New turn in US-India ties

PRESIDENT Bush’s arrival in New Delhi and the conclusion of the civil nuclear cooperation agreement as the centrepiece of the new “strategic partnership” was the culmination of America’s wooing of India which started almost from the day that India and Pakistan won their independence. There were idealistic and practical reasons for this fascination.

On the idealistic plane India was the world’s largest democracy and a country that won its independence through non-violent protest.

This was seen as fascinating enough to overcome the aversion to the “socialism” that India theoretically practised at home and the “non-alignment” it preached. It was in 1959 that President Eisenhower, the first American president to visit India, told his Indian interlocutors that “we who are free — and who prize our freedom above all other gifts of God and nature — must know each other better, trust each other more, support each other.”

On the practical “realist” plane there was the desire initially to make India-the largest country of the region — a part of the string of alliances the US had created around the world to “contain” the communist threat from both the Soviet Union and the People’s Republic of China.

It was only after India rejected American overtures that the Americans turned towards Pakistan and made it the lynchpin in the Baghdad (later Cento) and Seato pacts aimed at the soft underbellies of the Soviet Union and China respectively. More recently, other American geo-political perceptions have made it appear that a strategic partnership with India is an indispensable element of American policy.

In the early years, the effort to make India part of the western alliance did not wane even while on the surface it seemed that Washington’s impatience with India’s hypocritical posturing and adamant refusal to be, in the American perception, genuinely non-aligned placed the two countries at odds. India was the recipient of large dollops of American aid and was perhaps the only country in the 1960s which had its PL-480 (food aid programme) loans written off. It was the largest recipient (40 per cent) of assistance, thanks to American influence over the soft loan window of the World Bank.

It was the principal beneficiary of the “green revolution”. The institutes of technology, the pride and joy of the Indian educational system and the foundation of the information technology industry in India were a gift from the Americans. Much of this could be attributed to the fact that India’s needs were great and the American philanthropic impulse was at play but there was no doubt that political factors also played a part.

It was in 1962 that this became most clearly evident when the Sino-Indian conflict led to massive defence supplies being rushed by the Americans and the British to India along with offers of unstinting political support. It came as a rude shock to the Pakistanis, the most allied of allies, that there was little regard for Pakistan’s pleas to exploit India’s hour of need to persuade it to settle its disputes with Pakistan.

If the Indo-American relationship did not acquire strategic dimensions at that time it was only because the Indians felt that they could derive greater benefits by being de facto allies of the Soviet Union while maintaining a facade of neutrality and thus having their cake and eating it too. The situation changed after the collapse of the Soviet Union and the emergence of a unipolar world.

The decision around the same time by the Indians to introduce economic reforms that opened up the economy to foreign investment had a dramatically positive effect on the “Hindu rate of growth” and suddenly brought to the fore the potential of India as a trading partner and a market of middle class consumers for western products on the one hand and the need for India to look westward for markets for its burgeoning exports and for the import of technology on the other.

This was reinforced by the growing economic and political clout of the Indians settled in America. The Americans were more than happy to respond. Indian suspicions of American intentions and the so-called American tilt towards Pakistan were put to rest by the manner in which Clinton handled the Kargil episode and by his week-long visit to India in March 2000 when it became evident that the American tilt was definitely towards India.

Fast forwarding to today the Americans in defining the reasons for seeking a strategic partnership with India have said that “India and the United States are both multi-ethnic, multi-lingual, multi-religious democracies with increasingly converging interests on the world’s most important issues. Opening new areas to economic cooperation and concluding a civilian nuclear partnership are two of the most important areas at this moment. Beyond that, we need to look at all the areas where our international interests intersect with those of India and where we can advance our interests by partnering with India in this region and beyond. Some areas that spring to mind are agriculture, democracy building, disaster relief, education, and science and technology”.

In addition, it has been argued that India’s growing market will offer interesting opportunities for American businessmen both for trade and investment and that India’s large reservoir of trained manpower will help fill the gaps that are beginning to arise in key sectors of the American economy.

