The U.S. & Pakistan’s Nukes

Washington—New American intelligence assessments have concluded that Pakistan has steadily expanded its nuclear arsenal since President Obama came to office…for the Obama administration the assessment poses a direct challenge to a central element of the President’s national security strategy, the reduction of nuclear stockpiles around the world.”—New York Times

The above words, written this past February, were followed by a Times editorial, titled “Pakistan’s Nuclear Folly,” decrying that “the weapons buildup has gotten too little attention,” and calling on Washington to “look for points of leverage” to stop it.

Well, the administration and the Times may be unhappy about Pakistan’s nuclear buildup, but it certainly should not have come as a surprise, nor is there much of a secret to the “points of leverage” that would almost certainly put a stopper on it: scupper the so-called 1-2-3 Agreement between the U.S. and India.

Back in 2003, Douglas Feith, then Under Secretary of Defense for Policy in the Bush Administration, pulled together a meeting of the U.S.-India Defense Policy Group to map out a blueprint for pulling New Delhi into an alliance against China. The code word used during the discussions was “stability,” but as P.R. Chari of the Institute for Peace and Conflict Studies noted, “What they really mean is how to deal with China.”

The Bush administration changed the Clinton Administration’s designation of China as a “strategic partner” to “strategic competitor,” and in its U.S.-China Security Review concluded that Beijing is “in direct competition with us for influence in Asia and beyond” and that in “the worst case this could lead to war.” Another Pentagon document revealed by Jane’s Foreign Report argued that both India and the U.S. were threatened by China, and that “India should emerge as a vital component of US strategy.”

One of the obstacles to that alliance was the Nuclear Non-Proliferation Treaty (NPT), which blocks any country that is not a signer from buying nuclear fuel on the world market. Since neither India nor Pakistan has signed the Treaty, they can’t buy fuel from the 45-member Nuclear Suppliers Group. That has been particularly hard on India because it has few native uranium sources and has to split those between nuclear energy and nuclear weapons. The ban, however, is central to the NPT, and one of the few checks on nuclear proliferation.

But the Bush administration proposed bypassing the NPT with the so-called 1-2-3 Agreement that permitted India to purchase nuclear materials even though New Delhi refused to sign the Treaty. India would agree to use the nuclear fuel only in its civilian plants and open those plants for inspection by the International Atomic Energy Agency (IAEA). But the Agreement also allowed India to divert its own domestic supplies to its weapons program, and those plants would remain off the inspection grid. In short, India would no longer have to choose between nuclear power and nuclear weapons: it could have both.

In July 2008, Pakistan’s then Foreign Minister Khurshid Kusuri predicted that if the 1-2-3 Agreement went through, “The whole Nuclear Non-Proliferation Treaty will unravel,” and, in a letter to the IAEA, Pakistan warned that the pact “threatens to increase the chances of a nuclear arms race in the subcontinent.”

However, neither the Bush administration nor the Obama administration paid any attention to Pakistan’s complaints. The results were predictable. Pakistan ramped up its nuclear weapons program and may soon pass Britain as the fifth largest nuclear weapons nation in the world.

It also dug in its heels at the 65-nation 2011 Conference on Disarmament in Geneva and blocked a proposal to halt the production of nuclear weapons-making material. The 1-2-3 Agreement and the push to bring India into the Nuclear Suppliers group, warned Ambassador Zamir Akram, were “undermining the validity and sanctity of the international non-proliferation regime” and would “further destabilize security in South Asia.” The Fissile Material Cut-Off Treaty (FMCT) is a priority for the Obama administration.

Islamabad is not alone in its criticism of the 1-2-3 Agreement or the FMCT. A number of nations are challenging NPT signers, including the U.S., China, Russia, Britain and France, to fulfill Article VI of the NPT that requires the elimination of nuclear weapons. While the U.S. and Russia have reduced their arsenals, both still have thousands of weapons, and the Americans are in the process of modernizing their current warheads.

Pakistan is a far smaller country than India, and would likely face defeat in a conventional conflict. It has already lost three wars to India. Its ace in the hole is nuclear weapons, and some Pakistanis have a distressingly casual view of nuclear war. “You can die crossing the street, or you could die in a nuclear war,” remarked former Pakistan army chief Gen. Mirza Aslem Beg. A BBC poll found that the Pakistani public has an “abysmally low” understanding of the threat.

