The Broad Mind Opinions from the Takshashila community

A 6-day sojourn through oil and gas-rich Arab countries in the past week by China’s premier Wen Jiabao has drawn global attention to tensions over fresh Western sanctions against Iran and its consequences for energy security in Asia. The European Union and the United States are pushing major importers of Iranian oil such as India, China, Japan, South Korea, and Turkey to join an economic embargo for pressuring Tehran into halting its advancing nuclear programme.

Although China rebuffed Western entreaties to reduce oil imports from Iran, the choice of Saudi Arabia, United Arab Emirates and Qatar as the only destinations in Wen’s Middle East itinerary tells a tale of precautionary diplomacy. These three Arab states are pro-Western, Sunni Arab suppliers of oil and gas to Asia’s booming economies, and they are presenting themselves as substitutes to energy products that Iran has been providing. While China publicly plays down talk of forsaking Iranian oil and replacing it with Arab alternatives, Wen repeatedly raised the prospect of drastically increasing energy imports from the anti-Iranian Arab regimes he just visited.

Chinese communiques during Wen’s Middle East tour referred to “complicated regional trends” and to shaky energy horizons due to “geopolitical factors”, codes for the growing chorus in the West to compel Iran on its suspected nuclear weapons development. Counter-threats from Tehran to shut down the Straits of Hormuz, through which much of Asia’s oil imports flow, and the ever present danger that Israel might unilaterally attack Iran, have creased brows in Beijing for coinciding with China’s slowing economic growth.

Yet, China is confident that its size and economic leverage over the US are such that ignoring Washington on embargoing Iranian oil will not incur real damage. When one Chinese oil firm was recently placed on the financial sanctions list for trading with Iran, Beijing reacted furiously and conveyed “strong dissatisfaction and adamant opposition.” There is no automatic trigger for closing American financial markets to all foreign companies that trade in Iranian oil, and this discretionary element in the sanctions architecture gives China and other Asian powers scope to wiggle out of the proposed embargo.

Despite their strategic closeness to the US, countries like India, Japan, South Korea and Turkey are wary of costly economic fallouts from sanctions and war in the Persian Gulf. New Delhi has rightly decided not to heed the West on abandoning Iranian oil imports, and it is proceeding to negotiate alternative payment processing mechanisms to continue trading with Tehran. But since we are not in a position to prevent a violent conflagration involving Israel and Iran, it is being reported that India’s petroleum ministry has instructed public sector oil refiners to “reduce their dependence on crude imports from that country (Iran).”

As with other Asian importers of Iranian oil who are on tenterhooks because of the cold war between Iran and the West, India will have to diversify away from (though not totally renounce) a politically unstable supplier like Iran. With international sea freight rates declining steadily, India can think of entering into long-term contracts to raise oil imports from geographically more distant but predictable countries such as Venezuela, Brazil and Angola. Currently, we depend on the volatile Middle East for 70 percent of oil and gas imports, an unhealthy addiction laden with grave international political risks.

While seeking to gradually free ourselves from Iranian and other Arab energy producers, India and other Asian powers must also factor in the larger structural implications— for the Middle East as a region— of suddenly deserting Iran at a time when the US and the EU are aiming at Tehran’s jugular. If the Iranian regime falls to a mix of economic woes and US-Israeli sanctions or war, it could leave the Middle East bereft of any counterbalancing force to the West.

It is in the interests of Asian powers to avert a Middle East entirely under the Western thumb simply because India and its continental peers profess a desire for a multipolar world where there is no single global hegemon. It makes tactical sense to slowly retrench from Iranian oil, but it would be a strategic disaster for Asian powers to become reliant on Western approval to access Middle Eastern energy, which will remain important in our energy mixes for at least some more years.

Unlike China, which has a first mover advantage, India is realising the value of Africa and Latin America as stable sources of energy and trade rather late. The fracas over Iran’s oil embargo should be a wakeup call to redouble Indian diplomacy and foreign investment in these two hitherto neglected continents, while not passively turning our backs on the still pivotal Middle East.

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by Somnath Mukherjee

For a government that has been (rightly) pilloried for policy paralysis, the celebration of 20 years of establishment of diplomatic relations with Israel is a rare occasion for the UPAII to claim a degree of coherence in policymaking.

First up, and perhaps most encouragingly, there has been no squeamishness in “celebrating” the occasion. The Foreign Minister is in Tel Aviv for the occasion, a slew of deals are being signed during his visit, an FTA is under negotiation. In short, the whole nine yeards. The optics are clear for everyone to see (and draw conclusions from).

Second, it follows through on a “Look West” policy initiative that has relations with Iran, Saudi Arabia and Israel as its cornerstones.

