Responding to the Economic Meltdown

Source: Indian Express
Thursday , Mar 19, 2009 at 1703 hrs
Responding to the Economic Meltdown

Some lessons for South Asia Arun Shourie

(The Asian Development Bank recently organised a meeting in Manila of central bank governors, ministers and senior finance officials from South Asia to consider the impact of the economic meltdown, and possible responses. Michel Camdesus, former managing director of the IMF delivered the opening address, former Union minister Arun Shourie the closing address. This is the text.)

Several features about the current economic crisis stand out. The first, of course, is the sheer scale of what preceded it, and the magnitude of what has happened in its wake: to recall a typical fact, in a recent lecture, Andrew Sheng mentions that, on the eve of the breakdown, the nominal value of financial derivatives and exchange traded derivatives had soared to fourteen times the world’s GDP.

The second feature is the pace of wealth destruction in this round: as has been observed, there has scarcely been another period of four to five months in which almost fifty trillion dollars worth of wealth has been wiped out.

Third, as several observers have pointed out, the breakdown differs from the Southeast Asian crisis in other respects also: that crisis was on the periphery of the world economic system; this one has originated in, and has thus far most severely struck the very heart of the system. The result makes demands of its own: as the Southeast Asian economies went into a tailspin, the OECD economies held up; this helped the recovery of the former as they were able to resume exports to the latter. This buoy is not available this time round: while some of our economies may be able to resume growth only when the US, European and Japanese economies come out of the recession, we will have to depend on our own efforts. This is all the more so as governments, pressed by job losses at home, will, overtly or covertly, adopt protectionist measures. As a lemma, the same proposition holds for China: it is idle to expect, as commentators kept saying in the last quarter of 2008, that China would shore up other economies. China is focusing its efforts on reorienting its economy towards domestic demand, domestic requirements, domestic employment: the “stimulus” this effort may provide for other economies will only be a residual.

FOurth, the world has turned out to have become much more intertwined than experts had pronounced it to be. Economies are much more inter-linked, sectors within an economy like India are much more interdependent than had been presumed. How contrived the declarations of October/November last year look just four/five months later – that our economies will not be affected as the “fundamentals” of our economies are strong, as our economies are, in effect, “decoupled” from western economies. Our economies are linked to others through exports of goods as well as services, through remittances, through foreign inflows – through monies that have come in for arbitrage even more so than as direct investment. But more than any of these, our economies are linked with those of US, Japan and Europe through that all-pervasive intangible – confidence. Yes, particular banks and firms have been thrown into difficulties. Yes, there is shortage of liquidity. But the real blow has been to confidence – that is the tsunami that has traveled all the way to our shores. Till confidence is restored, things will not begin to turn around. And notice that as yet, the 4 trillion dollars notwithstanding, nothing that the governments of the US, Europe or Japan have done has shored up confidence.

That is one reason why the periodic declarations, “We expect recovery from the third quarter of 2009/ from the first quarter of 2010…,” are just that much whistling in the dark.

In spite of the scale of the breakdown; in spite of the pace at which wealth has been destroyed; in spite of the fact that nothing that has been done thus far – and what has been done this time round is far greater in magnitude than in any other crisis in decades – has shored confidence, in spite of these features, government after government has underestimated the impact that the crisis is certain to have on its economy. Indeed, several governments – and the Government of India is a prime example – have been in denial. The tsunami has hit countries successively. But, till the penultimate moment, each has convinced itself that the tsunami has passed at a safe distance.

The first lesson is not to remain in denial. Governments must anticipate. They must react at lightning speed. They must overwhelm. The old adage is indeed apt: hope for the best but prepare for the worst. A lemma is: do not be lulled into relaxing your effort by blips: that in Pakistan’s case remittances have, in fact, increased a bit in the last two months may well be due to the fact that workers who are being laid off in the Middle East are repatriating their savings in one go; that automobile sales in India have gone up in January may well be due to some transient factors… Hence, instead of clutching at these straws, prudence dictates that we assume that developed countries will take five to seven years to return to the status quo ante, and devise our responses accordingly.

Nature of the stimulus

The view has been urged, “Our deficit is our stimulus.” Such claims are a symptom: the current crisis is being used by many governments, the Government of India is again a prime example, to cover up the results of mismanagement during the period preceding the crisis. Financial profligacy is what caused the deficits in India, for instance, not some prescience about the impending breakdown. Unchecked, poorly targeted subsidies on food and fertilizers; on petroleum products; a massive waiver of agricultural debts; pay rises for government staff – these three items are what pushed the combined deficit of central and state governments in India to over 11 per cent of the country’s GDP. Not only were these outlays way beyond what prudence would have allowed, they were grossly under-budgeted: the provision for food and fertilizer subsidies was at least a third less than what would manifestly be required; the POL subsidies were kept out of the Budget calculations all together; as were the outlays on the massive increases in governmental salaries.

The assertion, “The deficit is our stimulus,” presumes that our economies are today suffering from the classic Keynesian deficiency of demand. That is far from being the case. Not a generalized deficiency of demand but a breakdown of confidence – this is what is causing industry to hold back on investment, it is what is causing even consumers to hold back on purchases. And that is precisely why cuts in rates of interest, cuts even in taxes are not triggering the surge in investments and purchases that policy makers have assumed would follow: how can the fact that a person will have to pay 2 per cent less as interest lead him to go in for a house when he is not sure whether he will have his job two months from now?

Prior profligacy limits a country’s ability to deal with the crisis. And profligacy today limits its ability to deal with the crisis as it continues into next year. Today the countries that have reserves, that have fiscal headroom, that have the ability to execute massive infrastructure projects – these are the countries that are in a better position to navigate the crisis. When investors and others see that their government is unable to bring its expenditures to heel, their confidence in the future is further damaged. And there is the real effect too: in India, with governmental borrowing of Rs. 3600 billion having become inescapable in 2009/2010, the State will be pre-empting the private sector from the market, it will be pre-empting the very sector on which it is coming to rely not just for executing infrastructure projects but even for financing them. A return to fiscal discipline, therefore, is necessary precisely for meeting the crisis.

There is another reason for this. The crisis is no longer a generalized one. By now it is sector-specific. It is location-specific. It is firm-specific. Units in Tirupur in Tamil Nadu producing garments for exports have been hit hard. By the time the stimulating effects of a general deficit will reach Tirupur, an age would have passed.

Moreover, jobs are not malleable. Establishments in the gems and jewelry business have had to cut down operations drastically in Gujarat. Assume that, through deficits, the Government finances public works in Bihar or even in Surat. How many diamond cutters will be inclined to or even be able to avail of them?

To be of help the relief must be in the locality and in the industry that has been hit. Faced with a sudden fall in purchases of trucks, the commercial vehicles sector will be helped not when the Government goes in for an even larger general-purpose deficit but when it decides to expedite procurement of trucks for the country’s defence forces.

The same goes for individual firms. To pluck an example from India, the very firms that were the pride of the country yesterday as they acquired firms abroad are in danger today: several of them acquired the foreign firms with substantial borrowings. Today, with the collapse of markets, the fall in commodity prices, the evaporation even of working capital, they are finding it difficult to service their obligations. That constitutes a twofold problem for the country. First, at the very time that foreign funds have been withdrawn – close to 70 billion dollars in the last six months – about $ 53 billion short term debt has to be serviced – either through repayment or through renewal – in the coming year. Second, a failure of even one of these firms will not just be a problem for that firm, it will be yet another blow to confidence in general. In a word, governments should be planning not just general packages but location-specific, industry-specific and firm-specific relief.

While doing so, governments must keep the inarticulate in mind also. With sources of external commercial borrowing having dried up, Indian corporates, for instance, will be turning to Indian banks and the Indian market. The small and medium establishments, already hit by the sudden and extreme risk-aversion that has seized our banks like banks elsewhere, will now be squeezed out completely. Yet, as a recent McKinsey study reminds us, this is a massive sector. It accounts for 40 per cent of manufacturing output, that is about 17 per cent of the country’s GDP. It accounts for close to 44 per cent of exports. Most important, it employs close to 30 million people. Closures and lay-offs in this sector will be diffused. But they will be of an order that, if unattended, can trigger social unrest.