Many Indians are not much better. Former Indian Defense Minister Georges Fernandes commented that “India can survive a nuclear attack, but Pakistan cannot.” And that same BBC poll found that for most Indians “the terror of a nuclear conflict is hard to imagine.”

Both countries have recently rolled out cruise missiles that are capable of carrying nuclear warheads. The Pakistani Hatf-7, or “Babur,” has a range of almost 500 miles and a speed of 550 miles. It appears to have been copied from the U.S. BGM-109 “Tomahawk,” several of which crashed in Pakistan during 1998 air strikes against Afghanistan. The Indian PJ-10 BrahMos cruise has a shorter range—180 miles—but a top speed of 2100 mph. India and Pakistan also have ballistic missiles capable of striking major cities in both countries.

In its editorial declaiming Pakistan as guilty of “nuclear folly,” the Times pointed out that “Pakistan cannot feed its people [or] educate its children.” Neither can India. As a 2010 United Nations Development Program report discovered, as bad as things are in Pakistan, life expectancy is lower in India, and the gap between rich and poor is greater. In fact, neither country can afford large militaries—Pakistan spends 35 percent of its budget on arms, and India is in the middle of a $40 billion military spending spree—and a nuclear war would not only destroy both countries, but also profoundly affect the entire globe.

Nuclear weapons are always folly, but what is sauce for the goose is sauce for the gander. The U.S. currently spends in excess of $1 trillion a year on all defense and security related items, while our education system is starving, our infrastructure is collapsing, and hunger and illiteracy are spreading. If the Times wants to ratchet down tensions in South Asia, let it call for dumping the 1-2-3 Agreement and beginning the process called for in Article VI of the Nuclear Non-Proliferation Treaty: “Each of the Parties to the Treaty undertakes to pursue negotiations in good faith on effective measure relating to the cessation of the nuclear arms race at an early date and to nuclear disarmament, and on a Treaty of general and complete disarmament under strict and effective international control.”

Share

TPJ MAG

Latin America: The Empire Strikes Back

For the past decade, American policy vis-à-vis Latin America has been relatively low-key, partly because of the wars in Iraq and Afghanistan, and partly because the region has seen an unprecedented growth in economic power and political independence. But, with Republicans taking over the House of Representatives, that is about to change, and, while the Southern Cone no longer stands to attention when Washington snaps its fingers, an aggressive and right wing Congress is capable of causing considerable mischief.

Rep. Lleana Ros-Lehtinen (R-Fl), a long-time hawk on Cuba and leftist regimes in Venezuela and Bolivia, is the new chair of the powerful House Committee on Foreign Affairs, and the rightist Rep. Connie Mack (D-Fl) heads up the House subcommittee on Western Hemisphere affairs. Ros-Lethinen is already preparing hearings aimed at Venezuela and Bolivia, and Mack will try to put the former on the State Department’s list of countries sponsoring terrorism.

Ros-Lehtinen plans to target Venezuela’s supposed ties to Middle East terrorist groups and Iran’s nuclear weapons program, and to push for economic sanctions against Venezuela’s state-owned oil company and banks. “It will be good for congressional subcommittees to start talking about [President of Venezuela Hugo] Chavez, about [President of Bolivia Evo] Morales, about issues that have not been talked about,” she told the Miami Herald.

The new chairs of the House Intelligence Committee and Judiciary Committee have also signaled they intend to weigh in on establishing a more hawkish line on Latin America.

Unfortunately, it is the Obama administration that created an opening for the Republicans. While the White House came in pledging to improve relations with Latin America, Washington has ended up supporting a coup in Honduras, strengthening the U.S. military’s presence in the region, and ignoring growing criticism of its failed war on drugs.

Recent disclosures by Wikileaks reveal the Obama administration was well aware that the June 2009 Honduran coup against President Manuel Zelaya was illegal; nonetheless, it intervened to help keep the coup forces in power. Other cables demonstrate an on-going American hostility to the Morales regime in Bolivia and Washington’s sympathy with secessionist forces in that country’s rich eastern provinces.

Many Latin Americans initially had high hopes the Obama administration would bring a new approach to its relations with the region, but some say they have seen little difference from the Bush Administration. “The truth is that nothing has changed and I view that with sadness,” says former Brazilian president Luiz Lula da Silva. But things may go from bad to worse if the White House is passive in the face of a sharp rightward turn by Congress.

