Houston: Oil prices tumbled below $50 a barrel Monday, spooking global financial markets and signaling that the remarkable 50 per cent price drop since June was continuing this year and even quickening.

The new drop in U.S. and global benchmarks of more than 4 percent was accompanied by a series of reports of increased Middle Eastern oil exports; continuing increases in U.S. production despite planned exploration cutbacks by many oil companies; and renewed worries about the declining economic fortunes of Europe.

The plunge once again sent jitters through global markets. The Dow Jones industrial average fell 331 points, or 1.86 percent, while the Standard & Poor’s 500-stock index, a broader benchmark, fell 37.62 points, or 1.83 percent. And the Vix, a measure of market volatility that is known as Wall Street’s fear gauge, leaped by around 12 percent.

In response, investors sought safety in government bonds around the world. As bond prices rose, the yield on the 10- year Treasury note fell to 2.04 percent on Monday.

The decline in oil was not the only source of concern in the markets. Worries about Greece’s ability to stay in the euro-zone have reasserted them- selves in recent days, for instance. The dollar continued its surge against the euro on Monday.

Still, as the oil price decline has continued, investors have increasingly seen it as a bad omen for the global economy. The drop may point to lower demand for oil and lower economic activity. And the decline suggests that policymakers have not managed to deal with the threat of deflation, or falling prices.

“There is certainly a deflationary mindset in the market,” said Jim Vogel, a debt markets strategist for FTN Financial, “and as we enter 2015, it’s beginning to nag some people that there could be a deflationary component to the economy.”

Leading the way is oil

“It is a very shaky start for the oil market,” said Tom Kloza, global head of energy analysis for Oil Price Information Service. “The norm is a lot of money comes into commodity index funds at the beginning of the year, and that can create a market rally. Today, instead of new money coming into oil, you got some more old money going out of oil.”

West Texas Intermediate crude dipped below $50 a barrel briefly Monday before recovering. Brent crude, the global benchmark, fell to about $53 a barrel.

The drop in prices has led to a rising tide of oil company announcements in recent days of investment cuts for the coming months. Ensign Energy Services, a Canadian drilling contractor, reported that it would be laying off 700 workers, or roughly 10 percent of its workforce, in California fields.

Several Texas based companies that have borrowed heavily in recent years to produce in new Texas and North Dakota shale fields are expected to announce steep investment and job cuts in the coming days.

Consumers continued to benefit from the oil price collapse, with the AAA auto club reporting Monday that the average national price for regular gasoline had fallen to $2.20 a gallon, 8 cents lower than a week ago, 51 cents lower than a month ago, and $1.11 below a year ago.

Energy experts say American families are likely to have as much as $115 billion more in disposable income in 2015 than last year because of lower gasoline prices alone. Additional benefits should come from drops in heating oil and diesel prices.

The last time oil and gasoline prices fell this low was in the wake of the 2008-09 financial collapse, when crude oil fell from well over $100 to below $40 a barrel in a matter of months. Energy analysts say the current price slump is of an entirely different nature, based primarily on a glut of oil being produced in the United States, along with increased production in Canada, Iraq and a handful of other countries.

While in the past the Organization of the Petroleum Exporting Countries has sometimes agreed to cut back production to shore up prices, Saudi Arabia and other Persian Gulf producers have decided to protect their global market share by cutting prices in the United States and Asian markets while increasing production somewhat.

In a recent interview with Middle East Petroleum and Economic Publications, based in Cyprus, the Saudi oil minister, Ali al-Naimi, indicated his country would remain steadfast rather than cut production anytime soon.

“If I reduce, what happens to my market share?” alNaimi said. “The price will go up and the Russians, the Brazilians, U.S. shale oil producers will take my share.”

Adding further pressure to prices is the weakening demand for oil and petroleum products in Europe and developing nations. That weakness is compounded as increasingly efficient vehicles come onto the market and China seeks to reduce the oil depend- ency of its economy.

There is little reason to believe any of those trends will change until midyear at the earliest, energy experts say. According to Simmons & Co., based in Houston, the 93 million barrel a day global market will continue to be over- supplied by at least 1 million barrels a day during the first half of 2015.

“It might be the dead of winter, but it looks as though markets will confront considerably more downside risk in the months ahead,” according to a Citi Research report released Sunday night, “and it will likely take well into the year before prices will bottom, let alone achieve a new equilibrium.”

Citi says it is most probable that the oil market will stabilize by the end of 2015, with the Brent price averaging $63 a barrel for the year – several dollars above the current price. But its more bearish forecast, with a 30 per- cent probability, is for Brent to average $55 for the year, roughly the current price.

A number of signs suggest that oil and oil product supplies will soon be increasing. The ramping up of several refineries in Saudi Arabia and the United Arab Emirates is likely to increase exports of products like gaso- line and diesel by 500,000 barrels a day in the coming months. Even without the Keystone XL pipeline, other Canadian pipelines coming online will bring as much as 350,000 more barrels onto the market.

Citi has projected that global investments in oil exploration and production will decline up to 15 percent this year, but U.S. companies continue to produce more efficiently.

Rystad Energy, a Norwegian global consulting firm, issued a report on Monday saying that the average break- even price for the principal shale fields in the United States had dropped to $58 a barrel, with the core areas of some fields remaining economical to produce at $50.

Oil-producing states are expected to suffer economically from the oil price drop, although the top oil-producing state, Texas, has worked hard to diversify its economy after the price bust of the 1980s. With a projected $3.5 billion budget deficit, Alaska has already announced a delay in six important infrastructure projects, including a gas pipeline from the North Slope.

© 2015 New York Times News Service

It is business in mind true but no. Uncle Sam is eyeing China hence left Pakistan dry and high to be with India. It is the geo political compulsion that force the most powerful man on earth to land in India for three working days. The rise of China, it’s expansionist mind set, military build up in South China sea and booming economy that is likely to overtake USA economy by 2028 has pushed USA to build solid relationship with India to counter the Chinese might collectively. For India, it is a tailor made situation to consolidate trade and technology relationship with the world’s most powerful nation. Secondly, the right wind NDA government led by hawkish Prime Minister Narendra Modi is an ideal partner to USA, presumably fighting a pitch battle with radical Islamic forces globally.

After arriving in India over the weekend, U.S. President Barack Obama concluded a series of bilateral agreements with Indian Prime Minister Narendra Modi. Obama, who was invited to India as the chief guest for India’s annual Republic Day celebrations, broached the once-uncomfortable topic of climate change with Modi, making surprising progress on the issue. The two leaders followed up on themes addressed during Modi’s September 2014 trip to the United States and addressed some issues that had been on the U.S.-India bilateral back-burner for several years now. What follows below is a quick distillation of nine high- lights out of the released joint statement, joint strategic vision document, and the visit overall. I’ll likely follow this up shortly with more detailed analysis on at least a couple of these points. I put together a similar summary of the previous U.S.-India bilateral joint statement after Modi’s U.S. trip, which focused primarily on defense and security issues that may help contextualize some of the below.

Ahead of this visit, the U.S. made it clear that both energy cooperation and climate change would be on the agenda. Unsurprisingly, one of the first announcements to come out of New Delhi during Obama’s visit was that the two countries had reached an agreement on climate change. Where previously India had resisted the notion that developing countries who had contributed little to global greenhouse gas production in the past should place caps on current emissions at the behest of developed countries, Modi seems to have partly revised India’s position. India will expand its use of renewable energy and move toward joining an international deal on global warming that would see developed and less-developed countries alike cap emissions. The development is a coup for the United States, which had similar success with China late last year. “When we think about the future generations and what kind of a world we are going to give them, then there is pres- sure,” Modi told the press after speaking with Obama. Obama, for his part, emphasized India’s importance for a global climate regulation regime: “India’s voice is very important” in negotiations, he said. Under a new agreement, the United States will also provide funding for renewable energy development in India.

