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September 2007 Country Archive


The Shanghai Co-operation Organisation met in KYRGYZSTAN, where we report it, deliberated and whatever else they accomplished, honed their collective image as hard nosed, not-to-be-shoved-about world actors. But one wonders what the subsequent military histrionics were all about? The Urals SCO joint military exercises held immediately afterwards, in front of a hard faced Putin and inscrutable Hu, were a series of set- piece military movements, including on film almost balletic unarmed-combat exercises, and a lot of dust from hard-charging military machinery. No one believes that they were about to, nor even could ‘take on’ the US, the product of whose military spending over so many years, is the guarantee of virtual immunity, against whatever combination of conventional forces could be put up against them. It may all have been for feel-good domestic consumption, particularly in RUSSIA heading towards a key election. Whatever else, it would have been welcomed in some quarters at least in Washington, as doing their job for them. For the arms lobbyists, it will be a great boost in stimulating Congressional demand for arms purchases. 

Attendees at the SCO included the other members, four of the former Soviet central Asian republics - the ‘stans.’ INDIA and PAKISTAN also were there as observers, and the reiterated stories that both were seeking full membership, may have caused some hard swallowing at Foggy Bottom. But on reflection it might be interpreted as good news (which we will do below). In addition, MONGOLIA was represented there, as was for the first time, oil and gas- rich TURKMENISTAN in the person of its new president; as well as President Karzai of AFGHANISTAN.

SCO really started life as a means by which China and Russia could together resist US hegemony on their very frontiers. Understandable enough, from their perspective! In the wake of 9/11 and the Afghan conflict, new US bases kept popping up in the FSU ‘stans’. Undoubtedly both these giant neighbours will continue to pressure the ‘stans’ to give up the US connection. No doubt they also co-operate on confronting any terrorist threat and drug trafficking as they claim, but they didn’t really need the SCO to do that. The fact is that there is not general agreement on what the SCO is for, almost certainly amongst the main players, other than resisting the hegemony bit. 

Somewhere along the line it began to look like a Sino-Russian military alliance – a first in history, which of course sets off all kinds of alarm bells in the west. Such activities as the said joint manoeuvres could be designed to give just that impression. Was this to be an Asian equivalent of NATO? 

We think not! Our Update on INDIA this month carries reports of the government there being in trouble with their domestic coalition allies, on whose votes they count to maintain a majority- on the grounds that the recent civil nuclear deal with the US is just too cosy and too binding. So, the US is not universally loved by all Indian political parties, even though most, including the government, are ‘pro’. But the good news is that certainly neither INDIA (nor PAKISTAN), are going to have any part of any military alliance directed against the USA. That is a given, and it follows that whatever Sino-Russian military attitudes turn out to be, the SCO, with INDIA and PAKISTAN if they were to become full members of it, would not be the vehicle for a military alliance opposing the USA, so a countervailing Asian ‘NATO’ we can forget.

One way in which the SCO may yet develop, is as an energy club. All the members and observers are either producers, or major clients, or transit countries. Both RUSSIA and China were particularly keen to have TURKMENISTAN on board and lobbied energetically to get them there. The Russians, it should be remembered, have their gas cartel equivalent to OPEC, as a major project. Perhaps Mr Putin will run with that, after he steps down from the Russian presidency? INDIA and PAKISTAN are already cooperating on a gas pipeline from IRAN (and putatively across AFGHANISTAN from TURKMENISTAN). MONGOLIA is a transit country for Russian hydrocarbons going to China. But then there is the politically sensitive problem of IRAN

IRAN is also an observer attendee and energetically seeks full membership. This question of full membership generally was not dealt with at the recent SCO summit, but it is highly unlikely that either RUSSIA or China will agree to full membership for IRAN. It would be too provocative and would imply approval of IRAN’S nuclear programme which absolutely no-one outside of IRAN, wants. There are also in SCO’s charter some provisions for mutual support in the event of invasion, and with a US or Israeli attack on IRAN always a possibility - which they certainly would oppose - nevertheless, the SCO nations do not want to get sucked-in militarily. 