For the same set of reasons, governments should be alert to early signs of stress even in sectors that are conventionally regarded as strong. In India, for instance, it is generally assumed, and quite rightly so, that our banking sector is safe as it has been conservative. It has made substantial progress in bringing down non-performing loans to just about 2 per cent of its outstandings. But recent studies – by Chetan Ahya and Ridham Desai of Morgan Stanley, by Joydeep Sengupta and Anu Madgavkar of McKinsey – remind us other that there are facets also: about 40 per cent of corporate India’s asset base has a return on incremental capital that is lower than the cost of capital; and Indian banks have lent $ 100 billion to these vulnerable firms – loans that account for a fifth of total bank loans. In a word, take no sector for granted. Identify the vulnerable units in each sector, and prepare contingency plans for them – remembering always that a collapse of any constituent of any sector will impair the most important variable that is needed for revival, the very variable that is most fragile today – namely, confidence in general.

In such environment general deficits will be as much of a stimulus as throwing money out of the window. The stimuli which will really help are ones that strengthen the viability, sustainability, and competitiveness of the economy for the long run -- that is, for the time when this particular crisis would have passed and the economy would be back to its normal course. A good example of this kind, for instance, is the announcement in the US that it will be deploying a good bit of its stimulus plan towards creating a green infrastructure. Outlays to create alternate energy which liberate economies like those of South Asia from their current dependence on imported oil supplies; expenditures to multiply and enlarge manifold the current facilities available for higher and technical education, facilities which would overcome the extreme shortage of technical personnel in these countries would be examples of the same kind. An excellent initiative, one that we should emulate, is available from Singapore. The Government has launched a plan under which a person losing his job can enroll in an institution for acquiring higher skills than the ones that are required for his existing job. He is paid a stipend for every day that he attends a class for five hours of class. When the current downturn is behind us, the person will be able to seek a job which is better paying and which demands more of him than the job that he has just lost.

The crucial variable here is the ability of the country to execute these projects expeditiously. This is why China is way ahead of, say, the typical South Asian country. To begin with, it has $ 2 trillion of reserves. With these it can finance massive infrastructure projects – an option that is not available to a country like India which, through the Government’s profligacy of the past three years, has robbed itself of fiscal headroom. Equally important, China has large supplies of engineers and skilled personnel – because of the extensive programmes which it had implemented earlier for both, training engineers as well as for upgrading vocational skills. With those two trillion dollars it can also, as it is doing, acquire mineral and other resources in other parts of the world, the resources that it will need for its long-term growth. Most important, China has a shelf of projects which it can start implementing forthwith: many of these projects had been prepared to the last detail as long ago as 2005. Several of them were kept in abeyance, in a sense, as it was felt that the economy was overheating. Now they can be implemented without any delay. And that is possible because China has overcome the customary obstacles which hold up the execution of projects in countries such as ours. It has acquired an unmatched capacity to implement projects expeditiously. In our case, apart from implementing such projects as can be implemented now, the current crisis is yet another occasion to make every effort to acquire the ability and resources to improve the capacity to implement projects more expeditiously in the future.

Why not start straightaway? Institute massive rewards for firms and local and provincial governments that expedite the implementation of projects? Institute tax rebates for companies which, instead of laying off workers, retain them and have them acquire better skills?

A role for the ADB

And this points to a vital role which an institution like the Asian Development Bank can discharge at this moment. Andrew Sheng and others justifiably remind us of the curious charge that has been put out – namely, that countries of Asia have exacerbated the current crisis by their excessive savings, that the current crisis has been made possible, indeed that it has been intensified by what have been called “global imbalances”. This is one of those predictable surprises. Our countries were being hectored incessantly that we should increase our savings rate. And now we are being told that, because we have done so, we have contributed to intensifying the existing crisis! But, for a moment, take this charge at face value. The cure is obvious. The cure to “global imbalances,” it has been rightly said, is to develop the capacity within Asia to use our savings here.

In addition to improving our capacity to implement projects within our countries, we should enhance our capacity to implement cross-country, regional projects. There are a large number of such projects which can be implemented, but which have been languishing for reasons that are as remediable as they are well-known. Setting up power projects in Nepal from which power is sold mostly to India; setting up projects to exploit the natural gas resources of Bangladesh from which a large proportion of gas would be sold to India – these projects have not got off the ground for decades because undertaking them has become a political issue within Nepal and Bangladesh. This is where the Asian Development Bank, with the trust which countries in the region repose in its fairness, and in its objectivity and expertise, can play a vital role. It should, for instance, draw up the terms and conditions which would be best for Nepal and would be fair to India for implementing power projects in that country.

This is the role which would be more appropriate than to expend time and effort in setting up yet another institution. As is customary in the wake of every crisis, today also proposals are being advanced for setting up new institutions. Shouldn’t we set up an institution for regional monitoring? Shouldn’t we set up an arrangement, a regional fund for helping our countries tide over such crises? Our experience with new institutions in response to crises has been, that, ten years after they have been set up to deal with the problem, the problem remains as it was, and the institution has become a new problem. Therefore, instead of going in for more institutions, an organisation like the ADB should use its influence and expertise and acceptability to persuade governments to at last start implementing cross-country projects.

Reforms

The current crisis has triggered a sort of triumphalism among those who have traditionally opposed reforms in our countries. “See,” they say, “capitalism has failed; liberalization and opening up of the economy, integration with the world has brought all these problems upon us.” Therefore, they are pressing, not just a halt to further reforms, but for a reversal of many of them. With this logic in hand, we should just have remained at the hunting and gathering stage. Had we only done so, none of the crises that afflict countries periodically would have touched us at all! The lesson is the opposite one. Every circumstance, every arrangement, every new setup opens up new opportunities just as it also occasions new problems. We should not, for that reason, shy away from reforms and progress. The lesson is to institute such correctives and reforms as the new circumstances demand. One of President Obama’s advisers has a good maxim: “No crisis should be allowed to go waste”. In the current circumstances also, the people, as well as governments will be prepared to take measures today which they would not have taken in normal times. The new circumstance should, therefore, be used to affect improvements that are necessary in the light of the crisis as it has unfolded, and at the same time to institute those reforms which will enable our countries to adopt policies and implement projects more expeditiously – policies and projects which, as we noted above, will strengthen the viability, competitiveness and sustainability of our societies for the future.

But all this is contingent on our having clear-headed, competent, purposeful, strong governments. This is the real deficit, the real crisis in our societies – apart from the advance that has been registered in Sri Lanka of overcoming the terrorist threat, and apart from the steady hands that guide Bhutan, governments in South Asia are losing grip as well as legitimacy. No stimulus package, no slew of economic reforms can survive the wreckage of governance.

Considerations that go beyond countries

One of the important features about the current crisis is that the breakdown has not come about because of one rogue, not even because of a handful of rogues. This is not the work of a Harshad Mehta or a Madoff. Entire industries have been involved in bringing about this collapse. Mortgage salesmen, banks, financial analysts, chartered accountants, auditors, rating agencies, regulators, central bankers and the governments – what has happened is the joint product of one and all of them. I’m reminded of a phrase which Joseph Berliner had used to describe the inability over decades of Soviet planners to get at the facts about individual enterprises. The reason, he said, was that from the bottom – the shop-floor of the factory – to the top – the provincial and central planning bodies – everyone had a vested interest in exaggerating the production figures and minimizing the quantities of raw material that had been used to produce the particular item. The reason, he wrote, was that functionaries all along the line were knit in “interlocking webs of mutual complicity.” These “interlocking webs” of the complicit are precisely what account for the current breakdown. For that reason, merely adding one more twist to a regulation or even to the law; merely setting up another institution which in the end comes to work in the same way as the existing institutions – such steps will not do.

For we must examine how this mountain of sand swelled to such proportions and “no one noticed.” We must reflect on the ease with which what was good for a few got dressed up as being good for all. We must reflect how warnings, even protests, some of them from leading statesmen of Asia itself, were disregarded. In fact, they were drowned in the general applause and acclamation of “financial innovation” which was said to be taking place. We must reflect how, in fact, regulations were enacted in countries like the U.S. but were not enforced. We must recall how, at crucial turns, regulations were, in fact, relaxed.

