaction, while "division of labor" implies positive action toward common ends; "prudence" alone does not fulfill blithely made commitments, but "burden-sharing" could. Peace, justice, and order will only follow from equilibrium.

There is as yet no clear vision for such a global concert of powers or a legitimate global division of labor among the three superpowers—but such multilateralism will be more a matter of imperial coordination than of channeling resources through common institutions. A global strategy of equilibrium would transform the current power transition from a wrestling match of suspicious powers into a team cycling race in which the lead is alternately shared toward the same finish line.

Yet at present the term "international community" is little more than a euphemism for Western dominance. The West can expect no allegiance to a Western order masquerading as representative of global values decreed without global input. America has called on China to be a "responsible stakeholder" in the global system, but because it is implicitly an American order China is naturally resistant to it. China will not exercise its enormous economic weight in the interests of antiquated and unrepresentative clubs like the G-8 that will not even let it in. Similarly, much as the efficacy of the UN Security Council today depends on the United States, the same is becoming true of China, which can also bribe the rotating Security Council members to vote its way. Without a new division of labor, Western institutions will diminish with America's power, leaving only classic geopolitical competition without even the veneer of diplomatic coordination.

Dynamic Equilibrium

Equilibrium requires that the United States, the European Union, and China determine the rules of the geopolitical game together. Much as in a family, equilibrium entails a complex set of codes to domesticate international relations, with compromise a similarly crucial value. The incentives in favor of creating institutions that intentionally diminish one's own power and elevate others are admittedly elusive; egotistical states need to be convinced that they would save costs through collaborations that serve their interests. But America could actually increase its influence if it tempers its power. The path between dominance and retrenchment is the active creation of an "international constitution" with broad allegiance.

Rather than the U.S.-Soviet-Chinese "strategic triangle" of the 1960s and 1970s, a G-3 institution of the United States, the European Union, and China would be the most appropriate forum to establish deeper working relations among the superpowers. By openly discussing specific countries where spheres of influence overlap and contradict one another such as Sudan, Iran, Uzbekistan, and Burma, their differences could be reduced from the strategic to the merely tactical. A broad agenda requiring active Chinese participation could go a long way toward softening Chinese suspicion of the United States and could commit China to pooling resources with its peers. The further down the road one looks, the more global problems revolve around energy resources and fresh water rather than calculations of military power imbalances and territorial rivalry. Yet China's present exclusion from the deliberations of the International Energy Agency fuels its suspicion that there is an "invisible Western hand" keeping global oil prices high. Instead, key energy consumers can focus on bringing more oil to a free market, hence reducing prices, rather than locking in oil contracts with state-owned companies to secure it from others' reach.

America must not only push for a G-3 forum, but must also refashion its own diplomacy from one that speaks only of its own interests to one that genuinely addresses global interests. It cannot convince the world that American-style democracy or democratization are ends in themselves, but it can provide bigger carrots for good and accountable governance. It can resist protectionist pressures and instead strengthen emerging markets that are increasingly America's main sources of corporate profits as well. Rather than lecture about human rights, labor, and environmental standards, it can provide more of the necessary technical assistance developing societies need in order to achieve stability and prosperity.

None of this will happen automatically. Globalization alone will not trump the geopolitical cycles of world war -- this task requires more than a blind belief in rationality. Indeed, history proves that mankind is often anything but rational, and often precisely when the world needs rationality most. Instead, altering our future course demands a mutual understanding among the superpowers and proactive and flexible statecraft to create and maintain stability. A century ago, globalization was defeated by geopolitics, unleashing World War I. The question is whether history will repeat itself a century later. The answer remains unknown, for as the second world shapes both geopolitics and globalization, diplomacy becomes ever more an art.

Parag Khanna is director of the Global Governance Initiative and a senior research fellow of the New America Foundation. His newest book is " The Second World: Empires and Influence in the New Global Order".

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Re: Geopolitical thread - 15

Postby RajeshA » 11 Oct 2008 23:13

Parag Khanna sounds like another guy who has a blind spot called India.

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Re: Geopolitical thread - 15

Postby fanne » 11 Oct 2008 23:29


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Re: Geopolitical thread - 15

Postby svinayak » 12 Oct 2008 00:03

kshirin wrote:Parag Khanna's book Second World is full of dire predictions regarding US decline and European promise (he counts Europe's periphery as contributing the vast missing hordes -only European Achilles' (sp?) heel being demographic), so that I had to balance it immediately by reading Zakaria's book, but his recommendation for a G3 (US+EU+China) coming from an Indian is strange, since he does not seems to realise how dangerously inimical to our interests such a coalition would be - hope he is proven wrong in our lifetimes with India trumping China to this group.

Why the US, Europe and China Need a 'G-3'
By Parag Khanna
(DER SPIEGEL 7.10.2008)

It is inter-imperial relations -- not international or inter-civilizational -- that shape the world. America, Europe, and China are not only unique empires, they are exceptional in their expansionism. These three powers together increasingly command the world economy, form the largest trading blocs, and set rules for the rest of the world to follow. They lead by example, and by treaty.
Each represents its own mode of diplomacy: For America it is coalition; Europe touts consensus; and China's style is consultative. The United States offers military and regime protection and aid; Europe offers deep reform and economic association with its union, and China offers full-service, conditionality free relationships.

But at the same time, it is hard to overestimate the fluidity of the early 21st-century landscape: America vacillates between shunning and embracing the international community, the Chinese politburo remains a black box, and the European Union cautiously exercises strategic leverage.

Then there are the many swing states of the "second world" that complicate the picture drastically: energy-giant Russia, aspiring India, and technological juggernaut Japan.

How will global governance be affected by this unprecedented and complex geopolitical landscape? As America's claims to exceptionalism wane, other powers quite rightly want their place in (or as) the sun, to be the world's Ordnungsmacht. For the first time in history, there exists a multipolar and multicivilizational world of three distinct superpowers competing on a planet of shrinking resources.

Parag is a US citizen looking after the interest of US and is an advisor for the presidential candidates. What is his stake to look after India interest,

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Re: Geopolitical thread - 15

Postby Rye » 12 Oct 2008 00:18

fanne, Acharya, that explains a lot. Thank you.

Coming on the heels of Merkel's statement about getting closer to Russia, and these articles by F. Zakaria and P. Khanna are trying to counter that by proposing a different grouping not including Russia. So if you consider the cross-continental groupings

NA : Mexico/USA/Canada
SA : 2. Brazil 3. Arg. 4. Ven. 5. Rest
6. Australia
Europe: 7. Russia 8. EU
Asia: 9. India 10. China 11. KSA 12. Iran
Africa: 13: South Africa/Namibia 14. Tanzania/kenya/Uganda 15. Egypt 16. Rest

Current groupings -- as an idle exercise, If we think of these as covalent bonds (High School Chemistry, anyone?) terms. Simply put, in CaC03 (calcium carbonate), the C03 acts as one group. because Carbon (the stuff of life) forms covalent bonds and shares electrons with Oxygen, but in Inorganic reactions, the CO3 always reacts as a group. The 3-Os can never break free of the carbon in most "normal" chemical reactions. Mix NaOH (lye) with CaCO3 (sandstone) and you will get Na2CO3 (the oxygen still cannot break free -- they just switch from the Calcium atom to the Sodium atom). If we view "lesser world powers" and their "covalent bonds" with other greater world powers, then we can postulate the following CO3-kind-of grouping

I am only listing the superset of all groupings. For example: 1.2.4 and 1.2 are both valid groupings in though
1 dominates all of it at the present time. (8) means the country is breaking out of the orbit of influence of that larger grouping.

IMO, these articles by Indian-American Luminaries are symptoms of perturbations in Group 1 where the EU is starting to become an Atom in its own right, and I do not mean to belittle the EU when I say that.

Edited: removed comment on Gaddafi -- libya was in the list and then it became too many countries to handle..

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Re: Geopolitical thread - 15

Postby Rye » 12 Oct 2008 01:56

Missed Japan in the above list, since the list should actually be about current economic powers.

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Re: Geopolitical thread - 15

Postby kshirin » 12 Oct 2008 03:40

EU+China+US would be very very dangerous. When you think of the relevant era: current foreign policies of China and US and past foreign (mainly colonial) policy of EU - they are the most dangeorus and cynical practitioners of power without any moral scruple or compass. Frightening to think what they could get up to together - total manipulation, dominance and control and 1984 comes to mind.

BTW know of many Indian academics abroad who do not share this mindset of Parag Khanna's - Pratap Bhanu Mehta who returned from Harvard and who resigned from Knowledge Commission in protest against resrevations.

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Re: Geopolitical thread - 15

Postby vsudhir » 12 Oct 2008 04:56

Parag Khanna, Sadanand Dhume etc all consider India to be too internally divided and too lacking in strategic vision to ever become a 'pole' in its own right. These thoughts are in their own words, IIRC.

The most charitable prognostication I've heard for India is that it might become a 'swing state' in that it could tilt the balance as and when it aligns with a pole but wouldn't be a pole in itself.

Reminds me of George Orwell's 1984 where again there are 3 'poles' Oceania (Anglo saxonia), Eurasia (EU+Russia) and Eastasia (China and its dominions) fighting a perpetual war in stalemate for resources (Africa, ME and South Asia). That was written in the 1940s and I can understand if the Brits had all but written off India's survival 2 decades from 1947 as a single, coherent entity. They continue to be proved wrong 6 decades from independence and who know the new soothsayers (Patrick Kannah, Sadant Dhume etc) might not be proved wrong themselves.

Zakaria has been charitable when writing about India (in his 'post-American world'), at least.

Me finally ordered The black Swan off Amazon after reading so many praises. Tks, all those who weighed in on that debate.

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Re: Geopolitical thread - 15

Postby Rye » 12 Oct 2008 05:00

something else is going on -- This Fareed Zakaria is openly arguing against the Indo-US deal in Newsweek for some reason (post in the nuclear thread).

This has something to do with North Korea suddenly becoming compliant and stopping its nuclear program.

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Re: Geopolitical thread - 15

Postby renukb » 12 Oct 2008 09:18

Parag is a US citizen looking after the interest of US and is an advisor for the presidential candidates. What is his stake to look after India interest

There are lots of such people on this forum who have taken oath to serve US interests, by accepting US citizenship, but act as if they care for India.

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Re: Geopolitical thread - 15

Postby renukb » 12 Oct 2008 09:27

I was expecting this.... May be they are repenting selling Ghorshkov to India... ... 541200.htm

Russia to build aircraft carriers
Vladimir Radyuhin

MOSCOW: Russia will launch large-scale construction of aircraft carriers within the next two years, said President Dmitry Medvedev.

“We need new aircraft carrying warships, this is a very important direction for the development of the Navy,” he said on board Russia’s only aircraft carrier, Admiral Kuznetsov. He added that the first aircraft carrier should be built by 2013-2015.

“We have lost much ground in the 1990s, when we did not build any warships. Now we have to restore an [industrial] basis for aircraft carrier construction and for the Navy as a whole.” Earlier the Navy announced plans to build eight nuclear submarines by 2015. Problems caused by global financial turmoil would not hurt Russian plans to revive its armed forces, he said.