Interestingly, the joint statement notes a confluence of two major East Asia-facing strategic initiatives by the two countries. The statement noted the alignment of “India’s ‘Act East Policy’ and the United States’ rebalance to Asia,” and the potential “opportunities for India, the United States, and other Asia-Pacific countries to work closely to strengthen regional ties” as result. This language did not appear in the September 2014 joint statement. Combined with the symbolism of Obama presiding over India’s Republic Day military parade, this sends a particularly strong message to Beijing. On a similar note, if you’re one for close textual analysis (as I sometimes am), the sixth clause of the statement highlights the “diversified” U.S.-India partnership with “strategic consultations, stronger defense, security, and economic cooperation.” Do take the ordering of those facets of cooperation with a grain of salt, but generally, the United States avoids emphasizing defense cooperation before economic cooperation in statements with countries that aren’t explicit allies.

On economics, the joint statement ticked all the usual points, promising increased trade and investment opportunities. The phrase “bilateral investment treaty” appears in this joint statement where it did not appear in the September 2014 document, suggesting that the two countries are serious about walking the walk on improved economic ties. U.S. firms in particular have complained about excessive red tape and corruption as risk-adding factors for doing business in India and a potential bilateral investment treaty negotiation process would likely require significant domestic political support in India.

The U.S. India Defense Technology and Trade Initiative (DTTI) once again makes an appearance. Back in September 2014, the two leaders noted that their countries would “treat each other at the same level as their closest partners” on issues including “defense technology transfers, trade, research, co-production, and co-development.” The DTTI is poised to increase co production, co-development and partner- ship in U.S.-India military-industrial matters. The initiative is line with the Modi government’s plans to increase India’s defense self-sufficiency and increase the share of India’s military hardware that is manufactured on Indian soil. There isn’t too much new information about the DTTI in this statement, though Modi’s new “Make in India” initiative gets a shout-out in the context of defense co-production.

Though not noted on the joint statement, Obama’s visit resulted in the revelation of more than a few straight- up hardware deals, including the joint production of parts and systems of the Lockheed C-130 (which India operates), and RQ-11 Raven drones. Both of these deals had appeared in reports prior to Obama’s trip. India will take delivery of six additional C-130s through 2017.

I noted back in September that the statement made then marked the first occasion the two countries official- ly pronounced their joint support for the principle of the freedom of navigation in the South China Sea and for resolving territorial disputes under UNCLOS. In the latest joint statement, neither the South China Sea nor UNCLOS makes an appearance. The Joint Strategic Vision document, however, notes that “regional prosperity depends on security. We affirm the importance of safeguarding maritime security and ensuring freedom of navigation and over flight throughout the region, especially in the South China Sea.” That same statement adds that the two countries “call on all parties to avoid the threat or use of force and pursue resolution of territorial and maritime disputes through all peaceful means, in accordance with universally recognized principles of international law, including the United Nations Convention on the Law of the Sea.” North Korea’s nuclear program makes an appearance in the joint statement yet again. Similar to the September statement, “human rights” are nowhere to be seen.

The statement as usual includes more than a few clauses addressing terrorism, law enforcement, and count- er-terrorism. Naturally, both countries will increase their cooperation on these issues. Similar to the September statement, Pakistan-based anti-India terror groups are called out by name in the joint statement. The two leaders pledged to come together “to disrupt entities such as Lashkar-e-Tayyiba, Jaish-e-Mohammad, D Company and the Haqqani Network.” Once again, they “reiterated their call for Pakistan to bring the perpetrators of the November 2008 terrorist attack in Mumbai to justice.”

One issue that has been on the U.S.- India back-burner for some time now came to the fore during this visit: the issue of nuclear energy and civil nuclear liability in India. Famously, the United States and India concluded a civil nuclear cooperation agreement 2006 and, in 2008, India received a waiver from the Nuclear Suppliers Group, making it the only non-nuclear Non-Proliferation Treaty (NPT) compliant state to engage in normal nuclear commerce while maintaining an active nuclear weapons program. Unfortunately, India is yet to attract U.S. suppliers to set up nuclear facilities on its soil due to an unfortunately harsh legal liability regime in the form of the 2010 Civil Liability for Nuclear Damage Act. This law creates unacceptably high amounts of risk for foreign suppliers. To address this, Obama and Modi are exploring the possibility of an insurance pool that will, in theory, moderate the risk exposure for U.S. suppliers and bring U.S. nuclear suppliers into India (this is a complex issue and Praveen Swami over at The Indian Express has a great primer outlining the stakes). For the moment, according to the New York Times, Westinghouse and GE Hitachi Nuclear Energy have welcomed the agreement.

As I noted above, both India’s “Act East” policy and the U.S. re balance  to Asia make an early appearance in the joint statement. The statement notes later that India and the United States will “work more closely with other Asia Pacific countries through consultations, dialogues, and joint exercises.” Interestingly enough, the next sentence specifically highlights the importance of the U.S. India Japan trilateral relationship. Japan is a U.S. treaty ally and an increasingly close partner to India. Japan’s Prime Minister Shinzo Abe was India’s chief guest at last year’s Republic Day celebrations. Overall, this visit is a strong indicator that U.S. India ties will follow a positive trajectory over the course of this year. It was indeed bold of Indian prime minister Narendra Modi to extend an offer to Obama to visit India so soon after visiting Washington himself. Obama, by accepting, became the first sitting U.S. president to visit India twice while in office (though Obama did cut his visit short to visit Saudi Arabia to pay respects to its recently deceased king). It’s been clear for some time now that the United States and India are strategically converging. Unfortunately, given India’s low standing on the list of U.S. foreign policy priorities and latent scepticism about U.S. intentions in India, the pace of that convergence was sluggish. If Obama’s visit and Modi’s 2014 U.S. visit are any indication, both countries are serious about making up for lost time. The USA think tank headed by Mr Henry Kissinger have quantified four  major blocks in the world namely USA, Europe, Arab world and China. The former NSA have never mentioned India in high priority list of foreign policy via USA. The sudden love of USA for India must be tread with caution and India must surrender itself to larger diplomatic designs by forgoing its own sovereign foreign policy. In the emerging new world order, surely there is a scope for building even deeper ties with USA. A country of over billion people must guard itself from foreign policy complacency and defense related preparation keeping in view the external and internal threats.

 – BY Prashant Tewari

Paris: The bloody denouement on Friday of two hostage crises at different ends of a traumatized Paris means attention will now shift to the gaping question facing the French government:

How did several jihadis and possibly a larger cell of co-conspirators manage to evade surveillance and execute a bold attack despite being well known to the country’s police and intelligence services?

On its own, the Wednesday morning slaughter that left 12 people dead at the satirical newspaper Charlie Hebdo represented a major breakdown for French security and intelligence forces, especially after authorities confirmed that the two suspects, the brothers Said and Cherif Kouachi, had known links to the militant group, al-Qaida in Yemen.

Then on Friday, even as police had cornered the Kouachi brothers inside a printing factory in the northeast suburbs, another militant, Amedy Coulibaly who has since been linked to the Kouachis stormed a Kosher supermarket in Paris and threatened to kill hostages if the police captured the Kouachis.

“There is a clear failing,” French Prime Minister Manuel Valls told French television Friday.

