IMF UPSTAGED BY CHAVEZ & CO

On November 3, Banco del Sur, a new Latin American development bank, will be inaugurated in Caracas, the Venezuelan capital, in a direct challenge to the US dominated World Bank and IMF – international Monetary Fund.
Also called Bank of the South, it is the brainchild of Venezuelan leader, Hugo Chavez. It will have $7 billion in start-up funds and an estimated $50 billion in assets within a year. Its creation has been welcomed by former World Bank chief economist, Joseph Stiglitz, a Nobel prize winner, who was an adviser to the Clinton Administration. Stiglitz reckons Bank of the South will be a shot in the arm for development in the region and a much needed wake up call for international lending institutions like the IMF. According to him, it will not only be a positive alternative to the World Bank and IMT, it will mirror the needs and ideals of the peoples in the region.
Brazil, the region’s biggest economy is onboard, along with Bolivia, Paraguay, Argentina, Ecuador and Uruguay though other countries are expected to join soon. In 2005, when the idea of supplanting the IMF with a regional development bank was first proposed, the Argentinean president, Nestor Kirchner remarked “there is life after the IMF and it is a very good life.
Washington is angry with this latest development, given that the US Treasury is the IMF’s largest shareholder. The reality, however, is that the power of the IMF has been in steady decline for some years in Latin America where it has been depicted as a tool of US policy. An example of the decline is that 80% of IMF loans, amounting to $4.5 billion, were spread across Latin American nations in 2005 but that has now dwindled to a trickle with some estimates putting the figure at 1% - approximately $50 million. The massive decrease in the IMF lender role can be attributed to Venezuelan leader, Hugo Chavez, who has used his country’s great oil wealth to make interest free loans to some of those countries who are on the Board of Bank of the South. For example, Chavez authorized a loan of $2.5 billion to Argentina and Bolivia got $1.5 billion. A loan to ease Ecuador poverty levels amounted to $500 million. Bolivia and Ecuador still owe international lenders approximately $15 billion and will now be hoping Bank of the South will help them get out from under those debts.
Since he came to power, Chavez has proved a thorn in the side of Washington by his continuing efforts to challenge US influence across the Latin American continent. This latest venture may be his biggest gamble to date in that effort and it could well work, especially with support from the economic giant of the region, Brazil. It possible the new bank could end, for the foreseeable future, IMF’s lending and oversee a declining role for the World Bank. Recently, the IMF was in such dire financial straits from unpaid loans it considered dipping into its gold reserves to keep itself afloat.
All the countries on the Board of the new institution have expressed opposition to the IMF, though Brazil, which has maintains close links to Washington, has been less vocal than the others. But, even Brazil has been critical of the way the IMF over decades set strict conditions for granting loans, conditions that were followed by stringent austerity measures, greater privatization and growing poverty levels, especially in the 1970s and 80s. According to Venezuela’s finance minister, Rodrigo Cabezas, the new bank will depart from the authoritarian nature of the IMF and “no conditions will be set on loans to members.” As for Hugo Chavez, he sees the bank as furthering his strategy to dilute US influence in the region.
Privately, Brazil has not been happy about ditching the IMF in favor of the new institution, feeling perhaps that it would not be a good idea to allow the Left, led by Chavez and Bolivia’s, Evo Morales, to detach Latin American nations from their traditional links to the US. But many Brazilian companies have expressed support for Bank of the South, in part because they do a lot business with oil-rich Venezuela and they fear the flow of money would cease if Brazil opted out of the new bank. It was pressure from such companies that forced Brazil to join the Board though Brazil’s finance minister stressed the need to keep Bank of the South’s operations within South America. He argued that the bank must operate on the basis of only interest bearing loans. In other words, Brazil was not happy that Chavez had talked about loaning money to Cuba. Brazil wants to see a properly functioning bank and not a vehicle for Chavez and Morales to play out socialist economic theories.
While the US can do little about the new bank, it may well feel that it will have to devote more time, money and manpower to covert strategies to weaken Venezuela’s hold on other countries in the region. For years, the influence of Chavez was underestimated by the Bush Administration. It paid little attention to what was happening in its back yard post 9/11. In the intervening years, the drift to the Left, allied to a growing anti-Americanism, can be traced directly to Chavez. A major mistake of the Bush Administration was to see Chavez as a buffoon when in fact he was a shrewd operator. Better still, Chavez had one of the great political survivors of our times as his closest adviser and mentor – Fidel Castro. Chavez has negotiated some difficult political hurdles and the emergence of Bank of the South testimony to the fact that he was seriously underestimated.