Mr. Medvedev watched a successful test launch of a strategic missile by the nuclear-powered submarine Tula from an underwater position in the Arctic Barents Sea.

The missile hit a target in an equatorial part of the Pacific Ocean 11,500 km away — a record distance for this type of missiles.

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Re: Geopolitical thread - 15

Postby renukb » 12 Oct 2008 09:31

Russia to Europe: Let’s have an anti-US alliance ... -alliance/

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Re: Geopolitical thread - 15

Postby renukb » 12 Oct 2008 10:33

Under Bush, US influence in Latin America wanes ... QD93OBVPG0

By FRANK BAJAK – 14 hours ago

QUITO, Ecuador (AP) — In a matter of weeks, a Russian naval squadron will arrive in the waters off Latin America for the first time since the Cold War. It is already getting a warm welcome from some in a region where the influence of the United States is in decline.

"The U.S. Fourth Fleet can come to Latin America but a Russian fleet can't?" said Ecuador's president, Rafael Correa. "If you ask me, any country and any fleet that wants can visit us. We're a country of open doors."

The United States remains the strongest outside power in Latin America by most measures, including trade, military cooperation and the sheer size of its embassies. Yet U.S. clout in what it once considered its backyard has sunk to perhaps the lowest point in decades. As Washington turned its attention to the Middle East, Latin America swung to the left and other powers moved in.

The United States' financial crisis is not helping. Latin American countries forced by Washington to swallow painful austerity measures in the 1980s and 1990s are aghast at the U.S. failure to police its own markets.

"We did our homework — and they didn't, they who've been telling us for three decades what to do," the man who presides over Latin America's largest economy, President Luiz Inacio Lula de Silva of Brazil, complained bitterly.

Latin America's more than 550 million people now "have every reason to view the U.S. as a banana republic," says analyst Michael Shifter of the Inter-American Dialogue think tank in Washington. "U.S. lectures to Latin Americans about excess greed and lack of accountability have long rung hollow, but today they sound even more ridiculous."

From 2002 through 2007, the U.S. image eroded in all six Latin American countries polled by the Pew organization, especially in Venezuela, Argentina and Bolivia. (The others were Brazil, Peru and Mexico.) People surveyed in 18 Latin American countries rated President Bush among the least popular leaders in 2007, along with President Hugo Chavez of Venezuela and just ahead of basement-bound Fidel Castro of Cuba, according to the Latinobarometro group of Chile.

In three years of presidential elections ending last year, Latin Americans chose mostly leftist leaders, and only Colombia and El Salvador elected unalloyed pro-U.S. chief executives. In May, the prestigious U.S. Council on Foreign Relations declared the era of U.S. hegemony in the Americas over. And in September, Bolivia and Venezuela both expelled their U.S. ambassadors, accusing them of meddling.

Along with the loss in political standing has come a decline in economic power. U.S. direct investment in Latin America slid from 30 percent to 20 percent of the total from 1998 to 2007, according to the U.N. Economic Commission on Latin American and the Caribbean.

The U.S. still does $560 billion in trade with Latin America, but in the meantime other countries are muscling in. China's trade with Latin America jumped from $10 billion in 2000 to $102.6 billion last year. In May, a state-owned Chinese company agreed to buy a Peruvian copper mine for $2.1 billion.

Other countries are also biting into U.S. military sales in the region. Boeing Co. is vying with finalists from France and Sweden for the sale of 36 jet fighters to Brazil. Venezuela's Chavez has committed to buying more than $4 billion in Russian arms, from Sukhoi jet fighters to Kalashnikov assault rifles. In April, Brazil and Russia agreed to jointly design top-line jet fighters and satellite-launch vehicles, and Brazil is getting technology from France to build a submarine.

"Similar deals could have been made with the United States had it been willing to share its technology," said Geraldo Cavagnari, of the University of Campinas near Sao Paulo.

Last month, Russian Prime Minister Vladimir Putin offered to help Chavez develop nuclear power. Even Colombia, the staunchest U.S. ally in South America, isn't limiting its options. After expressing alarm about the Russian warships a week ago, its defense minister, Juan Manuel Santos, promptly headed for Russia himself to discuss "better relations in defense." Chavez says he expects to hold joint Russian-Venezuelan naval exercises as early as November.

Bolivia also is looking to deepen ties with Russia and Iran.

Although the Islamic republic's ambassador has yet to arrive in South America's poorest country, its top diplomat there announced Friday that Iran will open two low-cost public health clinics.

And while Bolivia's only announced Russian hardware purchase is five helicopters for civil defense, Moscow's ambassador told the AP — after Bolivia booted the U.S. ambassador — that Russia has every right to help Latin American nations arm themselves.

"We know of many historical cases of U.S. intervention in Latin American countries," said the diplomat, Leonid Golubev.

Thomas Shannon, U.S. assistant secretary of state for the hemisphere, wouldn't comment directly on whether the U.S. has lost influence in Latin America. But he added that there is no doubt that the U.S. still holds most of the military power in the Caribbean, and said it has no interest in reviving "Cold War rhetoric." Shannon also noted that overall U.S. aid to the region will reach $2.2 billion for 2009, to total more than $14 billion during Bush's presidency.

However, critics point out that roughly half that aid is for the military or counternarcotics, and that Washington sends more money annually to Israel alone. Even U.S. giving has been dwarfed by Chavez's checkbook diplomacy, which easily eclipses U.S. aid between outright gifts and discounted oil.

His largesse has lured several longtime U.S. friends. Honduras' president, Manuel Zelaya, said last month that after pleading with Washington and the World Bank, he accepted $300 million a year from Chavez for agricultural investment to help fight rising food prices.

"Allies, friends, did not help me when I asked," he said.

Costa Rica's president, Oscar Arias, says Venezuela offers Latin America about four or five times as much money as the United States. Costa Rica has become the 19th member of Petrocaribe, through which Chavez sells Caribbean and Central American nations cut-rate oil at very low interest.

The diminished profile of the U.S. in Latin America comes after a history of welcomed influence dating back to President Franklin Roosevelt's "Good Neighbor" policy of the 1930s, which emphasized cooperation and trade over military intervention. There have been major bailouts, such as Washington's $20 billion rescue of Mexico in the 1994 peso devaluation crisis. As former Assistant Secretary of State Otto Reich noted, "We are the assistance bureau of first choice for the region."

But the U.S. has an ugly legacy of covert intervention in countries including Chile, Nicaragua, Guatemala and Cuba. Chile's center-left president, Michele Bachelet, was jailed and tortured by a U.S.-backed military dictatorship in the 1970s. She recently recalled telling Washington's ambassador to Chile an old joke: "Some say the only reason there's never been a coup in the United States is because there's no U.S. Embassy in the United States."

The United States has also long served as chief educator to Latin America's elite. Correa is among its presidents with a U.S. graduate degree — though that didn't stop him from accusing the CIA of infiltrating his military, or refusing to renew a lease for U.S. counterdrug missions to fly out of Ecuador.

With the U.S. facing its own financial crisis, it's unlikely to be able to leverage economic influence in Latin America anytime soon. Sen. Barack Obama's senior adviser on Latin America, Dan Restrepo, acknowledges that his candidate is essentially proposing a symbolic shift in style — albeit adding a special White House envoy for the Americas.

"Barack doesn't see the United States as the savior of the Americas, but as a constructive partner," Restrepo told the AP.

Reich, an adviser to Sen. John McCain who served three Republican presidents in the region, put it even more bluntly.

"No matter who is elected in November, there is not going to be any money for Latin America," he said. "Latin Americans expecting financial resources, any kind of help from the United States, they are barking up the wrong tree."

Associated Press writers Dan Keane in Bolivia, Eduardo Gallardo in Chile and Stan Lehman in Brazil contributed to this report.

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Re: Geopolitical thread - 15

Postby renukb » 12 Oct 2008 11:08

Now it's the airforces turn...
Report: Russian strategic bombers launch cruise missiles ... 181019.htm

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Re: Geopolitical thread - 15

Postby renukb » 12 Oct 2008 11:36

North Korea prepares to launch 10 missiles
North Korea has reportedly deployed at least ten missiles on its West coast, two days after firing two short-range missiles into the Yellow Sea. ... siles.html

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Re: Geopolitical thread - 15

Postby renukb » 12 Oct 2008 20:02

Russia conducts ballistic missile tests
1 hour ago ... SbJlllfCug

MOSCOW (AFP) — Russia test-fired three long-range missiles on Sunday and pronounced its nuclear deterrent strong in a show of force that experts said had not been seen since the days of the Cold War.

Two of the missiles were fired from nuclear submarines in the Asian and European extremes of the sprawling country while a third was watched by President Dmitry Medvedev on land in northwest Russia, news agencies reported.

It was the second Russian intercontinental ballistic missile (ICBM) test in as many days and the latest in a series of high-profile military exercises of conventional land, sea and air forces as well as strategic nuclear units.

"This shows that our deterrent is in order," Medvedev was quoted by RIA Novosti news agency as saying after Sunday's missile launches.

"We will of course be introducing new types of forces and means into the military," he added, without elaborating.

Independent military analyst Pavel Felgenhauer said the exercises reflected Russia's determination to prepare for major military conflict.

"This was a dry run for a war with the United States," Felgenhauer :D said of the missile launches, part of major military manoeuvres billed "Stability 2008" involving all military branches.

"These are the biggest strategic war games in more than 20 years. They are on a parallel with those held in the first half of the 1980s. Nothing of the sort has been seen either in Russia or the United States since then," he said.

Russian navy spokesman Igor Dygalo confirmed the near-simultaneous ICBM test-launches from submarines in the Sea of Okhotsk north of Japan and the Barents Sea northeast of Norway, saying they had been planned well in advance.

Speaking to AFP from northwest Russia, Dygalo admitted it was unusual for the navy to conduct three ICBM test launches in two days -- a submarine in the Barents Sea also fired a missile Saturday -- and called the tests successful.

"The missiles hit right on target," he said. News agencies said the missiles launched from the Barents Sea and the secret base at Plesetsk hit targets on the Kamchatka peninsula thousands of kilometres (miles) to the east.

The missile fired from the Sea of Okhotsk hit on target near Kanin Nos, a finger of land jutting into the White Sea in extreme northwest Russia, the reports said.

The Sineva missile launched Saturday -- an exercise also watched by Medvedev from aboard an aircraft carrier -- travelled more than 11,500 kilometres (7,145 miles) in what the Russian president claimed was an all-time distance record.

The missile tests came a day after Russia announced that a small naval flotilla led by the nuclear battlecruiser Pyotr Veliky (Peter the Great) had paid a call at the Libyan port of Tripoli.

The ships, including a submarine destroyer and support vessels, were to conduct exercises at unspecified locations in the Mediterrannean Sea before heading toward Venezuela for joint exercises there in November, officials said.

Two Russian Tupolev-162 strategic bombers -- each capable of carrying 12 cruise missiles armed with single 200-megaton nuclear warheads -- carried out exercises in Venezuela last month.

Last week, Japan scrambled a pair of US-made F-15 fighters to intercept and escort Russian bombers on patrol near, but not inside, Japanese territorial waters.

The Kremlin, alarmed and angered over new US missile defence plans in eastern Europe and the expansion of the US-led NATO alliance into countries once allied with Moscow, has stressed for a year that it will respond in kind.