This sparks the thought that we might be heading for a re-run of when the US failed to get UN approval for its invasion in IRAQ - but did it anyway! Unless some amazing deals are being worked out in the UN corridors, it seems inevitable that both China and RUSSIA will block any really painful UN sanctions against IRAN. The IRAQ war brought about a US invasion with its largely ‘dragooned’ coalition and seeing how that turned out, including the false prospectus which was the casus belli, one might say the US would never make that mistake again. But that would be to underestimate the Dick Cheney approach to the declining years of this presidency. To him and his kind, the UN is nothing. He has said, as have his people, that the UN is useful only insofar as it serves US interests (as of course he would define them)! They are clearly not making their plans based on the UN. 

The question is only then are they seeking to carry out a military strike, or will they settle for souped-up unilateral sanctions (against such nations, that is, that don’t comply with US sanctions on IRAN), and not depending on what can be achieved as UN resolutions. One would imagine that the State Department will keep on pointing to what negotiations can achieve, as in NORTH KOREA. But whilst that is what their coalition friends will have been telling them was the most likely way to get IRAN to agree to guarantee it has no military nuclear ambitions, it remains a hard pill for the two sets of extremists in Washington’s White House and Tehran to swallow. Perhaps French President Sarko, the US’s ‘new best friend’, having talked the ‘bombing talk’, will Blair-like, be able to now insinuate the voice of reason within the White House? 

At least, it is quite obvious that one-on-one talks with the US should be tried. IRAN wants and is entitled to civil nuclear power, so every reasonable assistance should be given. By the same token IRAN well knows that despite some UN Security Council members being opposed to extreme sanctions against it, no-one supports its acquisition of a military nuclear potential, not China, not RUSSIA. If they believe that there is some conjuring trick whereby they can deceive the unrestrained UN inspectors, then they are wrong. The US is the big player in this affair and the essential negotiating partner in finding any peaceful way forward. For the US to refuse for IRAN what they agreed to for NORTH KOREA - that is to conduct high-level secret negotiations, would logically be tantamount to saying they do not want agreement with IRAN! 

In TURKMENISTAN it emerges that the new ruler, Kurbanguley Berdymukhamedov (KB) is after all a player, and not the creature of the power clique that so swiftly secured the presidency for him last Christmas. The leader of that group, Akhmurat Rejepov, the former KGB head of the Praetorian Guard to the predecessor president, is we are told, serving a 20 year jail sentence, as his unexpected ‘reward’ from KB. It might have been that he actually expected something different, such as running KB as a puppet – we don’t know. But others, relict from around the former president, have also disappeared into prison. It does looks as though those who knew, for example, where his billions were stashed, are having those secrets locked up with them. We speculate as to whether KB is actually all the while Moscow’s man – or Beijing’s? Or even, since the non-accountable, absolute ruler of this oil/gas- rich country is inevitably one of the richest of the world’s billionaires, whether some shadowy smart operator like a Hong Kong banker, is now ‘advising’ the new president? Unlike his predecessor who feared to do so, KB is traveling abroad, as for example to the recent SCO summit, which implies that he feels secure enough to do that. Time will tell. 

In IRAQ, a recent disclosure has been that the second largest armed force after that of the USA was not, as many had thought, the 5,500 remaining troops from the United Kingdom but, in fact, upwards of 52,000 armed mercenaries, or if you prefer, security guards, supplied by private corporations. They are armed not with rifles alone, but with a whole range of modern weaponry, some with armoured cars and Black Hawk helicopters. It seems that the predictions of Professor Philip Bobbitt in his “The Shield of Achilles,” of the oncoming ‘market state,’ has ratcheted that much closer. Why have citizen armies if the market can provide them for you? We also report in RUSSIA that the State Duma has voted for the right for Corporations to set up their own armed forces, in what one legislator described as leading to “a multitude of Corporate armies”. 

