Business Recorder Editorial Nov 18, 2018

Russian mediation in Afghanistan

The first meeting of the Moscow Format, a platform created by Russia in 2016 whose membership has grown to 11 countries, saw a galaxy of country delegations, observers, the Taliban and Afghanistan’s High Peace Council coming together to exchange views and positions on ending the Afghan conflict. But the proceedings were a reminder once again of how intractable the US’s longest running foreign war actually is. For starters, the Taliban delegation that attended an international diplomatic conference in Russia for the first time reiterated its long standing position that it would not negotiate with the Kabul government but talk to the US instead, with the withdrawal of American forces from the country the irreducible main demand. The High Peace Council, it was clarified by President Ashraf Ghani’s government, did not represent it as Kabul did not send an official delegation to the moot and it simply repeated Ghani’s offer of peace talks without preconditions. The US-led west and Kabul view the Moscow meeting with some suspicion, seeing it as an attempt by Russia to muscle its way into a process they say must be led by Afghanistan. Pakistan’s delegation reiterated its view that only an Afghan-led, Afghan-owned peace process could reap results, a formulation Islamabad created some years ago and which has found steady traction in international opinion since by now most stakeholders and interlocutors are convinced there is no military solution to the war. It is interesting that this view holds in the face of the recent advances in terms of attacks, mounting casualties amongst the Afghan government forces and territorial control gains the Taliban have been making of late. While these battlefield successes obviously bolster the Taliban’s confidence, they too seem to have come to the conclusion that they cannot achieve an outright military victory over the Kabul government, especially as long as US troops and airpower can blunt their ability to take cities whose surrounding countryside they may dominate. A military strategic impasse of this nature logically should boost the chances of all the contending parties looking for alternative conflict resolution means. However, experience shows there is still many a slip between the cup and the lip.

The US had for many years resisted the idea of direct talks with the Taliban. However, increasing war weariness amongst the American public and the media may have finally persuaded Washington to at least explore this path. The appointment of Zalmay Khalilzad as the US point man this year has led to one meeting with the Taliban office in Qatar in October. Now another meeting in Qatar seems on the cards as part of Khalilzad’s tour of the region, during which he will also visit Pakistan, Afghanistan and the UAE. While the tenuous and difficult direct US-Taliban talks trundle along, Pakistan’s public stance of promoting a peaceful, negotiated settlement still arouses suspicions and reservations in the US and the Afghan government. This is because of the presence of the Taliban on Pakistan’s soil since 2001. Although Islamabad has fluctuated between outright denial of any such presence now and its argument that the Taliban control enough territory inside Afghanistan not to need a rear base for military operations inside Afghanistan, these suspicions and reservations refuse to die. Islamabad’s oft-repeated concern to the US at the Indian role in Afghanistan, where it has resurrected its traditional friendship with Kabul through offering aid and development, has not found enough mileage in Washington. India sent an observer to the Moscow conference for the first time, where it sat face to face with the Taliban.

Washington may have blundered into the Afghan quagmire following 9/11 for faulty strategic and tactical reasoning to punish the Taliban regime for hosting and protecting Osama bin Laden, but by now, the analysis of astute observers of the Afghan conflict over many years is proving correct. Afghanistan confirmed its reputation as the graveyard of empires against the Soviet occupiers and has shown the will and means to at least deny Washington satisfaction until it tires of the unending war. Difficult as the turn from conflict to peace still appears, all stakeholders, regional and global, must persist with even the small openings offered by the US-Taliban dialogue and the universal consensus that since there appears to be no military solution to the war, diplomacy and negotiations are the only way forward. Perhaps some combination of power sharing in Kabul and decentralised provincial governance may restore the lost compact that the Afghan monarchy offered the diverse and fractured country till 1973. A return to the past therefore may ironically pave the way to a peaceful future.

