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  #1  
Old Tuesday, October 26, 2010
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Default Council on foreign relations

Pakistan's Dysfunctional Family


In the 63 years since Pakistan became an independent country, it has had rulers who were incompetent, corrupt, dictatorial or sometimes all three. Two of those leaders were named Bhutto: Zulfikar Ali, prime minister in the 1970s, deposed in a military coup and later hanged by order of his successor, and his daughter Benazir, prime minister from 1988 to 1990 and again from 1993 to 1996. She was assassinated as she attempted to return to power in 2007. The current president, Asif Zardari, was her husband.
Wealthy, well-educated and deeply political, the Bhuttos have sometimes been described as the Kennedys of Pakistan, complete with Harvard degrees and violent deaths. But they are more like Renaissance Europe's corrupt Borgias, as becomes all too apparent in this intensely personal, vengeful narrative by Fatima Bhutto, granddaughter of Zulfikar, niece of Benazir and daughter of a third slain Bhutto, Benazir's brother Murtaza. Yet another Bhutto, Shahnawaz, younger brother of Murtaza, was poisoned in 1985.
There are really three books within "Songs of Blood and Sword." One is an account of Pakistan's appalling history since the 1950s. One is a young woman's memoir of her family, which has been at the center of that history. The third is a detective story: Who was responsible for the fatal police shooting of Murtaza Bhutto in 1996?
The author's conclusion, reached after interviews with scores of her father's friends, professors and political allies, is that the police shot Murtaza on orders from his sister Benazir. The motivation, according to Fatima Bhutto, was that Murtaza, once released from the jail where Benazir's government had confined him, was challenging Benazir and her husband for control of the Pakistan People's Party and thus posed a threat to the vast wealth they had amassed through spectacular corruption.
"Benazir and her cronies were now backed against a wall," Fatima writes of her father, who to her was the only person in the family who could do no wrong. "Murtaza's threat was manageable for them when he was behind bars and access to him and his ability to speak to the people were restricted. Now that he was free, he was unstoppable."
Fatima Bhutto found no smoking gun, but she unearthed plenty of circumstantial evidence, including the fact that the police took her wounded father to a hospital where they knew no surgeon was on duty, and that the scene of her father's killing was hosed down and cleansed of evidence within a few hours. A tribunal concluded that Murtaza's killing could not have happened without orders from high authority.
She is disgusted that the chain of death in the Bhutto family has resulted in Asif Zardari's becoming president. "This is the legacy Benazir has left behind for Pakistan," her niece writes -- a "saprophytic culture" in which Zardari is the organism that lives off the corpses. Do not invite Fatima Bhutto and Asif Zardari to the same dinner party. She lives in Karachi, but judging by her account of its political environment, she might be well advised not to return there after her U.S. book tour.
Fatima Bhutto, a journalist who was educated at Columbia and the University of London--breaking the family's Harvard tradition--is not yet 30 years old, and her youth shows in this undisciplined book. It is at least 50 pages too long, larded with self-indulgent emotional outbursts and personality sketches of minor characters, and her reflexive anti-Americanism is tiresome. Her occasional references to U.S. policy sound like snippets of a conversation with Che Guevara, whose poster Murtaza Bhutto mounted in his room at Harvard. She actually believes that U.S. troops herded Vietnamese villagers into urban communities because "that made it much easier for the US army to bomb civilians in their separated enclaves," as if that were the Army's objective.
Yet her book will be valuable to readers who want to understand why Pakistan is such an ungovernable mess. In her account, the country's entire political culture is based on corruption, violence, opportunism, mendacity and a feudal economic system. Even the revered Zulfikar, whose mantle everyone in this book tries to claim, tinkered with the constitution to advance his own power. "He was a polarizing figure," his granddaughter writes. "You either loved Zulfikar or hated him." She loved him, but then she used to love her Aunt Benazir, too.
Thomas W. Lippman is an adjunct senior fellow for Middle East studies at the Council on Foreign Relations.
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Old Wednesday, October 27, 2010
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Default Four More Years of War

The secret date for the withdrawal of U.S. forces from Afghanistan has been hiding in plain sight for months. It's certainly not the much ballyhooed July 2011 date, which will only begin withdrawals. It's not even July 2012 to smooth President Obama's reelection campaign. It's the end of 2014. The plan, NATO diplomats say, is for NATO leaders to formally announce this date at their Lisbon summit on November 19-20. Their thinking is to do this soon to reassure worried, friendly Afghans, to signal resolution to the Taliban, and to use their allied unity for political cushioning at home. NATO emissaries are still bargaining over exactly how many troops will remain after departure day and for what purposes. Details aside, the devastating truth is that U.S. forces will be fighting in Afghanistan for at least four more years.

Most of the players on America's side of the Afghan war are content with this date, but the Taliban and most Democrats won't be. Savor the explanations for these preferences.
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Default The Road to Negotiations in Afghanistan

The Road to Negotiations in Afghanistan


The Obama administration last week acknowledged that NATO had facilitated the passage of at least one Taliban leader to Kabul for talks with the government, though these are being called preliminary discussions. The talks occur against the backdrop of increased military pressure on the Taliban, which CFR defense expert Max Boot argues is necessary before negotiations can be "viable." Boot says President Barack Obama's stated goal of starting to withdraw troops from Afghanistan in July 2011 would likely make the war a "mission impossible." But he believes Obama is, in fact, committed to a strong counterinsurgency strategy and understands that his administration will be judged by the outcome in Afghanistan. Once Afghans and their neighbors are convinced the United States is not going to pull out in July, Boot says, "that could convince people in the region that we are a force to be reckoned with." Boot adds that the Obama administration should pressure Pakistan to take a stronger stand against terrorism and reassure Pakistan that the United States will be a steady partner.

Everyone says the current talks are not negotiations, but just a preliminary phase. How do you see the likelihood of a negotiated end to the war in Afghanistan?

Negotiations are going to be viable in the long term, but it's premature to expect a successful result from the negotiations going on right now. The best perspective I've heard on the subject came to me from a NATO officer I talked to in Kabul a while ago. He said, "First you gotta knock 'em on their backside, and then you can offer a helping hand up." But we're only starting now to knock them on their backside. And you're seeing it happen. You're seeing coalition troops surging into insurgent strongholds. You're seeing coalition airstrikes and Special Operations raids up sharply. All that is designed to put pressure on the Taliban and make them realize they can't win at gunpoint and that their best hope would be negotiating with the government.

But that process is just beginning. We have not yet applied enough pressure to get most of those guys to crack, and I'm not sure that you're ever going to have a high level of surrender by the Taliban. Our best bet is to put enough pressure on a lot of the lower and mid-level guys, who are not necessarily ideologically motivated and will simply decide that that there are easier ways to make a buck and they'll stop fighting.

How much of a problem is President Obama's stated starting point for withdrawal next July?

If we do start to withdraw in a serious way next July, it'll be "mission impossible." I don't think there's any way we can win by next July. But I've seen a lot of indications that President Obama has backed off that deadline since he announced it last December, and whenever he's been given an opportunity, he's consistently opted for a more ambitious counterinsurgency strategy, even though he doesn't use that word. There's a lot of expectation on the part of the Taliban and others in the region that we will start withdrawing next July. Basically they're telling people, "You can't count on the Americans." But if next July rolls around and we don't start withdrawing in a major way, and there's only a small, symbolic withdrawal, that could convince a lot of people that the Taliban claims are not to be believed and, in fact, we are a force to be reckoned with, as I think we are.

In fact, CFR's Stephen Biddle was saying that right now no one believes we're not going to leave in July. But when they see we're still there next summer, they'll have a rude awakening.