It is also noted that at a time when admirers of America are becoming few and far between a recent survey has shown that 71 per cent of Indians have a favourable view of America and Prime Minister Manmohan Singh could truthfully tell an American TV channel when asked about domestic opposition to Indo-US cooperation that “there are the Left parties of our coalition, they still regard the United States as a hegemonic power. But I think the new Indians of tomorrow, our young people, our businessmen, our scientists, our technologists, I think they are not held back by the Cold War thinking.”

American analysts and policymakers have argued that India following the capitalist path for economic development while maintaining a democratic structure was the model that other developing countries should be encouraged to follow and that this would happen only if India was assisted in its effort to match the fantastic economic progress that China had made under totalitarian rule.

As a logical corollary but also as part of “containment” it is argued that India cannot be regarded as a model if it cannot match China in military prowess and “nuclear status”. It must therefore be allowed if not helped to develop nuclear weapons of the same calibre and in the same quantity as China. Currently China may be adhering as the other nuclear weapon states are doing to the policy of not producing fissionable material for nuclear weapons but it has already accumulated a sufficient stockpile of nuclear weapons and, in addition a large quantity of fissionable material, to add to this stockpile whenever it chooses. India must be enabled to do likewise.

This argument has been made most bluntly by the former ambassador to India, Robert Blackwill who said in a recent article that “Of course we should sell advanced weaponry to India. The million-man Indian army actually fights, unlike the post-modern militaries of many of our European allies.” America should help India with its space programme without worrying too much whether that will help India build missiles. “Why should the United States want to check India’s missile capability in ways that could lead to China’s permanent nuclear dominance over democratic India?”

Other thinkers put it more delicately suggesting that while there is no desire to contain China it is the American national interest to prevent the domination of Asia by any one power since this could jeopardise American interests and those of American allies in the region and that the rise of India as a power equal to China was, therefore, an American interest.

The American view of China has changed from the days that Bush came to power and talked of China as a strategic competitor. Now there is recognition that cheap consumer goods from China are helping keep inflation in check in the US and that American companies have large investments in China. There is once again an emphasis on engagement. The nature of engagement is not, however, necessarily friendly.

From India’s perspective the memories of 1962 still remain. There are suspicions about the nature of the Sino-Pak relationship and accusations abound in the Indian press regarding China’s assistance for Pakistan’s nuclear and missile programmes. Most importantly in justifying its testing of nuclear weapons in May 1998 former Prime Minister Atal Behari Vajpayee’s letter to President Clinton had talked of the threat that Chinese nuclear weapons posed to India.

There is the Indian desire in its ‘Look East’ policy to develop trade and economic ties with Asean countries where it finds itself far outstripped by China. Of course, alongside it must be noted that Sino-Indian talks on the border issue appear to be going well and trade between the two nations has grown at over 30 per cent annually since 1999. They are cooperating in securing oil and gas concessions so as to avoid being driven into competition for limited resources and there is much talk of the fact that in a relatively short time China may supplant the US as India’s largest trading partner.

In other words, there is a possibility that the view of China as an adversary both in Washington and in New Delhi may be subject to some measure of adjustment.

There is perhaps another, and at this time more pressing, American interest in the Indo-US strategic relationship. In the past years Indian analysts, particularly academics based in the US, had been making the point that India and the US had a common interest in combating the arc of instability represented by the crescent of Muslim states lying between Israel and India. It was postulated that the US could cooperate with these two countries to combat the menace of “Islamic terrorism”.

This concept drew upon earlier American thinking that despite its enormous power the US would need to rely upon “regional influentials” to ensure that its regional objectives were achieved. At the time that this was first propounded in the mid 1970s the Shah of Iran was a strong American ally and it was thought that Iran and Israel would be the regional influentials who would safeguard American interests. In the changed circumstances assigning such a role to India and Israel would appear plausible.