Washington has shrugged off Russian moves over the past 18 months to resume strategic bomber patrols around the world and reactivate use of its navy to project power on the seas, questioning if the hardware was up to the task.

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Re: Geopolitical thread - 15

Postby renukb » 12 Oct 2008 20:14

Its strange, Iceland is a NATO member, but no NATO nation wants to help them. At the same time they care for Georgia and Ukraine etc... :eek:

The Next World War? It Could Be Financial. ... inionsbox1

By Peter Boone and Simon Johnson
Sunday, October 12, 2008; Page B01

The global financial outlook grows more dire by the day: The United States has been forced to shore up Wall Street, and European governments are bailing out numerous commercial banks. Even more alarmingly, the government of Iceland is presiding over a massive default by all the country's major banks. This troubling development points not only to an even more painful recession than anticipated, but also to the urgent need for international coordination to avoid something worse: all-out financial warfare.

The ramifications of Iceland's misery are probably more serious than people realize. The country's bank assets are more than 10 times greater than its gross domestic product, so the government clearly cannot afford a bailout. This is going to be a large default, affecting many parties. In the United Kingdom alone, 300,000 account holders face sudden loss of access to their funds, and the process for claiming deposit insurance is not entirely clear.

But there's a broader concern. With European governments turning down his appeals for assistance, Iceland's prime minister, Geir Haarde, warned last week that it was now "every country for itself." This smacks of the financial autarchy that characterized defaulters in the financial crisis in Asia in the late 1990s. Similarly, when Argentina defaulted on its debt in 2001-'02, politicians there faced enormous pressure to change the rule of law to benefit domestic property holders over foreigners, and they changed the bankruptcy law to give local debtors the upper hand. In Indonesia and Russia after the crises of 1998, local enterprises and banks took the opportunity of the confusion to grab property, then found ways to ensure that courts sided with them.

This is a natural outcome of chaotic times. Iceland's promise to guarantee domestic depositors while reneging on guarantees to foreigners may be just a first step. British Prime Minister Gordon Brown's decision last week to sue Iceland over this issue may escalate the crisis. The use of counterterrorist legislation to take over Icelandic bank assets and operations in the United Kingdom also has a potentially dramatic symbolic effect.

Most of the time, financial war of this kind is painful and costly. It will lead to decades of lower international capital flows and could have other far-reaching effects on politics and global peace. Unless the leading industrial countries take concerted action, there's a very real danger that we will all suffer more.

In addition, we're now likely to see substantially more defaults and credit panics in smaller countries and emerging markets. After Iceland's fall, every creditor to other nations with large deficits and substantial external debt must be looking for ways to reduce its exposure. The obvious risks include much of Eastern Europe, Turkey and parts of Latin America. Russia's difficulties show that seemingly solvent countries can be high-risk: While the Russian central bank has gold and foreign exchange reserves of $556 billion, the private sector has recently built up an estimated $450 billion of debt. Creditors don't want to roll over the debt, so the government is using its reserves to do it. It has already ordered $200 billion channeled through state banks to companies repaying debt. If oil prices fall, a seemingly highly solvent country could quickly look nearly insolvent. Some other rising stars, such as Brazil and even India, may have similar problems.

Added to this are worrying signs that the credibility of U.S. authorities is on the decline. Despite Washington's moves to stabilize the financial system, credit and equity markets continue to drop. This pattern is reminiscent of the 1997-98 Asian crisis, when successive International Monetary Fund programs provided briefer and briefer respites from market routs in emerging economies.

There is now a risk that continued corporate and bank defaults within nations, matched by large shifts in capital flows across nations, will lead to a chaotic series of national and local defaults. If governments don't respond with sensible, coordinated policies, there's a risk of financial war. Here are six steps toward avoiding a situation of "each nation for itself":

1. The world's leading financial powers -- at a minimum, the United States, the United Kingdom, France and Germany -- should jointly announce national plans to require recapitalization of banks (i.e., restructuring their debt and equity mixture) so that they have sufficient capital to weather a major global recession. How this is done can be determined internally by each nation, but this should be a common goal, so that citizens and companies can again trust their banks.

2. The countries should announce a temporary blanket guarantee on all existing bank deposits and debts. This will, in effect, promise creditors that they can safely expect the institutions to function until the recapitalization takes place, and it will help prevent the large flows of funds that could occur as some banks or countries conduct recapitalizations earlier than others. This guarantee should only be temporary (say, for six months).

3. The monetary authorities of these countries need to lower interest rates dramatically. Europe, Canada and the United States recently announced a coordinated 0.5 percent reduction in rates. This is a good start, but only a start. More will be needed, and it won't stop the credit crunch within or across countries. The events of the last nine months have set us on course for a global recession in which commodity prices will continue to fall and demand will remain weak. Inflation will be low, and deflation (falling prices) is a risk. More interest-rate cuts will be needed.

4. The monetary authorities also need to remain committed to pumping liquidity into the financial system as long as credit markets and interbank lending remain weak. This should be promised for at least one year.

5. All industrialized countries and most leading emerging markets should commit to a sizable fiscal expansion (at least 1 percent of GDP), structured to work within the local political environment, to offset the coming large decline in global demand.

6. Many families worldwide are going to have negative equity (i.e., mortgages larger than the value of their homes) due to declining home prices. There are going to be large-scale recriminations against lenders and politicians. The most affected nations, including the United States, the United Kingdom, Ireland and Spain, urgently need to develop programs to provide relief for homeowners, both to offset real hardship and to prevent a vicious downward cycle in home prices.

It's important to prepare properly: Partial and piecemeal actions will no longer work. Actions by one country alone, and the current pattern of small steps, are no longer credible enough to change the tide: Markets need to be jolted out of their panic. It's worth bringing a sufficient mass of economic power to bear in a comprehensive program to unfreeze the markets. If the major powers of Europe and the United States were to implement such a program, we can be sure that other countries would follow suit, dramatically relieving fears of bank failure in these countries.

We also need to let prices move to a level supported by the market, which unfortunately means that wealth is likely to decline even further. The events of the last six months will almost surely cause a recession, and large downward revisions in earnings estimates are a near certainty. The crisis has undoubtedly changed investors' perception of the risks of investing in equities and real estate. As we saw after the Asian crises, this can mean that stocks, bonds and other assets become very cheap, and it takes a long time for values to recover. Fiscal expansion and help to homeowners will reduce the pain from these losses, but it's important to be clear that the success of the program should not be measured by rising asset prices.

Finally, it's important for everyone to recognize that we are well past the days where even dramatic steps could have stopped the panic and prevented a major recession. A successful program will not prevent recession, and we will still see many personal, corporate and perhaps even national bankruptcies. Once the genie of panic and uncertainty is unleashed, it takes years to put it back in the bottle. What we need to do is to prevent a chaotic collapse arising from incomplete policies, lack of credibility and international financial warfare.
Peter Boone is chairman of Effective Intervention, a U.K.-based charity. Simon Johnson is a professor at MIT's Sloan School of Management. With James Kwak, they run the economic crisis Web site

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Re: Geopolitical thread - 15

Postby renukb » 12 Oct 2008 20:21

All pointers lead to WW III within the next decade or so... US is in a hurry, because they don't want a strong and stable Russia....US is scared of revenge by USSR.

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Re: Geopolitical thread - 15

Postby vsudhir » 12 Oct 2008 21:59

Can Bharat mata offer a few $$$'00 millions in return for military basing rights in the North Atlantic???

Admittedly, just wondering onlee.....

Umrika has signaled to Rekjavik that they care more abt non-NATO ally Papistan than NATO-founding member Iceland, going by the legions of $$$ showered on TSP....tch, tch. Whats a few $$ billions now 2 bailout 'em poor icelanders? Whyz unkil being sooo kanjoos? Seems to me the underlying problem is a lot worse than just the few billions claimed in the media. What we're seeing in EU is just the tipo of the icelandberg, perhaps.....

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Re: Geopolitical thread - 15

Postby svinayak » 13 Oct 2008 09:27

Behind the Panic: Financial Warfare over Future of Global Bank Power
By F. William Engdahl, 10 October 2008 ... /1009.html

What's clear from the behavior of European financial markets over the past two weeks is that the dramatic stories of financial meltdown and panic are deliberately being used by certain influential factions in and outside the EU to shape the future face of global banking in the wake of the US sub-prime and Asset-Backed Security (ABS) debacle. The most interesting development in recent days has been the unified and strong position of the German Chancellor, Finance Minister, Bundesbank and coalition Government, all opposing an American-style EU Superfund bank bailout. Meanwhile Treasury Secretary Henry Paulson pursues his Crony Capitalism to the detriment of the nation and benefit of his cronies in the financial world. It's an explosive cocktail that need not have been.

Stock market falls of 7 to 10% a day make for dramatic news headlines and serve to foster a broad sense of unease bordering on panic among ordinary citizens. The events of the last two weeks among EU banks since the dramatic state rescues of Hypo Real Estate, Dexia and Fortis banks, and the announcement by UK Chancellor of the Exchequer, Alistair Darling of a radical shift in policy in dealing with troubled UK banks, have begun to reveal the outline of a distinctly different European response to what in effect is a crisis 'Made in USA.'

There is serious ground to believe that US Goldman Sachs ex CEO Henry Paulson, as Treasury Secretary, is not stupid. There is also serious ground to believe that he is actually moving according to a well-thought-out long-term strategy. Events as they are now unfolding in the EU tend to confirm that. As one senior European banker put it to me in private discussion, 'There is an all-out war going on between the United States and the EU to define the future face of European banking.'

In this banker's view, the ongoing attempt of Italian Prime Minister Silvio Berlusconi and France's Nicholas Sarkosy to get an EU common 'fund', with perhaps upwards of $300 billion to rescue troubled banks, would de facto play directly into Paulson and the US establishment's long-term strategy, by in effect weakening the banks and repaying US-originated Asset Backed Securities held by EU banks.

Using panic to centralize power

As I document in my forthcoming book, Power of Money: The Rise and Decline of the American Century, in every major US financial panic since at least the Panic of 1835, the titans of Wall Street-most especially until 1929, the House of JP Morgan-have deliberately triggered bank panics behind the scenes in order to consolidate their grip on US banking. The private banks used the panics to control Washington policy including the exact definition of the private ownership of the new Federal Reserve in 1913, and to consolidate their control over industry such as US Steel, Caterpillar, Westinghouse and the like. They are, in short, old hands at such financial warfare to increase their power.

Now they must do something similar on a global scale to be able to continue to dominate global finance, the heart of the power of the American Century.

That process of using panics to centralize their private power created an extremely powerful, concentration of financial and economic power in a few private hands, the same hands which created the influential US foreign policy think-tank, the New York Council on Foreign Relations in 1919 to guide the ascent of the American Century, as Time founder Henry Luce called it in a pivotal 1941 essay.

It's becoming increasingly obvious that people like Henry Paulson, who by the way was one of the most aggressive practitioners of the ABS revolution on Wall Street before becoming Treasury Secretary, are operating on motives beyond their over-proportional sense of greed. Paulson's own background is interesting in that context. Back in the early 1970's Paulson started his career working for a rather notorious man named John Erlichman, Nixon's ruthless adviser who created the Plumbers' Unit during the Watergate era to silence opponents of the President, and was left by Nixon to 'twist in the wind' for it in prison.