For Israel, the occasion comes at a time when its social-strategic compact with the rest of the Middle East is undergoing a fundamental shift. Its traditional ally, Turkey, has increasingly taken a position sharply antagonistic, primarily on account of the ruling AKP’s aspiration to reinvent Turkey as the primary “tilt” power in the larger muslim and Arab world. The various “springs” in the larger Arab world on the other hand – from Egypt to Bahrain to Syria, bring nervous portends for Israel. Shorn of the rhetoric, Israel had assiduously built a co-existance compact with the Arab street over the decades. The new dispensations taking over from the older autocracies , or those struggling to do the same do not necessarily share with Israel the same covert affinity of fear (of Iran). Nor indeed do the Islamists looking to cut deals in the same manner as Hosni Mubarak or the House of the Saud have been in the past.

At the same time, India has embarked on an ambitious new agenda with the Arab world, primarily woven around economics.

India has historically had a unique position in the Arab world. Not many remember that till the late ’60s, the Indian rupee was legal tender in much of the current GCC area. India’s support for the Palestinian cause was well in line with the Arab street for a long time. And even the surge in Indo-Israeli relationship has not taken the rhetoric away completely – note that SM Krishna’s next after Tel Aviv is going to be Palestine!

While Israel tries to navigate around the emerging Arab world and newer alliances, India can play a unique role in helping the it engage with it afresh. India’s in a unique place – its important and credible to Israel in terms of hard dollars, and it is important and credible to the larger Arab world (and Iran, in a delicious twist of potential opportunity!) in terms of hard dollars. There are only two other countries that have the same leverage – US and China. US is not trusted by the Arab street, while the Chinese tango with Israel will always be hamstrung by the large looming reality of US influence within Israel.

This is an opportunity that India cannot miss. By most accounts, it is doing a fair job of it…

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by Somnath Mukherjee

The press, both print and electronic has been abuzz with the date of birth issue over the last couple of weeks. Politicians, never to be expected to let go of opportunities to get into the limelight, have jumped in. On the issue specifically, it is really much ado about little. Disputes over date of birth are par for the course in government services, and happen by the dozens every year at many levels. “Political interference” too is hardly new or unique to this situation – from Nehru’s handling of Gen Thimayya to Indira Gandhi’s supercession of Lt Gens Sinha and Bhagat to Mulayam Singh Yadav’s open interference on blatant caste terms for certain Army commanders – its a reality which hardly needed a caper over the incumbent Chief’s date of birth to unravel. In the present case, all it requires is a bit of common sense on both sides (the good General and the MoD) for the issue to be resolved amicably.

The larger question however is different. Which is of the state of higher management of defence in the country. Nearly 15 years after Kargil, ad hocism mark most decision-making on policy. The K Subramanyam committee recommendations have achieved the status of most “committee” reports in India, ie, be food for termites in a departmental almirah.

Starting from a lack of institution building at the apex level (when was the last meeting of the NSAB?) to continuing interservice quarrels over equipment (latest being the fracas between IAF and IA over ownership of tactical attack choppers), India’s higher level defence management doesnt seem to have changed much since the ’70s!

An integrated service headquarters with MoD is nowhere in the horizon, CDS has not gone beyond intra-service bickerings, and each service arm continues to buy equipment rather than plan for meeting objectives. Importantly, barring some notable exceptions, India continues to try being a military power primarily on imported equipment, the first for any country in recent or distant memory.

In the Indian concepts of “timelessness”, dates are forgotten only too easily. One has only to look at the Kargil lessons to realise this. In that context, the Chief’s date of birth is but a matter of minor detail!

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by Somnath Mukherjee

The fiasco over FDI in multi-brand retail was one of the many faced by the government in the year gone by, but in many ways exemplified the policy paralysis.

Be that as it may, while the government can be legitimately be accused of incompetence, the intellectual opposition to the measure can surely be largely accused of being, simply put, illiteracy. Nothing exemplified this as much as this op-ed in The Hindu by none other than Prabhat Patnaik. Now, Prabhat Patnaik is not a pamphleteer of the RSS-type, nor indeed one of the Leftist cabal. He is a distinguished professor of JNU, has held important policy positions, and usually argues with his facts and rationale impeccably in place. True even when his prescriptions can be argued as antediluvian.

In this case however, he has “worsted” the worst of the RSS brand of unintellectual pamphleteering. To start with, the very basis, Pareto Optimality.

Vilfredo Pareto, the Italian philosopher-economist, had suggested a criterion for comparing alternative states of society, which has acquired wide currency in economics. According to it, between social states A and B, if there are some persons who are better off, and nobody is worse off, in A compared to B, then A is socially preferable. On the other hand, if some persons are worse off in A compared to B while others are better off then we cannot say that A is to be preferred to B. Taking A to be the social state where MNCs are operating in retail, it clearly follows that we cannot consider their operation to be socially preferable to a state where they are not operating.