“When 17 people die, it means there were cracks.”

A U.S. official speaking about the failure to identify the plot said that French intelligence and law enforcement agencies had conducted surveillance on one or both of the Kouachi brothers after Said returned from Yemen, but later lessened that monitoring or dropped it altogether to focus on what were believed to be bigger threats.

“These guys were known to be bad, and the French had tabs on them for a while,” said the official, who spoke on the condition of anonymity to avoid complicating a delicate intelligence matter. “At some point, though, they allocated resources differently. They moved on to other targets.”

The official acknowledged that U.S.spy agencies tracked Westerners, particularly young men, traveling in and out of Yemen much more closely after a failed al-Qaida plot to blow up an airliner on Christmas Day 2009.

But the official said the United States left the monitoring of the Kouachi brothers and other French citizens in France to that country’s security services.

One reason for the lapses may be that the number of possible jihadis inside France has continued to expand sharply. France has seen 1,000 to 2,000 of its citizens go to fight in Syria or Iraq, with about 200 returning, and the task of surveillance has grown overwhelming.

The questions facing French intelligence services will begin with the attack at Charlie Hebdo.

Authorities knew that striking the satirical newspaper and its editor, for their vulgar treatment of the Prophet Muhammad, had been a stated goal of al-Qaida in the Arabian Peninsula, through its propaganda journal, Inspire.

Intelligence officers also had identified the Kouachi brothers as being previously involved in jihad related activities, for which Cherif was convicted in 2008. Investigators also have linked Cherif to a plot to free from prison an Islamic militant convicted for the 1995 bombing of a French subway station, while French news organizations have reported that Coulibaly was also implicated in that case.

© 2015, The New York Times News Service

The US is on the thin edge of strategic failure in two wars: the war in Iraq and the war in Afghanistan/Pakistan. This failure may never reach the point of outright defeat in either country. Iraq may never become hostile, revert to civil war, or come under anything approaching Iranian control. Afghanistan and Pakistan may never become major sanctuaries for terrorist attacks on the US and its allies.

Yet Iraq is already a grand strategic failure. The US went to war for the wrong reasons, let Iraq slide into a half decade of civil war, and failed to build an effective democracy and base for Iraq’s economic development. Its tactical victories if they last did little more than put an end to a conflict it help create, and the US failed to establish anything like the strategic partnership it sought.

The US invasion did bring down a remarkably unpleasant dictatorship, but at cost of some eight years of turmoil and conflict, some 5,000 US and allied lives and 35,000 wounded, and over 100,000 Iraqi lives. The Congressional Research Service estimates that the dollar cost of the war to the US alone is over $823 billion through FY 2012, and SIGIR estimates that the US and its allies will have spent some $75 billion on aid – much of it with little lasting benefit to Iraq.

The outcome in Afghanistan and Pakistan now seems unlikely to be any better. While any such judgments are subjective, the odds of meaningful strategic success have dropped from roughly even in 2009 to 4:1 to 6:1 against at the end of 2011. It is all very well for senior US officials to discuss ?fight, talk, and build, and for creating a successful transition before the US and ISAF allies withdraw virtually all of their combat troops and make massive cuts in the flow of outside money to Afghanistan. The US, however, has yet to present a credible and detailed plan for transition that shows the US and its allies can achieve some form of stable, strategic outcome in Afghanistan that even approaches the outcome of the Iraq War.

Far too many US actions have begun to look like a cover for an exit strategy from Afghanistan, and the US has never provided a credible set of goals indeed any goals at all for the strategic out- come it wants in Pakistan. Unless the US does far more to show it can execute a transition that has lasting strategic benefits in Afghanistan and Pakistan well after 2014, it is all too likely to repeat the tragedy of its withdrawal from Vietnam.

Such a US strategic failure may not mean outright defeat, although this again is possible. It is far from clear that the Taliban and other insurgents will win control of the country, that Afghanistan will plunge into another round of civil war, or that Afghanistan and Pakistan will see the rebirth of Al Qaida or any other major Islamist extremist or terrorist threat.

However, the human and financial costs have far outstripped the probable grand strategic benefits of the war. Given the likely rush to a US and ISAF exit, cuts in donor funding and in country expenditures, and unwillingness to provide adequate funding after 2014, Afghanistan is likely to have less success than Iraq in building a functioning democracy with control over governance, economic development, and security. Worse, Pakistan is far more strategically important and is drifting towards growing internal violence and many of the aspects of a failed state.

Even if Afghanistan gets enough outside funding to avoid an economic crisis and civil war after US and allied withdrawal, it will remain a weak and divided state dependent on continuing US and outside aid through 2024 and beyond, confining any strategic role to one of open-ended dependence. As for a nuclear-armed Pakistan, it is far more likely to be a disruptive force in Afghanistan than a constructive one, and there is little sign it will become any form of real ally or effectively manage its growing internal problems.

Regardless of which outcome occurs, the result will still be strategic failure in le estimates of total Afghan casualties since 2001, but some estimates put direct deaths at around 18,000 and indirect deaths at another 3,200-20,000. And the war is far from over.terms of cost-benefits to the US and its allies. The Afghan War has cost the US and its allies over 2,700 dead and well over 18,000 wounded. There are no reliable.

The Congressional Research Service estimates that the dollar cost of the war to the US alone is over $527 billion through FY2012, and SIGAR estimates that the US and its allies will have spent some $73 billion on aid much of it again with little lasting benefit. Similar cost estimates are lacking for Pakistan, but they have also taken significant casualties and received substantial amounts of US aid.

The key question now is whether the US can minimize the scale of its strategic failure. Can the US move from concepts and rhetoric to working with its allies, Afghanistan, and Pakistan to create a credible transition plan that can secure Congressional and popular sup- port and funding? Can they actually implement such a transition plan with the effectiveness that has been lacking in its efforts in Iraq and Afghanistan to date?

Some form of success (or limited failure) may still be possible, but the analysis in this paper warns that nothing the US government has said to date raises a high probability that this will be the case, and that much of the progress it has reported may be misleading. There are four critical areas wherein any lasting level of success is now unlikely:

Strategic failure?

The US has not shown that it can bring about enough of the elements required to create Afghan security and stability in a way that creates more than a marginal possibility that Afghanistan will have a successful transition by 2014, or at any time in the near future. It has never announced any plan that would make this possible. It has no strategic plans or clearly defined goals for Pakistan, although it has far more strategic importance than Afghanistan. Talk Without Hope: It is far from clear that any major insurgent faction feels it is either losing, or cannot simply out wait, US and allied withdrawal. Nor is it clear that Pakistan will ever seriously attempt to eliminate insurgent sanctuaries within its borders. If insurgents do chose to negotiate it may well be because they feel the US, allied, and GIROA position is becoming so weak they can use diplomacy as a form of war by other means and speed their victory through deception and by obtaining US,allied, and GIROA concessions. They have already used similar tactics in Helmand and Pakistan, and Nepal and Cambodia are warnings that ?talk may do little more than cover an exit. Tactical Success? The very real gains the US and ISAF have made in the south may not be possible to hold if the US move forces east, and the US and ISAF are cutting forces so quickly that it is doubtful they can achieve the goals that ISAF set for 2012. ANSF development is being rushed forward as future resources are being cut, and it is far from clear that the insurgents cannot out wait the US and ISAF and win a war of political attrition without having to win tactical battles in the field. The ISAF focus on significant acts of violence is a questionable approach to assessing both tactical and strategic progress, and ANSF transition has been little more than political symbolism. Spend Not Build?

