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Saturday, August 6, 2011

“Left cannot be suppressed by violence”

“CPI(M) and Left Front are facing severe attacks in West Bengal”

The Left Front movement in West Bengal cannot be suppressed by force, coercion and violence, asserted Communist Party of India (Marxist) general secretary Prakash Karat here on Friday.

Speaking at a function to observe the birth anniversary of one of the pioneers of the Left movement in the country, Muzaffar Ahmed, Mr. Karat said the CPI(M) and the Left Front were facing severe attacks in West Bengal.

“We are confident that with the support of the people, with the public opinion that will be developed in West Bengal and the country, we will be able to withstand these attacks and once more take up the cause of the people,” Mr. Karat said.

Questioning the killings, attacks on party workers and offices, and intimidation of elected panchayat representatives, Mr. Karat said the Trinamool Congress had derided the CPI(M) for being an ‘authoritarian' regime, but was putting such a regime into practice now.

He called upon those holding public office to “respect the wishes of those who have pledged their allegiance to a different ideology and politics.”

The Hindu

U.S. Treasury hits back at S&P

The U.S. Treasury Friday night hit back against a Standard and Poor’s downgrade of U.S. top-notch credit rating, saying that the agency’s judgement was flawed.

“A judgment flawed by a 2 trillion U.S. dollars error speaks for itself,” a spokesperson of the Treasury said in a short statement.

The global rating agency stripped the world’s largest economy of its top AAA long-term sovereign credit rating and lowered it by one notch to AA-plus.

“The downgrade reflects our opinion that the fiscal consolidation plan that Congress and the administration recently agreed to falls short of what, in our view, would be necessary to stabilise the government’s medium-term debt dynamics,” said the S&P.

“The outlook on the long-term rating is negative,” noted the agency, which means that it might further lower the U.S. credit rating.


US loses AAA rating, G7 finance ministers to meet amid huge slide in stocks

The United States lost its top-tier AAA credit rating from Standard & Poor’s on Friday, hours after investors alarmed by the euro zone debt crisis forced Italy to speed up an austerity drive.

The downgrade followed days of heavy losses on stock markets around the world, as investor confidence was hammered by fears for the US economy and a warning from the head of the European Commission that the eurozone debt crisis had likely spread.

In a sign of how concerned world leaders are about a slide in stocks that wiped about $2.5 trillion off global markets this week, Italian Prime Minister Silvio Berlusconi said finance ministers from the Group of Seven industrialized nations would meet in “just a few days” to seek a common plan of action.

Worries the eurozone debt crisis was spreading and the United States was slipping into recession have driven the rout in financial markets. Better-than-expected jobs growth in July helped support Wall Street on Friday but stocks slipped back into the red in late trading.

The S&P cut in the US long-term credit rating by one notch to AA-plus was an unprecedented blow and resulted from concerns about the nation’s budget deficits and climbing debt burden. The move is likely to eventually raise borrowing costs for the American government, companies and consumers.

As well as cutting the rating, S&P said the outlook was “negative,” a sign that another downgrade is possible in the next 12 to 18 months.

S&P said political gridlock in Washington was part of the reason behind the cut, saying politics was preventing the United States from addressing its deficit and debt problems.

“The downgrade reflects our opinion that the fiscal consolidation plan that Congress and the Administration recently agreed to falls short of what, in our view, would be necessary to stabilize the government’s medium-term debt dynamics,” S&P said in a statement.

While the impact of the rating cut on financial markets when they reopen on Monday may be modest because the decision was expected, the shift may have a major long-term impact for the US standing in the world, the dollar’s status, and the global financial system.

“The global system must now adjust to the many implications and uncertainties of the once-unthinkable loss of America’s AAA,” Mohamed El-Erian, co-chief investment officer at Pacific Investment Management Co., which oversees $1.2 trillion in assets, told Reuters.

In Europe, Italy buckled to world pressure by pledging to bring forward cuts to balance the budget in 2013 in return for European Central Bank help with funding.