Absolutely, if Obama would come out and say, "No, we're not leaving next July," I think that would be helpful, but he's clearly not going to do that. There's a sense in Washington that he has backed off the deadline, but that has not communicated itself to places like Afghanistan or Pakistan. So, all the talk right now is futile. What really counts is action. If we continue fighting and continue making gains on the ground, that will change the psychology both in Afghanistan and also on our own home front.

Is it important whether the Republicans come out of the upcoming midterm elections stronger in Congress than they are now? Will that have any impact on the Afghan situation?

It could have an impact, certainly. So far Republicans have been pretty stalwart in backing President Obama in Afghanistan. Most of the opposition comes from the Democratic Party. If you have more Republicans, presumably that will mean more support for the war effort, which is a good thing. It will also signal American strength to the region and to lots of people who are in places like Afghanistan or Pakistan. If you see big Republican gains, that will be a sign of American seriousness and commitment, which will be helpful.

Bob Woodward's latest book, Obama's Wars, describes the in-fighting that went on in the administration over the question of size of troops and whether to announce a withdrawal timeframe. Obama made it clear that he wanted a withdrawal date to keep the Democratic Party in line.

Our best bet is to put enough pressure on a lot of the lower and mid-level guys, who are not necessarily ideologically motivated and will simply decide that that there are easier ways to make a buck and they'll stop fighting.
But it's not clear what all that means. I think he said that "in July 2011, we'll begin a transition to Afghan responsibility," but how much of a transition will actually happen is very much conditions-based. And the reality is, I think, he goes all-in in Afghanistan. The most telling comments from that book were when Vice President Joe Biden says to him, "if you don't back down from the [then commanding officer General Stanley] McChrystal strategy, you're going to own this war." And Obama said, "I already own it." That to me is the reality of the situation. And that's something that Obama recognizes. A lot of the way in which Obama's presidency will be judged will be on the outcome in Afghanistan. And he doesn't have the option of saying, "It's not really my war." It's his war. It's on his watch. He understands he needs to have a decent outcome.

The American public's view of this war is increasingly sour. Is that simply because it's been going on for so long?

It's because we're not seeing obvious results on the ground. I don't think the American people are really opposed to fighting a war. What they're opposed to is fighting a war we don't seem to be winning. They want to see us start to win. And if we do, you will see the same kind of turnaround that we saw in the case of Iraq, where the war was very unpopular by 2007. The surge happened. We saw progress on the ground, and all of the sudden, opposition to the war melted away. Afghanistan is not as unpopular as Iraq was in 2007. People are basically up in the air. They're looking for results. If General [David] Petraeus and the troops under his command can deliver those results, I think you will see a sea change in public opinion.

What is General Petraeus's strategy right now as far as you can tell?

It's a multifaceted strategy that includes both what's known as counterinsurgency and counterterrorism. The counterinsurgency part is pushing troops into populations in Helmand and Kandahar provinces, where there have not been a lot of coalition troops before, and that's the traditional heartland of the Taliban. He's pushing troops off the large bases into communities to provide twenty-four hour/seven-day protection to the people and create some law and order where none has existed before.

A lot of the way in which Obama's presidency will be judged will be on the outcome in Afghanistan. And he doesn't have the option of saying, "It's not really my war." It's his war. It's on his watch. He understands he needs to have a decent outcome.
At the same time, he is ramping up Special Operations raids and airstrikes. That's the counterterrorism part of his strategy: to take out a lot of mid- to high-level Taliban facilitators and leaders, hurting the insurgency in that way. Another part of his strategy is trying to increase the level of governance in Afghanistan and trying to cut down on the corrosive levels of corruption, which alienate people from their own government and drive them into the arms of the Taliban. He's trying to work with the leaders of the government of Afghanistan to weed out the most corrupt officials and end the most abusive practices.

Those are the key planks of his multifaceted strategy, and what he realizes is that you can't do any one of those things in isolation. You have to have multiple elements to attack all levels of the problem at once, along with some of the other things that he's doing that include creating the conditions under which Taliban defectors can come over to the government's side [and] the reintegration programs for them. And that goes back to the issues I was talking about. I doubt he thinks that the talks are going to work overnight. But he and the forces under his command want to create the conditions so that if and when the Taliban starts to crack, they'll be able to come over and be welcomed and provided with jobs and security so that defecting will seem like a sensible option.

Has Pakistan been helpful to the United States in dealing with the Taliban?

Pakistan has been helpful and unhelpful at the same time. They certainly do cooperate with us, for example, in facilitating the drone strikes on Taliban, even though they don't publicly acknowledge that. At the same time, there's a lot of evidence that they continue to provide aid and support to the Haqqani network [pro-Taliban guerrillas] and other elements of the insurgency, which is deeply troubling and very unhelpful. I don't think anybody has any good idea about how to turn around the government of Pakistan. We pretty much have to keep doing what we're doing, which is on the one hand applying pressure through the drone strikes on the terrorist networks, and on the other hand, offering aid and assistance to the government of Pakistan to try to nudge them in the direction of taking on some of these terrorist and guerilla groups with which they've been affiliated. It would be helpful in that regard if President Obama did a better job of communicating that we have a long-term commitment to the region, and that if Pakistan does do some dangerous things we will be there to support them, that we're not going to leave them in the lurch. They are very much concerned that we will do again what we did in the 1990s, which is to leave them holding the bag.
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Old Wednesday, October 27, 2010
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Default Addicted to Drones

Addicted to Drones


"The military's impressive, isn't it?," U.S. President Bill Clinton remarked to his aide George Stephanopoulos in 1994, as the 82nd Airborne Division stood by for orders to invade Haiti to remove the Raoul Cédras's regime from power. For civilian officials, the military's ability to find and destroy things from a safe distance never ceases to amaze. The CIA's ongoing drone strike campaign is a particularly redoubtable example, with drone operators in the United States taking out targets in Pakistan's tribal areas. In September alone, the agency launched more than 20 unmanned drone strikes against suspected al Qaeda and Taliban operatives in Pakistan.


These recent drone strikes epitomize an important trend: When confronted with a foreign-policy problem that threatens U.S. national interests, civilian policymakers routinely call on limited military force such as drone strikes, cruise missile attacks, and special-operations raids. Many experts -- from pundits to anonymous U.S. officials -- laud such drone strikes as a low-cost, highly responsive, and effective military tactic. In practice, however, drones -- like other uses of limited force -- have substantial downsides that deserve attention given their increasingly prominent role.

One largely ignored downside is procedural and pertains to an unsexy and wonkish aspect of policymaking: interagency coordination. Under pressure to act in response to a threat and seduced by the allure and responsiveness of limited force, presidents elevate military options above other instruments of statecraft. Inevitably, after the missiles are launched, they announce their intention to keep the pressure on targeted adversaries with a follow-on campaign using all elements of national power. Once the bombs have been dropped, however, and the politically necessary "do something" box has been ticked, complex, robust secondary measures rarely come to fruition.
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Old Monday, November 01, 2010
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Default Confronting the China-U.S. Economic Imbalance


Confronting the China-U.S.
Economic Imbalance



China has stepped up its purchases of U.S. Treasuries in recent years, making it the second biggest foreign holder of U.S. debt after Japan. By many expert accounts, this has fueled a relationship of dependency between the United States and China, whereby China has lent to the United States to help fuel its export industry, while U.S. consumers in turn have demanded more exports and further access to cheap credit. This relationship attracted increasing scrutiny in the aftermath of the global financial crisis as the United States' massive stimulus outlays and loose monetary and fiscal policies fueled doubts about the U.S. economy and the value of U.S. debt. China's $586 billion in stimulus spending bolstered its weakening export industry and raised concerns about whether China will continue to buy U.S. debt. Meanwhile, Chinese officials have made calls to replace the dollar's role as an international reserve currency with the International Monetary Fund's Special Drawing Right, and trade tensions between the United States and China have grown over products such as tires and poultry. Some experts warn economic and political pressures could lead both countries to adopt more protectionist policies at a time when the global economic recovery remains fragile.