The latest Department of Defense and SIGAR reports do little to indicate that US and allied efforts to improve the quality of government, the rule of law, representative democracy, and economic development are making any- thing like the needed level of progress. They are a warning that Afghanistan and the Afghan government may face a massive recession as funding is cut, and the dreams of options like mining income and a ?new Silk road are little more than a triumph of hope over credible expectations. Once again, the very real progress being made in the development of the ANSF is being rushed as future funding is being cut, and it is unclear that current gains will be sustained or that the US has sufficient time left in which to find credible answers to these questions, build Congressional, domestic, and allied support, and then to begin implementing them. It is now entering the 11th year of a war for which it seems to have no clear plans and no clear strategic goals. The new strategy that President Obama outlined in 2009 is now in tatters.

There are no obvious prospects for stable relations with Pakistan or for get- ting more Pakistani support. The Karzai government barely functions, and new elections must come in 2014 – the year combat forces are supposed to leave. US and allied troop levels are dropping to critical levels. No one knows what presence – if any – would stay after 2014. Progress is taking place in creating an Afghan army, but without a functioning state to defend, the ANSF could fragment. Far less progress is taking place in creating the police and justice system. Massive aid to Afghanistan has produced far too few tangible results, and the Afghan economy is likely to go into a depression in 2014 in the face of massive aid and spending cuts that will cripple both the economy and Afghan forces.

It is time the Obama Administration faced these issues credibly and in depth. The US and its allies need a transition plan for Afghanistan that either provides a credible way to stay with credible costs and prospects for victory or an exit plan that reflects at least some regard for nearly 30 million Afghans and our future role in the region. It needs to consider what will happen once the US leaves Afghanistan and what longer term approaches it should take to a steadily more divided and unstable Pakistan.

In the case of the US, this also means a detailed transition plan that spells out exactly how the US plans to phase down its civil and military efforts, what steps it will take to ensure that transition is stable through 2014, and a clear estimate of the probable cost. The US needs a meaningful action plan that Congress, the media, area experts, and the American people can debate and commit themselves to supporting. If President Obama cannot provide such a plan within months, and win the sup- port necessary to implement it, any hope of salvaging lasting success in the war will vanish.

Even if the US does act on such a plan and provide the necessary resources, it may not succeed, and Pakistan may become progressively more unstable regardless of US aid and actions in Afghanistan. Any de facto ?exit strategy? will make this future almost inevitable.

The most likely post-2014 out come in Afghanistan, at this point in time, is not the successful transition to a democratic Afghan government with control of the entire country. Nor is it likely that the Taliban will regain control of large parts of the country. Rather, the most likely outcome is some sort of middle ground where the insurgents control and operate in some areas, while others are controlled by the Pashtun. Some form of the Northern Alliance is likely to appear, and the role of the central government in Kabul would be limited or caught up in civil conflict.

This would not be what some US policy makers call ?Afghan good enough,? it would be ?Afghan muddle through.? What, exactly such an ?Afghan muddle would look like, and how divided and violent it would be, is impossible to predict. But it is the most likely outcome and the US needs to start now to examine the different options it has for dealing with a post-2014 Afghanistan that is far less stable and self-sufficient than current plans predict, and make real plans for a Pakistan whose government and military cannot move the country forward and contain its rising internal violence. As is the case in Iraq, strategic failure in the Afghanistan Pakistan War cannot end in a total US exit. The US must be ready to deal with near and long term consequences.

Courtesy CSIS

Taiwan is a part of the geographical area of operation of India’s Look East Policy (LEP). Although India does not recognize Taiwan as a sovereign state, its functional and people-to- people contacts with Taiwan are explainable under the LEP. Besides, India’s economic activities are on the rise in the vicinity of Taiwan. Though commercial in nature, India’s presence in the South China Sea, along with improvement in its bilateral relations with Asia-Pacific countries especially in the realm of politics and defense cooperation is of strategic significance. In the overall strategic context of the region, increasing functional ties with Taiwan without undermining the support to the one China Policy would be a stiff challenge requiring clarity of vision and skilled diplomacy. Thus, it is imperative for India to have a much better understanding of Taiwan, and the Asia-Pacific region.

In the author’s view, functional ties/cooperation and people-to-people relations could make a separate category without attaching any diplomatic, political or strategic meanings. The main attributes of this category can be listed as below:

• A comprehensive package that includes cooperation in education, culture, science and technology, trade and investment and other similar issue- areas.
• The package could also be characterised as people-to-people relations.
• Cooperation without manifest strategic underpinning and implications.

Engagement with Taiwan would lead India to have a more informed Taiwan policy. Its unique geographical location and political situation would also con- tribute to India’s understanding of the Asia-Pacific region. Taiwan is situated in the middle of the disputed waters of the South and the East China Seas. Considering the continued threat from the People Republic of China (PRC) to its national security, Taiwan not only has a natural interest in the modernization of the People’s Liberation Army (PLA), China-Japan tensions, and the dynamic of Sino-US relations, but also a natural expertise on them. Taiwan and China have historical and cultural affinity, but political and strategic distance. Strategically, Taiwan is close to the US and figures in Japan’s security considerations. It is obliquely mentioned in the US-Japan Defense Guidelines, 1997. But the US and Japan’s support for PRC’s One China Policy has set a limit on their relations with Taiwan. Thus, Taiwan is not fully open to either of the major regional players. This situation leaves it marginalized and dissatisfied with every major power in the region and makes it a neutral interpreter of the region’s politics. India could tap into this consultative potential of Taiwan.

Functional cooperation with Taiwan is even more valuable. Taiwan is a thriving and industrialized economy that is closely integrated with the international economy. It is amongst the world’s leading exporting and importing countries. It is the leading producer and manufacturer in the world in foundries, IC packages, blank optical discs, mask ROMs, mobility scooters/powered wheelchairs and chlorella. If the products made by Taiwanese companies outside Taiwan are also taken into account, the list of products commanding a high share in the world is even longer. Notebooks, Tablets, LCD monitors, IC packages, motherboards (System & Pure MB), WLAN CPEs, cable modems, and digital blood-pressure monitors are a few examples. Apart from electronics, Taiwan’s agro industries, particularly food-processing, maintain international standards. It also holds high rank in the international rating by agencies like the Institute for Management Development (IMD), Business Environment Risk Intelligence (BERI), the World Economic Forum (WEF), and the Heritage Foundation. Its business environment, research and development, and innovation are recognized worldwide. (Data relating to all these is available in the tables at the end of this monograph). Further, Taiwan’s education system ranks quite high. For instance, fourteen Taiwanese universities in 30 disciplines are on the list-compiled by the QS World University of the UK of the top 200 universities in the world.1 India could become an important destination for Taiwan’s new Go South policy for diversifying Taiwan’s trade and investment basket. India could also become an alternative to China for many Taiwanese companies in view of rising wages and costs in that country.

In fact, a regulated flow of skilled labour from India can help overcome the problem of high costs in Taiwan itself. Taiwanese FDI can contribute to India’s manufacturing, infrastructure and other sectors. India and Taiwan make a case for mutual benefit by being substantial complementary economies, as India’s computer software industry complements Taiwan’s computer hardware capability. India’s demography, with a more than 300 million strong middle class, offers an economic opportunity for Taiwanese entrepreneurs. India is also one of the leading suppliers of natural resources. It can be a gateway to South Asia, and even West Asia, for Taiwanese companies. Further, like Taiwan, India too has a reasonably impressive record of achievements in science and technology. For instance, India has gained inter- national recognition in the automobile, electronics and space science sectors. In education, India has internationally recognised institutes- like the Indian Institutes of Technology (IITs) and Indian Institutes of Management (IIMs). Besides, there is sufficient space for cooperation between the two countries in the spheres of culture and tourism. This monograph deals with Taiwanas it exists in the world today.