Business Recorder Editorial Nov 16, 2018

Goldman Sachs in the dock again

Prime Minister Mahathir Mohamad has not pulled any punches in accusing Goldman Sachs of having ‘cheated’ Malaysia. He aired the accusation in an interview with CNBC. Two former bankers from the Wall Street giant firm, Tim Leissner and Ng Chong Hwa have been charged this month by the US Justice Department of working with a Malaysian financier Low Taek Jho to launder huge sums allegedly stolen from sovereign wealth fund 1MDB. All three are accused of involvement in a sophisticated fraud linked to former prime minister Najib Razak, who suffered a shock defeat of his long-ruling government in elections in May because of the scandal. Prime Minister Mahathir Mohamad has suggested Malaysia could take action against Goldman Sachs if it was found to have broken the law. As it is, the US Justice Department has filed civil suits seeking to recover assets in the US allegedly bought with stolen 1MBD funds. It has estimated that about $ 4.5 billion was looted from the sovereign wealth fund. Mahathir says it could take time but US officials have promised to return any money they recover. Tim Leissner and Ng Chong Hwa have been charged with money laundering and conspiring to bribe officials in Malaysia and Abu Dhabi to hire Goldman Sachs for lucrative consulting contracts. Of the $ 6.5 billion worth of bonds 1MBD issued and which were underwritten by Goldman Sachs, US authorities allege $ 2.7 billion were siphoned off. Goldman Sachs earned $ 600 million in fees for the bond issue, which Malaysia’s finance minister wants fully refunded. Tim Leissner has pleaded guilty and agreed to pay $ 43.7 million as restitution of ill-gotten gains. Meanwhile Ng Chong Hwa has been arrested in Malaysia but Low Taek Jho remains at large. Goldman Sachs has not been charged with any wrongdoing as yet.

In the world of high flying global finance, scandals surface with monotonous regularity. Of course the mother of all scandals was the 2007-08 financial crisis stemming from the sub-prime mortgage collapse and whose spreading eddies took down such iconic names in banking as Lehman Brothers. Goldman Sachs was in the centre of that crisis too for defrauding investors and had to pay $ 5.06 billion on account of the sale of mortgage-backed securities. Since most banks considered ‘too big to fail’ were bailed out by taxpayers’ money, Goldman Sachs weathered the storm. However, the Malaysian scandal seems to indicate it has not mended its ways. Surely the time has come to put banks like Goldman Sachs in the dock again, this time with a view to ensuring this kind of hanky panky does not occur again. In the case of Goldman Sachs, it appears a culture of playing fast and loose without any ethics or principles still rules the roost, or as Malaysian Prime Minister Mahathir Mohamad put it more politely, the bank’s compliance controls “do not work very well”. The financialisation of the global capitalist system has put enormous clout in the hands of the few who control the commanding heights of the global financial system. Their unfettered power poses a threat not only to the unsuspecting investor, it could bring the whole system into disrepute if not crashing down unless steps are taken to correct the exposed anomalies and downright criminal intent and practice of this elite, of which Goldman Sachs is proving to be a negative living embodiment.

Business Recorder editorial Nov 15, 2018

US midterm elections

Midterm elections take place towards the middle of US presidents’ term. This time too, President Donald Trump having been in office for two years by now, elections took place for 35 of the 100 Senate seats, all 435 of the House of Representatives seats, 39 state and territorial governorships and numerous other state and local elections. These midterm polls were being cast as a referendum on President Donald Trump, perhaps the most divisive president in US history. In the event, the results present a mixed bag, although the Democratic Party made significant gains. The Democrats won control of the House of Representatives, the lower house of Congress. They also gained at state level. The Republicans managed to hold on to their majority in the Senate, but with the House of Representatives slipping from their grasp, the Trump administration will face an uphill battle on the legislative front. The trend decipherable in the polls for both chambers was that many defeated incumbents represented districts that voted for the presidential candidate of the opposing party in the presidential elections of 2016 that brought Donald Trump to power. On the whole, the Democrats made great strides in winning seven governorships, and of the 87 out of 99 state legislatures, they won 350 seats and seven state legislatures. They also won seven state governments and broke Republican control of four more.