Had it not been for recent political turbulence in the Himalayan mountain state of Nepal, smart Pentagon planners might have picked up on the fact that since 1815 (the same year as the Battle of Waterloo, so for nearly two centuries) Nepal, by arrangement with its rulers, has been providing first class professional soldiers, the Gurkhas, to the British army. Also, for over the sixty years since independence, to the Indian army - and beyond. Such is their courage, dependability and general soldierly qualities, the Gurkhas are also highly prized by the governments of Singapore and Brunei, and as private security guards throughout East and South Asia. Additionally, the Nepalese are generally Hindu or Buddhist – the implications of which are obvious! It can be certain that Congressional pressure on the White House would be of a very diminished order were the grunts on the ground not US citizens, but those of the kingdom of Nepal, serving their mission on contract (and no doubt doing a bit of beheading of their own). 

In the US, the IRAQ issues are now far more political than they have ever been. It is generally understood, and is the White House position, that having opened up this can of aggressive worms that is IRAQ, they now have a duty to resolve the violence, if it can be done before pulling out. But we should never lose sight of the fact that the Iraqi oil industry was a, perhaps the, major factor in the invasion, and the arrangements for its sale to US and other international oil groups is not yet a done deal – we report on the state of that. Even after the eventual ‘privatization’, the security of the oil province will be required, so it is likely that the US will never completely pull out a military presence, unless they sub-contract, Bobbitt-style, to the Gurkhas, or whoever. 

Which is not to say that the ‘Bring the Troops Home Now’ lobby does not have a head of steam. But Bush who still talks of “Victory” (but never defines the term) about which he tells us he is confident, conflates ‘withdrawal’, which is only a matter of time, with the 1975 departure of US forces from Vietnam. He apparently thinks (it sounds like Cheney’s influence), that the US should have stayed in south-east Asia until it had achieved a ‘victory’ there. As is well known, General Petraeus’s status report in September will be carefully picked over, with each side gleaning what they want from the text. One thing we can be quite confident about, is that the general who almost certainly would not use the term, no more than the president will be defining this contentious word, ‘victory’.

A deeply depressing story about the US presence in IRAQ has been brought to light by the Associated Press, which has conducted a survey of ‘whistleblowers’ in the fight against corruption. Congress approved more than $30 billion to rebuild IRAQ. At least $8.8bn has ‘disappeared’. It is generally believed that it is amongst the US civilian contractors that are to be found the culprits, not that any are likely to actually be found! Like the contracted military mercenaries referred to above, they are not subject to Iraqi law and therefore to no law, except where appropriate (it never is), to that of their own nations. Many are the horror stories about the mercenaries. An infamous web-site video of bored western mercenaries was for a time widely seen in the world, where their ‘game’ was, whilst travelling in a SUV with the tail-gate raised, sniping at civilian cars some distance behind. So confident that they were immune, (like the military police at Abu Ghraib), they filmed the results and put it up on the web – their laughter is also recorded - such as windshields bursting, the cars crashing, or swerving off the road, occupants including women and kids, diving into ditches, etc. 

In the case of the big time corruption, which might account for part of the missing $8.8bn, the whistle-blowers that came forward have been “vilified, fired and demoted. Or worse.” A US Navy veteran, working for an Iraqi-owned security company, together with a colleague documented evidence of such corruption: of rocket launchers, mines, and guns sold for cash without receipts, including to Iraqi insurgents, and handed the file to the FBI back in the USA (as he said he didn’t know who to trust in IRAQ). 

Was he ever right about that! As a result, he was classified as a ‘security detainee,’ and locked -up by the US military authorities for 97 days in a US military prison outside Baghdad, where he was subjected to ‘harsh interrogation methods’. A senior officer (a naval captain) speaking for the military prison service, contacted by AP for comment, confirmed the detention but would give no reason for the confinement. 