There were several reasons why all this happened. For the present purpose recalling just two of them will suffice. First, the beneficiaries, for instance the investment bankers, had acquired the position and “the intellectual stature” of referees. They were interlinked with advisers, analysts, rating agencies, and ultimately with the regulators. That is how what was good for them came to be dressed up as being good for all. Similarly, several governments and central bankers, as is now acknowledged even by some of the prime actors themselves, blew into the bubble and made it swell even more. The reason was that they took the resulting rise in asset values as certificates for their performance, they took them to be evidence of the correctness of their policies and as proof of the confidence which markets all over the world reposed in them personally.

After all, it is not that warnings were lacking. It is not the case that everyone was convinced that the innovations were all for the good. All of us today recall the statement of Warren Buffet – about an entire category of these innovative instruments being “Weapons of Mass Destruction”. We recall the warnings of Naseem Talib, of Roubini, of Jeremy Grantham. The point to reflect is, “How is it that these warnings went unheeded? How did they get drowned?”

The second point to reflect upon is more fundamental: are there features that are inherent in this kind of a financial universe and which make such breakdowns inevitable? Take, for instance, the simple matter of Asset-based Lending. Marry it to the perverse incentive system which became the characteristic of the financial world in the West. Loans would be given on the basis of the value of a category of assets, say houses. As the volume of loans against that category of assets for further investment in that category of assets increased, the value of those assets went up. Accordingly, in the second round, those who could offer those assets as collateral were able to borrow even more against those assets. That in turn raised the value of those assets even higher… And the larger the volume of loans that got made against those assets, the higher the rewards that accrued to those stoking the fire. And notice, the extent to which “innovation” was taken to further this fire: so much so that today the banks themselves, and the companies that ostensibly insured the transactions of those banks do not know the extent, even by a broad order of magnitude, to which they have become exposed to those toxic instruments.

To continue with the current example, so as to safeguard ourselves against future collapses of this kind, we must devise and hone gauges of our own to identify bubbles. And it should be the duty of our governments and central banks to alert our citizens, in particular small, uninformed, retail investors about bubbles that are emerging. Even this recent episode shows that when asset prices rise at the astronomical rate at which they did in the last five years, a bubble is getting formed. Similarly, when transactions come to have little to do with reality, that too is an indication that we should heed. In this last round, for instance, far-fetched and unimaginably esoteric formulae became the basis for millions of dollars to move into and out of “packages”, and countries. The ratio of one currency to another; the ratio of those two currencies to that of another pair of currencies; correlations of absolutely distant variables over whatever stretch of time fit that string of observations… Such determinants became the automatic triggers for transactions. They had nothing to do with what was happening in the underlying sectors, in the firms. When things are reach such a pass, we should know that transactions and instruments have departed so far from reality that they are bound to come down in a crash.

Thus, the spiral and the eventual collapse were inherent in the design itself. But there is an even more basic question that we must ponder. Are the spiral and the subsequent collapse inherent only in a particular sector? Or is it that the economies themselves have got addicted to bubbles? The real estate bubble in one round. The dotcom bubble in the next. The sub-prime and yen-trade bubble in the third…

Therefore, while much has been made of the fact that this breakdown was triggered by a policy failure, the failure to save Lehman Brothers, the fact is that the failure to save Lehman Brothers was just the occasion for what happened subsequently. That failure, to recall an expression used in a very different context, was just “the spark that lit the prairie fire.” The fact that entire sectors collapsed, that entire economies went into a tailspin so swiftly upon the decision not to save a single institution shows that the whole structure had become just a wall of sand. That is what we should reflect on for our future.

Several operational conclusions follow.

A few things to do

First, there is much talk of a new international economic architecture. Unfortunately, once again almost all work on what shape that architecture should take is being done in the very countries, sometimes by the very institutions and personnel whose excesses and misjudgments, to put it no higher, have led to the present pass. But they are, and quite naturally, loath to part with power. They may well let time pass. They may once again busy us in futile debates. And ensure that processes and institutions remain in their control. That would only ensure that the next bubble, and with it the next jolt will not be long in coming. That is all the more likely because, in those societies, the ones whose excesses and greed have led the world into this pit have got away scot-free. Others – tax payers who must pick up the bill for the bailouts, workers who must suffer joblessness – are the ones who are defraying the cost.

Second, we must keep our ears open to the Cassandras. We must not get swept away by intellectual fashions. Certainly, we should not succumb to the urgings of financial wizards and advisers who chastise our countries and governments for not keeping up with innovations that have been adopted “all over the world.”

Third, these events remind us once again that we must think for ourselves. We must be centres of countervailing intellectual, institutional and real economic power. Unless we build up these capacities, we will remain vulnerable to being misled by persons and institutions that have ideas that suit them rather than us, to say nothing of agendas they might have.

It is equally important to nail the culpable. First, we must document and nail the double standards of the West and of international institutions and international advisers. Policymakers in Southeast Asia recall vividly the advice which was thrust down their throats in the late 1990s. “No, no,” they were told, “you must let those who had made mistakes collapse. That is the way the market ensures that the mistakes will not be repeated in the future.” Governments in Southeast Asia, the government even of Japan, the country with the second largest economy of the world, let banks and other firms fail. These were then bought up at throw-away prices by western companies and consortia. And what is the position today? We are told that all rulebooks have to be thrown overboard. We are told that governments must intervene to save the companies and institutions which have done such gross wrongs, which have made such enormous mistakes, which have been propelled by little else than personal greed – we are told that governments just have to intervene and save these institutions at the cost of the taxpayer because, otherwise, the system as a whole will come down. When that was to be the consequence for our countries, no one was prepared to listen. Not just advisers, but institutions on which countries across the world, including our countries are represented insisted that failure was the only instrument for improvement. These double standards continue to this day. How many have spoken out against the protectionist measures which have already been announced by President Obama? Has he not announced that tax reliefs will not be available to firms that outsource their work? Has he not announced that foreign nurses will not be an employed or welcomed? What if the leaders of one of our countries had announced such measures?

For the same reason it is very necessary to document and nail the red-cards and yellow-cards which rating agencies and other monitors keep handing out. How come they were giving triple ‘A’ ratings to institutions and to instruments and to packages which we now see were entirely hollow? Are these not the very rating agencies and monitors that hand out ratings of one kind or another to our firms, indeed even to our countries, ratings that then influence the decisions of investors and thereby move billions of dollars into or out of our countries? We must document their record so that, in future, they command only as much authority as the intrinsic worth of their work deserves.

Conclusions

In a word,

We must grab the crisis by the forelocks, as we would grab time.

Second, by now the remedies have to be sector-specific, location-specific, firm-specific. General-purpose deficits are no answer to the downturn into which we have been pushed.

Third, we must think for ourselves. In particular, we must document the advice that was thrust down our throats over the years.

Fourth, we must focus on working and reforming existing institutions and processes rather than on setting up yet another slew of institutions. For this purpose institutions like the Asian Development Bank, countries like India and others in South Asia should coordinate and sustain intellectual effort.

[1] Andrew Sheng, “From Asian to global financial crisis,” Third K.B. Lall Memorial Lecture, Indian Council for Research on International Economic Relations, New Delhi, 7 February 2009.

Surprised ?

Source: Indian Express

Monday , Dec 01, 2008 at 0545 hrs

Our coastal areas are coming under increased threat from terrorist groups, which have decided to use the sea route to infiltrate into India. They also plan to induct arms and ammunition through the sea routes” — that is Shivraj Patil addressing the directors general and inspectors general of police in November 2006. “We understand they (the terrorists) have been collecting information regarding location of various refineries on or near the Indian coastline... Some Lashkar-e-Taiba (LeT) operatives are also being trained specifically for sabotage of oil installations. There are plans to occupy some uninhabited islands off the country’s coastline to use them as bases for launching operations on the Indian coast...”

That was the ever-alert home minister in November 2006. The minister of defence has been no less alert. On March 9 2007, he was asked in the Lok Sabha, whether “the intelligence agencies have warned about the possibility of terrorists trying to infiltrate through the sea route or trying to target our offshore installations?” He answered, “Yes, sir. There are reports about terrorists of various tanzeems being imparted training and likelihood of their infiltration through sea routes...” He was asked whether “maritime terrorism, gun-running, drug-trafficking and piracy are major threats that India is facing from the sea borders of the country?” His answer? “Yes, sir.”