China's U.S. Debt Holdings

China holds roughly $1.5 trillion in U.S. assets, at least 65 percent of China's total foreign assets, according to a May 2009 paper by economist Brad Setser, a former CFR fellow and now senior director for the White House's National Economic Council. This represents enormous growth in its U.S. dollar holdings over the past decade, which, in January 2001 amounted to less than $100 billion. Experts debate the causes of this buildup, though it is clear that a flood of foreign capital into China has been a major contributing factor. Many economists attribute the buildup to China's apparent export-led growth strategy and exchange rate policies over the past decade. China began pegging its currency to the dollar in the wake of the Asian financial crisis in 1998. That peg continued until July 2005, as China bought or sold as many dollar-denominated assets as were needed to stabilize its exchange rate against the dollar. By mid-2004, China had developed a large trade surplus with the United States. After facing the prospect of an economic slump during the SARS pandemic in 2005, when China pumped money into the economy to stimulate growth, it announced in July that year that it would allow a 2.1 percent revaluation of the yuan to ease the inflationary pressures caused by excess liquidity.

China's policy of maintaining currency stability has been a component of the country's response to the financial crisis. - Zhu Guangyao, Assistant Finance Minister, China
The exchange rate appreciated gradually until August 2008 in what experts describe as a "managed float," after which many economists believe China moved back to a fixed exchange rate to prevent its export markets from collapsing during the global financial crisis. Chinese authorities have not announced an official change in policy during this period. Instead, experts "infer it from the fact that the rate hasn't moved," says CFR's Adjunct Senior Fellow for International Economics Steven Dunaway.

An Undervalued Yuan
U.S. policymakers, businesses, and labor groups have argued that the Chinese currency is undervalued by as much as 40 percent against the dollar, making Chinese exports--such as steel pipes and tires--to the United States cheaper and putting massive dollar flows in the hands of the Chinese. Undervaluation of the yuan, these voices contend, has expanded the U.S. trade deficit with China, hurting U.S. manufacturers and depressing U.S. employment, which, in November 2009 slightly exceeded 10 percent. As evidence that the yuan is "significantly undervalued," the U.S.-funded nonpartisan Congressional Research Service cites the sharp increase in China's foreign exchange reserves--which rose from $403 billion at the end of 2003 to $1.5 trillion at the end of October 2007--along with China's large trade surplus, which reached $268 billion in 2007. During May 2007 U.S. Senate hearings, Fred Bergsten, who heads the Peterson Institute for International Economics, testified that China had been buying $15 billion to $20 billion of U.S. assets per month for several years to try to hold down the value of its currency. "The world's most competitive economy has become even more competitive through a deliberate policy of currency undervaluation," said Bergsten. Chinese leaders have stressed the need for gradual currency policies that maintain global growth. In November 2009, China's Assistant Finance Minister Zhu Guangyao said that China's policy of maintaining "currency stability" has been a "component" of the country's response to the financial crisis and that early withdrawal from those measures would incur a "big cost."
Others disagree with the notion that an undervalued yuan is the root cause of China's trade surplus and buildup of U.S. dollar reserves. The Atlantic Council's Albert Keidel argues China's buildup of U.S. dollar reserves is not a result of its exchange rate policy but derives instead from the lax U.S. financial regulations that fueled highly leveraged over-borrowing and overconsumption of Chinese exports. "U.S. financial regulatory failures ultimately forced trade surpluses on China," says Keidel. Governments build foreign exchange reserves to fend off speculation against their currencies as they liberalize their financial markets, he says.

A Currency "Manipulator"?
Some economists question whether China's exchange rate policies vis-à-vis the United States and its use of U.S. dollar reserves can be considered "predatory," or designed to depress the value of the yuan and push cheap Chinese goods into U.S. markets. Under the 1988 Omnibus Trade and Competitiveness Act, the Treasury department is required to report annually on the exchange rate policies of countries with large trade surpluses with the United States to determine if they "manipulate" their currencies against the dollar to "prevent effective balance of payments adjustments or to achieve an unfair competitive advantage in international trade."
The Treasury department has not labeled China or any country a currency manipulator. Treasury reports since China's July 2005 policy change have been increasingly critical of China but have avoided using the term "manipulation," which would trigger negotiations between the two countries and could lead to economic sanctions if the United States brought the case before the World Trade Organization. In Senate hearings on his nomination as U.S. Treasury Secretary in January 2009, Timothy Geithner responded to allegations of China's "manipulation" of its currency by saying it was a "significant issue" and that China should have "a more flexible exchange rate system." The Treasury then delayed the release of its October 2010 currency report on China, citing its hopes for diplomatic progress on the issue at the upcoming G20 meeting in Seoul, South Korea. Geithner also defended the Obama administration's cautious diplomacy on China's yuan policy in September 2010 Congressional testimony, and he advised U.S. lawmakers against taking legislative action that would impede U.S. companies' access to Chinese markets.

"The IMF has never labeled a country a currency manipulator, but it's something they need to think about, because if there's no pressure, there's no change." - Steven Dunaway, CFR
Though many concentrate on the exchange-rate dimension of trade and currency imbalances, some experts say links between these issues are overwrought. The Congressional Research Service cites data showing that increasing productivity in Chinese export firms--a factor unrelated to exchange rates--has contributed to Chinese export growth.
There is also evidence to suggest that much of the U.S. trade deficit (which widened in September 2009 by 18 percent to $36.5 billion, the largest increase in a decade) from China comes from the many export-oriented U.S. multinational companies that have moved production to China to take advantage of its low labor costs. In 1986, only 1.9 percent of China's exports came from foreign-investment enterprises in China; in 2006, the share rose to 58.2 percent, a CRS report notes. Some analysts argue that the use of foreign inputs in Chinese exports also dilutes the relationship between exchange rates and U.S.-China imbalances. According to 2003 congressional testimony by Stanford University economist Lawrence Lau, an appreciation of China's currency would not significantly alter China's exports to the United States, since, by his estimates, only 20 percent of the value of Chinese exports comes from China's assembly of imported parts, while 80 percent comes from the value of parts before they are imported.
In a 2010 white paper on doing business in China, the American Chamber of Commerce in China said it was "concerned that the [United States] is placing disproportionate emphasis on [yuan] valuation." Revaluing China's currency "would likely result only in a modest decrease in the current trade deficit" between the United States and China, whereas "focusing on other price distortions, such as factor pricing [the cost of labor or resources] in China, would possibly result in greater adjustments."

Risks to the U.S. and Global Economies
Critics of China's exchange rate policies and its trade surplus say the resulting buildup of China's dollar reserves threatens growth and stability in the U.S. economy. The Petersen Institute's Bergsten has said that China's policy of keeping the yuan undervalued leads to a "sizeable dollar overvaluation" and rising trade deficits. These deficits in turn provoke industry leaders to ramp up pressure for protectionist U.S. trade policies, he argues, which in the past policymakers have responded to by drastically devaluing the dollar. Bergsten cites the dollar's drop by more than 30 percent under the Reagan-era Plaza Accord (1985-1987) and the Nixon administration's import surcharge and removal of the dollar's gold peg, which effected more than a 20 percent devaluation of the dollar during the early 1970s.
Another concern is whether the United States can continue to rely on China to buy U.S. debt as the U.S. deficits grow. Some analysts contend that the U.S. economy would suffer a significant blow if it lost the favorable interest rates offered by China to finance its debt. CFR's Center for Geoeconomic Studies notes that China's purchases of U.S. Treasuries have actually accelerated over the past year but that China has been trading its long-term Treasuries for short-term notes, an indication of the country's growing concern about inflation and U.S. debt eating at the dollar's value.
Even if China abandoned its dollar peg and allowed the yuan to appreciate in line with U.S. demands, the likely resulting slowdown in China's economic growth could lead to political unrest, some experts say. "China has an 8 percent growth target because it needs that growth level to maintain enough jobs to absorb surplus labor in China's rural areas. Without the labor, you breed conditions for instability," says CFR's Dunaway.