After a frantic round of telephone diplomacy, Mr. Berlusconi said his government would bring forward cuts to balance the Italian budget in 2013, a year ahead of schedule, and rush through welfare and labor market reforms.

“We consider it appropriate to introduce an acceleration of the measures which we introduced recently in the fiscal planning law to give us the possibility of reaching our objective of balancing the budget early, by 2013 instead of 2014,” Mr. Berlusconi told a news conference after a day of calls with world leaders including German Chancellor Angela Merkel and US Treasury Secretary Tim Geithner.

Sources close to the matter told Reuters the ECB had demanded such measures in exchange for buying bonds to ease the pressure on Italy, which has come under market attack.

Mr. Berlusconi said the G7 finance ministers meeting could also prepare the ground for a meeting of heads of state.

Late in the day, the White House said President Barack Obama had spoken separately with Mrs. Merkel and French President Nicolas Sarkozy about the euro zone crisis but offered no details.

The ECB had no immediate reaction to Italy’s announcement but a European Commission spokesman said the measures responded to assessments set out earlier in the day by EU Economic and Monetary Affairs Commissioner Olli Rehn and “go in the right direction.”

Investors have been unimpressed by a 48 billion euro austerity package passed by Mr. Berlusconi’s government, partly because most of the measures were delayed until after elections scheduled for 2013, for clear political reasons.

The crisis was receiving attention at the highest levels as leaders of Germany, France and Spain conferred by telephone during the day.

Discord among EU policymakers over how to stop a disastrous spread of the sovereign debt crisis to Italy and Spain, the euro zone’s third and fourth biggest economies, has frustrated investors.

The European Central Bank disappointed markets by buying Irish and Portuguese bonds but not government paper in Italy and Spain where bond yields have blown out this week on fears they may need bailing out.

That now appears to have been a gambit to force Italy to act.

“In principle it is right to say that the ECB could start buying Spanish and Italian bonds if they made an extra effort with fiscal and structural reforms,” a senior eurozone official told Reuters.

Bank of Spain governor Jose Manuel Gonazalez-Paramo, a member of the ECB’s governing council, said he expected Spain to announce further measures on Aug. 19 to ensure it meets its budget austerity targets.

Earlier in the day, China and Japan called for coordinated action to avert a new worldwide crisis sourced to Europe and the United States, as did Mr. Rehn.

“International policy coordination through the G7 and G20 is of critical importance,” he told a news conference, having broken off his vacation and returned to Brussels.

China said it “has every right” to demand the US address its debt problem following its downgrade by S& P

In a stinging commentary, the official Xinhua news agency said Washington needed to “come to terms with the painful fact that the good old days when it could just borrow its way out of messes of its own making are finally gone.”

Xinhua said that unless Washington made substantial cuts to what it called the “US gigantic military expenditure and bloated social welfare costs”, the downgrade would simply be a “prelude to more devastating credit rating cuts”.

“China, the largest creditor of the world’s sole superpower, has every right now to demand the United States to address its structural debt problems and ensure the safety of China's dollar assets,” the English-language commentary said.

Britain called for a “concerted international effort” to show governments would work together to avert a financial crisis and Brazil also urged unity, saying the world economy was “in a situation of stress.”

This was the first time the US was downgraded since it received an AAA rating from Moody's in 1917; it has held the S&P rating since 1941.

Al Arabia

Libya foes in propaganda war, seeking rifts in each other’s ranks

Mired in a slow-moving ground war, Libya’s warring parties are turning to propaganda to try to splinter each other’s support base and gain leverage in talks on a political settlement.

Muammar Qaddafi is playing on fears among Libyans that Western-backed rebels will tip the country deeper into chaos. The opposition’s message is that only an end to Qaddafi’s 41-year-old rule can bring peace, stability and justice.

The war of words is not new: Both sides took to the airwaves and the Internet within hours of the February start of a revolt against Qaddafi’s government.