Since this is not an isolated case, of whistle blowers being penalized, ruined even, there is an obvious inference in the absence of any other explanation, that some high-ranking US military officers may be a part of this corruption and using the considerable powers they have, are squelching anybody that threatens the riches coming their way. It’s a depressing thought and only a congressional or US government investigation and action can put this matter straight, but there are few signs of it happening. Meanwhile the American NGO: ‘Project on Government Oversight’ is basically advising whistle blowers now not to come forward, or they “will be destroyed.” 

now moving into election mode for 2008, before the US, is in the curious situation of not knowing who they will be able to vote for. They know, as we all do, that the Kremlin nominee will be the successful candidate, but who will that be? So long as there is any slight chance that Putin might after all abrogate the constitution and stand again, neither of his two closest aides will stick their heads above the parapet. But how long will it take for that Rubicon to be crossed? 

The billionaire Russian parliamentarian, Alexandr Lebedev, very neatly summarises the RUSSIA of today with that before Putin: 

“In the 1990’s the raw materials and the media were in the hands of a small group of oligarchs. Now the state has taken a lot of that back, with the result that we have no independent media, a weak legislature, a judicial system that leaves a lot to be desired and a bureaucracy that is beyond control.” 

Our survey of RUSSIA this month considers the slide into a cold war atmosphere, even if that is largely a matter of language rather than actions. It is our view that with new leaders due to be elected in both countries in 2008, that this is a much needed opportunity to start over. The principal lesson of the Bush years being that RUSSIA is, and expects to be treated as an equal, (notwithstanding whatever the west dislikes about the internal situation there). The relationship has been unequal since the time of Yeltsin, who was undoubtedly patronized by the western world generally. We have observed Putin’s frustration and annoyance about the double standards and attitude of moral superiority endemic in the US, and the way it assumes this in terms of international relations. He points out, in terms of the US blithely assuming an inbuilt moral superiority, that the USSR, whatever reprehensible things it did do, never nuclear-bombed civilian populations, as did the US. 

RUSSIA has now won back its clout in world affairs, not through military might, but in the fact that it is, and is likely to remain this new beast, an energy superpower. It is the key nation for the global supply of oil and gas, which the world seems to need more of than ever. Yet patronizing attitudes have continued. Putin never publicly responded on what he thought about Bush’s ‘insight,’ back in Ljubljana when they first met - about looking into his eyes and seeing his soul – an observation more appropriate to the family dog, one might think. He also never commented publicly about what he saw looking into Bush’s eyes - but we can guess! 

The extraordinary fact is, that there is no objective reason why RUSSIA and the US should not be friends, indeed both major trading partners and friends. They are not rivals. RUSSIA, unlike the former USSR is not a contender for global domination and we must hope the next US president understands that neither should the US seek that status! Our point here is that military ‘domination’ per se, has been proven to be an illusion, first in Vietnam 33 years ago, with that lesson hammered home in IRAQ. There is no need for it, except to fuel the arms industries, and it creates unnecessary dangers globally. 

In TAJIKISTAN this month we tell of corruption and of court decisions which may affect that. This is the poorest country in Central Asia (and that means poor). They are 142nd in the world’s corruption tables; with a GDP standing at 145th in the world. Here, just one business TALCO, Tajikistan’s Aluminum company, accounts for 50% of ALL exports. Would it be a surprise to learn that the country’s President controls this corporation and that it is the largest concentration of wealth in the country? They recently unwisely initiated litigation abroad – in London, inadvertently pouring a flood of bright light into their dark corners The British judges had some fascinating observations to make in giving a massive award against them, as we tell. 