It does not deal with the legal question, whether Taiwan is an independent state or a Chinese province. Despite its ambiguous diplomatic status, Taiwan remains an important factor in the East Asian security scenario. In spite of the Cross-Strait relations in their best phase, the solution to the Cross-Strait conundrum remains elusive. Taiwan and the People’s Republic of China (PRC) have signed 19 agreements related to functional areas since 2008. However, a formal political dialogue or a peace agreement that the PRC is pushing hard for, is not in sight. Taiwan does not appear inclined to yield on the question of sovereignty. Any formula that would downgrade Taiwan’s international standing is unacceptable to both Taiwan’s political class and the common Taiwanese.

Contrary to Chinese expectations, the prospects of economic cooperation and integration have not made the Taiwanese amenable to Chinese claims over Taiwan. Similarly, on the other side of the Taiwan Strait, Taiwan’s unification with China continues to be a powerful reference point for Chinese nationalism. China still has its missiles deployed against Taiwan. Moreover, it is yet to renounce the use of force as an option to resolve the Cross-Strait problem. This reinforces Taiwan’s perception of China as a threat to its security. Finally, the US, the security guarantor of Taiwan under the Taiwan Relations Act (TRA) 1979, continues to maintain diplomatic ambiguity over the Cross-Strait issue. Therefore, any conflagration in the volatile waters of Taiwan Strait could result in a US- China face off.

Taiwan is also a part of problematic territorial claims in the East China Sea and the South China Sea. Its claims overlap with those of China and are ignored by the other concerned parties. Taiwanese claims mostly address domestic constituency. It appears con- tent with the practical arrangements for resource-sharing. A good example is its fishery pact with Japan in 2013. However, since these claims stoke popular sentiment in Taiwan, it is difficult for the Taiwanese government to ignore the public opinion on these issues. Therefore, overlooking Taiwan in the regional security map would bring pres- sure on the US alliance in the region, of which Taiwan is a part. Taiwan success- fully drove this point during the stand- offs between Japan and China in the East China Sea over the Senkaku/Diao Yu islands in 2012-13 by its diplomatic manoeuvrings. In fact, the Japan- Taiwan fishery pact has effectively made the dispute tripartite, and implies that Taiwan is a player in the dispute. In May 2013, the government of Taiwan conveyed that diplomatic recognition or not, it is capable of taking care of its citizens when it flexed its economic muscle against the Philippines over the killing of a Taiwanese farmer-fisherman by the Philippines coastguard.

Finally, accelerated interaction and cooperation in functional areas between India and Taiwan would, in the long-term, also contribute to increased mutual awareness. The Cross-Strait unification would not be the only eventuality in the dialectics of Cross-Strait relations. Whether Taiwan would eventually unify with China, or the status quo would persist, or some other form of Cross-Strait relations would emerge, is difficult to predict. To study and engage Taiwan is important irrespective of the scenarios, because each scenario will shape the regional security dynamics in its own way.

 – Prashant Kumar Singh

Finally, the much anticipated elections for the National Assembly along with four Provincial Assemblies got over last week. While the results are clear in terms of who won and how many seats, it would take few weeks to identify the major trends in 2013 elections. This commentary focuses on eight major trends/out comes that could be identified, as a preliminary analysis.

First and foremost, the election process and the polling, was by and large free and fair, especially in a South Asian, and in particular Pakistani context. Though there was violence, it did not totally disrupt the election process. And more importantly, there are no reasons to believe that either the military or the intelligence agencies tried to change the outcome of the results. Invariably, every political party, perhaps except the ANP (Awami National Party) had a level playing field in terms of freeness and fairness of the election process and polling.

Zardari deserves a big applause for not only his deft handling of internal political issues and external issues in such a manner that there was no dissolution of the elected assemblies, but also for conducting elections as per the schedule. And perhaps it deserves special applause for the smooth transition, through the appointment of caretaker governments both at the national and provincial levels. It is unfortunate, that the PPP lost badly, despite its success in completing the term, amongst threats from the TTP, failing economy and huge foreign policy and security challenges.

Second major outcome that could be identified is the rationalization of all national political parties in Pakistan. Though it is generally being voiced both inside and outside the region, that Pakistan has voted Nawaz Sharif to power, an analysis of the seats that the PML-N has won, clearly projects that the seats for the National Assembly has been primarily from the constituencies in Punjab. Of the 123 seats that the PML-N has won, except for a few seats from KP, the rest had come primarily from Punjab. For the PPP, almost all its seats that it has won for the National Assembly have come from Sindh. Similarly, for the PTI of Imran Khan, majority of the seats it has won for the National Assembly has come from Khyber Pakutunkhwa.

Third major outcome, which could be easily identified, is the failure of religious political parties to make any significant impact. Though the last two general elections witnessed a decent growth in their contribution to the National Assembly, 2013 elections should have been a disappointment for the religious political parties. While the JUI (Fazlur Rahman) and Jamaat-e- Islami (JI) could manage to win ten and three seats respectively, rest of the religious parties could not capture a single seat. Perhaps, this election has cremat- ed whatever was left of the MMA.

Those who have been following the performance of the religious political parties in Pakistan would agree that in any free and fair elections, the Right did not have much of a success. They may have a strong street power, but it never materialised into seats, if the elections remained free and fair.

If the religious political parties did not perform well in the elections, nor did the liberal and secular parties, such as the PPP, ANP and MQM, which could be identified as the fourth major outcome of this election. For the PPP, it was almost a complete disaster. From being the ruling party for the last five years, all that the PPP could manage was 31 seats, that too only from Sindh. The implications of this election for the PPP should be a larger discussion; with no Benazir Bhutto and with a corrupt image for Zardari, the PPP will need nothing short of a miracle to bounce back, first within Sindh and second at the national level. Bilawal Bhutto is too far physically and emotionally from Pakistan, and especially from the PPP supporters.

The ANP, PPP’s partner performed worse. The party has been completely wiped off and decimated both at the national level, and in the KP province, which is its stronghold. Undoubtedly, the ANP was the primary target of the TTP and took most of the violence perpetrated by the Taliban before and during the elections. As a result, when compared to the other political parties, the ANP could not campaign that effectively. Though the TTP led violence could be considered as a reason for the ANP’s bad performance, the fact is, it could not project a coherent road map or win the support of people from its performance. All it could manage was a single seat for the National Assembly!

Though the MQM could manage 13 seats, mainly from Sindh, more data is needed to find out in which regions it has performed well and whether it has been able to retain the vote bank. PML- Q, the other liberal party could manage only two seats.

Fifth major outcome, when compared to above liberal political parties, is the substantial performance of Imran Khan and his PTI. His party has won 26 seats, few short of the PPP, but way ahead of the rest of other established political parties. Though he has secured most of seats from KP, he did manage to win a few from other provinces as well.

However, for someone who has been touted as the next Prime Minister, and an alternative for the PML-N in Punjab, Imran Khan and his PTI was a bubble that had burst. All he and his party could manage is a collation government in KP province.

Despite the above drawback, undoubtedly the PTI was a success story; along with the PML-N, both the political parties could be seen as right of the center in terms of ideology. Both are not exactly liberal political parties, and that could be the sixth major outcome of this election.

Seventh major outcome could be the relative stability in provincial assemblies. The biggest province Punjab will be ruled by the PML-N, with much ease, and Sindh by the PPP. There seems to be an understanding already in KP in letting Imran Khan’s PTI to form the government. Balochistan may remain the only province in terms of political stability within the Assembly.