It is in this context that one should see the highlighting in American official statements and in the media of the fact that India has been on the side of the Americans on the question of Iran’s nuclear programme, and of the fact that with its large and tolerant Muslim population India may also be an ally against Islamic radicalism. It should also be noted that with American encouragement the Indo-Israeli relationship is flourishing with extensive ties being established in the sphere of security and defence.

How the nuclear deal and the rationale for the deal will impinge upon the security situation in the region generally and on Pakistan in particular is something that we need to think about. I have no doubt, however, that in informal consultations, if not in public testimony, Bush administration officials will seek to highlight this anti-terrorism role and the tie-up with Israel as the principal or at least the added benefits to be derived from giving India concessions on the nuclear issue.

The American administration has submitted to Congress the proposal for amending the American laws that will have to be modified to permit the civilian nuclear cooperation to go forward. Passage is not going to be easy. In my next article I will look at the prospects for such approval.

The writer is a former foreign secretary.

Iran’s euro game

THE Internet is a double-edged sword. It is a useful and accessible source of information. But it can also swamp you with disinformation leaving you totally confused and incapable of logical thinking. The issue that is doing the rounds on the Internet these days — but has not been taken up by the print media in a big way — is that of the Iranian oil bourse (IOB) that is on the anvil and is expected to trade in euros.

It seems to have assumed extraordinary importance because it is being linked directly to the current American confrontation with Tehran, which many fear would lead to war. After a similar build-up of rhetorics three years ago, the United States had attacked Iraq — and is still not ruing the consequences — so no one now dismisses as nonsense the talk of another military adventure by the Bush administration.

As is the case with conspiracy theories, there are some grains of truth in what is being said. It is the interpretation and the motives being read into the statements made and actions taken which leave one wondering about their credibility. The IOB theory goes as follows.

The United States attacked Iraq primarily not for any of the proclaimed reasons — gain control of Iraqi oil reserves, destroy Saddam Hussein’s weapons of mass destruction (WMD), regime change in Baghdad — but to prevent the Saddam government from switching over to the euros as the currency of transaction to sell its oil. Regime change and control of oil came as a bonus. The WMD never existed as we are now told. Of course the American objective of preempting the petroeuros can only be confined to the realm of speculation for such issues are not reported by the mainstream media in the US.

We know for certain that some moves were made though one can only deduce the motives behind them as the conspiracy theorists do. But obviously there is no way of confirming these motives.

For instance, Saddam Hussein had announced in 2000 that Iraq’s oil would be sold for euros, a currency stronger than the dollar, and he even started trading some of the Iraqi oil in euros. In June 2003, after the American conquest of Iraq, when Iraqi oil sales returned to the international market, it was announced that the transaction would be in dollars. It is left to the readers to decide if the conspiracy theorists have a point.

When the war drums began to be sounded in Washington against Iran, the most dangerous member of the axis of evil, the theory about petroeuros once again returned to the Internet. The major fact announced in this regard is the announcement by Mr Mohammad Javad Asemipur, an adviser to Iran’s oil ministry and the person responsible for this project, that his government intends to create an Iranian oil bourse.

This would be in addition to (and obviously in competition with) the existing two oil bourses (in London and New York) owned by American corporations. Iran has been trading its oil in euros with its EU customers. This move, according to William Clark, who has been studying this development very closely, would have “noteworthy” macroeconomic implications especially because the EU imports more oil from Opec producers than the US and accounts for 45 per cent of the Middle East’s imports.

According to the researchers, if the euro was to be made the currency of oil trade, the dollar would lose its preeminent status as the world reserve currency that it has enjoyed since 1971 when President Nixon removed the US currency from the gold standard.

Since this gives the United States an unparalleled advantage — it controls the world trade and can import goods and services for very low relative costs — it is obviously in its interest that a switchover to the euro does not take place.

According to William Clark and other researchers who accept his reasoning, the Bush administration is looking for a pretext to attack Iran and the nuclear issue, on which such a rumpus has been created, simply serves as a casus belli. If it wasn’t uranium enrichment it would have been something else.