If Prof Patnaik take pure Pareto Optimality as a touchstone for every policy action, first up he has been bypassed by the entire body of economics work around Pareto Optimality. Almost nothing in the real world can be Pareto Optimal, given frictional costs of implementation, as well as rent seeking behaviour from all economic agents. Shorn of the jargon, what it means is that in any policy decision taken, there will be winners and there will be losers, the decisions are therefore taken in order to maximise the total benefits accruing to society. In the process, “winners” are incentivised (or taxed) to compensate the “losers”.

But I am sure that Prof Patnaik knows more than a thing or two about Kaldor-Hicks Efficiency (among others around Pareto Optimality), but he simply uses amateur sophistry to base his opposition towards a completely indefensible intellectual paradigm. The most eggregious of which is the reference to economic policies of the Raj.

And it is exactly identical to the argument put forward in the colonial context that since imported manufactured goods were of superior quality and benefited the consumers (who would not have bought them otherwise), among whom were numerous peasants, the fact that they destroyed the livelihoods of millions of artisans and weavers, should not be held against the policy that freely allowed such imports. In fact the argument for FDI in retail is a precise recreation of the discourse of colonialism.

The irony cannot be more delicious. The nationalist discourse of the freedom movement bases itself on how India was starved of opportunities to produce domestically the same goods that were incentivised for imports from Great Britain. The greater issue wasnt that of mill-made cloth versus hand-woven, but of the fact that the same was being produced in Britain, and not India. In economic terms, the Pareto frontier was being built through a loss to Indian producers offset by gains to Indian consumers and gains to British manufacturers. The nationalist narrative was largely focused on the last element. Which in itself drive much of the protectionist industrial policies post independence.

With FDI in retail, the propositionists are really saying that efficiency gains from logistics are to be passed on to producers and consumers of India, with the logistics itself being owned “within” India.

Ofcourse, if the touchstone of Pareto optimality, Prof Patnaik style, is taken to its logical end, every single social welfare measure in India will be deemed sub optimal. With coruption eating away much of the outlays and therefore benefits being uncertain while “losers” in terms of higher burden on taxpayers being pretty certainly identified, the equation isnt much different from what he is painting in the op-ed.

Which is really the issue with the opposition to retail FDI, Right or Left (another delicious irony – on most contentious issue, the congruence of views of both makes one wonder) – there is really no intellectual praxis of the opposition, only sophistry to suit a cynical political position.

from: Chanakyan

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by Somnath Mukherjee

This headline in the Indian Express today caught my attention. Andhra Pradesh recorded the lowest ever fatalities in recent memory as a result of Maoist violence. Press reports are often half baked, so a its always good to refer back to more rigorous sources. South Asia Terrorism Portal (SATP) is perhaps the best on the matter. Surprisingly, SATP confirms the view - the total number of non-Maoist fatalities in AP in 2011 is 6, and no police/paramil fatalities. For a change, the media is carrying the right facts.

Here is where the praise stops though. The article goes on to ascribe the success of anti-Maoist capmpaign to the Greyhounds, the elite police formation in AP. Unfortunately, this is the party line bought hook, line and sinker by most politicians and policy makers as well – terror threats need to be combated using “special” forces. However, had that been true, Chattisgarh and Jharkhand, with their long experience and experiments with “special” forces like Koya commandos and salwa judum would have had the same success. Or for that matter, West Bengal, whose police forces are “special” only in their sheer inexperience and lack of capacities even by Indian standards, would not have seen such a drastic fall in 2011 from the previous couple of years.

The reasons therefore are more complex than the potency of a special force.

At a combat level, the decisive cutting edge comes from intelligence and basic policing capacities. AP has invested persistently in setting up a first class intelligence network against the Maoists, with the State Intelligence Bureau at the helm of that effort. The potency of this network has enabled it (for now) to mask the inadequacies in capacities endemic to police forces all over the country. Absent this, no number of “specials” can do the job, as the Greyhounds themselves discovered in the Balimella incident, where 33 commandos were killed by the Maoists.

At a different, and more strategic level, tackling Maoism (or any insurgency) is a political challenge. Combat forces can soften up the underground and remove the more virulent personalities from the equation, the final solution has to be always political. The exaggerated operations of the Maoists in West Bengal in the last few years had a lot to do with the large scale rural disaffectation with the ruling CPIM cadres. Incidents like Nandigram provided fertile ground for the Maoists to breed violent actions against state (and quasi state CPIM) elements. The transfer of power post elections to Mamta Bannerjee has given an immediate outlet to people’s grievances, and the results are therefore visible in the numbers. Maoism is still alive in WB, but has a much harder job at hand. It is upto the state government to not let the situation drift.

The lessons for states like Jharkhand and C’garh are clear. There are no short cuts possible, disastrous attempts like Salwa Judum worsen the issue. Political action and policing capacities need to be built up in order to defang the Maoist threat.

from: Chanakyan

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