As we reported in our last issue, the world now has to yet again confront an increased poppy crop in this country, already the supplier of 95% of the world’s heroin. As we report there is continuing disagreement as to how to eliminate this problem The Afghan government and the Europeans do not agree to a US proposal to spray the crops with herbicide, partly on the grounds of memories of the human damage done in Vietnam with ‘Agent Orange.’ Also because the poppy crop is typically intermingled or close to conventional food crops - and aerial spraying would destroy the lot! Further, there is the political problem that to simply destroy the farms’ crops, will destroy their livelihood and drive them into the arms of the Taleban. 

The US has budgeted $449 million to tackle opium production and the British are spending $60 million on promoting legal crops, such as wheat, mint and cotton. The US now seeks to reward Afghan Provincial Governors who succeed best in eliminating the poppy, but half of all the country’s poppy production is in the Helmland province, the scene of continuing fighting with the Taleban, so ‘hearts and minds’ with the civilian population, are a factor in this also, whilst bullets are flying. The think-tank :The Senlis Council, has proposed that farming communities could produce medicinal morphine locally, as well as for the international pharmaceutical market. Nevertheless, we modestly believe our uncomplicated proposal “AFGHAN DRUGS” would be the most likely to succeed. 

The news of the deal being worked out whereby President Musharraf will resign as the uniformed leader of the PAKISTAN military and cooperate with Mrs Bhutto’s bid for power in the elections of next January, will, if it actually happens, come as a relief for many, but not for the political leader whom Musharraf displaced. Nawaz Sharif, the former prime-minister was allowed back into PAKISTAN by winning his case in the courts and this may have determined Musahrraf to go ahead with a deal with Mrs Bhutto, herself a former prime minister - and for him, the lesser of two evils. For her part, she has guaranteed the support of her party to Musharraf to be elected as the civilian president. It is perhaps good news for democracy. The general took power and sent Nawaz Sharif packing as the cause of the coup was, as Musharraf saw it, an attempt to kill him.  Or at least by a coup de main exclude him from the country by barring the general’s civilian airliner, short on fuel, from landing at any Pakistani airport, as he returned from a mission representing his country abroad. But the negotiations continue as we publish this.

Musharraf has taken a firm grip on governmental affairs. As readers of our reports will know, the economy has been doing quite well. Under his government he has been more successful in capturing al Qaeda agents in his country, than any other country in the world. He has come down hard on the corruption almost endemic in Pakistan, whilst the two former prime-ministers, his political rivals, have been deeply mired in this. He has sought to come to grips with the large number of fervent Islamic fundamentalists, when their activities have become violent, or illegal. In response, there have been at least three serious attempts to assassinate him, but he has persevered. It is likely that the army will now play a role comparable to that in Turkey, a country in which he lived as a boy with his diplomatic family. 

He has the makings of a Kemal Ataturk. He knows that PAKISTAN needs to be rescued from the dangers of political Islam and dragged albeit reluctantly, into the 21st century. As to the price of his deal with Bhutto - if it goes through, his supporters will not have failed to remind him that even without the uniform, the president is also C-in- C of the nation’s armed forces. 

It is to the credit of the political players and military alike in TURKEY that the new president has been installed, despite the ugly downside that loomed large so recently. 

The new President Gul is internationally respected as a statesman, his party gained the vote of public confidence they sought, after his first attempt at the presidency was frustrated. Democratically impeccable as a modus operandi, he was finally elected, clearly the choice of the people, despite the vote being made in the parliament. 

TURKEY’s formidable military, although somewhat grumpy because apprehensive, accepted the will of the electorate and the deed is done. The presidency has historically been seen as a check on the elected parliament, and not without cause. Radical, political Islam is a concept of recent times, churned up by the actions, including terrorism, of a new breed of revolutionaries. They see 7th century Islam, like the desert ancients, as a complete way of life, indeed all that matters in existence, not simply a way of worship. TURKEY’s Islamic politics are not like this. Only if it were to be persecuted, might it ever go in that direction. Political parties need an ideology as a raison d’etre, and in developed Islamic countries ‘soft’ Islamic ideas provide a moral platform, entirely comparable to those of the Christian Democracy espoused in such countries as Germany and Austria.