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On May 9 2007, the home minister was asked in the Rajya Sabha, whether “it is a fact that there are strong apprehensions of terrorist threats to the country through the sea route?” “As per available reports,” he answered, “Pak based terrorist groups, particularly LeT, have been exploring possibilities of induction of manpower and terrorist hardware through the sea route...” On December 8, 2007, the National Security Adviser, M.K. Narayanan, was educating the world at the 4th Regional Security Summit organised by the International Institute of Strategic Studies, the Manama Dialogue. “According to our intelligence reports,” he confided to the assembled sheikhs and experts, “there are now certain new schools that are now being established on the Pakistan-Afghanistan border, which now specialise in the training of an international brigade of terrorists to fight in many climes. According to our information, recruits from 14 to 15 countries have been identified as amongst the trainees there... Training has become extremely rigorous — it is almost frightening in nature... Studies are being carried out about important targets, with regard to vulnerability, accessibility, poor security, absence of proper counter-terrorism measures, etc. The sea route, in particular, is becoming the chosen route for carrying out many attacks, even on land. References to this are to be found replete in current terrorist literature.” “Given India’s experience in dealing with terrorism,” he added, “I would like to therefore sound a note of warning, that there is no scope for complacency...”

On March 11, 2008, A.K. Antony addressed the “International Maritime Search and Rescue Conference,” in Delhi. He warned the delegates of “dangers of terror attacks from the sea in the region.” In the course of his address, Antony admitted that the Coast Guard faces shortage of manpower as well as hardware. But “necessary steps are being taken to strengthen the search and rescue infrastructure of the Indian Coast Guard...” On November 13, 2008, just a fortnight before the assaults at Mumbai, Manmohan Singh warned the BIMSTEC summit, “Terrorism and threats from the sea continue to challenge the authority of the state...”

By now it was time for Shivraj Patil to address yet another meeting of the DGs and IGs of Police. Thus on November 22, 2008, that is literally on the eve of the attacks in Mumbai, he told the police chiefs, “To control terrorism in the hinterland, we have to see that infiltration of terrorists from other countries does not take place through the sea routes and through the borders between India and friendly countries. The coastlines also have to be guarded through Navy, Coast Guard and coastal police. The states’ special branches and the CID should identify the persons forming part of the sleeper cells and lodging in cities and towns and studying in educational institutions and working in industries and professions...”

And four days later, the terrorists, using the exact same sea route, do the exact same thing that these worthies have been warning others about. Are they consultants to government or ones running the government? Is their job to issue warnings to others or to see that the warnings are acted upon? Warning given, the job is done. But that is the fate of warnings in this system. After all, that very sea route was used to smuggle explosives for the blasts across Bombay in 1993. Were those blasts not warning enough?

Seven years later —in 2000 — the warning and lesson were made explicit yet again. Four task forces were set up in the wake of the Kargil war. The one on border management warned, “The long coastline with its inadequate policing makes it easy to land arms and explosives at isolated spots on the coast.” It recalled that this is exactly how explosives were smuggled into Maharashtra in 1993. “The situation, if anything, has worsened over the years with the activities of the ISI becoming more widespread along the coast particularly by extension into the coast of Kerala... Such coastal areas must be particularly kept under surveillance.”

There is space here to cite just one example. The task force pointed out that the ISI had started using the Lakshadweep archipelago as a major staging point for smuggling arms and personnel into India. The agency used smugglers and their networks — like Dawood Ibrahim and his tentacles — and their routes for doing so. These dons and their networks were given shelter and support in return for helping the agency with its operations against India.

Now, Lakhsdweep has 36 islands. Ten of these are inhabited. Talking of one of these islands — Suheli — the task force pointed out that, sea vessels of smugglers apart, “there have been instances of twin rotor helicopters (of the kind used by militaries) landing at Suheli Island and spotting of unidentified helicopters flying over the waters around the islands...” And what were we doing? “Intelligence gathering in the islands,” the task force recorded, “is carried out by one inspector, one sub inspector, one head constable and three constables working in the special branch at Kavaratti” — just one of the 36 islands. “Intelligence gathering in all other islands is carried out by one head constable/constable who reports to the OIC (the officer in charge) of the police station who in turn passes it on to the inspector (special branch) at Kavaratti.” Please read that again: 36 islands; one inspector, one sub inspector, one head constable and three constables on the main island; and one head constable/constable for all the remaining 35 islands...

What has happened since, what is the position today, I ask the person who has held the highest posts in intelligence. Exactly what it was then, he says, with one difference. With the upgradation of all posts, the inspector (special branch) at Kavaratti is now designated not as officer in charge, but as joint assistant director or deputy central intelligence officer depending on his cadre. As for the other recommendations — patrolling, setting up sensors, and a host of others things are as they were.

And we are surprised!

I can multiply such examples by the score at no notice at all. Recalling just one thing will be sufficient. When, during a debate on national security in the Rajya Sabha, I began citing such passages from the report of this task force, shouts went up from the Congress, “But this is a secret report... How has he got it?... How is he citing it?...” Shivraj Patil remained his composed self, eventually chiding me with the sagacity which even terrorists have by now come to associate with him.

Things to do. First, act on recommendations that are made by committees you set up. Second, that will not happen unless we send a better type into legislatures and, thence, to governments. When we select leaders who treat the police as their private army; when we select leaders for whom investigating agencies are instruments to fix rivals or let off allies, don’t expect the police and agencies to suddenly turn around and forestall terrorists.

Third, remember that little can be achieved unless every aspect of governance, is brought up to par. You can’t have a first-rate commando force and a third rate magistracy. You can’t have defence and intelligence personnel who will nab terrorists and courts that will let them off, or, better still, enable them to live off the treasury as state guests for years. And that excellence must reach down to that “head constable/constable” level. When K.P.S. Gill reconquered Punjab for the country, he did so by strengthening and invigorating the local thana.

Fourth, that is only one part of the explanation. A weakened and confused society explains as much — and the responsibility lies as much with those who have dissipated national resolve, who have made nationalism a dirty word. That set includes the media as much as politicians. Sixty-seventy thousand killed by terrorism and we are still debating whether we should have a federal investigating agency. Sixty-seventy thousand killed by terrorists and we are still debating whether we should have a special law to bring them to book.

Of course, we must have the agency. Of course, we must have the sternest law in the world. But having the law is not enough. We must enforce it. One side of the picture is that, to pander to its vote bank among Muslims, the government has been withholding sanction to the law passed by the Gujarat assembly — even though that law is the exact replica of the law that its own party’s government has passed in adjacent Maharashtra. The other side is that, as the Maharashtra government does not use the law it has, those who will give shelter and support to terrorists give them with abandon — you just have to think of the quantum of weapons that the terrorists brought in; the detailed local knowledge they had — of the spot at which to land their boats, of the location of the building in which Jews and Israelis were staying, of the insides of the hotels, to see that they could not have executed their plans without the most extensive local help, help given over months.

And enforcing the law means carrying out sentences that the law provides. The parliament of India is attacked, guards are killed; one of the killers is tried and convicted, the sentence is confirmed by the Supreme Court, and, eight years after the assault, his “papers are still being processed,” indeed there are signature campaigns against executing the sentence. Given these circumstances, the best thing for a terrorist to succeed in his mission, and then get caught. He will get the best lawyers to defend him. He will get judges who are ever so solicitous about his rights, ever so finicky about procedures. And, of course, he will get activists to shoot off press statements on his behalf. Lawyers better, judges more solicitous, activists more articulate and better networked than any in his own country.

But for any of this to happen, the society has to be clear in its mind. This is, it has for 20 years been, war. It can be won only by overwhelming the adversary — not by running after the terrorist, as K.P.S. Gill says, but by out-running him, indeed by over-running him. Not an eye for an eye. For an eye, both eyes. Not a tooth for a tooth. For a tooth, the whole jaw. Human rights? Yes, we will respect the human rights of the terrorists and their sponsors and their local supporters to the extent that they respect the human rights of our people.