Only time will tell how big an impact the new bank will have in terms of poverty levels in the region. Some observers believe that no matter what happens the IMF will continue to have a role, even though for the time being it will be a watch and wait role while the US burrow away covertly, hoping to undermine Chavez.

AFGHAN WAR SIX YEARS ON

Six years ago this month, the Bush Administration launched its first major response to the 9/11 attacks by invading Afghanistan in an operation called Enduring Freedom. Six years on, much of that country remains lawless and OEF, as the invasion is now termed within the Pentagon, could be renamed Operation Without Enduring Freedom, because NATO may have to remain in Afghanistan for decades to come, fighting the Taliban and foreign fighters.
As invasions go, the Afghanistan invasion was far from orthodox because of an almost total reliance on air power. The objectives were to destroy the Taliban, catch Osama Bin Laden and eliminate his Al Qaeda network. That was all left to small teams of CIA agents and CIA allies within the Afghan Northern Alliance militia led by its warlord, General Dostum. They were all backed up by high altitude, precision bombing.
The overwhelming use of “shock and awe” tactics quickly disposed of the Taliban, many of whom faded into the tribal areas of Pakistan bordering Afghanistan. Others simply changed sides, a tradition past time among Afghan fighters. In 2001, reasons for switching allegiances included survival and large sums of cash offered by the CIA to tribal war lords to persuade their men to fight against both the Taliban and Al Qaeda.
The objectives of Operation Enduring Freedom were never fully met because the Taliban was not wiped out, Bin Laden and his inner circle were not captured and Al Qaeda remains a serious threat to this day, having morphed into an organization that now supplies many of the foreign fighters killing US soldiers in Iraq.
So, what happened? Why did the early success of removing the Taliban from power not lead to all the objectives of OEF being achieved? Most experts tend to agree that several factors complicated the Afghanistan invasion, the most important being that the US did not put enough troops on the ground. The failure to do so meant that too much emphasis was placed on Afghan allies, namely warlords and their militias, to track down and destroy Bin Laden and his network.
As the Taliban regime crumbled under relentless US bombing, Bin Laden and his Al Qaeda followers fled into the Tora Bora mountain range along the border with Pakistan. It was terrain Bin Laden knew well from his days as an engineer building tunnels for the Mujihadeen who fought the Soviets to a standstill between 1979 and 1989. During that decade, Bin Laden’s tunnels enabled Afghan fighters during that decade to survive Soviet air assaults and to launch attacks on the Soviet military. By the time the Soviets accepted defeat, they had suffered 30,000 fatalities. More than 50,000 of their soldiers were seriously injured, and as many as 200,000 were treated for illnesses like typhoid and malaria.
Had US military planners studied the history of that campaign they would have known that Bin Laden would seek sanctuary in Tora Bora. That would have enabled them to put sufficient troops on the ground to cut off his escape route. Instead, the Pentagon planners, including Secretary of Defense, Donald Rumsfeld, relied heavily on US air power, and paid Afghan fighters who were secretly taking bribes from Al Qaeda to let the leaders of that organization flee the country. The outcome was that Bin Laden and his followers made their way to Pakistan, even by-passing formations of Pakistani troops on the border.
The US failure to commit enough troops can be attributed to the fact that the Bush administration was secretly planning another war at that time – the invasion of Iraq. It mean President Bush, Dick Cheney and others were less concerned about the perpetrators of the 9/11 attacks than their desire to overthrow Saddam Hussein and go after Iraq’s oil. In pure military terms, Operation Enduring Freedom was grossly mismanaged. Any undergraduate student of history could have told the White House and Pentagon that you cannot take lightly at your peril any campaign in Afghanistan. No one knew that more than the British who lost many soldiers their in 19th century Afghan campaigns. But the British leader in 2001, Tony Blair, was not prepared to question the strategy of his closest ally and friend, George Bush.
Ever since the Iraq invasion in 2003, there has been a growing consensus among experts that the decision not to commit fully to Afghanistan allowed the Taliban to re-group and Al Qaeda to reconstitute itself as a global terror network. Therefore, the potential for victory was sacrificed. One of the likely consequences is that NATO will be fighting a defensive battle there for decades to come.
Afghanistan is hard to subdue, not merely because of its geography and the changing alliances and interference of its neighbors, including Iran and Pakistan, but because it is the world’s largest producer of opium. When the Taliban were in power they incurred the wrath of war lords and their followers by banning the growing of poppies. The US, against advice from the British, now wants to do the same thing and the result will be the same. Sadly, Afghanistan does not have Iraq’s energy resources. It is an economy run on drug money, which in turn fuels terrorism and encourages war lords to resist the US-NATO presence.