It is difficult to say with authenticity if the US is gunning for Iran because of the euro issue. It is, however, interesting to note that initially it was announced that the Iranian oil bourse was to start functioning in March 2005. Then the schedule was changed to March 20, 2006.

Now The Globe and Mail of Toronto has reported that it has been put off to a much later date. “But they are jumping the gun if they still figure Iran is within days of launching a new international oil exchange that would sell its own and other Middle Eastern oil producers’ black gold in euros rather than US dollars — and which, the theory goes, could ultimately torpedo the greenback and the US economy.

Despite repeated reports over the past 18 months or so ... the start date has been postponed by at least several months and maybe more than a year. ‘In the middle of 2006, we are able to start the bourse,’ Mohammad Asemipur said when reached in Tehran. The plan is to trade petrochemical products first, with a crude oil contract coming last, a rollout that likely will take three years, he said,” The Globe and Mail wrote in its March 15 issue.

This shows that the Iranians are proceeding cautiously with the project. Many Iranian experts and leaders have also reiterated that the bourse will pose no threat to the American dollar. What merits some serious American thinking, however, is the state of its own economy that has made America so vulnerable.

Washington has been depending on its military superiority to dominate the world. But the sustenance of its war machine might prove difficult for its weakening economy as happened in the case of the USSR leading to its collapse.

Here is some information that has a bearing on the American policy vis-a-vis Iran and other countries which the policymakers in Washington must have carefully considered. The Economist of London (March 18, 2006) reports some interesting features about the world currencies. America’s current account deficit is likely to hit an annual rate of $1 trillion before the end of the year since the US is manufacturing only 63 per cent of the goods it needs to meet its domestic demand and it is outsourcing its manufacturing to cheaper Third World countries.

Its heavy dependence on imports has weakened the dollar which is down by 28 per cent against the euro since its peak in 2002. It is expected to fall to $1.35 against the euro by the year’s end.

Net foreign direct investment by American firms has also fallen to $21 billion from $252 billion two years ago. So far the dollar has been cushioned from the jolts this performance would have caused by the fact that most international trading takes place in dollars.

But what would be worrying to the US is the trend that has set in for many countries to convert their foreign currency reserves into euros. Iran has been indicating its plan to introduce this change. Syria has confirmed its plans to use euros instead of dollars for its external transactions while the UAE has reacted to the American move to block a Dubai company from buying five of its sea ports by threatening to move 10 per cent of its reserves into euros. More and more oil exporters are talking openly about selling oil in euros.

Can America preempt many of the unfavourable moves by applying sanctions against Iran and thus showing its economic muscles to the others? One cannot be certain because the rest of the world has been quietly realigning itself and the US may suddenly find itself isolated. Consider this.

Iran has entered into a $100 billion accord with China for developing the 26 billion barrel Yadavaran oil field in return for which it could buy 10 million tons of liquefied natural gas per year for 25 years.

Russia has $10 billion contracts with Iran to build nuclear reactors. Japan buys 550,000 bpd of oil from Iran and a Japanese company will be developing the Azadegan oil fields. India imports 150,000 bpd of oil from Iran. South Korea refines about 10,00bpd of Iranian crude and has developed the Soroush-Nowruz oilfields. Will all these countries agree to sanctions against Iran? As the drama unfolds against the backdrop of the changing international economic partnerships, we have to wait and see what comes next.

Worth of a bureaucrat

“BUREAUCRACY is a giant mechanism operated by pygmies.” So said the 19th century French novelist Honore de Balzac. Why did that graphic depicter of French high society have to comment on the bureaucracy at all? Did he, like you and me, have a problem in getting his ID card, or pay bribe to get the transfer of a plot registered, or face difficulties that confront the public in Pakistan when it has to deal with public servants?

Sardar Mohammad Iqbal, Pakistan’s first Ombudsman, used to say that from getting a child inoculated to setting up a steel mill there is nothing in which our bureaucrat does not have a hand. You just can’t do without him whether it is your public or private life. Add to this the fact that you want him as a husband for your daughter.