"U.S. financial regulatory failures ultimately forced trade surpluses on China." - Albert Keidel, the Atlantic Council
In the United States, a continued buildup of U.S. debt has heightened global concerns about the safety of holding U.S. assets and could, some experts argue, cause central banks and private investors to dump their dollars in favor of safer investments. In an October 2009 interview, CFR's Benn Steil said that "the world is very conscious of the incentives the U.S. has to inflate away its burgeoning debt, meaning that U.S. insouciance in the face of a further dollar decline could provoke a run on the dollar in the currency markets." A devalued dollar, said Steil, might lead to higher inflation and interest rates in the United States, as well as slower U.S. growth and increased unemployment.

U.S. Policy Implications
Many U.S. policymakers have called for China to wean itself off export dependence and build up domestic consumption to correct the "global imbalances" that drew so many U.S. dollars to China to begin with. The Obama administration and G-20 leaders, including the Chinese President Hu Jintao, pledged at the Pittsburgh summit in September to develop a program to address these imbalances and undertake "monetary policies consistent with price stability in the context of market oriented exchange rates." Midterm election pressures in 2010 accelerated the pace of a bipartisan House bill to punish Chinese imports (WSJ) that benefit from an undervalued Chinese yuan with tariffs. Yet, as long as China remains the biggest creditor of the United States, it will be difficult for the United States to directly influence Chinese leaders on currency matters, some experts say. So far, repeated U.S. calls for China to revalue its currency have had little effect. In a July 2008 Financial Times op-ed, Morris Goldstein and Nicholas Lardy of the Petersen Institute argue that Chinese efforts to appreciate its currency are only a third to a half of what is needed in "rebalancing the sources of its economic growth."
Bergsten has noted Europe's incentive to join the United States in pressuring China to revalue its currency, since its economy will suffer from a rise in the value of the euro if the dollar declines sharply. U.S. congressional leaders have also proposed ways to act against China through international bodies, including referring the matter to the International Monetary Fund and bringing a formal complaint to the WTO that would treat the alleged currency manipulation as an unfair trade subsidy. "The IMF has never labeled a country a currency manipulator, but it's something they need to think about, because if there's no pressure, there's no change," says Dunaway, a former IMF official on Asia. He says China returned to a fixed exchange rate last year in part because "the issue dropped off the agenda" globally. Other experts question the efficacy of appeals to international institutions on the matter. In a December 2008 paper (PDF), Stanford University's Robert Staiger and Alan Sykes write that proving China's violation of WTO commitments vis-à-vis its currency policies would be difficult, and they dispute the notion that currency devaluation alters trade balances in the long run.
Some say focusing on China's currency is merely a distraction from other drivers of U.S. debt. In an October 2009 interview, Morgan Stanley's Stephen Roach said the currency issue is a "red herring" for U.S. policymakers and that the United States should instead focus its efforts on boosting U.S. savings. "If we want to redirect our economy away from excess consumption towards more of a savings-based economy, then and only then
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Default Continental and maritime in US-India ties

Continental and maritime in US-India ties

Two worlds — continental and maritime — have intermingled and collided throughout the history of Asia. For a thousand years, Asia was deeply interconnected. Goods, capital, technologies, ideas and religions moved across Silk Road caravan routes and over well-trafficked Asian sea-lanes.

But between the 16th and 18th centuries, Asia fragmented. Maritime trade swamped continental trade. And many of India’s traditional roles in Asia were subsumed within the British Empire.

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To American strategists, today’s India is a jumble of contradictions. India is a maritime nation — strategically situated near key chokepoints — but with a continental strategic tradition. India is a nation of illustrious mercantile traditions but for decades walled off large swaths of its economy.

Much has changed, largely because India’s rapid economic growth has allowed it to break from the confining shackles of South Asia. India is again an Asian player, better integrated into the East Asian economic system and with a growing capacity to influence the balance of power.

So, as US President Barack Obama arrives in India this week, it’s worth asking this question about US-India relations: If so much has changed, why do Washington and New Delhi remain burdened, even imprisoned, by continental preoccupations?

At one level, this is unavoidable. Indeed, viewed from an Indian perspective, it is understandable. After all, Pakistan’s choices complicate American policies. And elements of Washington’s partnership with Islamabad complicate Indian policies too.

What is more, President Obama is determined to extricate the US from Afghanistan. So, the timing and manner of US withdrawal will affect Indian interests, and quite possibly leave India holding the strategic pieces.

The president needs to address this, not least because the most important problem in US-India relations since he took office has been substantive. Bluntly put, disagreements over his administration’s policies toward Afghanistan and Pakistan have been a principal obstacle to strengthened US-India relations. Many in India’s government are deeply sceptical about the administration’s approach. And if the Indian government has been sceptical, then commentators and former Indian officials have been downright frigid.

The good news is that many in the administration understand this. In an important speech on US-India relations in June, Undersecretary of State William Burns (a key player on India policy in both the Bush and Obama administrations), bluntly tackled this critique of US policies: “We can’t afford to gloss over such questions,” he said, “or pretend that they don’t exist… that the United States seeks to ‘re-hyphenate’ relations with India… that we see India mainly through the prism of preoccupations in Afghanistan and Pakistan… that we won’t push Pakistan hard enough on terrorists who kill and threaten Indians… that we will hurry toward the exit in Afghanistan.”

Burns offered a ringing endorsement of India’s emergence on the international canvas. The US, he said, has an “enormous stake” in “India’s rise as a global power”.

That’s good news. But then, if it’s true, it will be imperative that continental preoccupations not imprison the relationship. Aligning US and Indian expectations in South and Central Asia (or, better yet, aligning objectives) would do much to strengthen the bilateral partnership.

But it is maritime, not continental, Asia that is the world’s centre of economic and geopolitical gravity. So, at a moment when India’s own foreign policy has burst the confining boundaries of its South Asian strategic geography, Mr Obama and Manmohan Singh would do well to focus renewed attention there.

As the US withdraws from Afghanistan, its ability to influence events in the central landmass of Eurasia will decrease exponentially. And India is now an Asian power. It has naval, energy and commercial interests in Asian waters. It has signed free trade deals with South Korea and the Asean countries, and its new Economic Cooperation Agreement with Japan should boost trade and ease the two-way flow of capital and talent. Reflecting this, the prime minister continues this week to wing his way from Tokyo and Kuala Lumpur to Hanoi and Seoul.

And if continental Asia has been an arena for US-India disagreement, even rancour, then maritime Asia offers natural affinities of interest — and the opportunity to turn common interests into complementary policies.

The US and India have multidimensional interests in Asia’s maritime space. These encompass energy, seaborne trade, finance, the global commons, and regional architecture.

Take the sea-lanes. This is an arena of mutual interest. It is an arena that raises questions about how to reconcile claims of sovereignty with the need to assure public goods. It is an arena that will test China’s rise as a stakeholder in global order. Beijing talks loudly about sovereign rights and claims. The US and India should speak equally loudly — and together — about international rights and customs. It is time the US and India defined new elements of a common strategic vision. And maritime spaces, not continental ones, seem the more promising place to do so.