Paulson seems to have learned from his White House mentor. As co-chairman of Goldman Sachs according to a New York Times account, in 1998 he forced out his co-chairman, Jon Corzine 'in what amounted to a coup' according to the Times.

Paulson, and his friends at Citigroup and JP Morgan Chase, had a strategy it is becoming clear, as did the Godfather of Asset Backed Securitization and deregulated banking, former Fed Chairman Alan Greenspan, as I have detailed in my earlier series here, Financial Tsunami, Parts I-V.

Knowing that at a certain juncture the pyramid of trillions of dollars of dubious sub-prime and other high risk home mortgage-based securities would come falling down, they apparently determined to spread the so-called 'toxic waste' ABS securities as globally as possible, in order to seduce the big global banks of the world, most especially of the EU, into their honey trap.

They had help. In recent testimony under oath by Mr Lynn Turner, Chief Accountant of the Securities & Exchange Commission (SEC) testified that the SEC Office of Risk Management which had oversight responsibility for the Credit Default Swap market, an exotic market worth nominally $62 trillions, was cut in Administration ‘budget cuts’ from a staff of one hundred people down to one person. Yes that was not a typo. One as in 'uno.'

Vermont Democratic Congressman Peter Welsh queried Turner, ‘... was there a systematic depopulating of the regulatory force so that it was impossible actually for regulation to occur if you have one person in that office? ...and then I understand that 146 people were cut from the enforcement division of the SEC, is that what you also testified to?’ Mr. Turner, in Congressional testimony replied, ‘Yes…I think there has been a systematic gutting, or whatever you want to call it, of the agency and it's capability through cutting back of staff.’

Was that just ideological budget cutting fervor, or was it deliberate? Was former Goldman Sachs man, the man who convinced the President to hire Paulson, Bush's former Director of the Office of Management and Budget (OMB), Joshua Bolten, now the President's Chief of Staff, responsible for insuring there was no effective government oversight on the exploding securitization of mortgage assets?

These are perhaps some questions which the good Congressmen ought to be asking people like Henry Paulson and Josh Bolten, and not such red herring questions as how large Richard Fuld's bonus pay at Lehman was. Are Mr Bolten's fingerprints on the corpse here? And why is no one questioning the role of Paulson as CEO of Goldman Sachs, then the most aggressive promoter of exotic and other Asset Backed Securitization products on Wall Street?

It now would appear that the Paulson strategy was to use a crisis-a crisis that was pre-programmed and predictable as far back as 2003 when Josh Bolten became head of OMB-when it exploded, to panic the more conservative European Union governments into rushing to the rescue of US toxic waste assets.

Were that to have happened, it would in the process destroy what was left of sound EU banking and financial institutions, bringing the world one step closer to a global money market controlled by Paulson's cronies-US-style Crony Capitalism. Crony Capitalism is certainly appropriate here. Paulson's predecessor at both Goldman Sachs and at Treasury, Robert Rubin, liked to accuse the Asian bankers of Thailand, Indonesia and other lands hit with the speculative attacks of US-financed hedge funds in 1997 of 'crony capitalism,' leaving the impression the crisis was home grown in Asia and not the result of a deliberate executed attack by US-financed financial institutions to eliminate the Asia Tiger model among other goals, and turn Asia into the funder of US debt.

Interesting to note is that Rubin is now a Director of Citigroup, obviously one of Paulson's crony bank 'survivors,' and the bank which to date has had to write off the largest sum in toxic waste securitized assets.

If the allegation of pre-planned panic, a la the Panic of 1907 is accurate, and it is a big if, then the plan worked…up to a point. That point came over the weekend of October 3, coincidentally the national unification holiday of Germany.

Germany breaks with US model

In closed door talks well into the evening of Sunday October 5, Alex Weber the hard-nosed head of the Bundesbank, BaFin head Jochen Sanio and representatives of the Berlin coalition Government of Chancellor Merkel came up with a rescue package for Hypo Real Estate of a nominal €50 billion. However, behind the dramatic headline number, as Weber pointed out in a September 29 letter to Finance Minister Peer Steinbrück that has been made public, not only did the private German banks have to come up with 60% of that figure, the state with 40%. But also, given the careful manner in which the Government in cooperation with the Bundesbank and BaFin, structured the rescue credit agreement, the maximum possible loss, in a worst case scenario, to the state would be limited to €5.7 billion, not €30 billion as many believed. It's still real money but not the blank check for $700 billion that a US Congress under duress and a few days of falling stock market prices agreed to give Paulson.

The swift action by Finance Minister Steinbrück to fire the head of HRE, in stark contrast to Wall Street where the same criminal fraudsters remain at their desks reaping huge bonuses, indicates as well a different approach. But that does not cut to the heart of the issue. The situation of HRE arose as noted previously, from excesses in a wholly-owned daughter bank of HRE subsidiary DEPFA in Ireland, an EU country known for its liberal loose regulation and low tax regime.

A British policy shift

In the UK, after the costly and foolish bailout of Northern Rock earlier in the year, the Government of Prime Minister Gordon Brown has just announced a dramatic change in policy in the direction of Germany's position. Britain's banks will get an unprecedented 50 billion-pound (€64 billion) government lifeline and emergency loans from the Bank of England.

The government will buy preference shares from Royal Bank of Scotland Group Plc, Barclays Plc and at least six other banks, and provide about 250 billion pounds of loan guarantees to refinance debt, the Treasury said. The Bank of England will make at least 200 billion pounds available. The plan doesn't specify how much each bank will get.

That means the UK Government will at least partially nationalize its most important international banks, rather than buy their bad loans as under the unworkable Paulson plan. Under such an approach, costs to UK taxpayers once the crisis abates and business returns to more normal conditions, the Government can sell the state shares back to a healthy bank at perhaps a nice profit to the Treasury. The Brown Government has apparently realized that the blanket guarantees it gave to Northern Rock and Bradford & Bingley merely opened the floodgates of government costs without changing the problem.

The new nationalization policy is a dramatic contrast to the Paulson ideological 'free market' approach of buying the worthless bonds held by the select banks Paulson chooses to save, rather than recapitalize those banks to allow them to continue to function.

The battle lines drawn

What has emerged are the outlines of two opposite approaches to the unfolding crisis. The Paulson plan is now clearly part of a project to create three colossal global financial giants-Citigroup, JP MorganChase and, of course, Paulson's own Goldman Sachs, now conveniently enough a bank. Having successfully used fear and panic to wrestle a $700 billion bailout from the US taxpayers, now the big three will try to use their unprecedented muscle to ravage European banks in the years ahead. So long as the world's largest financial credit rating agencies-Moody's and Standard & Poors-are untouched by the scandals and Congressional hearings, the reorganized US financial power of Goldman Sachs, Citigroup and JP Morgan Chase could potentially regroup and advance their global agenda over the coming several years, walking over the ashes of a bankrupt American economy made bankrupt by their follies.

By agreeing on a strategy of nationalizing what EU finance ministers deem are 'EU banks too systemically strategic to fail,' while guaranteeing bank deposits, the largest EU governments, Germany and the UK, in contrast to the US, have opted for what will in the longer run allow European banking giants to withstand the anticipated financial attacks from the likes of Goldman or Citigroup.

The dramatic selloff of stocks across European bourses and across Asia is in reality a secondary and far less critical issue. According to market reports, the selloff is being driven mainly by US hedge funds desperate to raise cash as they realize the US economy is going into economic depression, that they are exposed and that the Paulson Plan does nothing to address that.

A functioning solvent banking and interbank system is far the more strategic issue. The ABS debacle was 'Made in New York.' Nonetheless, its effects have to be isolated and viable EU banks defended in the public interest, not just the interest of Paulson's banking cronies as in the US. Unregulated offshore vehicles such as hedge funds, unregulated banking, unregulated insurance all went into building the $80 trillion ABS Tsunami as I have called it. Certain more conservative EU hands are not about to buy the remedy being offered by Washington.

The coordinated interest rate cut by the ECB and other European central banks while grabbing headlines, in effect do little to address the real problem: banks fear to lend to each other until their solvency is assured.

By initiating state partial nationalizations across the EU, and rejecting the Berlusconi/Sarkozy bailout scheme, the governments of the EU, interestingly enough this time led by the German, are laying a more sound foundation to emerge from the crisis.

Stay tuned, it's far from over. This is a fight for the survival of the American Century which has been bvuilt since 1939 on the twin pillars of American financial dominance and American military dominance-Full Spectrum, Dominance.

Asian banks, badly burned by Wall Street's manipulated 1997-98 Asia Crisis, are apparently very little exposed to the US problem. European banks are exposed in different ways, but none so serious as in the US banking world.

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Re: Geopolitical thread - 15

Postby Neshant » 13 Oct 2008 14:36

Paulson's predecessor at both Goldman Sachs and at Treasury, Robert Rubin, liked to accuse the Asian bankers of Thailand, Indonesia and other lands hit with the speculative attacks of US-financed hedge funds in 1997 of 'crony capitalism,' leaving the impression the crisis was home grown in Asia and not the result of a deliberate executed attack by US-financed financial institutions to eliminate the Asia Tiger model among other goals, and turn Asia into the funder of US debt.

Ah who could forget.

They screwed Indonesia good and proper. Even had the IMF come in with a package where assets of the country were transferred to western corporations and indonesia received a loan of paper currency for it.

Wonder if they could pull such a stunt on India.

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Re: Geopolitical thread - 15

Postby Philip » 13 Oct 2008 17:30

Veteran British journalist,Robert Fisk,scatthing about US neglect of the Israeli-Palestinian peace.

Fisk 'shocked' by US failure to debate conflict in Israel

By Amol Rajan
Monday, 13 October 2008


Robert Fisk lets fly in a debate at the Woodstock Literary Festival

A feisty debate between Robert Fisk and the author Professor Sir Lawrence Freedman brought The Independent Woodstock Literary Festival to a close on a high note last night.

The absence of a debate on the conflict between Israelis and Palestinians in the US presidential elections was "shocking", Fisk told a packed hall at Blenheim Palace, the grand 18th-century home in Woodstock, Oxfordshire, which hosted the festival.

"America must pull its military forces out of Iraq and the Middle East, leaving the peoples of the region to decide their own future," said Fisk, an author and Middle East correspondent for The Independent. He said the US and its allies had "built a new Iron Curtain from the ice cap to the equator", and added that the result of the elections on 4 November "would not make the slightest bit of difference in the Middle East".

"America's uncritical support for Israel is going to continue," he said.

Professor Freedman, of King's College, London, however, provided stiff resistance, arguing that the United States must play a constructive role in the region and around the globe.

The debate was one of a series of discussions with leading figures from the worlds of literature, the arts and politics that have engrossed audiences since the festival began last week.

Only a few hours before Fisk and Professor Freedman's appearance, the acclaimed historian, Simon Schama, spoke to The Independent columnist Deborah Orr about his new book The American Future: A History, which accompanies a current BBC series.