Finally, have a clear realisation of the condition of the society and state of Pakistan. Unless you come across evidence that the nature of the state and society of Pakistan has changed, it is idiotic to put faith in the profession of this ruler or that. Remember Musharraf’s “Main naya dil leyke aayaa hun”? Taliban and Al Qaeda are not the cause of the state of Pakistan. They are the result of the Talibanisation of Pakistani society and state.

Where do you think, and by whom do you think are the teachers instructed to ensure that students from class 1 onwards “recognise the importance of jihad”; to ensure that they “must be aware of the blessings of jihad”; to ensure that they “create yearning for jihad in his heart”; to ensure that they develop “love and aspiration for jihad, tabligh, shahadat, sacrifice, ghazi, shaheed”? Where do you think, and by whom are teachers instructed to ensure that students from kindergarten onwards learn to “make speeches on jihad and shahadat”, and are “judged on their spirit while making speeches on jihad”? Do you think these are instructions issued by the Islamic fundamentalists to maulvis in madrasas? They are instructions given by the government of Pakistan through official circulars to principals and teachers in government schools of Pakistan.

You didn’t know that? Exactly. That is a large part of the problem. You will find reams of these and other facts in the 2002 report edited by Pakistani academics, A.H. Nayyar and Ahmed Salim, and published by the Sustainable Development Institute, Islamabad, ‘The Subtle Subversion: The state of curricula and textbooks in Pakistan, Urdu, English, Social Studies and Civics’. Get on to the Internet, download and read the report from www.sdpi.org. Here is a part of the problem that you can solve by yourself.

As for the rest of the problem,as we can no longer rely on Shivraj Patil, we are compelled to continue to rely on the one who has been for the government as a whole, what Shivraj Patil has been for the home ministry — that is, the prime minister, Manmohan Singh.

The writer is a Rajya Sabha MP from the BJP

An empty claim?

Source: Indian Express

Monday , Sep 08, 2008 at 2352 hrs

Arun Shourie

Manmohan Singh and his spokespersons have said times without number that the US has assured India of “uninterrupted fuel supplies”. They have pointed to Article 5(6) as proof to say that the 123 Agreement enshrines this commitment. I had pointed out at that very time that the Article is just a face-saving farce. Manmohan Singh had told Parliament that the Americans had assured him that they would ensure “uninterrupted fuel supplies”, and that this would be provided in the 123 Agreement. In the event, the Americans did not budge an inch, they refused to incorporate any assurance to this effect in the 123 Agreement. At the last minute, to pleas that something had to be done to save face of the Manmohan Singh Government, they agreed to cut and paste his statement saying that in the 123 Agreement such an assurance shall be incorporated. But this was the 123 Agreement! What was to be provided in this 123 Agreement was left to some future 123 Agreement!

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Yet, the people here were sought to be fooled - we have got the Americans to promise us “uninterrupted fuel supplies”. Indeed, the insinuation went further - it was almost as if fuel supplies could not now be stopped under any circumstances. In answer to question 15 and again in answer to question 18, the US government states that only if fuel supply is interrupted for no fault of India, shall the US assist in resuming it. Thus, if some US firm fails to live up to its commitment to supply fuel, or if there is some disruption in global markets, the US will chip in. But if, for instance, we test; or we default in the account we keep of uranium we import, mine and use; or if we default on any of the numerous conditions prescribed in the 123 Agreement, the Hyde Act, the agreement with the IAEA, as well as under the guidelines of the NSG, and, as a result, fuel supply is stopped, the US will most emphatically not step in to restore fuel supplies.

Similarly, while we have been fed the fiction that the US has agreed to our building “strategic reserves” of fuel so that our reactors are not subjected to the Tarapur experience, twice in this document — from answers to questions 19 and 20 — we learn that there is no assurance to this effect. That India can secure fuel only, as the Obama amendment in the Hyde Act provides, for “reasonable operational requirements”. Not just that. The replies reveal that what this phrase - “reasonable operational requirements” - implies is not clear at all!

Manmohan Singh has repeatedly asserted that, in the event fuel supplies are interrupted or other difficulties are created, India has the right to take “corrective measures”. What is this magic bullet, we have wanted to know. Of course, there has been no answer. The US Congress asked Bush’s officials the same question. What does the Indian PM mean by “corrective measures”? The suggestion has been that, if things don’t turn out to our satisfaction, we can always withdraw our reactors from safeguards.

The answer to question 25 and again the answer to question 42 show how empty a claim this is. The Indian Government has not described what the expression means, the US Government says: we expect India to live up to the letter as well as the spirit of its commitment that it shall adhere to the safeguards “in perpetuity”. Furthermore, says the US Government, quoting the precise words to which persons like me had drawn attention in Parliament, the Secretary of State, Condoleezza Rice, has told the US Congress, “We have been very clear with the Indians that the permanence of the safeguards is the permanence of safeguards without condition.”

When the text of the 123 Agreement became public, I had drawn attention to the minatory Article 16. This provides that, should India, in the judgment of the US, step outside its commitments, even if the Agreement is terminated, the US shall have the right to get back every bit of nuclear material, every bit of non-nuclear material, every reactor, component, every ounce of fuel it has supplied under the Agreement. This position is reiterated in answers to questions 41 and 42.

Manmohan Singh keeps repeating, and so do the managed parts of the media, that India’s right to test remains unaffected. The US Congress as well as officials of the US Government have made it absolutely clear that the moment India tests, even if it is for peaceful purposes, the 123 Agreement will be terminated, and all nuclear commerce will stop. These consequences shall follow immediately. This position is reiterated in this document not once but four times - in answers to questions 16, 17, 37 and 38.

But it is not only in regard to tests that the government has woven falsehoods. The answers make two further things explicit. First, a test by India is not the only circumstance which triggers these consequences. It is just one of the circumstances that will invite the termination of the Agreement and the stoppage of all nuclear commerce. Other circumstances will be, such as a “material violation of the 123 Agreement, or termination, abrogation, or material violation of International Atomic Energy Agency safeguards.” Notice the “such as” that I wrote in the preceding sentence: these are not the only circumstances that will trigger the consequences. The answer refers to them with vital prefatory words, “for example”. Second, as the answer to question 38 puts it, that this is the import of Article 14 of the 123 Agreement is clear and well understood by India as much as by the US.

The final blow, the one that comes in response to the last question, number 45, is devastating as it shows how blatantly the Manmohan Singh Government has been lying. It has been maintaining that in the 123 Agreement, if nuclear commerce with India is stopped, the US Government has pledged that it will assist India to get the supplies, etc., from other members of the NSG. This sort of an assertion could be made only on the belief that everyone concerned is an idiot. Yet, not only has it been made, it has been swallowed and spread by sections of the media.

The Hyde Act binds the US Government to ensure the opposite — namely, that, if it terminates the 123 Agreement and stops nuclear commerce with India, it shall ensure that India cannot get the supplies from any other member of the NSG. That position is reiterated, and the pledge that the US Government will indeed ensure this is repeated in answer to question 45. The US Government has drawn attention of the Congress to the guidelines that exist in the NSG, and pledged that they will apply in case the US stops nuclear commerce with India.

Paragraph 16 of the NSG guidelines, the US government says, “provides that suppliers should (1) consult if, inter alia, one or more suppliers believe there has been a violation of a supplier/recipient understanding; (2) avoid acting in a manner that could prejudice measures that may be adopted in response to such a violation; and (3) agree on “an appropriate response and possible action”, which could include the termination of nuclear transfers to that recipient.” If the NSG agrees to the exception for India, the US Government assures, this guideline “would apply in the case of any nuclear transfers by a Nuclear Suppliers Group supplier to India.” And yet the falsehoods continue.

And now comes the NSG waiver. Hailed as a great victory for the country, it seals the three-year-long effort to get India into the two-layered net — a layer to limit the country’s ability to enhance its strategic capabilities; and the second layer that follows from the first: as we will not be able to acquire the sinews ourselves. To secure us against China, we will necessarily have to seek protection under the American umbrella.

Recall that the Hyde Act has several provisions that prescribe what India must do in regard to the Fissile Material Cutoff Treaty, the Wassenaar Arrangement, the MTCR, the Proliferation Security Initiative. Manmohan Singh declared in Parliament that these are “extraneous provisions” and that India shall not accept them. Just the other day, Pranab Mukherjee repeated, “We shall not accept any prescriptive conditions.” “The waiver must be unconditional and clean”, the Government has been saying all along.