This midterm election brought to the fore with a vengeance all the passions for and against Donald Trump since his successful campaign for president two years ago. While arguably his loyal vote bank stuck with the incumbent and his Republican Party, disquiet was evident at some of Donald Trump’s more outlandish positions. Women, minorities, youth seemed determined to turn out in greater numbers than is usual for relatively low turnout midterm elections to thwart the Trump populist-reactionary juggernaut. Healthcare, immigration, racism and all the other contentious issues that Donald Trump has roiled with his unwise, superficial and plain dumb pronouncements stood centre-stage in this electoral exercise. The world too was watching to see what the American electorate would make of a president who wants to preside over the dismantling of the post-Second World War structure of the world, including the trans-Atlantic alliance with Europe. Immediately after the midterm polls, Trump was in France for the commemoration ceremonies of the centenary of the end of World War I. There too, in his usual blustering style, he took on French President Emmanuel Macron for suggesting Europe needed its own defence force to guard against challenges from Russia, China, and even the US. In their meeting in Paris, some of the previous bonhomie was restored by Macron agreeing that Europe needed to pay more towards NATO, but the strain underlying the encounter was visible. Trump’s style at home and abroad, whether on immigration, the media, women, etc at home, or Iran, North Korea and even old allies such as Europe abroad, is inherently designed to offend.

Pakistan can draw half a sigh of relief that the ‘referendum’ on Donald Trump as president dented his seeming infallibility. One can anticipate that the Democrats control of the House of Representatives could bring the spotlight of accountability on Trump and his sundry lapses and downright riding roughshod over all within earshot, including his own administration officials (he fires them like he used to on his reality TV show), but whether the Republican retained control of the Senate will permit an impeachment of the incumbent is far from a settled matter. Nevertheless, a Trump under assault at home from those who rightly regard him as dangerous, could take some of the wind out of his sails abroad. Iran would welcome that, and Pakistan may not be far behind, having been subjected to extreme pressures from Washington on many issues during the last two years. The world can only hope that these midterm elections represent the nadir of the rise of Trump, which may not now appear as irresistible as it once did.

Business Recorder Column November 13, 2018

The war to end all wars?

Rashed Rahman

November 11, 2018 marked the centenary of the end of World War I (WWI). The Armistice signed on that date by the German and French protagonists came amidst a vow on all sides that the industrial scale massacre witnessed in European trenches and battlefields elsewhere should mark WWI as the ‘war to end all wars’. To illustrate the sentiment, it only needs reminding that 10 million soldiers and six million civilians were killed during 1914-18. From the British-occupied colonial Subcontinent came 1.3 million soldiers, many of them from Punjab. The deaths amongst them totalled almost 75,000 in the major battles at the Somme, Ypres and other battlefields throughout Europe and elsewhere. Their courage and valour being known to their British commanders, they were often the first to be thrown at the enemy in frontal assaults through barbed wire-infested, muddy fields to be mowed down by the relatively new weapon of mass destruction – the machine gun. This role and the cost in Indian lives gave birth to the phrase ‘cannon fodder’.

The war was the outcome of the rivalry between older colonial-imperialist powers such as France and Britain, and the new rising power Germany over the latter’s ambition for a redivision of the world, benefiting it with expansion into new colonies taken away from the older imperialist powers. The Austro-Hungarian and the Ottoman Empires aligned in this ambition with Germany, with most of Europe being on the other side.

In the event, the defeat of Germany and its allies in 1918 came at a huge human and material cost for both sides. The humiliating terms and crippling reparations imposed on Germany led to the resentment against the victors that fed into the rise of Nazism in Germany (preceded by the emergence of fascism in Italy). During the war, the Russian Revolution, first democratic, then socialist, in 1917 changed history. The Great Depression of the late 1920s and 30s produced the kind of economic and political crisis that fed directly into Hitler’s revanchism.