Finally, the biggest outcome of the election was the general participation and the rejection of TTP’s threats. The violence has neither affected the outcome, nor the process; the people took part with enthusiasm and in big numbers. Perhaps, this could be a new beginning that Pakistan has been looking forward. Much will depend on how the process is taken forward by Nawaz Sharif and the provinces.

Courtesy : Institute of Peace and Conflict Studies (http://www.ipcs.org)

China and economic stagnation in Europe and America is making the West increasingly uncomfortable. While China is not taking over the world militarily, it seems to be steadily taking it over commercially. In just the past week, Chinese companies and investors have sought to buy two iconic Western companies, Smith field Foods, the American pork producer, and Club Med, the French resort company.

Europeans and Americans tend to fret over Beijing’s assertiveness in the South China Sea, its territorial disputes with Japan, and cyber attacks on Western firms, but all of this is much less important than a phenomenon that is less visible but more disturbing: the aggressive worldwide push of Chinese state capitalism. By buying companies, exploiting natural resources, building infrastructure and giving loans all over the world, China is pursuing a soft but unstoppable form of economic domination. Beijing’s essentially unlimited financial resources allow the country to be a game-changing force in both the developed and developing world, one that threatens to obliterate the competitive edge of Western firms, kill jobs in Europe and America and blunt criticism of human rights abuses in China.

Ultimately, thanks to the deposits of over a billion Chinese savers, China Inc. has been able to acquire strategic assets worldwide. This is possible because those deposits are financially repressed savers receive negative returns because of interest rates below the inflation rate and strict capital controls that prevent savers from investing their money in more profitable investments abroad. Consequently, the Chinese government now controls oil and gas pipelines from Turkmenistan to China and from South Sudan to the Red Sea.

Another pipeline, from the Indian Ocean to the Chinese city of Kunming, running through Myanmar, is scheduled to be completed soon, and yet another, from Siberia to northern China, has already been built. China has also invested heavily in building infrastructure, undertaking huge hydroelectric projects like the Merowe Dam on the Nile in Sudan — the biggest Chinese engineering project in Africa and Ecuador’s $2.3 billion Coca Codo Sinclair Dam. And China is currently involved in the building of more than 200 other dams across the planet, according to International Rivers, a nonprofit environmental organization.

China has become the world’s leading exporter; it also surpassed the United States as the world’s biggest trading nation in 2012. In the span of just a few years, China has become the leading trading partner of countries like Australia, Brazil and Chile as it seeks resources like iron ore, soybeans and copper. Lower tariffs and China’s booming economy explain this exponential growth. By buying mainly natural resources and food, China is ensuring that two of the country’s economic engines urbanization and the export sector are securely supplied with the needed resources.

In Europe and North America, China’s arrival on the scene has been more recent but the figures clearly show a growing trend: annual investment from China to the European Union grew from less than $1 billion annually before 2008 to more than $10 billion in the past two years. And in the United States, investment surged from less than $1 billion in 2008 to a record high of $6.7 billion in 2012, according to the Rhodium Group, an economic research firm. Last year, Europe was the destination for 33 percent of China’s foreign direct investment.

Government support, through hidden subsidies and cheap financing, gives Chinese state owned firms a major advantage over competitors. Since 2008, the West’s economic downturn has allowed them to gain broad access to Western markets to hunt for technology, know how and deals that weren’t previously available to them. Western assets that weren’t on sale in the past now are, and Chinese investments have provided desperately needed liquidity.

This trend will only increase in the future, as China’s foreign direct investment skyrockets in the coming years. It is projected to reach as much as $1 trillion to $2 trillion by 2020, according to the Rhodium Group. This means that Chinese state-owned companies that enjoy a monopolistic position at home can now pursue ambitious international expansions and compete with global corporate giants. The unfairness of this situation is clearest in the steel and solar- panel industries, where China has gone from a net importer to the world’s largest producer and exporter in only a few years. It has been able to flood the market with products well below market price and consequently destroy industries and employment in the West and elsewhere.

THIS is the real threat to the United States and other countries. However, most Western governments don’t seem to be addressing China’s state driven expansionism as an immediate priority. On the contrary, European governments dealing with their own economic crises see China as a country that can help, either by buying sovereign debt or going ahead with investments in their countries that will create jobs.

The Chinese state-owned company Cosco currently manages the main cargo terminal in the biggest Greek port, Piraeus, near Athens a 35-year concession deal. And China’s sovereign wealth fund, C.I.C., took a 10 percent stake in London’s Heathrow Airport in 2012, as well as a nearly 9 percent stake in the British utility company Thames Water. The state-owned firms Three Gorges Corporation and State Grid are the main foreign investors in Portugal’s power-generation sector, and C.I.C. also bought a 7 percent stake in France’s Eutelsat Communications.

In the Greek port the Chinese have been able to triple capacity, amid local unions’ criticism of worsening labor conditions. It’s too early to measure China’s impact in the other investments, but the fact that Chinese companies are able to invest in sectors that are closed or restricted for European firms in China says a lot about how minimal Europe’s leverage with China is.

Take Germany, which accounts for nearly half of the European Union’s exports to China. It’s highly unlikely that Berlin would make unfair competition the cornerstone of its China policy. Moreover, the lack of leverage and leadership in Brussels means that the union is unable to take firm action to force China into adopting measures that would level the playing field or guarantee reciprocity in its domestic market. The only exception is the United States, which seems to be addressing the issue by pushing forward the Trans Pacific Partnership, a regional trade association that is seen by critics in Beijing and elsewhere as an American led policy to contain China. The club is thought to be restricted to countries that meet high American standards on issues like free competition, labor and local regulations would allow the arrival of thousands of low wage Chinese workers.

The Arctic territory didn’t have too many alternatives. No other country is in a position to become Greenland’s strategic partner for its future development, given the business risks involved in the Arctic region and the scale of the investment needed in a territory bigger than Mexico but without a single highway. An American oil company couldn’t have handled the task alone. The Chinese state capitalist system, by contrast, allows multiple state owned companies to work together, making it possible for the China National Petroleum Corporation, for instance, to extract oil while China Railway builds basic infrastructure.

Greenland’s leaders accepted China’s terms because they likely believed these costly projects might never go ahead if the Chinese didn’t get involved; only China has the money, the demand, the experience and the political will to proceed. Moreover, there are not enough skilled workers in Greenland for such projects, so the Greenlandic government made an exception to the law, allowing Chinese laborers to earn less than minimum wage figuring that local residents would benefit from new infrastructure and royalties.

China’s deep pockets, as well as its extensive labor force and unlimited demand for natural resources, made all the difference, and accordingly Greenland was prepared to pass tailor made legislation to meet Chinese needs. Even Denmark, which holds authority in Greenland in areas like migration and foreign policy, decided not to interfere.

IT is even happening in progressive bastions like Canada. President Obama’s refusal thus far to approve the Keystone pipeline project has made Prime Minister Stephen Harper’s conservative government turn to China to secure an export market for Canadian crude oil reserves. The Calgary based oil industry has lobbied Mr. Harper to adopt a new diversification strategy that includes the construction of a controversial pipeline to western British Columbia, despite strong opposition from environmental groups, the First Nations aboriginal communities and the public. In the meantime, Canada also signed a Foreign Investment Promotion and Protection Agreement with China, which gives remarkably generous investment protection to the Chinese.