The author is head, Asia Practice Group, at Eurasia Group, and is also adjunct senior fellow for Asia at the Council on Foreign Relations, Washington, DC
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Default Pakistan's New Generation of Terrorists

Pakistan's New Generation of Terrorists


Introduction
As an increasing number of suicide attacks rock Pakistan's major cities, concerns for the country's security are rising. In recent years, many new terrorist groups have emerged, several existing groups have reconstituted themselves, and a new crop of militants has emerged, more violent and less conducive to political solutions than their predecessors. Links between many of these new and existing groups have strengthened, say experts, giving rise to fresh concerns for stability. A failed bombing attempt in New York's Times Square in May 2010 with links to Pakistan also exposes the growing ambitions of many of these groups that had previously focused only on the region. The Pakistan-born U.S. citizen Faisal Shahzad who confessed to the bombing attempt was sentenced to life imprisonment by a U.S. court in October.

Pakistani authorities have long had ties to militant groups based on their soil that largely focused their efforts in Afghanistan and India. But with Pakistan joining the United States as an ally in its "war on terrorism" since 9/11, experts say Islamabad has seen harsh blowback on its policy of backing militants operating abroad. Leadership elements of al-Qaeda and the Afghan Taliban, along with other terrorist groups, have made Pakistan's tribal areas (the semi-autonomous region along the Afghan border) their home and now work closely with a wide variety of Pakistani militant groups. Security concerns are reverberating beyond Pakistan. In April 2009, U.S. Secretary of State Hillary Clinton said deteriorating security in nuclear-armed Pakistan "poses a mortal threat" to the United States and the world.

Terrorist Groups
Many experts say it is difficult to determine how many terrorist groups are operating out of Pakistan. Most of these groups have tended to fall into one of the five distinct categories laid out by Ashley J. Tellis, a senior associate at Carnegie Endowment for International Peace, in January 2008 testimony (PDF) before a U.S. House Foreign Affairs subcommittee.

Sectarian: Groups such as the Sunni Sipah-e-Sahaba and the Shia Tehrik-e-Jafria, which are engaged in violence within Pakistan;
Anti-Indian: Terrorist groups that operate with the alleged support of the Pakistani military and the intelligence agency Inter-Services Intelligence (ISI), such as the Lashkar-e-Taiba (LeT), the Jaish-e-Muhammad (JeM), and the Harakat ul-Mujahadeen (HuM). This Backgrounder profiles these organizations which have been active in Kashmir;
Afghan Taliban: The original Taliban movement and especially its Kandahari leadership centered around Mullah Mohammad Omar, believed to be now living in Quetta;
Al-Qaeda and its affiliates: The organization led by Osama bin Laden and other non-South Asian terrorists believed to be ensconced in the Federally Administered Tribal Areas (FATA). Rohan Gunaratna of the International Centre for Political Violence and Terrorism Research in Singapore says other foreign militant groups such as the Islamic Movement of Uzbekistan, Islamic Jihad group, the Libyan Islamic Fighters Group and the Eastern Turkistan Islamic Movement are also located in FATA;
The Pakistani Taliban: Groups consisting of extremist outfits in the FATA, led by individuals such as Hakimullah Mehsud, of the Mehsud tribe in South Waziristan, Maulana Faqir Muhammad of Bajaur, and Maulana Qazi Fazlullah of the Tehrik-e-Nafaz-e-Shariat-e-Mohammadi (TNSM).

There are some other militant groups that do not fit into any of the above categories. For instance, secessionist groups such as the Balochistan Liberation Army in the southwest province of Balochistan. BLA was declared a terrorist organization by Pakistan in 2006. Also, a new militant network, often labeled the Punjabi Taliban, has gained prominence after the major 2008 and 2009 attacks in the Punjabi cities of Lahore, Islamabad, and Rawalpindi.

Hassan Abbas, a fellow at the Asia Society, writes the Punjabi Taliban network is a loose conglomeration of members of banned militant groups of Punjabi origin-sectarian as well as those focused on Kashmir-that have developed strong connections with the Pakistani Taliban, Afghan Taliban, and other militant groups based in FATA and the North-West Frontier Province (NWFP). The Punjabi Taliban provide logistical support for attacks on cities in Punjab province and include individuals or factions of groups such as Jaish-e-Mohammed, Sipah-i-Sahaba Pakistan, and Lashkar-i-Jhangvi and their various splinter groups, along with small cells unaffiliated with any large group. Abbas writes that many of these militants "directly benefited from state patronage in the 1990s and were professionally trained in asymmetrical warfare, guerrilla tactics, and sabotage." The Punjabi Taliban are distinct from the traditional Pashtun Taliban, experts say. They are usually more educated and more technologically savvy.

In recent years, many new terrorist groups have emerged in Pakistan, several existing groups have reconstituted themselves, and a new crop of militants has emerged, more violent and less conducive to political solutions than their predecessors.
Since there is also greater coordination between all these groups, say experts, lines have blurred regarding which category a militant group fits in. For instance, the Pakistani Taliban, which were committed to fighting against the Pakistani state, are now increasingly joining insurgents fighting U.S. and international troops across the border in Afghanistan. U.S. Central Command Chief General David H. Petraeus, in a CFR interview, says the groups have long shared a symbiotic relationship. "They support each other, they coordinate with each other, sometimes they compete with each other, [and] sometimes they even fight each other," making it difficult to distinguish between them.

The Pakistani Taliban
Supporters of the Afghan Taliban in the tribal areas transitioned into a mainstream Taliban force of their own as a reaction to the Pakistani army's incursion into the tribal areas, which began in 2002, to hunt down the militants. In December 2007, about thirteen disparate militant groups coalesced under the umbrella of Tehrik-i-Taliban Pakistan (TTP), also known as the Pakistani Taliban, with militant commander Baitullah Mehsud from South Waziristan as the leader. After Mehsud was killed in August 2009 in a U.S. missile strike, his cousin and deputy Hakimullah Mehsud took over as leader of the TTP. Experts say most adult men in Pakistan's tribal areas grew up carrying arms but it is only in the last few years that they have begun to organize themselves around a Taliban-style Islamic ideology pursuing an agenda much similar to that of the Afghan Taliban in Afghanistan. Abbas writes (PDF) in a January 2008 paper that the Pakistani Taliban killed approximately two hundred tribal leaders and effectively established themselves as an alternative.

TTP not only has representation from all of FATA's seven agencies (please refer to this interactive map of the area) but also from several settled districts of the NWFP. According to some estimates, the Pakistani Taliban collectively have around 30,000 to 35,000 members. Among their other objectives, the TTP has announced a defensive jihad against the Pakistani army, enforcement of sharia, and a plan to unite against NATO forces in Afghanistan. Pakistani authorities accused the group's former leader, Baitullah Mehsud, of assassinating former Prime Minister Benazir Bhutto in December 2007. Some experts have questioned the ability of the different groups working under the Pakistani Taliban umbrella to stay united given the rivalries between the various tribes. However, the group has proved since its inception, through a string of suicide attacks, that it poses a serious threat to the country's stability. TTP also expressed transnational ambitions when it claimed responsibility for a failed bomb attack in New York in May 2010.

Changing Face of Terrorism
Violence in Pakistan has been on the rise as more militant groups target the state. According to South Asia Terrorism Portal (SATP), a terrorism database, 2,155 civilians were killed in terrorist violence in 2008 and nearly 1800 civilians have been killed in the first ten months of 2009 as compared to around 1600 civilian deaths from 2003 to 2006. This new generation of terrorists is also more willing to engage in suicide attacks; journalist Sharmeen Obaid-Chinoy, in a new documentary (CBC), reports that the Taliban are recruiting younger and younger children to carry out suicide attacks. According to SATP, there were nearly sixty suicide attacks in Pakistan in 2009 as compared to only two in 2002. Gunaratna attributes this to the influence of al-Qaeda. He says bin Laden's group is training most of the terrorist groups in FATA. "Al-Qaeda considers itself as the vanguard of the Islamic movement," Gunaratna says, and has introduced its practice of suicide bombings to both the Afghan and the Pakistani Taliban.