The Latin America of 2011 is not the same place it was a generation ago. Economic growth has outstripped the U.S. and Europe, progressive and left governments have lifted 38 million people out of poverty, cut extreme poverty by 70 percent, and increased literacy. The region has also increased its south-south relations with countries like China, South Africa and India. China is now Brazil’s number one trading partner. An economic alliance—Mercosur—has knitted the region together economically, and the U.S.-dominated Organization of American States (OAS) finds itself eclipsed by the newly formed Union of South American Nations.

But many countries in Latin America are still riven by wealth disparities, ethnic divides, and powerful ties between local oligarchies and the region’s curse: powerful and undemocratic police and militaries. One such military pulled off the Honduran coup, and police came within a whisker of overthrowing Ecuador’s progressive president, Rafael Correa, in 2010.

One 2007 Wikileaks cable titled “A Southern Cone perspective on countering Chavez and reasserting U.S. leadership,” pointed out “Southern Cone militaries remain key institutions in their respective countries and important allies for the U.S.” The author of the cable, then ambassador to Chile, Craig Kelly, is currently principle Deputy Assistant Secretary of State. Kelly strongly recommended increasing aid to Latin American militaries to help them “modernize.”

In many cases, rightists in Latin America share an agenda with right-wing forces in the U.S. For instance, Republicans played a key role in supporting the Honduran coup and continue to strengthen those ties. In a recent trip to Honduras, Rep. Dana Rohrabacher (R-Ca)—a senior member of the House Foreign Affairs Committee—brought together U.S. business leaders and Honduran officials to discuss American investment. Honduras was suspended from the OAS, and only a handful of Latin American governments recognize the new president, Porfirio Lobo.

It was the Obama Administration, however, who recognized the government established by the coup, and remains silent in the face of what Amnesty International and Human Rights Watch calls widespread human rights violations by the Lobos regime, including the unsolved murder of at least 18 opponents. U.S. Secretary of State Hillary Clinton is lobbying hard to have Honduras re-admitted to the OAS.

A quick survey of Republican targets suggests troubled waters ahead.

Chavez has won two elections and is enormously popular. He has cut poverty, tripled social spending, doubled university enrollment, and extended health care to most of the poor. A U.S. engineered coup seems unlikely. But a “supporter of terrorism” designation would cause considerable difficulties with international financing and foreign investment. Sanctions on oil and banking would also disrupt the Venezuelan economy, in the long run creating conditions favorable to a possible coup.

While it is hard to imagine what else the U.S. could do to Cuba, Congress may try to choke off investment in Cuba’s growing oil and gas industries. Companies are already jumping through hoops to avoid getting around the current embargo. The Spanish oil company Repsol and Italy’s Eni SpA recently built an offshore oil rig in China to dodge the blockade.

“It is ridiculous that Repsol, a Spanish oil company, is paying an Italian firm to build an oil rig in China that will be used next year to explore for oil 50 miles from Florida,” Sarah Stephens, director of the Center for Democracy in the Americas told the Financial Times. If the Republicans have their way, sanctions will be applied to those oil companies.

Ecuador’s Correa beat back a recent right-wing coup, largely because of his 67 percent approval rating. He has doubled spending on health care, increased social spending, and stiffed an illegitimate $3.2 billion foreign debt. But he has a tense relationship with indigenous movements, which accuse him of trying to marginalize them. While those groups did not support the coup, neither did they rally to the government’s support. Those divisions could be easily exploited to destabilize the government.

In the case of Bolivia, the Wikileak released cables, according to Latin American journalist and author Benjamin Dangl, “lays bare an embassy that is biased against Evo Morales’ government, underestimates the sophistication of the governing party’s grassroots base, and is out of touch with the political reality of the country.”

The cables indicate the U.S. is relying on information from extreme right wing and violent secessionist groups in Eastern Bolivia, groups that receive financing and training from the National Endowment for Democracy and USAID. Both groups have close ties to American intelligence organizations. Given Brazil’s strong opposition to any attempt to break up Bolivia, it is not clear a succession movement would succeed. But would Brazil—or Argentina, Uruguay or Paraguay—actually intervene?

Paraguay is also a country deeply divided between left and right, with a progressive president who warned last year that a coup by the country’s powerful military was a possibility.