With China in the center of debates over FIPA and the west coast pipeline, Canada’s government then approved the takeover of the Canadian energy giant Nexen by the Chinese state owned oil firm Cnooc. The $15.1 billion transaction was China’s largest foreign takeover.

Closer economic ties have had political side effects; the Harper administration now seems much more cautious in criticizing China’s human rights record. Given that Canada was until very recently one of the fiercest voices on China’s handling of dissidents, this is not only a remarkable 180-degree turn, but also a clear indication of how China’s economic influence can push the political agenda to the sidelines, even in the West.

In Australia, Chinese accumulated investment inflows at the end of 2012 surpassed $50 billion. The trend is striking: Chinese direct investment in Australia in 2012 increased 21 percent from 2011 levels to reach $11.4 billion, making it an important player in Australia’s mining industry. Australia’s trade portfolio remains highly diversified, but the Chinese share is growing rapidly.

China has also become the biggest investor in Germany (in terms of the number of deals), surpassing the United States. Chinese companies are looking for companies that, like Putzmeister, have a technological edge and have become world leaders in niche markets. Those takeovers also allow them to absorb Western know how on branding, marketing, distribution and customer relations. Others are more opportunistic. Faced with recession, struggling European firms like Volvo quickly welcomed Chinese partners who were ready to inject capital and take full control.

The loans that Beijing is giving worldwide are even more significant, in dollar terms, than direct foreign investment. These loans include $40 billion to Venezuela and more than $8 billion to Turkmenistan in recent years. China’s policy banks (China Development Bank and Export Import Bank of China) are the key institutions supporting China’s “Go global” strategy, as they provide billions of dollars in loans to foreign countries to acquire Chinese goods; finance Chinese-built infrastructure; and start projects in the extractive and other industries.

This is clearest in countries where the West claims to link its aid to human rights and good business practices. Chinese loans have been crucial in countries like Angola that have faced threats of a cutoff in financing from Western creditors, the World Bank and the International Monetary Fund. Ecuador, Venezuela, Turkmenistan, Sudan and Iran have all faced such difficulties, and China has stepped in without political or ethical strings attached. Chinese statistics reveal little about these loans, but a study by The Financial Times showed that, between 2009 and 2010, China was the world’s largest lender, doling out $110 billion, more than the World Bank.

It is important to remember what is really behind China’s global economic expansion: the state. China may be moving in the right direction on a number of issues, but when Chinese state owned companies go abroad and seek to play by rules that emanate from an authoritarian regime, there is grave danger that Western countries will, out of economic need, end up playing by Beijing’s rules.

As China becomes a global player and a fierce competitor in American and European markets, its political system and state capitalist ideology pose a threat. It is therefore essential that Western governments stick to what has been the core of Western prosperity: the rule of law, political freedom and fair competition.

They must not think shortsightedly. Giving up on our commitment to human rights, or being compliant in the face of rapacious state capitalism, will hurt Western countries in the long term. It is China that needs to adapt to the world, not the other way

Courtesy New York Times

Army confirms Chinese buildup along India border

LADAKH: The Indian army has long voiced concern over the depth and pace of China's military modernisation, especially in its infrastructure bordering India. On the Line of Actual Control at Demchok in South-East Ladakh, signs of that modernisation on the China side were visible.

Lt General Ravi Dastane, Army Commander, Leh said, "We are watching it closely, it's a capability they are building, it also has a military implication." Colonel SK Sheoran said, "Before 2008 they were 35km behind Demchok, now a platoon strong is deployed in the Zorawar Hill."

In contrast, infrastructure in Ladakh is non-existent. All military and civil vehicles move along dirt trails similar to the mule tracks of the 1962 war. Commander, Fuk-Che Anil Chaudhary said, "Whatever roads are there, gravel surface or natural surface are adequate for moving of military vehicles however better developed roads would add impetus to our own preparation."

Add to that the constant surveillance from Chinese observation posts. New roads are now being laid behind hills that block China's view but progress is slow. In many cases environmental clearances have delayed road building. Air support is hampered by the lack of airfields. The army admits that advanced landing grounds in Fuk-Che and further north in Chushul are too close to the Line of Actual Control to be of use in a conflict. The Air force is trying to get the NYOMA airfield operational but it will take time.

The army does not expect conflict with China in the near term. But power struggles in Beijing within a leadership in transition could have echoes in distant Demchok.

China and India at War: Study

Contemplates Conflict Between Asian Giants

There are plenty of reasons why China and India won't go to war. The two Asian giants hope to reach $100 billion in annual bilateral trade by 2015. Peace and stability are watchwords for both nations' rise on the world stage. Yet tensions between the neighbors seem inescapable: they face each other across a heavily militarized nearly 4,000km-long border and are increasingly competing against each other in a scramble for natural resources around the world. Indian fears over Chinese projects along the Indian Ocean rim were matched recently by Beijing's ire over growing Indian interests in the South China Sea, a body of water China controversially claims as its exclusive territorial sphere of influence. Despite the sense of optimism and ambition that drives these two states, which comprise between them nearly a third of humanity, the legacy of the brief 1962 Sino-Indian war (a humiliating blow for India) still smolders nearly five decades later.

And it's alive on the pages of a new policy report issued by the Institute for Defence Studies and Analyses in New Delhi, an independent think tank that is affiliated with India's Ministry of Defense. "A Consideration of Sino-Indian Conflict" is hardly a hawkish tract-it advocates "war avoidance" - but, by spelling out a few concrete scenarios of how conflict may look between the two countries, it reveals the palpable lack of trust on the part of strategists both in New Delhi and Beijing. The report applauds long term Indian efforts underway to beef up defenses along the Chinese border, but warns that Beijing may still take action:

In future, India could be subject to China's hegemonic attention. Since India would be better prepared by then, China may instead wish to set India back now by a preventive war. This means current day preparedness is as essential as preparation for the future. A [defeat] now will have as severe political costs, internally and externally, as it had back in 1962; for, as then, India is yet again contemplating a global role.

While a lot of recent media attention has focused on the likelihood of Sino-Indian clashes at sea, the IDSA report keeps its scope trained along the traditional, glacial Himalayan land boundary, referred to in wonkish parlance as the LAC, the Line of Actual Control.

Since the 1962 war, China and India have yet to formally resolve longstanding disputes over vast stretches of territory along this line. Those disputes have resurfaced noticeably in recent years, with China making unprecedented noises, much to the alarm of New Delhi, over its historical claims to the entirety of the northeastern Indian state of Arunachal Pradesh - what the Chinese deem "Southern Tibet." The Chinese even rebuked Indian Prime Minister Manmohan Singh for having the audacity of visiting the Indian state during local elections in 2009.

Not surprisingly, it's in this remote corner of the world that many suspect a war could kick-off, particularly around the historic Tibetan monastery town of Tawang. India has reinforced its position in Arunachal with more boots on the ground, new missile defenses and some of the Indian air force's best strike craft, new Russian-made Su-30 fighters. After decades of focusing its army west against perennial threat Pakistan, India is tacitly realigning its military east to face the long-term challenge of China.

The report speculates that China could make a targeted territorial grab, "for example, a bid to take Tawang." Further west along the LAC, another flashpoint lies in Kashmir. China controls a piece of largely uninhabited territory known as Aksai Chin that it captured during the 1962 war. Indian press frequently publish alarmist stories about Chinese incursions from Aksai Chin and elsewhere, playing up the scale of Chinese investment in strategic infrastructure on its side of the border in stark contrast to the seeming lethargy of Indian planners. Part of what fuels the anxiety in New Delhi, as the report notes, is the threat of coordinated action between China and Pakistan – an alliance built largely out of years of mutual antipathy toward India. In one mooted scenario, Pakistan, either with its own forces or terrorist, insurgent proxies, would "make diversionary moves" across the blood-stained Siachen glacier or Kargil, site of the last Indo-Pakistani war in 1999, while a Chinese offensive strikes further east along the border.