The waiver, which is being hailed as a great national victory, states that it is being given as India has undertaken “the following commitments and actions.” Among these is the pledge that it shall continue its moratorium on tests. Both as a result of the 123 Agreement with the US, and now by the pledges made to the NSG, the Government has converted what was a voluntary decision into a pledge that is now a binding international commitment.

And make no mistake, it is a commitment for the indefinite future. For, as Japan has stated after the meeting, nuclear commerce with India shall cease the moment it tests. Second, exactly as the Hyde Act requires, India has pledged “its readiness to work with others towards the conclusion of a multilateral Fissile Material Cutoff Treaty.” Yet, we are fed the lullaby: “The Hyde Act does not apply,”

Third, having entered the cage, we are now subject to scrutiny by NSG members in accordance with, to take just one instance, part 2 of the NSG guidelines. These say, in portions, that each member country shall have to be satisfied that India’s “statements and policies” “are supportive of nuclear non-proliferation” and that our actions are “in compliance with its international obligations in the field of non-proliferation.” The “non-proliferation” that concerns us is not of our giving nuclear technology or materials to others, but of our developing our strategic weapons.

Put this requirement alongside the statement that Pranab Mukherjee made on behalf of the Government to secure the waiver. In that statement the Government pledged that India shall desist from “an arms race including a nuclear arms race,” and that it will join steps being taken towards disarmament and non-proliferation. But all those agreements — the MTCR, the FMCT, the Wassenaar Arrangement, the PSI — agreements and arrangements about which Manmohan Singh had said India has “reservations”, which he said are “extraneous” to the nuclear deal, are one and all regarded by the NSG members as steps that are necessary for non-proliferation. By pledging to abide by guideline 2 of the NSG, and to have our “compliance in this regard to be assessed by each member before and as it trades with us, we pledge ourselves to signing up on each of them. It is not for nothing that, after the meetings, Germany, which had been presiding over the meetings, declared that India shall now have to undertake to work for the “entry into force of the CTBT and a termination of fissile material production for weapons.” Exactly what the Hyde Act prescribes.

Finally, contrary to the falsehood that the Government has been feeding us, that should the US stop nuclear supplies to India, it is bound by the 123 Agreement to help India obtain them from other countries, the waiver has been given on the condition that all members shall ensure the opposite.

Paragraph 3(e) prescribes as follows: Participating Governments will maintain contact and consult through regular channels. For the purpose of considering matters connected with the implementation of all aspects of this Statement taking into account relevant international commitments or bilateral agreements with India. In the event that one or more Participating Governments consider that circumstances have arisen which require consultations, Participating Governments will meet, and then act in accordance with paragraph 16 of the Guidelines.

And that paragraph requires that all members act in such a way that, if one country decides to terminate nuclear supplies to a recipient country, in this case India, that recipient is not be able to obtain the supplies from elsewhere. Exactly what the Hyde Act asked the US Government to ensure, and exactly what the US Government pledged in that letter to the US Congress it would ensure.

And yet, “The Hyde Act does not apply,”; “the US administration letter has no force of law”; “a national victory”. The Government has taken the country into a chakravyuh — the consequences will unfold one by one. As for the media, I can only plead with great sadness in my heart, do not make yourselves an instrument of falsehoods. The consequences far transcend your momentary shows and “stories”.

‘But there is nothing new’

Posted: Saturday , Sep 06, 2008 at 0157 hrs
Arun Shourie
 Source: Indian Express

Sep 06, 2008 at 0157 hrs 

But why now? Why on the eve of the NSG meeting in Vienna?” — the cry went up. Entirely predictably: when they can’t deal with the facts of a disclosure, the embarrassed always demand, “But why now?” Should we not, on the contrary, be grateful that, at least at this penultimate hour, someone has awakened us to what the government is bartering away in Vienna? Is there an inauspicious time for being awakened to the facts? “The secret letter has been revealed by a known opponent of the nuclear deal,” they say — as if the fact that the person disclosing the document is a known opponent of the deal, in some way dilutes the veracity of the text! And this from a newspaper that discloses secret documents every other week!

“But there is nothing new in the US Administration letter to the Congress,” say the spokesmen of the government, and its apologists in the media. Actually, that very fact, as we shall soon see, makes things all the worse. Indeed, the American ambassador, David Mulford, has been more specific: he has said that the letter that the administration sent to the US Congress contains nothing that has not already been shared with the Indian government. In a word, the government has known all these facts all along, and has yet continued to assert its falsehoods to the contrary for months on end. The US administration letter, in fact, reveals more: on point after point, it reveals that the Indian government, while asserting falsehoods to the contrary here in India, has not just been in the know of what the Americans were extracting, it agreed with the construction the Americans had put on the clauses in question.

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“Falsehoods” is the right word, make no mistake.

“The Hyde Act does not apply to us,” government spokesmen have been insisting. “We are bound by the 123 Agreement alone.” Indeed, as recently as July 2 this year, the prime minister’s office asserted, “the 123 Agreement clearly overrides the Hyde Act and this position would be clear to anyone going through the provisions.” That is patent nonsense. Article 2 of the 123 Agreement provides that in implementing it, the two countries shall be governed by, among other things, their “national laws”. What are the national laws of the US in this regard? The Atomic Energy Act of 1954 and the Hyde Act. Does the Hyde Act apply or not?

But clauses apart, even a fool can see through the lie in that: does the Hyde Act apply to the Americans or not? That is all that is required for the consequences listed in the Act to follow. Suppose we test. What are the Americans bound to do in return by law? Both by the Hyde Act as well as the original Atomic Energy Act of 1954, they must immediately cease all nuclear commerce with India. By both these Acts as well as the guidelines of the NSG, they must ensure that every other member of the NSG also ceases all nuclear cooperation with India. In a word, by the laws that apply to them, the Americans have to bring upon us the full weight of sanctions. What comfort is it that the sanctions fall upon us by laws applicable to them and not applicable to us?

That simple and brutal fact is compounded by the 123 Agreement. In Question 3, the US Congress asks the Bush administration, “Does the Administration believe that the nuclear cooperation agreement with India overrides the Hyde Act regarding any apparent conflicts, discrepancies, or inconsistencies? Does this include provisions in the Hyde Act which do not appear in the nuclear cooperation agreement?” In turn, the Bush administration says that the 123 agreement “is in full conformity with the Hyde Act,” that it is “consistent with the legal requirements of both the Hyde Act and the Atomic Energy Act” — both of them, incidentally, require that, to take just one example, the agreement be terminated forthwith the moment India conducts a test, even for “peaceful purposes”.

The prime minister has said over and over again that the cooperation shall be “full”, that it shall cover all aspects of the full nuclear cycle. In particular, that India shall have full access to “sensitive technologies”. Anything less, Manmohan Singh has said again and again, shall be inconsistent with the statement he had signed with Bush, and India shall not accept such a dilution. Persons like me have pointed out from the beginning that this just cannot be the case, that the Americans have an unambiguous policy in this regard, a policy that has been reiterated personally by Bush as well as by the US Congress — namely, that countries like India shall not be given access to technologies for enrichment, reprocessing or heavy water production. Manmohan Singh has gone on repeating, “Full means full”.

And as proof, the government’s propagandists have been pointing to Article 5(2) of the 123 Agreement. This clause in fact is just a sleight of words. It says that these “sensitive technologies... may be transferred to India under this agreement pursuant to an amendment to this agreement.” Even then, the clause clearly records, the transfer “will be subject to the Parties’ respective applicable laws, regulations and license policies.” Hence, three conditions: (a) “may be”; (b) “pursuant to an amendment to this agreement”; and (c) “subject to the Parties’ respective applicable laws, regulations and license policies.” In spite of this, the Government’s propagandists have kept repeating that India has won access to these sensitive technologies.

In its answers to not one but six questions (questions 4 to 9) from the US Congress, Bush’s administration says six times, that the sensitive technologies will not be transferred and that there is no proposal at all to amend the 123 Agreement!