Worse still, the Taliban has been back in business since 2005, making much of the country ungovernable from the capital, Kabul, where the Afghan president, Hamid Karzai sits surrounded by scores of bodyguards. He is now considering political deals with the Taliban.
The British forces within NATO have had success against the Taliban in the south but at a cost of lives and injuries to their soldiers. Still, they recognize it is going to be a long campaign and they will need reinforcements. To that end, they have been pulling troops out of Iraq, a war that has no support within Britain.
Afghanistan remains high on the British agenda but so too does a recognition that it has not been accorded the emphasis it needs in Washington, and in some European capitals. Recently the British conservative leader, David Cameron, promised that if he won the next general election in Britain he would make Afghanistan his “number one priority in foreign policy.” He has to be aware, however, that success will depend on the efforts of Washington and London to persuade Pakistan to deal effectively with the Taliban and Al Qaeda. Pakistani intelligence created the Taliban and has enough information to destroy it. The same applies to Al Qaeda, which uses Pakistan’s tribal areas to evade capture, train fighters and plan new atrocities.
The lack of commitment by Pakistan is evident in the latest UN statistics. They show a 30% increase in suicide bombings in Afghanistan. As the Taliban wilts under a fierce British military assault in the south, its leaders in Pakistan are sending foreign fighters, many of them with experience in Iraq, into Afghanistan to create mayhem.
No matter how long NATO remains in Iraq, the term Operation Enduring Freedom will always seem like a grandiose plan poorly conceived and sacrificed on the altar of an overwhelming desire by neocons in the Bush administration to settle “unfinished business,” namely the overthrow of Saddam Hussein and the securing of his country’s massive oil reserves. That is no longer a fiction and was recently confirmed by the former head of the Federal Reserve, Alan Greenspan. He was close enough to the Bush administration after 2001 to know what was on the mind of the president and his inner circle.

CHINA'S UNTESTED MILITARY GETS READY FOR HI-TECH WARS

China is investing billions of dollars in preparing its military to fight hi-tech adversaries and one of them could be the United States military should it defend Taiwan in the event China decides to invade the island as it has often threatened it will.
In a signal to Taiwan that it remains of frontline interest to the Chinese Community Party, Chinese leaders recently recommended the appointment of five new members to its CMC - Central Military Commission - all of them with experience in planning an invasion of Taiwan. The five, including generals like Wu Shengli, who was made the new naval commander last year, will have their posts on the CMC rubber stamped on October 15 when the 17th Congress of the Chinese Communist Party meets in Beijing to confirm the present leaders in power.
The saber rattling about Taiwan comes as Taiwan prepares for next year’s presidential elections amid threats from one of the leading contenders that, should he win, he will seek UN membership for the island, thereby declaring de facto independence from mainland China. The present Chinese leadership has already indicated that it will not stand by and allow that to happen.
All of this comes at a time when the Pentagon is convinced that China’s PLA –Peoples Liberation Army – is training to “win local wars under conditions of informatization,” meaning that it is developing a hi-tech capability to fight wars against enemies like the United States, and not just within the Taiwan Straits, but farther a field if necessary. In particular, China needs its military to be able to operate in sea lanes which it uses for the constant flow of oil, gas and metals that it ships to the Chinese mainland from across the globe. It needs those imports to boost its massive economy and to upgrade its infrastructure.
This year, China announced that it had increased its military budget by 17.8%, bringing its total expenditure to $45 billion. No one was fooled by that figure, given the fact China has never been truthful about his military spending. The US and the EU believe the figure is much higher and that the one provided by China exposes its lack of transparency, thereby making it difficult for others to discern China’s true military objectives.
The Pentagon is in no doubt that China’s military expansion is not only aimed at someday invading Taiwan but also at making its influence felt on the “greater periphery” of Central Asia and the Middle East. With regard to Taiwan, one third of China’s 1.5 million ground forces are camped in 3 military districts facing Taiwan. There are approximately 900 short range missiles pointed at Taiwan, an increase of 100 since 2006. The Chinese navy, which includes 58 attack submarines, is busy building a larger naval capability with ship to ship missiles, some capable of being used at long distances. And, according to the Pentagon, the Chinese air force has as many as 700 combat aircraft “within un-fueled range” of Taiwan.