Hundreds watched Schama lament the collapse of American self-confidence under George Bush. The historian, who spent much of his career at Oxford but is now based at Columbia University in New York, made no attempt to hide his view that the Democratic candidate, Barack Obama, could help renew the ideals that inspired the birth of the American nation.

Speaking in the splendour of the palace Orangery, Schama described Mr Bush as a "comical little front man" for what ought to be considered the "Cheney administration".

Schama also derided the Republican presidential candidate, John McCain, for running a divisive campaign that would backfire in states that didn't already support him.

And he said that vice-presidential candidate Sarah Palin's comment at a rally last week that Mr Obama "is not a man who sees America the way that you and I see America" had racist undertones that made it "morally repellent". It was, Schama said, "code for depicting Obama as the Other".

In one of the early highlights of the festival, the Conservative Party leader, David Cameron, took to the stage on Friday in an apparent attempt to cast himself as the heir to Tony Blair. In an interview with Simon Kelner, editor-in-chief of The Independent, Mr Cameron, who celebrated his 42nd birthday last Thursday, declared: "I'm a very straightforward person."

The comment invoked Mr Blair's assertion that he was "a pretty straight kind of guy".

Other prominent speakers to draw large crowds included the typically forthright war correspondents Martin Bell and Ann Leslie, novelists Elizabeth Jane Howard and P D James, 85 and 88 respectively, and two Independent columnists: novelist Howard Jacobson and chef Mark Hix.

Dame Ann, promoting an autobiography which includes compelling details about her time on the front line, issued a hurried apology after uttering a four letter expletive in Woodstock's Church of St Mary Magdalene.

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Re: Geopolitical thread - 15

Postby svinayak » 14 Oct 2008 05:33

Is US fighting force big enough?
America needs a bigger military to stabilize weak or potentially threatening nations, some analysts argue.
By Gordon Lubold | Staff writer of The Christian Science Monitor

from the October 14, 2008 edition

Washington - American's armed forces are growing bigger to reduce the strains from seven years of war, but if the US is confronting an era of "persistent conflict," as some experts believe, it will need an even bigger military.

A larger military could more easily conduct military and nation-building operations around the world. But whether the American public has the appetite to pursue and pay for such a foreign-policy agenda, especially after more than five years of an unpopular war in Iraq, is far from clear.

Last week, the Army released a new manual on "stability operations" that outlines for the Army a prominent global role as a nation-builder.
The service will maintain its ability to fight conventional land wars, but the manual's release signals that it expects future conflicts to look more like Iraq or Afghanistan than World War II. While Defense Secretary Robert Gates has not publicly supported expanding the force beyond what is already planned, he has said the United States must prepare for more counterinsurgency wars like the ones it is fighting now – a hint that a larger military may be necessary.

Some analysts are certain of that need.

The Army currently has about 540,000 active-duty soldiers and is expected to attain its goal of 547,000 by 2011. The Marine Corps, also tapped to expand, should top 202,000 within the next couple of years. The total American force – including active-duty, reserve, and guard – is about 2.2 million.

John Nagl, a counterinsurgency expert and a retired Army officer, says in coming years the Army should grow to 750,000 and the Marine Corps to 250,000. Demand for troops is already high, and it won't abate anytime soon even if substantial numbers of troops return from Iraq, he recently said at the Center for a New American Security, a think tank in Washington.

Meanwhile, the top US commander in Afghanistan has asked for more American troops that the US simply can't produce until more leave Iraq.

"We don't have enough brigades to fight – that is an inconvertible fact," says Mr. Nagl.

If the US is to remain a superpower in a world in which weak nations, not strong ones, are the big threats, then it must expand its forces so it won't again enter a conflict using too few troops, as it did in Iraq, say other experts. America must stay engaged in nations with weak or nonexistent governments to prevent extremism from taking root and threatening the US.

"This is not a prediction of conflicts to come, but a recognition that the potential for stabilization and reconstruction missions remains high," writes Fred Kagan, a senior fellow at the conservative American Enterprise Institute, a think tank here, in a book he cowrote called "Ground Truth." Mr. Kagan and Thomas Donnelly argue for a total force of about 2.8 million, which includes an active Army of about 800,000 and a Marine Corps of about 200,000.

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Re: Geopolitical thread - 15

Postby paramu » 14 Oct 2008 06:36

kshirin wrote:...but his recommendation for a G3 (US+EU+China) coming from an Indian is strange, since he does not seems to realise how dangerously inimical to our interests such a coalition would be - hope he is proven wrong in our lifetimes with India trumping China to this group.

Is this an indicator that Parag Khanna knows about plan to collapse India by 2017? :shock:

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Re: Geopolitical thread - 15

Postby renukb » 14 Oct 2008 07:43

How China could wreck the US economy

M R Venkatesh

The recent bailout package being approved in the US Congress needs to be viewed in the context of the spurt in the accumulation of forex reserves of China by about $500 billion in the last six months to about $2 trillion in aggregate.

This gargantuan build-up of forex reserves by China has strangely received very little attention of economists, policy analysts, currency traders and, of course, geo-strategists around the world.

Why is China engaged in this exercise? What could be its implications on the on going global financial crisis? Could China trip the bailout package announced by the US last week? Crucially what are the implications for the existing global order?

What is intriguing in the Chinese forex reserve build-up is that both trade surplus and foreign direct investment account only for a part of this gargantuan pile. After adjusting for all known sources of reserve accretion, experts conclude that approximately an excess of $200 billion could have flown into China as 'hot money' -- read inexplicable flow of funds -- in this period.

The Economist -- in one of its issue in recent months -- quotes Michael Pettis, an economist working in China, who explains how and why hot money flows into China. According to Pettis, hot money comes into China when companies overstate FDI and over-invoice exports.

But where is such money getting parked in China? The Chinese stock market, like many of its counter parts across the globe, continues to plunge. Hence, it may not be an attractive destination for hot money. Some experts suggest that it could have gone into property while the predominant view is that it could simply be the Chinese banks that offer interest rates in excess of 4 per cent on yuan deposits compared with a lower rate on dollars.

How a 2 per cent interest rate differential results in such cross-border flow of capital requires some explanation. What makes the dollar-yuan exchange rates central to any discussion on global finance is the fact that trade between the United States and China has burgeoned in the past decade or so. But this is not a two-way trade as would be commonly believed. Most of this is unilateral -- i.e. exports from China to the US.

In fact, this is the fundamental reason for the burgeoning current account surplus that in turn translates into China's forex reserves. In the process, over the years, the US has become extremely dependent on China not only for supplying cheap goods but also for the Chinese to fund such imports by parking their forex surplus within the US.

This twin-dependency on the Chinese for goods and money to finance its deficits has always engaged the attention of the US policy framers who till recently were not at all comfortable with this arrangement. And now added to this is the latest aggressive build-up of forex reserves by China surely has the Americans in a bind.

The economics behind Chinese yuan

Economists in the US till recently believed that a weak yuan implicitly subsidises the Chinese exports leading to such huge trade imbalances between the two countries. Consequently, they have been pointing out to the imperative need for a substantial appreciation of the yuan by a minimum of 20-25 per cent vis-a-vis the US dollar to remedy the situation. In the alternative they have suggested a countervailing duty of a similar scale on imports from China.

Further, economists are of the opinion that by constant intervention in the forex market not only does the Chinese Central Bank ensure a weak yuan it also causes competitive devaluation of various currencies in Asia.

The net consequence is a domino effect with the result that the US dollar is artificially valued at higher-level vis-a-vis most Asian currencies. Experts believe that a significant yuan revaluation will ensure a more realistic exchange rate mechanism in Asia as it could force other countries to follow suit.

It is in this connection that C Fred Bergsten of the Peterson Institute, in a testimony before the hearing on the Treasury Department's Report to Congress on International Economic and Exchange Rate Policy in early 2007, states: "By keeping its own currency undervalued, China has also deterred a number of other Asian countries from letting their currencies rise very much against the for fear of losing competitive position against China."

Naturally, in anticipation of a significant revaluation of the yuan, most experts believe given the uncertainty associated with the global financial markets that hot money is flowing to a relatively safe destination. After all, China not only offers higher return but also is virtually insured against any downward movement against the US dollar.

In effect, is this hot money flowing into China in anticipation of this revaluation of the yuan? Or is it a simple case of China maintaining trade competitiveness through a weak yuan? Or is there something more to it than meets the eye? Are the Chinese acquiring the dollars with some sinister motive? In effect, has the Chinese strategy of a weak currency over the years the un-stated policy of dynamiting the American economy?

Mutually Assured Destruction (MAD)

What is worrying the Americans is that China accounts for about one-fourth of the global forex surpluses and are the counterparts of the US current account deficit. Put simply, while China accumulates forex reserves, the US accumulates a corresponding debt. And the Americans are aware that it is the Chinese are the biggest accumulators of the US treasury bonds.

What is indeed intriguing is that a country -- the US -- that prides on being 'independent' of other countries, especially in security affairs, is now caught in a quagmire as it has to be constantly in the good books of the Chinese government if it wants to avoid a sudden shock.

Countries that hold large US dollar denominated forex reserves have a powerful tool in their arsenal -- they could wreck American financial markets at a mere click of a mouse by selling their dollar holdings. Imagine China with a holding nearly $2 trillion worth of treasury bonds seceding to sell the same overnight.

And that could instantaneously dynamite the global financial system as it could suck out liquidity and cause interest rates to shoot through the roof. Remember, the $700 billion package announced last week by the US is precisely aimed at addressing the liquidity crunch within the US.

China, of course, might have no sinister intent, as this would be at a huge cost. But the Chinese know that no country can ever become a global superpower without a cost. As and when the Chinese decide to take a hit on their dollar holdings, global finance could indeed take a roller coaster ride.

Obviously, the Americans' borrowing from China and the Chinese supply of money to the US is indeed an intriguing geo-political game. Surely, this cannot be simple economics by any stretch of imagination.

Given this paradigm, till date experts opine that both are locked in a tight bear hug. According to Lawrence Summers, 'It is a new form of mutually assured destruction that has quietly emerged over the last few years. This implies that China needs the US (for its exports and to park its forex reserves) as much as the US needs China (for imports and borrowings).

So have the Americans played into the hands of Chinese?

Recent events in the US have turned this 'MAD paradigm' upside down. It is in this context that the recent bailout package needs to be viewed, which seeks to increase liquidity over a period of time by the US government taking over sub-prime assets from financial institutions. That, according to the American thinking, is expected to provide liquidity to the US economy.

But it is all these happenings within the US that makes this accumulation of forex reserves by China extremely interesting. It may be noted that the Chinese, unlike the others, have always questioned the global order with the US at the helm of affairs. And the Chinese accumulation of forex reserves is surely a strategy that perhaps has an ominous side to it.

All this is not pure economics as it is made out to be. Rather, it was and remains a well-planned economic, political and military strategy of the Chinese. And in a way it is the mirror image of the Star Wars programme that the then US President Reagan unleashed on the erstwhile USSR in the early eighties that eventually bankrupted the later within a few years as it engaged in competitive arms build-up with the former.

Statecraft is all about engaging other countries at one's own terms, pace, time and cost. This is what the US did to the USSR in the eighties and succeeded in dynamiting that country. And that is what China could do to a vulnerable US in the coming months. Crucially, if it doesn't, from the Chinese perspective it might well rue this moment forever.