The Treaty of Versailles that sealed the end of hostilities dictated such humiliating terms to Germany that it could be regarded as one of the main causes of World War II (WWII) breaking out a bare 21 years later in 1939. During that interregnum, the tendency of the capitalist system towards periodic crises played out with a vengeance, condemning millions in the developed and developing world to penury and starvation. While the capitalist powers were unable to undo the Soviet Union despite 22 imperialist powers intervening militarily to tilt the scales in favour of a restoration of the overthrown Czarist monarchy in a bloody civil war that lasted till 1922, they now saw the rise of communism as the biggest threat to their global hegemony.

Even before full scale world war broke out in 1939 with Hitler’s march into Poland (or at least that half ceded to it by the Ribbentrop-Molotov no-war pact between Germany and the Soviet Union), the Spanish civil war that raged 1936-39 proved the dress rehearsal for the mass slaughter to come in 1939-45. The brunt of that fascist slaughter was visited on the Soviet Union, which lost over 26 million soldiers and civilians at the hands of Hitler’s hordes, a toll greater than all the rest of the Allies in the field against the Axis powers (Germany, Italy and Japan). To argue that it was the Soviet Union that gave the greatest sacrifice and defeated Hitler would be no exaggeration. Hitler’s Operation Barbarossa, the surprise invasion of the Soviet Union in mid-1941 despite having signed a no-war pact with the sole socialist state at that time, which saw the war as another inter-imperialist one and manouevred to stay out of the conflict, extracted a human and material toll accompanied by huge forces arrayed on either side across the length and breadth of European Russia that even today beggars belief. Between 1941 and 1945, the Soviet Union fought against the Nazi hordes virtually alone, Europe having been overrun and occupied by Germany, Britain retreating from the Continent to wage an air war of attrition, and the US only reluctantly entering the war after the surprise Japanese attack on Pearl Harbor in December 1941. The western allies concentrated for many years on nibbling away at the periphery of the territory occupied by the Axis powers before the 1944 D-Day invasion of continental Europe. Until then, the brunt of the war against Hitler fell to the lot of the Soviet Union.

The Allies’ 1945 victory reshaped the post-war world. Soviet forces not only rolled back the Nazi tide from Soviet territory, they liberated Germany (at least its eastern half, including Berlin) and many Eastern European countries. What followed were tacit and declared agreements between the western Allies and the Soviet Union for a division of Europe between the socialist east and the capitalist west. Actual war was replaced by a Cold War in which both sides jostled for their own space. This new world 'disorder' finally came to an end in 1989-91 when a rolling trend demolished Eastern European socialism and led to the implosion of the Soviet Union.

It seemed in 1991 that the victory of capitalism over socialism was so complete that theses and slogans to the effect that ‘There is no alternative (to neo-liberal capitalism and bourgeois parliamentary democracy)’ and ‘The end of history’ became received wisdom. However, the crowing pundits of capitalism’s triumph overlooked the tendency of periodic crises inherent in the structure and functioning of the capitalist system. Unregulated, expanding globally, capitalism’s juggernaut seemed unstoppable in the 1990s and early 21^st century. However, the system upended all the pundits by the 2007-08 crisis emanating from the financialisation of the global economy, a development that saw the final dominance of finance capital over industrial and other forms, and whose fragility became evident when the sub-prime default crisis in the US incrementally rocked the world capitalist system. The costs of the crisis were largely borne by the poor and working people, while the rich, powerful and dominant capitalists were rescued through bailouts with taxpayers’ money.

The post-Cold War world also saw the global dominance of capitalism accompanied by new wars, largely in what was once called the Third World. The inaptly named War on Terror after 9/11, declared by George Bush, has translated into endless military interventions in Third world countries such as Afghanistan, Iraq, Libya and Syria by the US-led west to engender regime change in countries having governments or leaderships considered inimical to the west and Israel’s interests. These interventions, despite the halt of the western military juggernaut in Syria with the help of Russia and Iran, have led to a virtual state of permanent war in South Asia, the Middle East and the wider region. Its effects have spilt over into the heartland of capitalism in the form of terrorism.