The Obama administration’s acceptance of the Honduran coup sent a chill throughout Latin America, and certainly emboldened those who see tanks and caudillos as an answer to the region’s surge of progressive politics and independent foreign policy. The recent effort by Turkey and Brazil to broker a compromise with Iran over its nuclear program did not go down well in Washington. Neither have efforts to chart an independent course on the Middle East by nations in the region. Several countries have formally recognized a Palestinian state, and Peru will host an Arab-Latin America summit Feb. 16.

Latin America is no longer an appendage to the colossus of the north, but its growing independence is fragile, as the coups in Honduras and Ecuador suggest. The chasm between rich and poor is being closed, but it is still substantial. The economies in the region are growing at a respectable 6 percent, but, because they are relatively small, they can be more easily derailed by internal and external crises. Even as its power wanes, the U.S. is still the world’s largest economy with the world’s largest military. This, plus anti-democratic forces in Latin America, is fertile ground for mischief, particularly if there is not strong resistance on the U.S. home front.

Share

TPJ MAG

Money Wars: Beating Up On Beijing?

Are the U.S. and China on a collision course? Consider the following:

During the 2010 mid-term elections, some 30 candidates for the House and Senate are blasting China for everything from undermining America’s financial structure to fueling the U.S. unemployment crisis.

The Obama Administration is accusing China of manipulating its currency to sabotage the U.S. exports trade, and the U.S. House of Representatives just passed a bill to slap huge tariffs on Chinese goods unless Beijing allows the renminbi, China’s currency, to appreciate.

A recent Financial Times article on the failure of the International Monetary Fund (IMF) to resolve the currency issue says, “The hostility between Washington and Beijing has escalated into something resembling trench warfare.” Last year a CNN poll found that 71 percent of Americans thought China was an economic threat, and 51 percent of those polled thought Beijing represented a military threat as well.

If one adds to the above the growing tensions with China in the South China Sea and the Taiwan Straits, some kind of dust up seems almost inevitable, though any “collision” would be a diplomatic one. But a major diplomatic fallout between the world’s two largest economies has global implications.

What is going on here? Is China indeed manipulating its currency to beggar the U.S.? Does it bear some responsibility for the high jobless rate and the inability of the American economy to recover from the deep recession?

The answer is both yes and no, and thereby hangs a tale.

The U.S. charges that China is deliberately undervaluing its currency, the renminbi, which makes Chinese export goods cheaper than its competitors and thus undermines other countries exports. 

China is indeed manipulating its currency, although it is hardly alone. In one way or another, Brazil, Japan, Switzerland, Thailand, South Korea and others have recently acted to keep their currencies competitive. Nor is currency manipulation something new. During the 1980s the Reagan Administration and Japan jimmied their currencies to deal with a huge trade gap. Indeed, the current free market orthodoxy regarding currency is a recent phenomenon in world finances, a reflection of the “Washington Consensus” model that has dominated institutions like the IMF and the World Bank for the last two decades.

How one sees the current dispute depends on where one sits. With U.S. unemployment above 10 percent, Americans are focused on policies that will bring that rate down. But from China’s point of view, any major upward evaluation of the renminbi would simply transfer U.S. jobless rates to China.

Since it would also reduce the value of the dollar, it would lower the value of the massive debt the U.S. owes China. “And that, to the Chinese, would feel suspiciously like a default,” says Stephen King, chief economist for HSBC.

In short, a lose-lose deal for Beijing.

From the Chinese side of the equation, the U.S. is essentially trying to unload the consequences of the economic meltdown that Wall Street caused onto them. And they dispute the fact that the huge trade surplus is all that relevant to the current crisis.

According to Avinash D. Persuad, chair of Intelligence Capital Limited, even if China’s $175 billion trade were to somehow vanish, it would only have a 0.25 percent impact on global GDP. “The Chinese economy is one quarter of the U.S. economy, and at the peak of the U.S. trade deficit, China’s surplus was less than a third of it. David may have toppled Goliath, but he couldn’t carry him,” says Persuad.

Exports have certainly been important to China, but they have only accounted for 10 to 15 percent of growth over the past decade. The main engine for Chinese growth has been investment. According to the World Bank Growth Commission, of the 13 countries that have enjoyed 7 percent growth rates over the past 10 years, all had high investment rates. These countries suppressed consumption by keeping wages low, allowing them to amass enormous pools of capital to pour into upgrading infrastructure or subsidizing industry.