But it is the PLA’s emphasis on hi-tech development that has most intrigued Pentagon watchers who have told Congress that the PLA has been developing a cyber warfare capability to attack US military computers in the opening hours of a conflict. A Pentagon report on the issue states that, as of 2005, the PLA had begun to incorporate “offensive computer network operations into its military exercises.” Part of the PLA’s cyber warfare training has already involved sustained hacker attacks on US military and civilian computer systems. This year, the Pentagon warned that the sheer scale of attacks on US information and banking systems from China indicated that the hacking could only be taking place with the connivance of the PLA and the Chinese political leadership. Pentagon cyber experts fear that China is developing a cyber capability to plant viruses in banking and critical intelligence networks in the US, viruses it will activate on the eve of a conflict in order to cause severe damage to the US economy and hamper the flow of intelligence between US agencies. The latest round of hacker attacks on US systems is being seen by experts as part of a training program by PLA cyber teams to see how well they can hack and infiltrate US networks.
In terms of military hardware, the Chinese are not only spending heavily on the international arms markets, they are also developing their own missiles. In January, they tested cruise-type missiles to be used by their nuclear forces. They also tested an anti-satellite missile and several types of intercontinental ballistic missiles that could reach the US. On the arms market, two of their major sources for materiel, including submarines, guided missile destroyers, drones, air-defense systems and aircraft are Russia and Israel that claims it is America’s number one ally.
Israel, much to the consternation of some in Congress, has had an historic arms relationship with China and has supplied it with advanced technology. In January, under pressure from the White House, Israel’s parliament implemented tougher controls on the export of military hardware. It is uncertain what impact these will have since Israel has generally acts alone in its international arms deals. According to Israel, it, like Russia, has not sold its most sophisticated weapons to the PLA. Not everyone is convinced by that argument. In the past, Israel sold important F-10 fighter avionics parts to the PLA in contravention of agreements with the US over dual use technology. It also sold US missile technology to China.
The Pentagon’s latest report to Congress on China’s military strategies confirms that the PLA and Chinese Communist Party remain obsessed with Taiwan and are moving towards a time when they will have a military capable of winning short wars against hi-tech adversaries. The report expresses concern that this “will increase Beijing’s option for military coercion to press for diplomatic advantage” in conflict situations.
Overall, Pentagon experts believe the PLA remains untested in modern warfare and that its political bosses lack military experience. Therefore, it is difficult to quantify the level of threat the PLA could pose to the US military in a regional conflict. But it is just this inexperience on the part of the PLA and its political bosses that could lead all of them to act on the basis of bad judgment and intelligence. In those circumstances, say Pentagon experts, the consequences “would be equally catastrophic whether based on advice from operationally inexperienced commanders or from ‘scientific’ combat models.”
The Pentagon report also points out that, as of 2007, “China can neither protect its foreign energy supplies, nor the routes on which they travel.” This is, in effect, the Achilles heel of China and its military. In a conflict with the US over Taiwan or disputed islands off Japan, the US navy and air force could effectively halt all energy supplies reaching China by sea and air. Over time, China could be starved of the fuel it would need for its military and of the much needed imports required to keep its manufacturing industry and economy afloat. China knows all of this and is anxious to expand its navy and air force. It hopes to have its first aircraft carrier in service within the next 7 to 8 years.

RUSSIA IN FACE-OFF OVER IRAN

When Russian president, Vladimir Putin, visits Teheran for the first time on October 16 it will not only be a snub to George Bush and Israeli prime minister, Ehud Olmert, but a sign that Russia does not approve of threats of unilateral military action against Iran.
Putin’s visit is timed to coincide with a summit of Caspian states that include Iran, Russia, Azerbaijan, Turkmenistan and Kazakhstan, all of them rich in oil and natural gas. Two of them, Iran and Russia, favor setting up a gas cartel like OPEC, the Organization of Petroleum Exporting Countries that controls the flow and price of oil globally.
Russia’s relationship with Iran is multi-faceted. Russia not only exports weapons, missiles and nuclear energy materials to Iran but it is a partner with Iran in trying to forge closer links with Turkmenistan to prevent the US or Britain acquiring rights to that country’s natural resources.
The Russian nexus of Iran and the other Caspian states is important to the Kremlin’s sense of the significance of its profile in the Caucusus and Central Asia. And, when it comes to the issue of threatened military action against Iran, Russian leaders become very concerned. For some time now, they have felt that the US policy of regime change in Iran is dangerous and laced with US-Israeli self interest. They further see the policy as an attempt to fulfill a neocon agenda of Middle East domination that would suit neocons in Washington and Tel Aviv. It has not gone unnoticed in Moscow that Israel has been constantly revving up of tensions with Iran and has been making efforts to condition the American public that the only way to deal with Iran is through military strikes. Russia has also been no doubt alarmed by reports that Vice-President Dick Cheney had considered encouraging Israel to strike at Iran so that when Iran retaliated the US would have justification for launching massive strikes against Iran’s military, its nuclear industry and its infrastructure.