The US till date was depending on the Chinese for imports and to finance them as well for such imports. Now they will have to be considerably dependent on the Chinese to protect their currency as well as to ensure liquidity in their money markets. And that completely alters the existing global order.

1 Chinese yuan = Rs 6.9160
1 US dollar = yuan 6.8527

The author is a Chennai-based chartered accountant. He can be contacted at

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Re: Geopolitical thread - 15

Postby renukb » 14 Oct 2008 13:23

Europe's death by guarantee
By Chan Akya ... 1Dj01.html

Through the latest financial crisis, I warned readers that the costs of banking bailouts in Europe would far outstrip those of the United States. Following from my "quick and dirty" summary at the bottom of last week's article (see Dismal math, Asia Times Online, October 4, 2008), this article expands on the subject at some length.

Before delving into the minutiae of total costs to the government though, a brief recap of recent events as follows:

Ireland guaranteed all bank deposits as well as interbank lending last week for all its banks, in effect providing a sovereign guarantee on the entire banking system at an indeterminate cost to taxpayers
Other countries in Europe including Greece followed suit in terms of guaranteeing all bank deposits. Anecdotally, this wasn't enough to actually stop outflows of funds from the banking sector in some countries.

Germany stepped in to directly rescue Hypo Real Estate over the last weekend, after a previously agreed rescue plan involving other banks fell through, leaving the government with the wreckage.
Even the usually insular French got into the act by suggesting the creation of cross-border bailout fund that was, however, rebuffed by Germany, as the latter believes its financial institutions aren't facing any imminent danger in the current market crisis.
Iceland had to nationalize its largest bank Kaupthing on Thursday, marking the third bank after Glitnir and Landsbanki to be taken over by the government. This drove strategic trades that are discussed later in the article.
The UK announced the most comprehensive series of bank interventions seen of late, marking a culmination of government involvement in the sector after the collapse of Northern Rock last year (see Rocking the land of Poppins, Asia Times Online, September 22, 2007); under the plan the government will provide up to 500 billion pounds (US$844 billion) in assistance for the sector including fresh injections of capital that have been modelled on the rescue of AIG by the US government.
Spain announced a 50 billion euro (US$68 billion) emergency fund earlier this week to provide liquidity by buying assets directly from Spanish banks. Nordic countries like Sweden and Denmark also extended deposit guarantees and in some cases also covered unsecured debt issued by the banks.
In conjunction with the US Fed, both the Bank of England and the European Central Bank this week cut interest rates by 50 basis points, signaling their willingness to provide greater liquidity to the broader economy while suspending inflation targeting for the interim period. This move will cut the incomes of millions of pensioners across Europe, therefore the overall economic impact on the "old" continent is not a straightforward positive as it is in the case of the US.

Who bails out the guarantors?
As highlighted in my previous article on the subject, the major hurdle that needs to be crossed by Europe at some point in the near future pertains not so much to the health of their banking systems as the viability of their sovereign finances. The idea of a "risk-free" European sovereign appears an oxymoron at the current juncture.

In response to the above-mentioned article, a reader complained that estimates for repaying bank debt should be based not so much on the total borrowing but the actual scale of losses incurred. The steps taken by European governments detailed above point to their wholesale undertaking of banking liabilities; secondly, I do not believe that government-owned entities will be managed any better (and probably a whole lot worse) than private enterprises, especially in lucrative areas such as banking.

Even giving generous allowances for this reader's view doesn't change my fundamental conclusion from last week, which is that European sovereigns simply cannot afford the banking bailout that is being proposed: which is perhaps the main reason for Germany to demur on continent-wide bailout that would unfairly expose German savers to the profligacy shown by Spanish and Irish bankers.

Let us first look at select European countries, continuing from the analysis of last week.

Bank Assets
/GDP % Additional
funding % Capital
Injctn. % Res.Mtgs.
% GDP Bailout loss
@ 25%
Iceland 1300 325 130 76 19
Switzerland 1000 250 100 102 25
Belgium 600 150 60 36 9
Holland 600 150 60 98 25
Italy 300 75 30 19 5
France 300 75 30 32 8
UK 300 75 30 83 21
Ireland 300 75 30 70 18

The first column details bank assets as percentage of gross domestic product. This figure is derived from looking at the biggest banks in each country, and then rounded down - for example, 1,369% in the case of Iceland became 1,300%. Since most European banks can no longer borrow in the interbank market or in bond markets, governments will need to step in to provide funding.

The second column makes a generous assumption that such funding is capped at only 25% of the asset base (in practice, for countries at the top of this table the actual number will be closer to 40%). While some will argue that such funding is not a "loss", governments are likely to tie them to social objectives such as uneconomic lending to individuals and small companies, thereby making the program a permanent diversion of resources to the banking sector.

The third column details the cost of the UK-style injection of capital, which is again calculated at a liberal (10%) rather than conservative (25%) proportion of outstanding assets. Both these columns are expressed as proportion of the underlying GDP to make the overall analysis comparable.

The next two columns detail the share of residential mortgages to GDP and the cost of a bailout at a loss proportion of 25%. This is important in the case of Europe because of the similarity to Japan in terms of the meteoric rise in property prices combined with the increasingly challenged demographic situation. In the case of Japan, property prices fell 65% from peak to trough; a conservative estimate of losses in the case of Europe would be around 50%. From this loss figure we subtract existing equity contribution of mortgage borrowers (again a liberal 25% of outstanding) to arrive at a loss of 25%.

Will the governments of Europe bail out individual borrowers in this fashion? Being liberal democracies that have just stepped in to rescue their much-reviled banking systems, it appears almost a certainty that such borrowers will be rescued. It is quite likely that politicians will argue about the need for compassion under the circumstances; this is also related to my point above on government assistance on bank funding that will likely be tied to such assistance to the mortgage borrowers.

The next stage is to calculate changes in sovereign leverage after including the above changes - in the main, the impact of providing direct funding for banks, capital injections and compensating residential mortgage borrowers for their losses.

Current govt.
debt/GDP Proforma
debt/GDP % 5 year
CDS spread
Iceland 33% 507 1300
Switzerland 50% 425 NA
Belgium 85% 304 45
Holland 45% 280 NA
Italy 104% 214 75
France 65% 178 29
UK 45% 169 50
Ireland 25% 148 73

Adding these figures to total government debt and including contingent liabilities such as guaranteed interbank funding gives a very significant boost to debt/GDP numbers across Europe (second column above).

For comparison, I have also included five-year credit default swap (a metric of what it costs to insure against a sovereign default) spreads in the third column. The point with this column is the trend for Iceland which now trades significantly wider than most sovereigns (for example Indonesia is quoted at around 600 basis points while China is quoted at 110 basis points). The rest of Europe doesn't have the same level of spreads, but going down the path that Iceland did makes it quite likely that one or more of such countries will find itself in a similar predicament at some point.

With this information, it becomes easy to adopt an International Monetary Fund-style framework wherein the governments are required to show budget surpluses in order to repay debt. Most of the European sovereigns mentioned above currently have a budget deficit, which suggests the need for bigger moves in government expenses than appears superficially.

For example, countries like France, the UK and Italy all currently post budget deficits of around 3% of GDP; therefore a swing to 1% surplus actually means a 4% move in the ratio of government expenses to incomes. The table below shows the number of years that governments would need to repay debt while running the surpluses mentioned - for example, Switzerland would take 170 years to repay its gross government debt if it ran a surplus of 2.5% of GDP annually.

Time to repay debt (years) / Annual Budget Surplus
1% 2.5% 5% 10%
Iceland 507 203 101 51
Switzerland 425 170 85 43
Belgium 304 122 61 30
Holland 280 112 56 28
Italy 214 86 43 21
France 178 71 36 18
UK 169 68 34 17
Ireland 148 59 40 15

These are horrible figures for even developing countries with young populations to bear. When the demographic angle is considered, that is the ageing of Europe that presents significant threats to the servicing of current debt loads leave alone additional borrowing to bail out the banking system, it is quite easy to conclude that European sovereigns are about as creditworthy as the average overextended American burger-flipper who "owns" two condominiums in Miami.

Strategic implications
The extraordinary steps taken this week across Europe highlight the flaws of the banking system, but equally of the willingness of politicians to be seen riding to the rescue of the unctuous bankers.

Iceland's example is in particular startling. Confronting a virtual run on its banking system, the country tried to stem the tide by nationalizing the troubled institutions only to find that credit markets in turn shut for the sovereign itself. This necessitated some desperate calls for help that went completely unanswered by the capitals of Western Europe.

Only Russia bothered to return the phone call, and it may be willing to provide longer-term assistance for the country. It is perhaps not the output of the Icelandic fishing fleet that the Russians are after though; the country's strategic position during the Cold War proved an unassailable advantage for the US.

With both the US and EU in deep financial trouble, the chances of any quick rescues of Iceland looks depressingly low, giving more than enough room for the Russians to negotiate non-financial terms for their willingness to help. Pretty soon, it is possible that Arab countries could look to providing similar deals to take over parts of their old empire including Turkey, Spain et al by using the leeway granted by the current financial crisis.

Utterly pointless Europe (Asia Times Online, August 16, 2008) dealt with the longer-term negative outlook for a continent that proved unwilling to stand up for itself in the face of Russian aggression in Georgia. The wonders of the current financial crisis are such that what looked like a long-shot just a little while ago now looks like a slam dunk possibility.

(Copyright 2008 Asia Times Online (Holdings) Ltd. All rights reserved. Please contact us about sales, syndication and republishing.)

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Re: Geopolitical thread - 15

Postby renukb » 14 Oct 2008 13:34

Banking crisis challenges US superpower status
5 hours ago ... CV5jZBqXaQ

NEW YORK (AFP) — First banks collapsed, then global economic stability -- could the United States' superpower status be the next, biggest victim of the financial crisis?

This is hotly denied by many who point out the country's role as the world's most dynamic economy and preeminent military force. But US foes say a dramatic shift has already happened and even some allies suggest the time is coming.

Doomsayers point to the costly and unending conflicts in Iraq and Afghanistan, the worst financial upheaval since the depression of the 1930s, and a crisis of confidence in politics and the domestic economy with few parallels.

Countries like Iran and Venezuela gleefully pronounce the end of "the empire," while Russia trumpets the coming "multi-polar world" in which emerging giants like China, India and Russia itself will hold sway.

Even Peer Steinbruck, the German economy minister, broke ranks last month, saying: "The US will lose its financial superpower status in the global financial system."

A similar warning was sounded recently by British political philospher John Gray, who wrote in The Observer that the world is witnessing "a historic geopolitical shift in which the balance of power in the world is being altered irrevocably."

"The era of American global leadership, reaching back to the Second World War, is over," he wrote.

There is no shortage of defenders of the United States.

They point to the extraordinarily way that US influence has penetrated every corner of the globe.

True, the rich lists include more Russians, Indians and Mexicans every year, yet all these tycoons eventually do business in New York and London -- and in the English language.

"There is no question that the U.S. will remain the dominant global power," said Nicholas Burns, a former US State Department spokesman and ambassador who now teaches politics and diplomacy at Harvard University, Massachusetts.