Similarly, government spokesmen have maintained that our right to reprocess spent fuel has been recognised. Indeed, Manmohan Singh himself has said that our reprocessing rights have been recognized so much so that they shall be “permanent”. The answers to questions 26 and 29, as indeed Articles 11 and 12 of the 123 Agreement itself, indicate that we shall be able to reprocess the spent fuel only in a facility (a) set up at our cost; (b) under IAEA oversight; (c) and only in accordance with “arrangements and procedures” to which the US agrees. As for the right being “permanent”, the answer to question 44 gives the lie. The answer does not just reiterate that the “arrangements and procedures” under which the reprocessing may be done shall have to be agreed to by the US; it says, “the proposed arrangements and procedures with India will provide for withdrawal of reprocessing consent.” Permanent?

Manmohan Singh has insisted all along that India shall not accept any oversight or inspections other than what it shall agree to under the “India specific safeguards” in its agreement with the IAEA. Persons like me drew attention to the stern and absolutely unambiguous statements of Condoleezza Rice; to the report of the joint committee of the US Congress; as well as to the provisions of the Hyde Act, which specifically provided that India shall have to accept “fallback safeguards” - that is, should, in the judgment of the IAEA or the US, the IAEA be unable to perform its inspections adequately, the US shall have the right to institute inspections and other measures of oversight through other agencies - its own or those of some other international bodies. Even as it was asserting the contrary, Manmohan Singh’s Government, agreed to have these additional inspections and restrictions through Articles 10 and 16(3) of the 123 Agreement. All that was done was that instead of the US inspectors being called “inspectors”, they were called “experts”. Through these clauses, India agreed to ensure for them the fullest access to sites and data that they wanted to inspect.

In its answers to questions 10 to 13, the US administration has reiterated four times that, yes, there shall be these additional fallback safeguards and inspections. Not just that, the administration tells the US Congress that, in addition to pledging that it is accepting IAEA safeguards and inspections in perpetuity, the Indian government “fully appreciates that paragraph 1 of Article 10 of the Agreement does not limit the safeguards required by the Agreement to Agency (that is, IAEA) safeguards.” In a word, while we were being told the exact opposite — “We shall not allow American inspectors to roam around our facilities” — the Manmohan Singh government had accepted that very roaming around.

To be concluded

"Put your difficulties to work"

Source: education times
 As part of our series on achievers who have failed yet stood tall, we speak to Arun Shourie, Former minister and journalist

When I failed:

I am the only editor to be dismissed not once but twice from The Indian Express. The first time, Mrs Gandhi put such pressure on (Indian Express owner) Ramnath Goenka that even a tiger like him made a goodwill gesture out of me.

But he did call me back and I was delighted to go back. But then he had a series of strokes. Those who were trying to swallow the company thought that S Gurumurthy and I would be the obstacles. And therefore, they first removed me and then Gurumurthy.

What I learnt:

My first learning is never look back. Or else you will suffer the fate of Lot's wife (in the Book of Genesis, Lot's wife ignores the advice of the angels not to turn back when fleeing the city of Sodom, and turns into a pillar of salt). My second learning: put your difficulties to work. There are very few difficulties that cannot be put to work. This is easier if our goal is inner growth. Third: always have three careers going at the same time. And carry each one lightly.

How it helped me succeed:

I have never looked back in my life. On the personal front, I have had to face several challenges: my 35-year-old son has multiple handicaps and my wife has had Parkinson's for the last 22 years. I have worked towards putting these things to work. I have followed at least three careers at the same time. I have written books, I have written columns and I have been a minister. I have carried each one of them lightly so that if I am thrown out I don't get disappointed. (Former prime minister) Vajpayeeji asked me a few years back: "Where are you living these days?" I said: "In my parents' house that they left behind for me. He asked me why I had not taken government accommodation. I said: "(If I do not take it) there is one less thing to give up."

(As told to Soma Banerjee)

US aims to make us strategically subservient: Shourie

Source : IBNLIVE.com

How credible are the Bhartiya Janta Party’s concerns about the 123 agreement and the NSG waiver? Those are the key issues Karan Thapar explored on the Devil's Advocate with one of the parties most outspoken critics Arun Shourie.

Karan Thapar: Let’s start with your central objection that the 123 agreement traps India into Hyde Act which will end up emasculating and crippling its nuclear deterrent. Now that India has got a waiver from the Nuclear Suppliers Group (NSG) and can trade with countries like France and Russia, hasn’t the 123 become irrelevant and, therefore, haven’t your concerns and objections become academic?

Arun Shourie: Each time something happens, we say let’s wait for the next one. This is to be seen as a chakravyuh, as an architecture. There are certain things in the Hyde Act, the123 agreement, the IAEA protocol, and there are certain thing in the additional protocols, which are yet to come, which has already been specified in the Hyde Act. In the NSG waiver, there are three other things, so it is all to be taken as a part of architecture.

NSG waiver in the end says that if any member country of the NSG is satisfied that conditions have arisen that it must stop nuclear commerce with India, then all countries should act in accordance of Paragraph 16 of the NSG guidelines.

Karan Thapar: This was in your series of articles in The Indian Express and I’m afraid you’re wrong. You’re referring to Paragraph 3e of the NSG waiver. Paragraph 3e doesn’t say this at all. All Paragraph 3e says is that NSG countries are required to consult and contact on the implementation of the waiver. It does not go as far as you’re suggesting

+91

Arun Shourie: There is no reason we should have any doubt on that. So I’ll read out to you what it says. I’m reading paragraph 5e: “In the event that one or more participant governments consider that circumstances have arisen which require consultation, participating governments will meet and then act in accordance with Paragraph 16 of the guidelines.”

Karan Thapar: And that does not specify that all countries would stop just because one has stopped. Your interpretation is not just wrong but it is, forgive me, exaggerated.

Arun Shourie: It’s not either. It is exactly the interpretation of the Americans themselves. It is the assurance they have given to their Congress.

Karan Thapar: I’m afraid you’re wrong. The American Ambassador speaking to the Network 18 programme Indian Tonight on Wednesday made it crystal clear that Paragraph 3e does not amount to your interpretation. It doesn’t even amount to a periodic review. It is simply a process of contact and consultation on the implementation of the waiver.

Arun Shourie: That is not what the US Government has told the US Congress. Mr Mulford’s statement should be seen in that context.

Karan Thapar: Forgive me, the US government has not as yet communicated with the US Congress about the NSG waiver at all.

Arun Shourie: No, please understand what they have said in their record of their answers to questions of 45…

Karan Thapar: But that’s not in connection with the NSG waiver. That at best has a connection with the 123. The NSG waiver only happened last Saturday. Paragraph 16 doesn’t lead to automatic termination. I’m afraid your interpretation is a part of the confusion that’s entered into the debate.

Arun Shourie: That’s not the case at all. You’re spreading confusion. You please read the text once.

Karan Thapar: I have read the text. I have researched it thoroughly before I came here. I double-checked with the American Ambassador when he was here on Wednesday. I double-checked with the Indian authorities. No one believes that your interpretation of that paragraph is correct. That’s why I’m saying to you that your concerns emanate from the 123 but now with the NSG coming into place, the 123 is irrelevant. Therefore, your concerns have become academic and irrelevant.

Arun Shourie: Absolutely not. Paragraph 16 of the NSG guidelines provides as follows: “In the event that one or more suppliers believe that there has been a violation of supplier/recipient understanding avoid acting in a manner that could prejudice measure that maybe adopted in response to such a violation.”

Karan Thapar: That does not mean that they have to act in a particular way. Once again you’re over-interpreting.

Arun Shourie: You don’t see the implication of all this?

Karan Thapar: I do — you’re over-interpreting. You’re seeing the worst possible interpretation that is based upon a misunderstanding, perhaps, I would even say, a wilful misunderstanding.

Arun Shourie: That is absolute bunk and nonsense and you’re using words that are not justified by the text. Text clearly says exactly what the Hyde Act has said — if America terminates the trade if it believes India has not acted according to the Hyde Act…

Karan Thapar: For the 123, not the NSG. You’re confusing the two.