Capitalist imperialism has delivered us into perpetual war, which feeds the war machine and armaments industry that is the engine driving western economies. Perhaps the time has come for the countries that have been the victims of this perpetual war as well as those affected by its fallout to come together under the banner of seeking permanent peace instead of the Armageddon threatened by warring or near-warring states, some of whom are armed with nuclear weapons.

rashed.rahman1@gmail.com

rashed-rahman.blogspot.com

Business Recorder Editorial Nov 10, 2018

China’s bailout

Finance Minister Asad Umar on his return from China tried to reassure the country and the markets in a press conference on November 6, 2018 that the imminent balance of payments crisis had been averted. This was made possible, he asserted, through the Saudi bail-out package of $6 billion ($3 billion to be parked in our foreign exchange reserves and $3 billion for deferred payments for oil imports), to which could now be added another $6 billion from China. However, the announcement was strong on rhetoric but woefully lacking in detail. It turns out from reports that in fact all China has done as our good friend so far is to promise financial help in principle, with the details and modalities of the package to be worked out by a high powered Pakistani delegation to visit Beijing on Nov 9. Also, China has reportedly agreed to boost Pakistani imports from Pakistan to twice and eventually three times their present level, which would go some way towards reducing our trade deficit with China, currently around $ 14 billion. Some of this burgeoning trade deficit is owed to imports from China related to CPEC, but the underlying reality is that Pakistan does not possess the sufficient exportable surpluses needed to dent the deficit meaningfully, although opening China’s market to Pakistani sugar and rice exports seems promising. Asad Umar was naturally expected to reveal what had been achieved during the China visit to an expectant country. Another consideration may have been the skittishness of the markets for the last few days amidst reports that the trip to China under Prime Minister Imran Khan’s leadership had failed to achieve much. Whether the announcement by Asad Umar will serve to relieve the uncertainty gripping the markets and restore confidence that Pakistan has manage to wriggle out of the economic hole it seemed trapped in remains to be seen. Unless and until the details of the China bail-out are authoritatively revealed, much remains in the realm of speculation, not a conducive atmosphere for business and market confidence. Another important aspect of the deliberations in China is the proposal to trade through a yuan-rupee swap arrangement on the argument that this would release pressure on our dollar reserves. This arrangement too remains to be discussed and worked out in detail in further meetings between the two sides. While these outcomes in principle and further deliberations focus on Pakistan’s immediate financial needs, perhaps the even more significant convergence in the long term is the agreement that now that CPEC’s first phase concentrated on infrastructure is drawing to a close, the second phase will concentrate on industrialisation (with the Special Economic Zones playing a critical part), agriculture, employment creation and vocational training. The PTI before and after coming to power had been critical of these aspects not being included in CPEC’s formulation, but that reservation seems to have been met in principle by our Chinese friends, a development that will boost the chances of the PTI government’s welfare agenda. The day after Asad Umar’s presser, meetings with the IMF visiting delegation started, whose results may be influenced by, and indeed impinge on, what has been agreed with China.

Without meaning to be too critical, the perception that the PTI government has been strong on rhetoric from its agitational days in opposition and weak in grasping firmly the nettle of our economic straits is perhaps abating. However unprepared for office in terms of policy (and the rub is always in the detail), the government’s team seems more realistically to be coming to grips with economic reality and the way things work, both at home and abroad. Our rock-solid Chinese friends are prepared to go out on a limb to help Pakistan, but they and the people of Pakistan expect and deserve that our government too would now burn the midnight oil to take full advantage of Beijing’s generosity in order to stabilise the country’s finances and move incrementally with good planning towards the implementation of the agreements with China.