But now international contacts are under way on a political solution, both sides are looking more urgently at psychological warfare to boost negotiating clout in the absence of a decisive military move in Libya’s deserts, mountains and towns.

An eye-catching example of the information struggle emerged on Wednesday when one of Colonel Qaddafi’s sons aired the possibility of an alliance with Islamist “terrorists,” a startling U-turn after the government’s previous insistence that its main enemy in the conflict was Al Qaeda.

“Libya will look like Saudi Arabia, like Iran. So what?” Saif Al Islam told the New York Times, adding he would now form an alliance with Islamists among the rebels.

Saif Al Islam has campaigned prominently for reconciliation with Islamist militants over the past five years, and helped arrange the release of hundreds of them from prison.

But the killing by Colonel Qaddafi loyalists of civilians in the 2011 uprising destroyed Saif Al Islam’s credibility with Islamists, analysts say. His latest remarks were greeted with derision by a wide range of Libyan opposition commentators.

“It’s childish scare tactics,” US-based Libyan activist Hafed Al Ghwell told Reuters. “The logic is, ‘Let’s frighten the hell out of the West by suggesting we’ll ally with Islamists.’”

“He knows very well that if Islamists ever move on Tripoli, their first target will be Qaddafi and his family.”

Islamist link is ‘desperate’

Ashour Shamis, a UK-based opposition activist and editor, said Islam’s remarks showed the Qaddafi camp was “absolutely desperate. It’s pathetic.”

“They are clutching at straws,” he said.

Noman Benotman, a former opposition guerrilla commander who once worked closely with Saif Al Islam on his reconciliation program, said the government had started to work with some members of a highly conservative, apolitical group of Salafi Islamists in Tripoli to try to counter rebel influence.

State television has also spoken vaguely of a possible Islamist tie-up.

Benotman said, however, that Saif Al Islam’s claim of a link to Islamists working within the rebel camp were false and “psychological warfare.”

But if the purported Qaddafi-Islamist tie-up sounds outlandish, the rebels’ credibility is if anything more compromised.

Despite weeks of sporadic gains on the ground and advances on the diplomatic arena, the rebels are on the defensive in the battle for Libyan hearts and minds as never before following the unexplained death on July 28 of their military leader Abdel Fattah Yunis.

His killing has drawn attention to rifts in the rebel camp, an assortment of armed groups that, especially in the east, has struggled to project an image of unity.

Yunis’s family has criticized the handling of the murky case by the rebel National Transitional Council and said it might take justice into its own hands unless rebel leaders come clean over exactly who killed him.

A propaganda gift to Qaddafi, the killing has raised concerns over instability and sustained trouble even if the opposition ousts the veteran leader.

Qaddafi points to Egypt, Tunisia unrest

Worries are running so deep that when a rebel spokesman on Friday reported the death of another of Qaddafi’s sons, Khamis, Libya-watchers immediately suspected it was a propaganda ploy to distract attention from Saif Al Islam’s New York Times interview, which received wide attention in the Arab world.

“It’s probably just propaganda,” one Libya analyst said. “It looks a bit desperate.”

The report was denied with hours by a Qaddafi spokesman.

Apparently buoyed by Yunis’s death, Saif Al Islam on Aug 2 seemed to remove a government offer of ceasefire talks if NATO stopped bombing, saying regardless of whether NATO disengaged from Libya, the war would continue until all Libya was freed.

Pointing to post-revolution unrest in Egypt and Tunisia, Colonel Qaddafi said in a July 23 audio address that the uprisings there had resulted in looting and destruction.

The message may well have been intended for a local audience, analysts say.

Qaddafi in June posed playing chess with a senior Russian chess player, looking relaxed and focus.

Al-Ghwell, the US-based Libya activist, said he worried that the ousting of Colonel Qaddafi was taking such a long time, although he was confident the rebels would eventually win.

“The fact is that the longer this lasts the more likely we’ll have more incidents like the killing of Yunis and the more likely we’ll have a messy situation in general.”