Of course, such table-top board game maneuvers have little purchase in present geo-politics. Direct, provocative action suits no player in the region, particularly when there's the specter of American power - a curious absence in the IDSA report - hovering on the side-lines.

Intriguingly, the report seems to dismiss the notion that China and India would clash in what others would consider obvious hotspots for rivalry; it says the landlocked Himalayan kingdom of Bhutan would likely be treated as a neutral "Switzerland", while Nepal, a country of 40 million that entertains both Beijing and New Delhi's patronage, is more or less assured that neither of its big neighbors would risk violating its sovereignty in the event of war.

Moreover, the IDSA seems to rule out either side encouraging or deploying proxies in more clandestine struggles against the other. The restive border regions on both sides of the LAC are home to resentful minority populations and more than a few insurgent factions. India and China - unlike Pakistan - have little precedent in abet-ting militant groups and strategists on both sides would be wary of fanning flames of rebellion that no one can put out.

Yet what seems to stoke Sino-Indian military tensions - and grim prophecies of conflict - are precisely these feelings of vulnerability. The uncertainties posed by both countries' astonishing economic growth, the lack of clear communication and trust between Beijing and New Delhi and the strong nationalism underlying both Indian and Chinese public opinion could unsettle the uneasy status quo that now exists. Managing all this is a task for wooly-heads in New Delhi and Beijing. But don't be surprised if more reports like this one come out, drawing lines on the battlefield.

Courtesy Ishaan Tharoor via TIME

US President Barack Obama's budget aimed at rebuilding the country's economy, emerging 'from the worst recession in generations', looks at India as 'one of the most important and promising emerging markets in the world'. Obama's proposed $3.7 trillion spending plan for 2011 hopes to 'win the future by out-innovating, out-educating, and out-build- ing our global competitors and creating the jobs and industries of tomorrow', according to the White House.

'India is one of the most important and promising emerging markets in the world, and represents a tremendous opportunity for US firms to expand their output of goods and services,' the budget proposal presented Monday said. 'On the margins of the president's trip to India in November, trade transactions were announced or showcased exceeding $14.9 billion in total value with $9.5 billion in US export content and that would support an estimated 53,670 jobs,' the White House noted.

These cross border collaborations, both public and private, un- derpin the expanding US-India strategic partnership, contributing to economic growth and development in both countries, it said. Notable examples include the sale of commercial and military air- craft, gas and steam turbines and precision measurements instrumentation. The budget proposals said the emergence of a global market place that includes the growing economies of China, India and other developing counties creates an opportunity for America to export US goods and services to new customers.

'With 95 percent of the world's customers as well as the globe's fastest growing markets beyond our borders, we must compete ag- gressively to spur economic growth and job creation,' the budget said.Obama's third annual budget says that it can reduce project- ed deficits by $1.1 trillion over the next decade, enough to sta- bilise the nation's fiscal health and buy time to address its longer- term problems, the New York Times said citing a senior adminis- tration official.

Two-thirds of the reductions that Obama claims are from cuts in spending, including in many domestic programmes that he sup- ports.Among the reductions for just the next fiscal year, 2012, which starts Oct 1, are more than $1 billion from airport grants and nearly $1 billion from grants to states for water treatment plants and similar projects. Public health and forestry pro- grammes would also be cut. With Republicans in charge of the House, Obama's budget is more a statement of his priorities and philosophy than an actual template for federal spending and tax policy, the Times noted.

(Arun Kumar can be contacted at arun.kumar@ians.in)

US President Barack Obama's budget aimed at rebuilding the country's economy, emerging 'from the worst recession in generations', looks at India as 'one of the most important and promising emerging markets in the world'. Obama's proposed $3.7 trillion spending plan for 2011 hopes to 'win the future by out-innovating, out-educating, and outbuilding our global competitors and creating the jobs and industries of tomorrow', according to the White House.

'India is one of the most important and promising emerging markets in the world, and represents a tremendous opportunity for US firms to expand their output of goods and services,' the budget proposal presented Monday said. 'On the margins of the president's trip to India in November, trade transactions were announced or showcased exceeding $14.9 billion in total value with $9.5 billion in US export content and that would support an estimated 53,670 jobs,' the White House noted.

These cross border collaborations, both public and private, underpin the expanding US-India strategic partnership, contributing to economic growth and development in both countries, it said. Notable examples include the sale of commercial and military air- craft, gas and steam turbines and precision measurements instrumentation. The budget proposals said the emergence of a global market place that includes the growing economies of China, India and other developing counties creates an opportunity for America to export US goods and services to new customers.

'With 95 percent of the world's customers as well as the globe's fastest growing markets beyond our borders, we must compete aggressively to spur economic growth and job creation,' the budget said. Obama's third annual budget says that it can reduce projected deficits by $1.1 trillion over the next decade, enough to stabilise the nation's fiscal health and buy time to address its longer- term problems, the New York Times said citing a senior administration official.

Two-thirds of the reductions that Obama claims are from cuts in spending, including in many domestic programmes that he supports. Among the reductions for just the next fiscal year, 2012 which starts Oct 1, are more than $1 billion from airport grants and nearly $1 billion from grants to states for water treatment plants and similar projects. Public health and forestry programmes would also be cut. With Republicans in charge of the House, Obama's budget is more a statement of his priorities and philosophy than an actual template for federal spending and tax policy, the Times noted.

(Arun Kumar can be contacted at arun.kumar@ians.in)

Osama bin Laden, the world's most wanted terrorist, was killed early today by US special forces in a helicopter-borne operation at Abbottabad near the Pakistani capital, climaxing a over 10-year long massive manhunt. The special forces personnel swooped down on the compound where bin Laden was holed up guarded by his ultra-loyal Arab bodyguards in a pre-dawn operation killing the dreaded terrorist, US officials said. The news of the slaying of the world's most prominent terror mastermind was broken to the world by US President Barack Obama, who made the announcement live from White House."Bin Laden, 54, is dead and his body is in US custody," President Obama said at half-past 11 mid-night US time after initial story had been broken by news channels.

Though it was dark, crowds massed outside White House chanted 'USA, USA'. Besides the al-Qaeda chief who carried a bounty of USD 25 million, two couriers one of whom was his son and the other a woman, reportedly used as a human shield, were killed in the operation, unnamed American officials were quoted as saying by ABC News. First reports said that it was through these couriers that bin Laden had been traced. Other women and children present in the compound were not harmed, according to Pakistani officials.

An American helicopter was destroyed by US Navy Seals after it was damaged and crashed during the operation that targeted a large compound in Bilal Town area near Abbottabad, 120 km from Islamabad. There was no word from the Pakistani government or military on the operation. Two US helicopters swept into the compound at 1:30 am and 2 am and 20 to 25 Navy Seals under the command of the Joint Special Operations Command stormed the compound in cooperation with the CIA and engaged bin Laden and his men in a firefight, US officials told ABC News.

Bin Laden fired his weapon during the fight, the US officials said. The Americans took bin Laden's body into custody after the firefight and confirmed his identity. One of the US helicopters was damaged during the operation and the troops decided to destroy it themselves with explosives.

Several Pakistani news channels beamed grainy footage of a burning helicopter on the empty lawn of the compound. They also beamed footage of the compound surrounded by Pakistani troops this morning.

(OECEL News Services)