Arun Shourie: No. The two are part of an architecture. You have raised these nonsensical words such as exaggerated and wilful misunderstanding…

Karan Thapar: Explain to me why you think that the NSG allows for the whole of the NSG terminating the trade ties because one country terminates. It is against the NSG guidelines…

Arun Shourie: That is not the case. The US government is obliged to ensure under clause 16 of the guideline that if it terminates its commerce with India all other countries will coordinate.

Karan Thapar: That’s Hyde Act you’re talking about. You’re now interpolating that into the NSG guidelines. The NSG is not subject to the Hyde Act. NSG has its own rules. Individual countries of the NSG don’t observe the Hyde Act regulations and stipulations. You’re reading one into the other.

Arun Shourie: … because they are part of an architecture. We have gone to the NSG and the IAEA as a consequence of the 123 and the Hyde Act.

Karan Thapar: I accept that but the essential point you’re missing and, this is the one I want to emphasise, is that now that we’ve got the NSG waiver, the 123 has become academic and irrelevant. If India chooses not to go ahead with the 123, the Americans will be angry and will deem us to as ungrateful but we would have opened a window to unfettered commerce with the NSG, particularly with countries like Russia and France who are not going to accept America’s regulation s on their head.

Arun Shourie: If that were the case, Russia and France would have already entered into nuclear commerce with us despite American blockade.

Karan Thapar: We are the country that has held back. They are keen to go ahead. Their ambassadors have communicated that much to us.

Arun Shourie: That’s only now.

Karan Thapar: No, it was earlier.

Arun Shourie: That is since the statement of the Prime Minister in February 2007 in regard to the four plants that Russia was prepared to give us. We raised the maintenance question — that you went to Russia and the Russians said that the agreement was ready, then why did you not sign it.

Karan Thapar: As a gratitude to America so that they had an even plain field for their companies. It wasn’t because of any legality.

Arun Shourie: That is what I’m trying to say. This is from February 2007. The sanctions we had on Uranium 20 years before that were only of America. But we could not go to France and Russia.

Karan Thapar: The NSG waiver has ended the experience of 30 years. That’s a significant step. What I’m saying is that people may believe or disbelieve your concerns with the 123. They may be valid, they may be invalid but now that that waiver has opened up opportunity for trade with the NSG countries, your concerns with the 123 and the Hyde Act are overtaken and hence irrelevant because they don’t apply to the NSG.

Arun Shourie: When the 123 agreement came you said ‘oh but the Hyde Act is irrelevant.’ Now that the NSG waiver has come, 123 has become irrelevant.

Karan Thapar: That’s because 123 and Hyde Act don’t affect NSG countries. They are separate, sovereign countries.

Arun Shourie: No. It’s a part of the architecture and India will have to pay the consequences after this waiver, as Germany and Japan have said.

Karan Thapar: Let me quote to you the leading non-proliferation authority, Daryl G Kimball of the Arms Control Association in America. He’s made it absolutely crystal clear that the restrictions of the Hyde Act have not been incorporated in any shape and form into the NSG. The Bush administration resisted efforts to incorporate in the NSG waiver the same restriction and conditions on nuclear trade that are mandatory to US law. Now I come back to my point: your concerns about the 123 are academic because they don’t apply to the NSG. The NSG has opened a new window which doesn’t have the same

restrictions and it actually makes up for the deficiencies of the 123.

Arun Shourie: Till yesterday you were saying there are no deficiencies in the 123 and that my interpretation of the Hyde Act is overblown. Now you’re saying all that is academic and NSG is all that counts. That’s not my interpretation. We can go on in circles about this.

Karan Thapar: The NSG waiver doesn’t put any restriction on fuel supply or assurances or upon the size of strategic deterrent that India can develop.

Arun Shourie: We were told the opposite — the NSG waiver will provide for a positive statement about India building strategic reserve, and that IAEA protocol will provide for India taking corrective steps in case…

Karan Thapar: It does permit corrective steps. The IAEA protocol in its preamble does permit corrective steps for India but it doesn’t specify what they are. By definition, corrective steps are something you can’t specify because then you lose the sovereignty of defining them.

Arun Shourie: When we quoted the preamble of the Hyde Act, everybody said the preamble is non binding, but in the IAEA safeguards you say they are binding.

Karan Thapar: In the case of the Hyde Act, George Bush in his signing statement in December 2006 specified that he would not honour and go by section 103 and the preamble. He said so and that’s why people argued that it’s not binding.

Arun Shourie: Again, another complete distortion. Bush’s signing statement had two points that in regard to foreign policy and seeking the determination of American foreign policy to an international body like NSG he would not give up US presidential powers

Karan Thapar: And he would therefore not implement section 103.

Arun Shourie: What is section 103?

Karan Thapar: The one that we’re talking about.

Arun Shourie: Not at all.

Karan Thapar: Yes. The whole of interpretation of the Hyde Act is irrelevant to the NSG

Arun Shourie: You are making assertions about the Hyde Act which are absolute bunk.

Karan Thapar: The NSG has given India fuel assurances. There is no bar on the size of strategic reserve. It gives India unlimited access under NSG concerns to non proliferation and enrichment technologies. It also allows India the right to reprocess. All of those were deemed to be deficiencies by some analysts — deficiencies in the 123 that have been taken care of by the NSG.

Arun Shourie: You are just completely fabricating things which are not there in the guidelines at all. Where is this bit about unlimited supplies in the NSG guidelines?

Karan Thapar: There is no bar. The NSG waiver permits India access to fuel supplies without restriction, it permits India to develop strategic reserves without limitation, it permits India access to proliferation technologies that are so defined to do with enrichment and reprocessing.

Arun Shourie: You are completely lying through your teeth to your viewers.

Karan Thapar: The point is — there is no bar on them. This is a waiver which is an exemption.

Arun Shourie: Karan this is your technique; you slip in your words and mislead the viewers.

Karan Thapar: Do you still believe that your concerns which are limited to the Hyde Act and the 123 apply to NSG countries, which are not subject to the Hyde Act or the 123? Do you still believe it?

Arun Shourie: Absolutely.

Karan Thapar: They have no sovereignty?

Arun Shourie: The NSG will work as a club. It says it will coordinate its efforts. Article 16 of the guideline specifies that they must coordinate their efforts. If one country is satisfied that conditions have arisen in which there has been a violation by the recipient country, they will all coordinate the effort.

Karan Thapar: Let’s come to the politics behind your concerns with the nuclear deal. For many people, the BJP is the architect of the relationship with America, which is today culminating in the Indo-US nuclear deal. Yet today, by some amazing transformation, the BJP has converted itself into the principal opponent to its own vision for the future.

Arun Shourie: BJP is the architect of strategic relationship, not of strategic subservience, and we believe that this architecture puts us in a position in which we would have to accept the American umbrella…

Karan Thapar: America’s aim is to make India strategically subservient. Is it a trap that America has set for India?

Arun Shourie: Of course.

Karan Thapar: Atal Bihari Vajpayee was the man who called America India’s natural ally. And today you’re saying that America has set a trap for its natural ally?

Arun Shourie: It is an ally and you have to be very cautious with this ally. Just see what they have made of Pakistan and several other countries.

Karan Thapar: Middle class supporters were exultant when the waiver was granted. Today you are putting yourself in opposition to them.

Arun Shourie: Are you the only one who understands the middle class? Don’t we know about the middle class? It will have consequences for the next three decades and we believe that it does subordinate India in a strategic relationship which is just a first step.

Karan Thapar: Isn’t it interesting that you’re arguing the same point which the CPM in China raised? So is BJP on the side of China when it comes to Indo-US nuclear deal?

Arun Shourie: You can get the CPM fellows and ask them that aren’t they ashamed of the fact that they are arguing the same thing as BJP. Is this even an argument?

Karan Thapar: Why does China not want the deal to go through? They believe that it would give India an opening which should be resisted. You seem to be arguing China’s case for them.

Arun Shourie: I’m arguing that in my view we have a great threat from China and we can not rely on the US umbrella to face it we have to strong independently.

Karan Thapar: Do you have no second thoughts about your criticism on the NSG waiver? You may be right about the Hyde Act, you may be right about the 123, but are you still critical on the NSG waiver?

Arun Shourie: Of course not.

Karan Thapar: Arun Shourie, a pleasure talking to you.

Arun Shourie: Thanks.