Warning: Creating default object from empty value in /nfs/c03/h01/mnt/56080/domains/filtercoffee.nationalinterest.in/html/wp-content/themes/canvas/functions/admin-hooks.php on line 160
Archive | Financial Crisis RSS feed for this section

The “unscrupulous” Mr. Karzai

When the solid matter hits the air circulating equipment, everyone looks out for their own interests. Are we?

“For it is dangerous to attach one’s self to the crowd in front, and so long as each one of us is more willing to trust another than to judge for himself…

Seneca the Younger, On The Happy Life

Groupthink is a dangerous thing. And while they may disagree about everything else under the sun, Washington-types have unanimously directed their ire at Afghan President Hamid Karzai.  An apparent quote from an unattributable source about Mr. Karzai threatening to join the Taliban, if international pressure on him did not cease, made the rounds in international media.  Ex-UN envoy to Afghanistan Peter Galbraith questioned Mr. Karzai’s mental condition and suggested that the president may have a drug use problem.

Steve Coll’s blogpost followed suit, with a detailed account of the pervasive corruption that the Karzai administration had fostered.  Fred Kaplan on The Slate asked whether a successful COIN operation could in fact be carried out in Afghanistan, given the manner in which Mr. Karzai is running things in Afghanistan.  Former US Assistant Secretary of Defense, Bing West, rather plainly called Mr. Karzai an “obstacle to progress” in his op-ed in The New York Times.

Washington’s foremost thinkers and analysts, singing together in perfect harmony. Mr. Kaplan sums up the groupthink perfectly — the US is of the opinion that Mr. Karzai believes he (and by extension, Afghanistan) is too big to fail, and with the stakes being as high as they are, the US is left with no option but to continue to pour resources — monetary and military, to sustain the Karzai government.

But a closer inspection at events unfolding in the region presents a clearer picture of Mr. Karzai’s intentions and US angst. Hamid Karzai began his second  term in office by stepping up engagement with China.  Mr. Karzai then invited Iranian President Mahmoud Ahmedinejad, who proceeded to chastise the Americans in the presence of his host.

Therein lies the US’s angst — Hamid Karzai appears eager to consolidate power and dilute US influence in Afghanistan.  To accomplish this, he needs the assistance of other regional powers — hence, the dialog with China, the invitation to Iran and the visit to Islamabad. He sees the benefits in ensuring an extended US stay in Afghanistan (the Americans are, after all, his primary financiers), but no longer desires to see the US as  the absolute dominant power in the country.

This is effectively the source of frustration in Washington.

As China, Pakistan and Iran prepare to step up engagement with Afghanistan, there are question marks about where the recent developments leave India.  While the Karzai government has in the past pressed New Delhi to play a larger role in the country, India has restricted its involvement in Afghanistan to providing humanitarian and  economic assistance. Frustrated, the Karzai regime now looks to hedge its bets elsewhere.

This puts India in a precarious position.  The prospects of a reemergence of a Russia-India-Iran order in Afghanistan aren’t great, given that Indo-Iranian relations are at a low.  But we’re still very far away from throwing in the towel.  There are significant caveats and complications in the Afghanistan-Pakistan-Iran relationship for it to become an order.

Both India and Iran share mutual interests in Afghanistan, and it is therefore imperative that Prime Minister Manmohan Singh’s government make amends for its folly at the IAEA. India’s attempts at revitalizing its relationship with Russia is a positive step — it is important that this relationship extend itself to securing both nations’ mutual interests in Afghanistan.

Ultimately, it is in India’s best interests that no one order — be it the US and its Western allies, or the Pakistan-Saudi-China triumvirate — dominate Afghanistan’s landscape.  This landscape will include the “unscrupulous” Mr. Karzai, and increasingly, warlords (affiliated as well as adversarial) and Taliban remnants.  India must therefore work with regional powers and political players to ensure that its interests in Afghanistan are protected, at a time when power equations in the war-torn nation are rapidly changing.

Read full story · Comments { 0 }

End of Story, Morning Glory?

The United Arab Emirates (UAE) is experiencing the antithesis of the “Dubai Chalo” mantra of the ’60s and ’70s.  Dubai is likely the shed 10% of its population over the next two years, as a result of unmanageable debt, failing businesses and shrinkage of property values.   This is only to be expected —  unsound economics have driven Dubai’s growth in recent years.  Unlike other states in the Arabian Peninsula, Dubai has no oil of its own.  Indeed, from the emirati pearl merchants of the early 1900s to the establishment of the Jebel Ali Port in the 1970s, its historic strength has been trade.

However, the single minded pursuit of turning this free-trade town into a megacity rivaling New York or Los Angeles is as bad an idea today as it was when it was conceived.  And now, conservative but oil-rich Abu Dhabi, who many said was slow off the mark in this maddening real estate circus, is having the last laugh.  The Maktoums of Dubai have had to had to swallow their pride and approach Abu Dhabi to bail them out.  But even Abu Dhabi’s bailout of Dubai comes with strings attached:

[T]he rapid deceleration had given rise to speculation that Abu Dhabi, the richest member of the UAE, might have to bail out its flashier neighbour. Rumours spread that Abu Dhabi would only stump up the cash if Dubai ceded control of its successful airline, Emirates.

Federal support has come through folding Dubai’s troubled mortgage companies into well-capitalised Abu Dhabi banks. There have been other direct discussions between Dubai and Abu Dhabi state companies, although none has reached agreement.

Sheikh Mohammed’s Dubai International Capital fund, whose assets have shrunk sharply, briefly courted investment from Mubadala, the Abu Dhabi investment arm. No substantive discussions ensued, people close to the matter say, but the incident fuelled rumours of a bail-out. Well before the credit crisis raised questions about Dubai’s solvency, Mubadala and Dubai Aluminium had been discussing equity restructuring of their joint venture, Emirates Aluminium, a vast smelter on the Abu Dhabi/Dubai border.

What Dubai needs to do now is to rightsize.  New York City was not built overnight.  Even if NYC’s economy relies heavily on financial markets, these markets trade against tangible products — from the pharmaceuticals of New Jersey, to the automobiles of Detroit.  Dubai’s financial markets trade in recycled financial instruments, which have a tendency to flourish during the good times, and falter during the bad.  This blogger also feels that Dubai (and the UAE as a whole) needs to address debt insolvency.  Given that foreigners and foreign owned entities form the majority of Dubai’s demographic and economic footprint, a credit history check system such as the one in the United States would be ineffective.  Yet, there is an urgent need to address the frequency with which expatriates and foreign-owned companies run up substantial debt and abscond from the country.  The current economic crisis in Dubai is as much a result of a nonexistent debt reconciliation system, as it is due to building artificial islands, skyscrapers and magical kingdoms that no one could afford.

The one benefit of an Abu Dhabi bailout might be that the UAE would start functioning more like a federation with a visible nucleus (Abu Dhabi) than the disagreegated collection of city-states that it now is.

Read full story · Comments { 0 }