Besides providing militant groups in Pakistan with technical expertise and capabilities, al-Qaeda is also promoting cooperation among a variety of them, say some experts. Don Rassler, an associate at the Combating Terrorism Center, an independent research institution based at the U.S. military academy at West Point, writes al-Qaeda "has assumed a role as mediator and coalition builder among various Pakistani militant group factions by promoting the unification of entities that have opposed one another or had conflicting ideas about whether to target the Pakistani state." Al-Qaeda's greatest strength today, says counterterrorism expert Brian Fishman, is its "ability to infiltrate and co-opt other militant groups that have existing operational capability." In Pakistan, he says, "There's this whole milieu of militant groups, and individuals within those groups, that have come together ideologically and decided that they want to embark on this mission that al-Qaeda has set forth for them."

Carnegie's Tellis says the coordination between these different militant groups is ad-hoc and is driven by necessity. "The important point is that such coordination takes place through the entire spectrum of jihadi groups," he says. "They are much more flexible in their cooperation now than they ever were historically."

Bruce Riedel, the original coordinator of President Obama's policy on the Afghanistan-Pakistan region, in a recent interview to CFR also stressed al-Qaeda's growing cooperation with groups like the Afghan Taliban, the Pakistani Taliban, Lashkar-e-Taiba, and others. "The notion that you can somehow selectively resolve the al-Qaeda problem while ignoring the larger jihadist sea in which [al-Qaeda] swims has failed in the past and will fail in the future," he said.

"Al-Qaeda has assumed a role as mediator and coalition builder among various Pakistani militant group factions by promoting the unification of entities that have opposed one another or had conflicting ideas about whether to target the Pakistani state." – Don Rassler
However, some experts believe that Pakistani Taliban's attacks against the government and the security establishment may have strained their relations with the Afghan Taliban who enjoy close relationship with the army and the ISI, the country's premier intelligence agency. Richard Barrett, a former British intelligence officer who tracks al-Qaeda and the Taliban for the United Nations told the New York Times in October 2009 that the Afghan Taliban "don't like the way that the Pakistan Taliban has been fighting the Pakistan government and causing a whole load of problems there."

Experts say militants have also expanded their control over other parts of Pakistan such as in South Punjab, some settled areas of NWFP, and as far south as Karachi. Military analyst Ayesha Siddiqa writes "South Punjab has become the hub of jihadism (Newsline)." She argues South Punjabi jihadists have been connected with the Afghan jihad since the 1980s and the majority is still engaged in fighting in Afghanistan. According to some estimates, she says about 5,000 to 9,000 youth from South Punjab are fighting in Afghanistan and Waziristan. According to some experts, the Karachi wing of TTP provides logistics support and recruits new members.

Counterterrorism Challenges
Pakistan's security forces are struggling to confront these domestic militants. As this Backgrounder points out, efforts are underway to reform the forces but challenges remain both in terms of willingness to fight some of these militant groups as well as capabilities. Security forces, especially the army and the police , have increasingly become the target for the militant groups. In October 2009, militants attacked the army headquarters in Rawalpindi and held around forty people hostage for over 20 hours much to the army's embarrassment.

These attacks have heralded a new period in army and ISI relations with many of these militant groups, say analysts. Steve Coll, president of the New America Foundation, a Washington-based think tank, says since the bloody encounter between Pakistan's security forces and militant Islamic students in Islamabad's Red Mosque in 2007, there has been a pattern of some of these groups previously under state patronage, breaking away from the state. He says Pakistan's security establishment is now trying to figure out how to control them.

Most analysts believe that even though the Pakistani army and the ISI are now more willing to go after militant groups, they continue some form of alliance with groups they want to use as a strategic hedge against India and Afghanistan. But Pakistan's security establishment denies these charges. In October 2009, ISI Chief Ahmad Shuja Pasha said: "The ISI is a professional agency and does not have links (Daily Times) with any militant outfit including the Taliban."

In particular, U.S. officials would like Pakistan to crackdown on the leadership of the Afghan Taliban believed to be based in Quetta and two major factions of the Afghan insurgency led by veteran Afghan warlords, Jalaluddin Haqqani and Gulbuddin Hekmatyar. These, U.S. officials believe, are actively engaged in supplying fighters in Afghanistan. Analysts believe these groups do not engage in direct attacks against the Pakistani state in lieu of political cover inside Pakistan. Pakistan denies these charges. However, Coll says, there is some shift in Pakistan's strategy of supporting groups against India and to project influence in Afghanistan. "There is more debate and more ambivalence," he says. "Overall, the Pakistani establishment is moving in the right direction but it will take a very long time to undo the pattern that has been established so far."
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Default The U.S.-India Nuclear Deal

The U.S.-India Nuclear Deall



Authors:
Jayshree Bajoria, Staff Writer
Esther Pan
Updated: November 5, 2010

Introduction
What are the terms of the deal?
What kind of technology would India receive in return?
What do proponents say about the deal?
What are the objections to the agreement?
Who needs to approve the agreement?
What effect will the U.S.-India deal have on the NPT?
What role does China play in the U.S.-Indian nuclear deal?
What effect will the deal have on U.S. and Indian relations with Pakistan?
What’s the history of India’s nuclear program?



Introduction

U.S. Congress on October 1, 2008, gave final approval to an agreement facilitating nuclear cooperation between the United States and India. The deal is seen as a watershed in U.S.-India relations and introduces a new aspect to international nonproliferation efforts. First introduced in the joint statement released by President Bush and Indian Prime Minister Manmohan Singh on July 18, 2005, the deal lifts a three-decade U.S. moratorium on nuclear trade with India. It provides U.S. assistance to India's civilian nuclear energy program, and expands U.S.-India cooperation in energy and satellite technology. But critics in the United States say the deal fundamentally reverses half a century of U.S. nonproliferation efforts, undermines attempts to prevent states like Iran and North Korea from acquiring nuclear weapons, and potentially contributes to a nuclear arms race in Asia. "It's an unprecedented deal for India," says Charles D. Ferguson, science and technology fellow at the Council on Foreign Relations. "If you look at the three countries outside the Nuclear Non-Proliferation Treaty (NPT)-Israel, India, and Pakistan-this stands to be a unique deal."
In July 2009, New Delhi designated two sites for U.S. companies to build nuclear reactors in India. But a nuclear liability law passed by the Indian parliament in August 2010 is causing a rift with U.S. nuclear suppliers. Critics of the law contend India's proposal to seek legal redress against nuclear suppliers is a sharp deviation from the international liability regime which holds nuclear operators solely responsible in case of an accident. India would also like the United States to relax some of its restrictions on technology transfer to India.
What are the terms of the deal?

The details of the deal include the following:
India agrees to allow inspectors from the International Atomic Energy Association (IAEA), the United Nations' nuclear watchdog group, access to its civilian nuclear program. By March 2006, India promised to place fourteen of its twenty-two power reactors under IAEA safeguards permanently. Teresita Schaffer, director of the South Asia program at the Center for Strategic and International Studies, says these will include domestically built plants, which India has not been willing to safeguard before now. India has promised that all future civilian thermal and breeder reactors shall be placed under IAEA safeguards permanently. However, the Indian prime minister says New Delhi "retains the sole right to determine such reactors as civilian." According to him: "This means that India will not be constrained in any way in building future nuclear facilities, whether civilian or military, as per our national requirements." Military facilities-and stockpiles of nuclear fuel that India has produced up to now-will be exempt from inspections or safeguards.
India commits to signing an Additional Protocol (PDF)-which allows more intrusive IAEA inspections-of its civilian facilities.
India agrees to continue its moratorium on nuclear weapons testing.
India commits to strengthening the security of its nuclear arsenals.
India works toward negotiating a Fissile Material Cutoff Treaty (FMCT) with the United States banning the production of fissile material for weapons purposes.India agrees to prevent the spread of enrichment and reprocessing technologies to states that don't possess them and to support international nonproliferation efforts.
U.S. companies will be allowed to build nuclear reactors in India and provide nuclear fuel for its civilian energy program. (An approval by the Nuclear Suppliers Group lifting the ban on India has also cleared the way for other countries to make nuclear fuel and technology sales to India.)
What kind of technology would India receive in return?