"Our military might and broad political reach will remain unrivaled. And, the US will remain the largest global economy with many strengths, including in innovation, biotechnology and nanotechnology," Burns told AFP.

Burns admitted that the financial crisis, which has shaken Wall Street to its foundations, posed a huge threat to the next president -- either Republican John McCain or Democrat Barack Obama.

"The financial crisis is now the central American strategic concern. The first order of business for the new US president will be to right the ship and to provide a solid economic base without which a successful foreign and defense policy will be difficult to achieve," he said.

But Burns -- echoing the message coming out from Obama in particular -- stressed that Washington could not hope to go it alone.

"The lesson for us is that other countries are also rising to world power," he said.

"We will need a stronger web of multilateral relationships to tackle effectively the great transnational problems of the economy, terrorism, and climate change."

For some the spectacle of the US government partly nationalising financial institutions signals the end of the US model of laissez-faire capitalism.

Raymond Lotta, a Marxist writer and author of "America in decline" says "this crisis is unfolding globally, and in explosive and unpredictable ways."

"It's not 'socialism for the rich,' nor a rescue for the people. It's emergency capitalism for the rich, and more brutal capitalism for the rest."

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Re: Geopolitical thread - 15

Postby renukb » 15 Oct 2008 18:47

Rising nations want a new, fair world order ... 199214.htm

BEIJING, Oct. 15 -- Emerging economies, especially represented by the booming BRICs (Brazil, Russia, India and China), have been pushing forward changes since the world stepped into the 21 century. And what attract us more are their new global strategies in facing international situations that are undergoing significant changes.

Represented by the BRICs, most of these emerging developing countries have had their comprehensive national powers risen considerably, and usually in a fast, stable and continuous way.

According to a report by Goldman Sachs, the BRICs are transforming the global economic situation and would probably emerge at the top in the field around the middle of this century. So far, the proportion of the rising economies in the global economy has grown to nearly 50 percent from 39.7 percent in the early 1990s, and these countries' foreign exchange reserves have also soared to some 75 percent of the world's total volume.

Some European and American media exclaimed recently that "the financial centers" of the emerging economies, especially Hong Kong and Dubai are competing with New York and London, and "are increasingly playing more important roles in the international capital market".

On the other hand, the neo-liberal sermons peddled by US-led "free world" are increasingly losing audience. One commentator from Mexico put it rather well: "The Washington Consensus of the US neo-liberalism fully exposed America's attempts to bring the American Continent onto the track of the US, but none of the economic and political 'outer garments' made by the Consensus were suitable for the Latin American region."

Not only Latin American countries have such feelings, but many developing countries also have learned painful lessons from the Asia Financial Crisis in 1997 and the "Shock Therapy" of the former Soviet Union.

Being invited to have dialogues with G8 in dealing with international problems,the five major developing countries (Brazil, Mexico, South Africa, India and China) are increasingly playing as an individual side. This was further highlighted this year at Japan's Toyo Lake. Meanwhile, the ASEAN and the SAARC have also had their corporation process accelerated.

The fast rise of the developing countries has become a reality, though such a rise is still quite uneven and some countries are still lagging behind in their development and even are in danger of being marginalized. And this irreversible trend, if directed strategically, has profound impacts and historic significance.

First of all, it prompts the trend of a multi-polar world. From the 1950s to 1960s, the then worldwide independence and liberation movements by colonies and semi-colonies dealt a deadly shock to the international imperialist system. Today, this political anti-control wave has just been dashing itself against the international economic order that is dominated by the West, along with the developing countries' fast rise and their diversified modes of development.

It cannot be denied that the US is still the world's unique superpower and to some extent maintains its influence over global affairs, but what is equally undoubted is that its "commanding rod" has been increasingly challenged and its unilateralism is getting more and more unpopular.

In fact, the existing world system has made it more difficult for a single country to say "yes" or "no" on common affairs. On this the events of the Doha Round are a good example.

Basically, developing countries still belong to the Third World and have the same dreams - political and economic independence, peace, development, fairness and cooperation - even though they may pursue such goals through different tactics. It is then no surprise that different opinions or even disputes sometimes exist among them, just as developed countries are no monolith.

A new century started along with the millennium clock, but a new era had already come after the Cold War ended. Ever since humankind has been facing a special question: what kind of a world do we need?

As late Chinese leader Deng Xiaoping once pointed out, he felt happy about the end of the Cold War, and he had constantly put peace and development as the main themes of our times. Facts have proved that he was much more farsighted than some Western leaders.

Since the 9/11 terrorists attack, the US has been exhausted by two wars - the war against terrorism and the invasion in Iraq. The first one exacerbated its fiscal situation, and the second one depleted its moral credibility. So, on the one hand, Uncle Sam has been going downward, and on the other, developing countries have been surging ahead pushed by the tide of economic globalization and high-techs.

And it's important to note what these developing countries advocate in these times of change: a multi-polar world instead of a unipolar one, democratization of international relations, emphasis on diversification for modes of development and freedom in choosing political systems, and the need for changing the unequal international mechanism.

(Source: China Daily)

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Re: Geopolitical thread - 15

Postby Arun_S » 15 Oct 2008 21:34

Ship hijack: Govt allows Indian Navy to patrol Somali waters
15 Oct 2008, 1538 hrs IST,Times Now
The Indian government has finally allowed the Indian Navy to patrol Somali waters to ensure that the safety of Indian sailors is not compromised.

In a statement issued on Tuesday, the government said, "Neighbouring powers and international agencies are working with India to free the sailors."

On Tuesday, Somali pirates set an ultimatum of 48 hours for paying ransom for the release of the 18 Indian sailors onboard the hijacked MT Stolt Valor.

The angry families have been demanding proactive action from the government and want the Navy to patrol the Somalian gulf in order to escort the ship back and avoid clashes with the pirates, as it could prove counter productive.

Seema Goyal, wife of captain of the ship Prabhat Goyal said she do not know which door to knock and collect the money.

"Assurances don't work. This is the time when I want help from any quarter and solve the matter," she added.

She also urged the Indian government to take more initiatives. "I have never asked the government to pay ransom. I want the government to take initiatives and pressurise the Japanese government to get our people back home soon," she said.

The seafarers on board MT Stlot Valor have been held hostage by the pirates who hijacked the cargo ship since September 15.

The ship is owned by a Japanese company and managed by Fleet Marine Ltd in Mumbai. The hijackers had earlier demanded a ransom of USD six million for the release of the crew and have now come down to USD two million.

The Somalian pirates have seized more than two dozen ships this year off the Horn of Africa.

Fresh hope for MT Stolt Valor crew

Even as the Indian government is mulling over options, Russia has already gone for the kill. Russia has dispatched its deadly Intrepid class frigates to the Somalian waters in a bid to free sailors taken hostage by Somalian pirates.

The intrepid class frigates are state of the art battleships carrying an impressive arsenal, which includes a battery of surface to air missiles, torpedoes and anti aircraft guns. The ship a part of Russia's Baltic fleet has been sent to intercept MV Faina hijacked by Somali pirates off the Somalian coast.

The ship entered the Meditteranean on October 4 and is likely to swoop down on the pirates very soon.

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Re: Geopolitical thread - 15

Postby renukb » 16 Oct 2008 11:37

Military Exercises Showcase Russian Power, and Its Limits
Richard Weitz | Bio | 15 Oct 2008
World Politics Review

The Russian government may not yet describe itself as a superpower, but its latest military exercise, "Stability 2008," clearly aims to affirm Russia's global military reach. The exercise's hypothetical scenario posited a local conflict (e.g., over Georgia) that escalates into a world war, pitting Russia and its ally, Belarus, in a conflict with the West in which both sides employ land, air, maritime, and eventually nuclear forces. All three components of Russia's strategic nuclear deterrent (bombers, submarines, and land forces) participated in the maneuvers, which were the largest conducted on Russian territory since the collapse of the Soviet Union in 1991. One Russian commentary on the month-long exercise, which began on Sept. 21, described it as an opportunity for Russia to "prove its Major League status."

Although the Georgia War has brought the issue to the forefront, Russia's military activities expanded well before this summer's conflict. For several years, Russia's Strategic Missile Forces (SMF) have engaged in an enlarged testing program of the country's land-based intercontinental ballistic missiles (ICBMs). The launches aim both to confirm existing missiles' reliability, and to develop new missile and warhead technologies. In August, for instance, the SMF test-launched Russia's main intercontinental ballistic missile, the RS-12M Topol ICBM (NATO codenamed SS-25 Sickle), with a new warhead designed to overcome U.S. missile defenses. Spokesperson Alexander Vovk declared, "An experimental warhead hit a target at a testing range on the Kamchatka peninsula with high precision, demonstrating its capability to deliver pinpoint strikes on well-defended targets."

In addition to its ICBM deterrent, Russia has been reinvigorating its air-based deterrent recently as well. Since last year, Russian strategic bombers have resumed global patrols, simulating nuclear attacks against the United States and its allies.

During the Stability 2008 exercises, Russian strategic bombers conducted their first live-fire exercises since the collapse of the Soviet Union. In northern Russia, the Tu-160 White Swan (NATO codename Blackjack) and Tu-95MS Bear-H strategic bombers deployed and launched their maximum combat payload of cruise missiles. Additional Russian combat and support warplanes also participated in the exercise.

And on Sept. 10, two Russian Tu-160 Blackjack supersonic strategic bombers flew to Venezuela, where they conducted a week of highly publicized exercises before returning to their home base of Engels in central Russia on Sept. 19. Their 16-hour flights were the longest in the history of Russian strategic aviation. The planes carried only dummy warheads on this deployment, as Russian warplanes usually do on exercises.

Perhaps the most interesting component of Russia's military resurgence, though, is the return of the Russian Navy, which in recent months has conducted exercises in maritime regions unvisited by Russian sailors since Soviet times. During the Georgia War, warships from Russia's Black Sea fleet, based at the Ukrainian port of Sevastopol, deployed along the coast of Georgia's breakaway province of Abkhazia to support Russian ground and air operations. After NATO warships entered the Black Sea to provide humanitarian assistance to the Georgian government, Russian Adm. Eduard Baltin boasted that the Russian Navy could destroy the NATO naval contingent within 20 minutes. President Dmitry Medvedev, Prime Minister Vladimir Putin, and other Russian leaders expressed concerns that the NATO ships were actually delivering weapons to Georgia under the guise of providing humanitarian assistance.

Following Ukrainian protests and a reaffirmation of Ukraine's intent to end Russia's lease on its Sevastopol naval base in 2017, a Russian Navy commander expressed interest in acquiring new bases in the Mediterranean Sea. Those would more than compensate for the loss of the Sevastopol base by providing the Russian fleet with a new presence in an important region of the world. The Soviet Navy had a limited flotilla in the Mediterranean, but Russian Federation warships have rarely deployed there. In addition to the Black Sea Fleet, the Russian Navy comprises the Northern Fleet, the Pacific Fleet, the Baltic Fleet, the Caspian Flotilla, Naval Aviation, Naval Infantry (marines), and coastal artillery.