Wednesday, August 3, 2011

Oil payment row and India-Iran ties

As Indian firms line up behind Saudi Arabia and its Gulf partners, their moves are likely to invite Iran's hostility which could easily spill over into the political realm.

India's ties with Iran need urgent attention as an unresolved row over oil payments threatens to drag the relationship, once described as “strategic,” to a new low.

The problem arose in December 2010 when the Reserve Bank of India, under U.S. pressure, decided to no longer use a clearing mechanism to pay Iran for its crude. Washington and its western allies had exhorted India not to use the Asian Clearing Union (ACU) currency swap system to pay Iran. They argued that this mechanism, established at the initiative of the United Nations Economic and Social Commission for Asia and Pacific (ESCAP) and in operation since 1974, was disconcertingly opaque. Consequently, it was difficult to ascertain whether the money flowing into Iran's coffers was not used to fortify the country's nuclear programme. Faced with these objections, India, according to the Financial Times, began using the German bank, EIH, for making payments. However, this channel broke down in May 2011, after the European Union imposed sanctions on Iran.

Iran is India's core energy partner — its second largest oil supplier. Nearly 12 per cent of India's total demand, around 4,00,000 barrels a day, feeds India's refineries and petrochemical complexes. The Mangalore Refinery and Petrochemicals Ltd (MPCL) is the largest oil importer from Iran. The IOC, BPCL, HPCL and Essar are also major consumers of Iranian crude.

Because of the difficulties over payments, Indian companies have accumulated a debt of nearly $5 billion. With the payment row festering, Iran decided to halt supplies to Indian firms for August. However, as the deadline for the payments neared, both sides scrambled to achieve a breakthrough. On July 31, Iran's Oil Ministry website SHANA reported that the payment row had been settled. India would pay part of the debt “promptly” and the rest would be “gradually settled.” The Ministry's optimism notwithstanding, details of the inner workings of the new mechanism and the prospects of its durability remain far from clear. (Media reports say that India and Iran have finalised the settlement of dues through a Turkish bank arrangement.)

The possible collapse of Iranian supplies will have far greater ramifications than a mere commercial impediment in a buyer-seller relationship. Iran's decision not to supply oil, if implemented, will deliver a serious blow to the evolution of a robust geostrategic relationship between New Delhi and Tehran, of which a highly developed energy partnership has to be the core. Aware of the importance of establishing a strong political relationship, India and Iran, with Pakistan as the third party, had begun negotiations on the Iran-Pakistan-India (IPI) pipeline. Had the pipeline materialised, it would have not only generated obvious economic benefits but also imparted regional stability, premised on mutually beneficial interdependence.

Despite the unrealised potential of the IPI or any of its variants, Iranian officials privately concede that the energy relationship between India and Iran should move on. Before threatening to stop supplies, Iran had begun to show fresh interest in seeking Indian investments in its oil and gas sector. Alive to the recent Indian energy forays in neighbouring Central Asia, Iranians were also considering working with India on a possible fuel swap arrangement in the future. Under this mechanism, Iran could export energy to India from its terminals, in return for an equal amount of oil delivered across the border to Iran, which may have been tapped by Indian firms in Central Asia.

Quite recently, India's induction into the United Nations Security Council as a non-permanent member appeared to have led Tehran, to consider afresh, the need for reinforcing its ties with New Delhi. “We realise that India in the future is likely to play an ever-larger global role, and we want to position ourselves well as this process unfolds,” an Iranian academic in Tehran, who did not wish to be named, recently told this correspondent.

Apart from energy, there are two key elements that define the relationship. One of them is trans-continental transit. Iran's port of Bandar Abbas is the starting point of the north-south corridor which can ferry goods northwards towards the Caspian, and further into Russia and Europe. But, more critically, India needs Iran to physically access Afghanistan. It can do so from the Iranian port of Chabahar, from where a land corridor extends northwards before entering Afghanistan. For reasons of geography, Iran is central to India's Afghan policy.