India would be eligible to buy U.S. dual-use nuclear technology, including materials and equipment that could be used to enrich uranium or reprocess plutonium, potentially creating the material for nuclear bombs. It would also receive imported fuel for its nuclear reactors.
What do proponents say about the deal?

Proponents of the agreement argue it will bring India closer to the United States at a time when the two countries are forging a strategic relationship to pursue common interests in fighting terrorism, spreading democracy, and preventing the domination of Asia by a single power. Ashley Tellis of the Carnegie Endowment for International Peace-who was intimately involved in negotiating the civil nuclear agreement with India as senior adviser to the U.S. undersecretary of state for political affairs-said in congressional testimony in 2005 that the deal recognizes this growing relationship by engaging India, which has proven it is not a nuclear proliferation risk. Other experts say the deal lays out the requirements for India to be recognized as a responsible steward of nuclear power. "This is part of a process of making India a more durable and reliable nuclear partner," Schaffer says.
Other experts say the deal:
Would encourage India to accept international safeguards on facilities it has not allowed to be inspected before. This is a major step, experts say, because the existing nonproliferation regime has failed either to force India to give up its nuclear weapons or make it accept international inspections and restrictions on its nuclear facilities. "President Bush's bilateral deal correctly recognizes that it is far better for the nonproliferation community if India works with it rather than against it," writes Seema Gahlaut of the University of Georgia's Center for International Trade and Security in a CSIS policy brief. IAEA Director-General Mohammed ElBaradei has strongly endorsed the deal, calling it a pragmatic way to bring India into the nonproliferation community.
Recognizes India's history of imposing voluntary safeguards on its nuclear program. Proponents of the deal say India has an excellent record of setting credible safeguards on its nuclear program for the last thirty years. After the safeguards on the U.S.-supplied Tarapur nuclear facility expired in 1993, for example, India voluntarily established a new agreement with the IAEA to continue the restrictions.
Recognizes that India has a good record on proliferation. Although it is not a signatory to the NPT, India has maintained strict controls on its nuclear technology and has not shared it with any other country. Proponents of the deal say this restraint shows that India, unlike its nuclear neighbor Pakistan, is committed to responsible nuclear stewardship and fighting proliferation. In May 2005 India passed a law, the WMD Act, which criminalizes the trade and brokering of sensitive technology.
Rewards India's decision to adopt similar nuclear export standards as those imposed by the Nuclear Suppliers Group (NSG). India has thus far chosen to abide by the strict export controls on nuclear technology set by the NSG, a group of forty-five nuclear-supplier states that coordinates controls of nuclear exports to non-nuclear-weapon states. Experts say if India chose to lift these voluntary restrictions, it could easily sell its technology to far less trustworthy countries around the world. The U.S. deal would reward the Indian government for its voluntary controls and give New Delhi incentive to continue them, against the demands of Indian hardliners who question what India gets out of placing such limits on itself.
What are the objections to the agreement?

Critics call the terms of the agreement overly beneficial for India and lacking sufficient safeguards to prevent New Delhi from continuing to produce nuclear weapons. "We are going to be sending, or allowing others to send, fresh fuel to India-including yellowcake and lightly enriched uraniumt-that will free up Indian domestic sources of fuel to be solely dedicated to making many more bombs than they would otherwise have been able to make," says Henry Sokolski, executive director of the Nonproliferation Policy Education Center, a nonprofit organization dedicated to improving awareness of proliferation issues. While India has pledged that any U.S. assistance to its civilian nuclear energy program will not benefit its nuclear weapons program, experts say India could use the imported nuclear fuel to feed its civilian energy program while diverting its own nuclear fuel to weapons production. New Delhi has done similar things in the past; India claimed it was using nuclear technology for civilian purposes right up until its first nuclear weapons test in 1974. A Congressional Research Service report (PDF) on the agreement states, "There are no measures in this global partnership to restrain India's nuclear weapons program."

Other objections raised by experts include:

The safeguards apply only to facilities and material manufactured by India beginning when the agreement was reached. It doesn't cover the fissile material produced by India over the last several decades of nuclear activity. The CRS report says, "A significant question is how India, in the absence of full-scope safeguards, can provide adequate confidence that U.S. peaceful nuclear technology will not be diverted to nuclear weapons purposes."
The deal does not require India to cap or limit its fissile material production. This comes at a time when nearly all the major nuclear powers-including the United States, France, Britain, and Russia-are moving to limit their production.
The deal does not require India to restrict the number of nuclear weapons it plans to produce.
There are more cost-efficient ways to improve India's energy and technology sectors. These could include making India's existing electricity grid more efficient, restructuring the country's coal industry, and expanding the use of renewable energy sources, Sokolski said in congressional testimony in 2005. All these steps would involve much less dangerous transfers of technology that would not be dual-use, and therefore not convertible to nuclear weapons production.
The agreement takes unnecessary risks without adequate preparation or expert review. The agreement "appears to have been formulated without a comprehensive high-level review of its potential impact on nonproliferation, the significant engagement of many of the government's most senior nonproliferation experts, or a clear plan for achieving its implementation," wrote William C. Potter, director of the Center for Nonproliferation Studies at the Monterey Institute of International Studies, in Nonproliferation Review in August 2005. "Indeed, it bears all the signs of a top-down administrative directive specifically designed to circumvent the interagency review process and to minimize input from any remnants of the traditional 'nonproliferation lobby.'"
Who needs to approve the agreement?

The final terms of the nuclear deal were approved by the following bodies before they could be implemented:
IAEA. India signed a safeguards agreement with the IAEA under which all nuclear material and equipment transferred to it by the United States as a part of this deal shall be subject to safeguards. In August 2008, the IAEA's Board of Governors approved an India-specific safeguards agreement (PDF). The IAEA said it will begin to implement the new agreement in 2009, with the aim of bringing fourteen Indian reactors under agency safeguards by 2014. The IAEA currently applies safeguards to six of these fourteen nuclear reactors under previous agreements. IAEA Director General Mohamed ElBaradei says the IAEA and India are in dialogue concerning an additional protocol to the draft safeguards agreement.
India's Parliament. While the deal does not require a formal vote by the parliament, the coalition government has faced a confidence vote over it. Many parliamentarians oppose the deal, arguing it will limit India's sovereignty and hurt its security. Some Indian nuclear experts are protesting what they see as excessive U.S. participation in deciding which of India's nuclear facilities to define as civilian, and open to international inspections under the plan.
The Nuclear Suppliers Group. In September 2008, after much lobbying by the Bush administration, the group approved the India-specific exemption.
Congress. In October 2008, the U.S. Congress gave final approval to the bill. Under the U.S. Atomic Energy Act, which regulates the trade of nuclear material, congressional approval was needed to pass the exemptions to U.S. laws required for the nuclear deal to be implemented. Some members of Congress were resistant, and called for India to commit to strict limits on its nuclear weapons program before the deal went through. There is a potential area of dispute with India over the terms for suspending the agreement. Before clearing the bill, the U.S. Senate rejected an amendment that would require U.S. nuclear supplies to be cut off if India tests nuclear weapons. The deal does not explicitly impose that condition, though it is part of a 2006 law known as the Hyde Act, which gave the deal preliminary approval.
What effect will the U.S.-India deal have on the NPT?
It could gut the agreement, some experts say. Article I of the treaty says nations that possess nuclear weapons agree not to help states that do not possess weapons to acquire them. David Albright, president of the Institute for Science and International Security, says without additional measures to ensure a real barrier exists between India's military and civilian nuclear programs, the agreement "could pose serious risks to the security of the United States" by potentially allowing Indian companies to proliferate banned nuclear technology around the world. In addition, it could lead other suppliers-including Russia and China-to bend the international rules so they can sell their own nuclear technology to other countries, some of them hostile to the United States. On the other hand, experts like Gahlaut argue the NPT was already failing in its mission to prevent proliferation. She says many countries-including North Korea, Libya, Iran, and Iraq-have cheated while being signatories of the NPT.
What role does China play in the U.S.-Indian nuclear deal?
It is a motivating factor in the deal, some experts say. China's rise in the region is prompting the United States to seek a strategic relationship with India. "The United States is trying to cement its relationship with the world's largest democracy in order to counterbalance China," CFR's Ferguson says. The Bush administration is "hoping that latching onto India as the rising star of Asia could help them handle China," Sokolski says.
Some experts say the growing economic relationship between China and India is so critical to New Delhi that its interests in China cannot be threatened or replaced by any agreement with the United States. Other experts worry U.S. nuclear aid to India could foster a dangerous nuclear rivalry between India and China. Though India has a strong interest in building economic relations with China, New Delhi is still wary of China's military rise in the region.
What effect will the deal have on U.S. and Indian relations with Pakistan?
Pakistan has not received a similar deal on nuclear energy from Washington. Some experts say this apparent U.S. favoritism toward India could increase the nuclear rivalry between the intensely competitive nations, and potentially raise tensions in the already dangerous region. "My impression is that [the Pakistanis] are worried this will feed the Indian nuclear weapons program and therefore weaken deterrence," Blackwill said. Other experts say the two countries, both admittedly now nuclear, could be forced to deal more cautiously with each other. Pakistan is already a proliferation risk: Pakistani nuclear scientist A.Q. Khan's illicit nuclear network, revealed in 2004, shocked the world with its brazen trade of nuclear technology. Some experts worry the U.S.-India deal could prompt Pakistan to go elsewhere, for instance to China, for similar terms.
What’s the history of India’s nuclear program?