On Sept. 22, meanwhile, two of the Russian Navy's newest warships -- the Pyotr Veliky ("Peter the Great"), a nuclear-powered guided missile heavy cruiser, and the Admiral Chabanenko, an anti-submarine warfare ship -- ostentatiously left their base in northern Russia, along with several escort ships. The task force is spending several weeks in the North Atlantic and the Mediterranean before engaging in joint military exercises with the Venezuelan Navy from Nov. 10-14. In describing the deployment, spokesman Igor Dygalo affirmed that, "The Navy remains a serious deterrent prepared to thwart any threat to Russia's national security, and if necessary provide an adequate response to any act of aggression." Capt. Dygalo added that, "The return of the Russian Navy to global oceans is an accomplished fact, whether you accept it or not."

The Baltic Fleet subsequently dispatched the Neustrashimy (Fearless) frigate from the port of Kaliningrad to confront Somali pirates who had seized a Ukrainian-owned ship whose captured crew included several Russians. The UN Security Council enacted a resolution authorizing countries to use force in Somalia's territorial waters against the pirates. Russian policy makers see the ship's deployment as both a means to reaffirm Russia's commitment to uphold international security and an opportunity to underscore their capacity for independent military action. "We are planning to participate in international efforts to fight piracy off the Somalia coast," observed Adm. Vladimir Vysotsky, the commander-in-chief of the Russian Navy, "but the Russian warships will conduct operations on their own."

Russia's fleet of strategic missile submarines has also shown renewed activity. On Oct. 12, the Russian armed forces fired three long-range ballistic missiles nearly simultaneously from separate launch platforms located thousands of miles apart -- a truck-mounted Topol missile from the Plesetsk cosmodrome in northwest Russia and ballistic missiles from submarines deployed in both the Barents Sea and the Sea of Okhotsk in the Pacific Ocean. The day before, a Russian submarine had launched a Sineva ballistic missile from the Barents Sea. The missile traveled a record distance of more than 11,500 kilometers to a target in the equatorial region of the Pacific Ocean. President Dmitry Medvedev, who observed the submarine launch on Saturday and the ground launch on Sunday, said that the exercise "shows that our deterrent is in order."

Until recently, the priority placed on reviving Russia's ground and air forces has meant that the Russian fleet has been declining in size due to the need to decommission ships that have reached the end of their operational lifespan. The current Russian rearmament program, which will provide the Russian military with 4.9 trillion rubles ($192.16 billion) until 2015, allocates 25% to constructing new warships.

Medvedev has stated that the government would give priority to "nuclear submarines with cruise missiles, and multi-purpose attack submarines." Russia's existing non-strategic submarines will soon reach the end of their designated lifespan since they were constructed during the 1980s and 1990s.

In July, Adm. Vysotsky, stated that Russia intended to eventually deploy five or six aircraft carrier task forces, which would be more useful than submarines for reestablishing Russia's global maritime presence. The current plan is to start building the carriers in 2012. Observers question, however, whether the Russian defense industry still has the capacity to construct such a large and complex weapons system as a modern aircraft carrier and its associated warplanes. Russia's only remaining aircraft carrier, the Admiral Kuznetsov, has repeatedly gone out of service since its commissioning in the early 1990s to undergo essential repairs. Russia does not now have a shipyard designed to construct aircraft carriers; the Kuznetsov was built in Ukraine during the 1980s, when Ukraine's defense industries were part of the integrated Soviet military-industrial complex.

Perhaps the most serious concern of the Russian Navy, though, is whether it can fulfill its important role in Russia's nuclear strategy. The critical uncertainties relate to Russia's new Bulava Submarine Launched Ballistic Missile (SLBM), which is designed to carry ten nuclear warheads a maximum range of 8,000 kilometers. A variety of developmental problems, including an unprecedented three successive failed launches, have delayed the Bulava's entry into service until at least 2009, which is already three years behind schedule.

On Sept. 18, the Dmitry Donskoi launched a Bulava from a submerged position in the White Sea at a target in the Kura testing grounds on the Kamchatka Peninsula. According to a Russian Navy spokesman, "It can be said that the launch and flight proceeded without a hitch." Nevertheless, some Russian sources subsequently claimed that the missile's multiple warheads failed to separate properly from the carrier bus and missed their targets. The Russian Navy is counting on the Bulava to equip its next generation Borey-class nuclear-power submarines, which is the only strategic submarine still under production in Russia.

The problems with the Bulava underscore the fragility of Russia's military revival. Despite the unprecedented scale of the recent military maneuvers, the Russian armed forces, especially the non-nuclear branches, have yet to acquire the robust range of military platforms and technologies required of a military superpower.

Richard Weitz is asenior fellow at the Hudson Institute and a World Politics Reviewcontributing editor. His weekly WPR column appears every Tuesday.

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Re: Geopolitical thread - 15

Postby renukb » 16 Oct 2008 15:19

Russia gives away some of its islands to China, leaving Japan jealous ... ia_china-0

Russia and China have finished the demarcation of the border by delivering Tarabarov Island and a part of the Bolshoi Ussuriysky Island to China, Itar-Tass reports. The official ceremony took place on the territories Tuesday. Russia and Chinese border guards have already begun their service on the newly established border.

The event marked the final establishment and the statutory recognition of the entire line of the 4,300-kilometer-long border between Russia and China.

According to the intergovernmental agreement, Tarabarov Island will become China’s Yinlong, whereas Bolshoi Ussuriysky will be split into two. Its western part will now belong to China and will be named Heiziazi. The eastern part of the island will remain under Russia’s jurisdiction. The total square of these territories reaches approximately 340 square kilometers.

Russia used to have an army base deployed on Bolshoi Ussuriysky Island. The Russian military left the island after the signing of the border agreement with China. Several posts have been set up to guard the new border.

The new agreement finally ends the territorial dispute between Russia and China. The border issue, which the two countries received as their historical legacy, has now been solved.

The governor of the Khabarovsk region, Viktor Ishayev, put forward a suggestion to establish the Russian-Chinese trade zone on Bolshoi Ussuriysky Island. The regional administration positively estimates the future perspectives for development. “We have not lost anything from the economic point of view,” the governor said.

The border between the Soviet Union and the People's Republic of China had long been an issue of contention. The Sino-Soviet border was a legacy of various treaties between the Qing Dynasty and the Russian Empire, the Treaty of Aigun and the Treaty of Beijing, in which Russia gained over 1 million km² (400,000 mi²) of territory in Manchuria at China's expense, and another 500,000 km² in the western regions from several other treaties. These treaties have long been regarded by Chinese as unequal treaties, and the issue partially arose again with the Sino-Soviet split, with tensions eventually leading to division-scale military clashes along the border in 1969.

Chinese territory expands for the expense of Russia
The Vladivostok ... _of_Russia

14 October the transfer ceremony of Tarabarov Island, Bolshoy Island of the Chita region and the half of the Bolshoy Ussuriyskiy Island of Khabarovsky region into the ownership of China took place. This bilateral accord was signed by Vladimir Putin and Chinese authorities on October 14th , 2004.

The extent of the transferred territories makes up 174 square kilometers and brings China 50 kilometers closer to Khabarovsky Region.

The islands were thought to be of strategic importance to Russia because they shielded Khabarovsk in the case of war. In the territory of Bolshoy Ussuriyskiy Island was disposed the fortified area, but yesterday the military men left it. The names of the territories have also changed for the Chinese – The Tarabarov Island turned into the Silver Dragon’s Island and the western part of the Bolshoy Ussuriysky Island turned into the Black Bear’s Island.

The residents of Sakhalin, Khabarovsky and Primorsky regions have mixed feelings about the fact of transmission. The authorities ensured that this event would reconcile the territorial claim of China and strengthen good neighborly relations between the two countries.

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Re: Geopolitical thread - 15

Postby renukb » 16 Oct 2008 15:22

Global Crisis: How Far to Go? Part I
Mistrust over lending grips the globe, but a wiser, more nimble US could emerge from the chaos
Branko Milanovic
YaleGlobal, 8 October 2008

Global Crisis: How Far to Go? Part II
Falling export demand could rattle Asian countries, but most are resilient enough to survive

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Re: Geopolitical thread - 15

Postby renukb » 16 Oct 2008 15:25

China, India world order vs end of American empire, global finance crisis
by globalization, finance, politics forum Monday, Oct. 13, 2008 at 9:47 PM

How is a crisis-filled world finance and political order to change? Will the deep-seated financial crisis of US and Europe lead to political and leadership crisis in view of surging China and India power? What would follow ongoing global financial and wealth crisis in the 21st century? Get powerful insights from 3 provocative thinkers Andre Gunder Frank, Chalmers Johnson, and George Zhibin Gu and timely discussions on basic conflicts and challenging issues of the world.

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Re: Geopolitical thread - 15

Postby renukb » 16 Oct 2008 15:32

This is a possibility in the long run, if EU treats Russia as a partner and not an adversary.

Berlusconi says he wants Russia to join the EU
14 hours ago

BRUSSELS (AFP) — Italian Prime Minister Silvio Berlusconi said Wednesday that he is in favour of Russia becoming a member of the European Union, a "vision" he has held for several years.

"I consider Russia to be a Western country and my plan is for the Russian Federation to be able to become a member of the European Union in the coming years," Berlusconi told reporters in Brussels.

He said that first of all the European Union should resume talks with Moscow on a partnership agreement that was suspended following a war between Russia and Georgia in August.

"Me, I want to go further. I have had this vision for years," Berlusconi said as he arrived in Brussels for an EU summit.

The Italian prime minister has had a friendly relationship with Russian Prime Minister Putin for several years and invited the former president of Russia, along with his family, to stay at his private residence on the island of Sardinia.

The EU suspended talks on a partnership agreement with Moscow on September 1 in protest at Russia's formal recognition of the breakaway Georgian regions of South Ossetia and Abkhazia.

Relations are fraught over a number of other areas including over the eastwards enlargement of the EU to former Soviet-bloc nations, US plans for elements of a missile defence shield in Poland and the Czech Republic, and expansion of the NATO military alliance.

Russia in turn has been accused of using its status as a major hydrocarbons exporter to political ends and has faced criticisms over alleged human rights abuses and democratic flaws in this year's presidential election.

But Moscow and the EU need each other. Russia is the main source of Europe's oil and gas and Russia is a major and fast-growing market for the continent's firms.

More Russian exports go to the EU than anywhere else while Russia is the bloc's third biggest trade partner after the United States and China.

Politically too, Moscow has close ties with Europe. Of all countries with which the EU has tight relations, it has the most frequent official meetings with Russia. Two EU-Russia summits are held annually compared with only one with the United States and China.

There are also regular meetings with the Russian foreign minister as well as numerous forums on subjects ranging from human rights to investment, justice issues and culture.

French President Nicolas Sarkozy, whose country currently holds the rotating EU presidency and which brokered a six-point Russia-Georgia ceasefire agreement, has indicated that he is in favour of resuming talks on the stalled new cooperation pact.

Currently, their relations are governed by a partnership accord that dates from 1997, when Russia was still suffering economically from the break-up of the Soviet Union.

The new partnership pact is supposed to deepen relations between the two sides both politically and economically and especially as regards energy supplies to Europe, eager to secure gas and oil supply guarantees. ... wDrF1l8zbw

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