The importance of Iran to fulfil India's aspirations in Afghanistan is bound to heighten as NATO, most likely without imparting much stability, begins to pull out of the country, in accordance with a three-year time table. In a likely political vacuum, there will be demands on India, Iran, its Central Asian neighbourhood and possibly Russia to play a proactive role in Afghanistan. That would, however, require a powerful vision and strategic cooperation, including intelligence sharing and political coordination at an unprecedented level, for which serious preparations have to begin right away. In fact, with western forces stepping out, in a manner not very different from the Soviet withdrawal from the country in 1989, India may find it necessary to initiate the evolution of a regional mechanism, where neither Pakistan nor China is left out, so that Afghanistan — a country prone to multiple influences — has a realistic chance to rebuild.

However, the manner in which the oil payments row is being handled suggests that New Delhi, far from strengthening ties with Tehran from a larger regional perspective, might have, after considerable deliberations and probably in line with the thinking in Washington, decided to scale down its ties with Iran. Alternatively, India-Iran ties, of which Afghanistan is a key component, might have become the victim of governmental drift, reflecting complete liberation from a larger strategic vision that should otherwise inform a vibrant relationship between the two countries.

It is, therefore, disappointing that India, instead of quickly arriving at a new payment agreement with Iran and defusing a major crisis, has apparently decided to place heavier reliance on Saudi Arabia as an alternative fuel supplier.

Reuters has quoted K. Murali, HPCL's head of refineries and international trade, as saying that the company has sought an additional supply of one million barrels in August from Saudi Aramco.

India's greater reliance on Saudi Arabia may not be temporary, confined to warding off its current difficulties with Iran. Indian refiners may already be restructuring their procurements by probing alternative suppliers, especially Saudi Arabia and its Gulf allies, to offset their dependence on Iran. In its annual report, MRPL has noted that given “the enhanced level of sanctions on Iran in future, [and] the non-resolution of the current payment crisis, the availability of Iranian crude may be difficult.”

As Indian firms appear to line up behind Saudi Arabia and its Arab Gulf partners, their moves are likely to invite Iran's hostility, which could easily spill over into the political realm. The decision to increase dependence on Saudi Arabia and reduce procurements from Iran is particularly ill-timed because of the rapid escalation recently of a Cold War between the two countries. Since the advent of the Arab Spring — the expression for the rising tide of pro-democracy movements since January that are sweeping across West Asia and North Africa — relations between Riyadh and Tehran have turned nasty. Saudi Arabia's decision in March to send troops into neighbouring Bahrain to quell, what was described by Riyadh as a pro-Iran Shia uprising, has added a sharp emotive edge to the Saudi-Iran rivalry. Iran's foes have also accused Tehran of fomenting the rise of the so-called “Shia crescent” in the region — a mythical Iran-led Shia alliance that allegedly is trying to foist a sectarian anti-Sunni agenda in the region.

By siding with the Arab petro-monarchies to meet its energy requirements, India has, inadvertently or otherwise, forced itself into the throes of the Saudi-Iran Cold War. For many influential Iranians, India's move would be seen as taking sides — a deliberate decision to join the anti-Iran camp led by the United States and its regional allies, chiefly Saudi Arabia. In highly politicised Iran, which is particularly on edge after the onset of the Arab Spring, this is combustible material, which can rapidly inflame public passions against India and eventually lead to the undermining of New Delhi's core interests in Afghanistan, compulsorily channelled through Iran.

Amid the fluidity of the Arab Spring and its accompanying firmament, India needs to navigate skilfully to establish parallel and independent relations with both Saudi Arabia, the world's largest oil producer, and Iran, its strategic partner, for the protection of its interests in Afghanistan and, later, in energy-rich Iraq, where Tehran's influence runs deep. But a balanced and vibrant relationship with the two regional giants will become possible only if India assesses its difficulties with Iran not as an isolated technical issue but as one which can define the contours of its influence in the region.

Atul aneja- The Hindu