When one considers that after the primary accusation, that Gul is a devout man; comes the second: that his wife customarily wears a headscarf, it can generally be agreed that this is hardly the stuff of narrow ayatollahs and crazed imams. 

The fact is that the electorate’s support for the government party over several years past has followed their display of continuing competence, when for so many years before, Turkish politics was marred by corruption and general incompetence amongst the representatives of its traditional secular parties. 

President Gul was formerly the foreign minister and well-regarded internationally. He is far too intelligent to seek to conflict by failing to maintain even-handedness in his decisions. Nor will he despite his closeness to them, be merely the cipher of his party in parliament. The military, as self-appointed guardians of Turkey’s secular constitution, do have a role to play, even by just being there, particularly now when the middle-east and western asia are deeply affected by religious extremism, because their very presence guarantees TURKEY’s stability at the eastern gateway to Europe. 

On the news that the giant international oil consortium AGIP KCO has been threatened with closure in developing the enormous (1.5 billion tonnes) Kashagan oilfield in the Caspian Sea, many observers immediately made the connection to the similar Russian squeeze play against western oil companies, using environmental concerns as a device to threaten the exploration /development licenses. It may be that President Nazarbayev, like President Putin has had a late attack of ‘the greens’, wheeling on an environmental minister (whom nobody has heard of, nor will they likely do again), to speak up for mother earth. Traditionally, the FSU states really don’t ‘do’ environmental concerns, any more than the USSR did. Visit the worked out oil-wells of AZERBAIJAN close to the capital Baku, to see an industrial desert – a vision of hell! 

Certainly there is widespread cynicism about the motive, the speculation however is what do they really want? Following the Russian pattern of using the full leverage of ‘force majeure,’ it seems a given that they want a larger - a much larger slice of the action. The Kazak partner in this oilfield, KazMunaiGaz, currently holds only 8% of the consortium. Its partners including ENI, Exxon Mobil, Royal Dutch Shell are the major partners, just as they are the major investors in this expensive project. 

But as distinct from the Russian parallels, (which are fairly uncomplicated grabs, simply because they can), there is another important factor in the Kazak situation, which is that the development of Kashagan itself has run into trouble. AGIP KCO had announced technical problems setting exploitation back by two years and doubling the cost of the investment to $136bn. KAZAKSTAN’s plan, prior to this had been to double its existing output for export by 2015, relying on Kashagan having come on stream and producing the necessary. It is reasonable to assume that Kazak anger is more to do with this set-back than the rather tenuous environmental problems that have arisen. There will be more to come and we predict that at least, the state company will have a substantially larger piece of the Kashagan cake, and even possibly there may be a new operator rather than AGIP-KCO. 

No one can seriously fault TAIWAN’s economic ‘nous’. At the time when all of Asia suffered shockwaves from the Asian financial crisis, the so-called ‘Asian Flu’ that commenced in Thailand, TAIWAN sailed serenely on, whilst other nations scrambled for financial lifeboats. It therefore behoves us to take note of any new initiative from this source, and just such a one is announced. 

It is no more at this stage than a gleam in the eye of the KMT party, currently in opposition and preparing for the next elections. It may never fly – but!

The suggestion is that TAIWAN - that is the whole of TAIWAN - should declare itself a free-trade zone as a means of countering the reluctance of governments around the world (because of looming China), to negotiate bilateral trade agreements with them. This small politically unrecognized, economic powerhouse, is already amazingly successful. If that proposal were ever to become law, then a good deal of international revision on trading strategies would undoubtedly follow. 

President Macapagal- Arroyo entering the last three years of her term, is forecasting that her nation will be ready for First World status within, well, not so many years. We examine the claims and give a thorough review of the economic prospects for this not very successful South East Asian country, which does however have the undoubted capacity to do better. 


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Clive Lindley 

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