The Chinese economy is booming—it never fell below 8 percent growth during the recession—but it has some vulnerabilities. The Chinese recognize that they need to shift their economy, away from an over reliance on exports to one based more on internal consumption,. To this end, private wages and consumption have been growing at a respectable 8 to 10 percent yearly. The thinking is that as consumption goes up, China will absorb more of its own products, and thus the trade deficit will go down.

China’s new five-year plan is trying to do exactly this. Shifting some of the economy away from the wealthy coastal areas toward the more depressed inland part of the country will help alleviate some of the wealth gap between city and country, and encourage urbanization in the interior. All of these moves will increase consumption.

If China were to suddenly raise the value of its currency, however, it would tank a number of export industries and flood China with unemployment. Since the jobless have no money, consumer spending would fall, setting off yet another round of layoffs and plant closings. This is, of course, exactly what Americans are discovering.

Beijing has begun raising the value of renminbi—it has risen 2.5 percent since June—but the slow pace has not satisfied Washington. The Americans are making other demands as well. For instance, the U.S. would like China to lower its interest rates, which the Americans argue would encourage consumption.

But as Michael Pettis, a professor of finance at Guanghua School in Beijing University and a senior associate at the Carnegie Endowment, points out, “This would be terrible for China. Lower interests rates and more credit will fuel a real estate boom and boost both capital-intensive manufacturing and infrastructure overcapacity—all without rebalancing consumption.”

From China’s point of view the problem is not its currency, but the lack of controls over American finance that can lead to tsunamis of money flooding into underdeveloped countries. In 1997, waves of international investment money poured into Thailand, tanking the currency and spreading a recession, the so-called “Asian Flu,” throughout the region. The Thais took action Oct. 12 to block a similar “hot wave” of money pouring into the country by imposing a 15 percent withholding tax on capital gains and interest payments on government and state-owned company bonds. Besides Thailand and South Korea, other countries in Asia, including Singapore and Taiwan, have also intervened to keep their financial ships on an even keel.

Europeans are blowing hot and cold on currency intervention. Last year and this past winter and spring, the EU had good reasons for remaining quiet about the subject of undervalued currencies. The Euro lost 17 percent of its value vis-à-vis the dollar over the Greek financial crisis, which had the effect of powering up European exports, in particular, by Germany.

Germany—the world’s second biggest exporter after China—is as much concerned about the dollar as the renminbi. “We expect the U.S. to continue its policy of printing money,” Aton Borner, president of the German exporters’ association, BGA, told the Financial Times. “This will trigger a currency devaluation spiral that will hit Europe the most.” The dollar has dropped 20 percent against the Euro since June, and German exports have fallen for two months in a row.

The Europeans are certainly concerned about the currency crisis, although they are a good deal more sotto voice than the Americans. “It’s not helpful to use bellicose statements when it comes to currency or to trade,” says French finance minister Christine Lagarde.

Governments that don’t take care of their own during an economic crisis will eventually pay a price at the polls. Brazilian Foreign Minister Celso Amorim is certainly concerned about defending Brazil’s currency, but he is careful about applying pressure as a way of finding solutions. “We have good coordination with China, and we’ve been talking to them,” he said, adding, “We can’t forget that China is our main customer.”

China charges that the U.S. is scapegoating it for problems that the U.S. created for itself, and there is certainly a strong odor of China bashing these days, even from intelligent and thoughtful people like Paul Krugman, Nobel laureate and New York Times columnist.

Krugman says that while he wants to avoid “hard ball policies,” he says “China is adding materially to the world’s economic problems at a time when those problems are already severe. It is time to take a stand.” Krugman suggests the U.S. should put a 10 percent surcharge on imports from China, a move more likely to ignite a global trade war than bring China to heel.

Last weekend’s meeting of the G20, representing the world’s leading economies, firmly rejected an American proposal aimed at the Chinese (and also the Germans) and opted for a less confrontational approach. The meeting in Seoul, South Korea essentially asked everyone to play nice. Whether they will or not remains to be seen. The subject is sure to come up again in November when G20’s heads of states get together.

The solution is not a quick re-evaluation of the currency, says the Carnegie Endowment’s Pettis, but “statesman-like behavior, in which the major economies agree to resolve their trade balances over several years.”

“Statesman-like behavior” is not exactly what is coming out of Washington these days.

Share

TPJ MAG