White House spokeswoman, Dana Perino recently accused Iran of provocation after it said it would retaliate if there was an Israeli strike. Perino’s comments highlighted the absurdity of the pro-Israel position at the White House. Ms. Perino was obviously unaware that it was not Iran that had threatened to attack Israel but the other way round. This year alone, senior Israeli figures, including Prime Minister Ehud Olmert, and several generals, have publicly declared they would not rule out a military strike against Iran. In April this year Olmert mused that it might take 10 days and 1,000 Tomahawk Cruise missiles to deal with Iran.
All of this has greatly concerned Russia and China and the Kremlin in particular has resisted attempts by the Bush Administration to buy its support for a tougher line against Iran. Informed sources have claimed that the Bush White House tried the “carrot” approach by offering to scale back its planned missile defense shield in Europe, and to back down from supporting independence for Kosovo. There was also a suggestion that Washington said it would ease off in its support for Baltic states like the pro-US Georgia that were proving a political headache on Russia’s boundaries. According to reports emanating from the Kremlin, Putin was not prepared to be “bribed,” proving how much importance he placed on Russia’s relationship with Iran. In order that Russia’s Iran policy was not misunderstood by the international community, especially by the US and Israel, Russia’s foreign minister, Sergei Lavrov lectured the French foreign minister, Bernard Kouchner. He told him that, while Russia would not approve a nuclear Iran, it would certainly not permit unilateral action against Iran by the US or any of its allies. Lavrov reminded his French counterpart that Washington agreed in 2006 with other members of the Security Council that the “sole objective” of the Council, and of Germany, which had been brought onboard to deal with the Iran issue, was to back the efforts of the International Atomic Energy Agency to make Iran complaint with IAEA rules.
In a deliberate thrust at the Bush Administration’s rush to war in Iraq in 2003, Lavrov added that everyone should remember that the Iraq war began after the AEIA warned the Bush Administration that Iraq had neither chemical nor nuclear weapons. His comment was a clear dig at the US, which have been arguing that Iran is not only close to having nuclear weapons it would target at the US and Israel, but it also has stockpiles of chemical weapons. Those claims echo bogus statements made by Colin Powell and Condoleezza Rice in the run up to the 2004 invasion of Iraq.
Lavrov’s advice to the French came after tough statements from France’s new president, Nicholas Sarkozy, supporting George Bush’s hard-line position on Iran. In the background, Russia knew French support for tougher sanctions against Iran had been bought with a promise by the US allow the French oil giant, Total, a share in Iraq’s oil. Total signed a deal last year with the American oil giant, Chevron, to seek rights to develop the Majnoon oil field in southern Iraq near the border with Iran. It is one of the largest oil fields in the country and though the Iraqi Oil Ministry recently declared it would treat the US-French tender like any other, it is unlikely the Chevron-Total tender would not be the winner. After all, the US calls the shots in relation to almost everything in Iraq. As of August 2006, plans for development of the Majnoon field were in the hands of the Iraqi Oil Minister.
Iraq and its oil have been very much at the heart of Russia's determination to make its position clear that the US and Israel have no international approval or UN sanction to attack Iran. Ever since the US occupation of Iraq Russia has been smarting at the fact that its oil companies have been denied access to Iraq’s oil reserves even though they had major exploration agreements with the late Saddam Hussein. The Kremlin, much like the ex-chairman of the Federal Reserve, Alan Greenspan, believes the war in Iraq was about oil. But the Kremlin is willing to go further by alleging that the Bush policy of regime change in Iran is aimed at expanding US control of oil and gas in the region, especially by gaining control of Iran’s huge oil and gas reserves.
In the months ahead, it is likely a cold war will develop between Russia and the US over Iran. Russia may find that it has a supporter in Turkey, which has resisted pressure from the US to stop buying gas from Iran for its own use and for export to other countries. India, a largely Muslim country that is considering forging an alliance with the US may back Russia because it buys much needed oil and gas supplies from Iran. And of course there is China which opposes any military action against Iran. Then there is Europe, which as a whole prefers not to tow the Washington line on Iran. For example, Germany has not followed the French policy of calling for tougher sanctions against Teheran.
If the reports are correct that Dick Cheney considered encouraging Israel to launch preemptive strikes against Iran in order to force Iran to retaliate, thereby providing a pretext for a major US attack on Iran’s military and infrastructure, the next year could prove to be a trying time for people who prefer diplomacy.