Recently an officer in East Punjab offered himself for auction because he couldn’t afford to pay the penal rent of a house he had unauthorizedly occupied during his transfer from one district to another. This could be the very first example of a government servant going up in auction of his own accord.

But no, hold on. Even in the case of this Mr Doshi this must be his second time. Why? Because Mr Doshi is a married man and like a good Indian or Pakistani civil servant he too must have auctioned his matrimonial prospects when his parents were looking for a suitable bride for him — naturally a bride complete with appurtenances like a furnished bungalow, a new car and a substantial bank balance transferred in his name before the wedding. After all it is no joke getting a civil servant bridegroom.

He must have got all that he wanted, otherwise the news of poor Mrs Doshi going up in smoke would have appeared long ago in the Indian press, unless, of course, if this chap was one of those unlucky ones who marry for love and get just the girl wrapped up in an old cotton sari. Not even a fancy packing.

Those of us who have suddenly awakened to a realization of self-respect and identity, why don’t we instil some of it into the young bridegroom? Why does he set his eyes with greed at the wealth (sometimes non-existent) of his future father-in-law?

Why can’t he use his brains and brawn to provide all the good and fashionable things of material life to his bride? Why should she have to come to him loaded with a car, TV set, fridge, deep freezer and microwave, apart from furniture and furnishings for his house?

If he had any self-esteem and decency of character he would scorn these free gifts. Let the bride’s parents give her what she needs for her personal use. Why should the boy’s mother and sisters go to them like beggars, armed with a list of demands? Don’t they and the dear boy for whom they are debasing themselves feel ashamed of this greedy activity? So far as he is concerned, this could be the depth of male depravity.

The Frontier and Balochistan are the two areas in Pakistan where the true Islamic tradition is practised in respect of marriage arrangements, and where the groom himself bears the complete wedding expenses, including the cost of the feast in the bride’s house. And in our mistaken concept of social values we accuse Pakhtoons and Balochs of giving their daughters away for money.

Assuming for a moment that they do so, the fact is that the girls are helpless and can’t change racial customs. But isn’t it also a fact that Punjabi and Urdu-speaking young men, in most cases educated, liberated and enlightened, sell themselves to the highest bidder? Are they too helpless in this transaction like those poor girls?

And the worst criminal in this respect is the bureaucrat bridegroom. His worth cannot be fully assessed because it is a hidden potential, especially if he is an engineer or doctor or an army officer, or better still, a member of the civil service. In the last case he can be worth a crore of rupees if he lays his hand well as a public servant and misses no opportunities. This worth goes on increasing till he retires.

The news from East Punjab did not say which aspect of his life Mr Doshi had decided to auction — his good looks or his potential. An industrialist would have gladly advanced him Rs 20 lakhs at the drop of a turban, and then gone on to act as his agent. He would have recovered his investment in six months.

I wonder what Balzac would have said if he had been alive today and on a visit to Pakistan. If a bureaucrat in France was a pygmy how would he have rated the government officer of this country? You may agree with me or not, but personally I lay the blame for most of Pakistan’s ills at the door of the higher bureaucracy than hold politicians responsible. I know I was a bureaucrat for most of my life.

Since 1947 these officers have been part of the elite class and the most educated and enlightened section of the community that controls Pakistan’s destiny. They claim to be the most patriotic. They exercised incalculable influence over political leaders and could have made them do anything. However, what they made the politicians do was of no use to the country. Some became politicians themselves and ended up as head of a government or head of the state. Through personal fads and foibles and a penchant for self-aggrandizement they let the country wander aimlessly.

They even laid the foundation of the hatred that led to the dismemberment of Pakistan. I do not recall any moment, any instance, any period in our unfortunate history when our bureaucracy rose to the occasion and did something that could be described as even remotely helpful to save or consolidate Pakistan.

After his study of Pakistan, Balzac would have had to look for a word other than pygmy, something that along with smallness of mind, also covers selfishness, myopia and inability to look beyond one’s nose.