In the 1950s, the United States helped India develop nuclear energy under the Atoms for Peace program. The United States built a nuclear reactor for India, provided nuclear fuel for a time, and allowed Indian scientists study at U.S. nuclear laboratories. In 1968, India refused to sign the NPT, claiming it was biased. In 1974, India tested its first nuclear bomb, showing it could develop nuclear weapons with technology transferred for peaceful purposes. As a result, the United States isolated India for twenty-five years, refusing nuclear cooperation and trying to convince other countries to do the same. But since 2000, the United States has moved to build a "strategic partnership" with India, increasing cooperation in fields including spaceflight, satellite technology, and missile defense.
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Default Currency Warriors Should Consider India

Currency Warriors Should Consider India


Author: Sebastian Mallaby, Director of the Maurice R. Greenberg Center for Geoeconomic Studies and Paul A. Volcker Senior Fellow for International Economics
November 15, 2010
Financial Times

After last week's disappointing summit of the Group of 20 leading economies, a full-blown currency war may look unavoidable. But consider India. At a time when more and more nations are resorting to capital controls and currency intervention, India shows there is another way.
Since a change of heart nearly two years ago, India has stopped intervening in markets to manage its exchange rate. It has not followed countries from Brazil to Thailand by slapping on new capital controls. Unlike China and other east Asian mercantilists, it does not run an export surplus; nor does it insist on showering excess savings on rich countries that have no good use for them. Instead, India manages its economy as the textbooks say a developing country ought to. It runs a trade deficit, thereby contributing to the rich world's recovery; and it imports capital to help lift its people out of poverty, registering growth of 8 per cent or so a year.
To many observers, including a lot of Indian ones, the country has succeeded because it has always kept capital controls, even if it has imposed no new ones recently – for example, its bond market remains largely closed to foreigners. Yet although India retains de jure restrictions on capital inflows, de facto global integration has progressed dramatically, as Ajay Shah of India's National Institute of Public Finance and Policy has argued. Gross cross-border flows of money have jumped from around 50 per cent of India's gross domestic product to more than 120 per cent over the past decade. Some 500 Indian multinationals have access to global capital markets and can funnel cash into and out of their home country. When you have globalisation of trade and investment, it is not in the power of government to suppress globalisation of capital.
If India has become surprisingly open, will it remain so in the face of today's strains? China's exchange-rate manipulation encourages its trade rivals to hold down their currencies; the manipulators drive capital into the economies of non-manipulators, pushing up their exchange rates and threatening them with asset bubbles. The more some governments intervene, in other words, the harder it is for non-interveners to stick to their principles. And yet, at least so far, India appears committed to its open model. The Reserve Bank of India acted the part of the anti-currency warrior recently, raising interest rates even at the risk of a stronger rupee.
What explains India's resolve? The country is certainly not immune to the danger of an asset bubble. The government's recent initial public offering of the state coal company was subscribed 15 times over; investors put in bids for $54bn worth of paper, enough to build 25 airports like the splendid new structure that just opened in Delhi. But at least some of India's financial leaders recognise that, to tame surging demand for equities, you just need an equivalent surge in the supply of equities. Lined up behind the coal company, scores of other state companies are ripe to be privatised. Through IPOs, India can mop up outside capital, converting potentially reversible “hot” portfolio flows into something more akin to stable foreign direct investment.
Of course, new equity issuance will not prevent the rupee from rising. But here again, most Indian leaders see the case for sticking to the country's open model. They do not want to impose new capital controls, because they know that these leak and are a nightmare to administer. They are reluctant to intervene against the rise of the currency, because they see that the best way to staunch inflows of hot money may be to allow it to appreciate – at a certain point, investors will fear that the rupee may reverse direction and hit them with losses.
Today's eager interventionists should take note. Far more than they realise, they are setting up one-way bets for traders. Hedge funds know that South Korea's won is being artificially held down by the government and is therefore more likely to rise than to depreciate, so they are hosing Seoul with capital and compounding the problem of hot inflows that Korea is desperate to alleviate. If India's leaders stick to their open policies, and if the neo-interventionists meet their comeuppance, the current dirigisme may prove mercifully short-lived
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Default Domestic Politics and NATO's 'Sensible' Summit

Domestic Politics and NATO's 'Sensible' Summit


November 22, 2010
Author: Charles A. Kupchan, Whitney Shepardson Senior Fellow



The NATO Summit went more or less according to plan. NATO members adopted a new Strategic Concept, which specifies the alliance's main missions for the coming decade. They also identified 2014 as the target date for the full handover of combat missions in Afghanistan to Afghan security forces and agreed to develop a joint missile defense system to cover the territory of alliance members. And the alliance took a step forward to advance relations with Russia, elevating the status of the NATO-Russia Council and securing greater Russian involvement in the mission in Afghanistan. Dialogue will also continue on Russia's potential cooperation with NATO's missile defense system.

Looking ahead, NATO's European members will struggle to maintain adequate force levels in the face of economic austerity. Only time will tell whether NATO and Afghan forces succeed in turning the tide against the Taliban and extremist insurgents in Afghanistan and whether the plan for cooperation with Russia develops into a program that anchors Russia within the Euro-Atlantic community.

In the current period of economic constraint and political polarization, NATO's evolution depends heavily on the trajectory of domestic politics in NATO members. Some members are under pressure to quit the mission in Afghanistan; the Dutch have already left and the Canadians are scheduled to depart next year. Russia's relationship with NATO will in part ride on the prospects for ratification of the New START Treaty in the United States, though at this point it remains uncertain whether the Senate will move ahead--either during the current lame-duck period or after the new Congress is in session.

NATO is seeking to adapt to a new array of threats and challenges. The summit in Lisbon charted a sensible way for doing so, but it remains to be seen whether the political will is available to back up NATO's plans.
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