23 March 2016

Brussels Attacks Tear At The Fabric Of The European Union

The March 22 terrorist attacks in Brussels come as the European Union is stillreeling from the November Paris attacks and scrambling to solve the migrant crisis. More important, they come as nationalist forces are challenging key principles of the Continental bloc, including the free movement of labor and the Schengen Agreement, which eliminated border controls among several member states. The atmosphere of fear and suspicion that is sure to follow will only worsen these social, political and economic crises.
The first outcome of the Brussels attacks will be a fresh round of debate over EU border controls, in particular those in the Schengen zone. The Schengen Agreementcame under fire at the start of the migrant crisis in early 2015. The Paris attacksescalated the controversy, particularly because the perpetrators moved between France and Belgium without detection. Consequently, France and other countries enhanced their border controls. The European Commission has since said that it wants all border controls in the Schengen area lifted by the end of 2016. However, the latest attacks - and the potential that more will follow - will make this difficult.
Several governments in Western Europe will likely soon announce new national security legislation, improved controls on fighters returning from conflicts in the Middle East and North Africa, as well as enhanced intelligence sharing with their neighbors. EU members will also resume discussions on how best to combat terrorism abroad in troubled nations such as Libya and Syria. Europeans will become more willing to contribute to the coalition against the Islamic State, possibly with more weapons and training for the Iraqi military and Kurdish militants, increased deployment of combat aircraft and participation in NATO surveillance missions in Turkey.
Another casualty could be the recent, tenuous agreement between Turkey and the European Union to limit the arrival of asylum seekers in Europe. Renewed awareness of the threat of terrorism among EU member states will bring focus on the bloc's external borders, possibly justifying deeper cooperation with Turkey. But the attacks could also reignite anti-Muslim sentiments in Europe and increase popular demands on EU governments not to grant visa-free travel to Turkish citizens - a key stipulation from Ankara for cooperation on migrant issues.
Anti-Muslim sentiment could also lead to more support for nationalist parties across the Continent.France's National Front already receives substantial support in electoral polls. In Germany, the anti-immigration Alternative for Germany party recently achieved record performances in regional electionsand is currently the country's third most popular party. Both France and Germany will hold general elections in 2017, in votes that will happen against the backdrop of the immigration crisis and the multiple terrorist attacks. In both cases, the mainstream parties will be under electoral pressure from their nationalist rivals. As a result, they will likely adopt some elements of nationalist party platforms. The same can be expected in other Northern European countries such as the Netherlands or Sweden, which also have relatively strong nationalist movements. Political parties and groups that want the United Kingdom to leave the European Union could also use the recent terrorist attacks to justify greater isolation from the Continent.

Belgium, Turkey and Islamic State's Strategy

A real-time update on global developments as they happen.
March 22, 2016
By George Friedman
The recent attacks strike at the heart of two potential threats to IS.
The attacks in Belgium and Turkey must be considered together. They are attacks in the symbolic heartlands of two potential enemies of the Islamic State, Europe and Turkey. The attacks are meant to destabilize each country and recruit potential operatives from each country’s pool of possible jihadists.
There have been two attacks this week, both apparently by the Islamic State, first in Turkey on March 19 and then today in Belgium. The close sequence of the two attacks might simply be a coincidence, but IS tends to be more strategic than other terrorist groups and has the ability to coordinate attacks. Therefore, why would they choose Belgium and Turkey for their attacks?

One answer is that they have operatives in both countries. Turkey is a Muslim country, and IS is able to recruit Turks and move other operatives into Turkey if needed. Belgium has a substantial Muslim population, which IS can target for recruiting and inserting operatives. But of course, that is true of many countries.
It is interesting that these attacks were against countries IS considers strategically significant. Turkey’s significance is obvious. It is a major power in the Middle East. It also had relatively benign relations with IS that have broken down. In striking Turkey, IS demonstrates to its followers that it is able to strike at an enemy. And it also, IS hopes, emboldens potential jihadists inside of Turkey to strike, politically and militarily crippling Turkey’s ability to strike IS in Syria and Iraq. IS is trying to shape Turkey’s behavior. And Turkey is an enormous presence in the region, as well as a symbol of non-Arab views of IS.
Belgium is not only one of the countries of Europe’s core, as is France, but it is also in some sense the capital of Europe. Brussels is the headquarters of the European Union’s secretariat. It is also near the headquarters of NATO. By striking Brussels, IS was striking at Europe’s core. IS has come to see Europe as an enemy, not only because it sees it as Christian, but also because it sees it as hostile.
And this is where we get to the heart of the matter strategically. Turkey and Europe collectively form a potential core for resistance to IS. The only possibility IS has of deterring this action or of crippling their ability to act is to conduct terror operations against them. If the operations are successful they will do two things. First, they will create a faction in each nation opposed to hostilities with IS because of the consequences. Second, they will utilize the significant population that could be recruited to join IS. Even failing that immediately, the inevitable scrutiny and repression of this population could recruit operatives.

IS is under significant pressure from conventional forces, and its boundaries appear to be contracting in Syria and Iraq. It needs to destabilize potential enemies and combine that with symbolism. Attacking tourists near Taksim Square in the heart of Istanbul is one strategy. Attacking Europe’s capital is another. As it comes under pressure in Syria and Iraq, it must consider shifting from a conventional to an insurgency role. An ideal mix is to maintain more conventional operations while intensifying terrorist acts outside of Syria and Iraq.
IS has few options in this regard, but attacking Istanbul and Belgium strikes at the heart of two potential threats, using resources that were in the country and generating responses that might strengthen their position.

Brussels Airport and Subway Attacks Kill at Least 30; ISIS Claims Responsibility

MARCH 22, 2016
BRUSSELS — The Islamic State claimed responsibility for deadly terrorist bombings that struck Brussels on Tuesday, killing at least 30 people at the main international airport and in a subway station at the heart of the city, near the headquarters of the European Union.
The violence began shortly before 8 a.m. with an explosion in the departure terminal at Brussels Airport believed to be a luggage bomb, followed shortly by another. Then, at 9:11 a.m., a bomb tore through the last car of a subway train as it was pulling out of the Maelbeek station.
Officials said the bombings killed at least 10 at the airport and 20 at the subway station — and more than 230 others were wounded.
“We were fearing terrorist attacks, and that has now happened,” Prime Minister Charles Michel of Belgium said at a news conference, calling the attacks “blind, violent, cowardly.” On Twitter, he called on people to “avoid all movement,” as the authorities braced for the possibility of additional violence. King Philippe planned a televised address later.
Belgian news media published a surveillance photograph from the airport showing three men pushing luggage carts, two of them appearing to be wearing gloves on their left hands and a third wearing a dark hat and white jacket. Belgium’s federal prosecutor, Frédéric Van Leeuw, told an evening news conference that the black-gloved men were “believed to have been suicide bombers,” and that the authorities were hunting the third man. He said several house searches were underway.
Passengers queuing at terminal counters described sudden panic and mayhem as the explosions turned the departure area into a death trap with flames, smoke, flying glass and shrapnel. The airport, in the town of Zaventem seven miles from Brussels, was closed and the Belgium authorities placed the entire area on emergency lockdown.
“We heard a big noise and saw a big flash,” said one passenger, Ilaria Ruggiano, who had been traveling with six others including her mother. “My mother went to the floor — she was hit. I just dropped my luggage and went to the floor. A kid came out, bleeding a lot. I tried to help him with a tissue, but it was not enough. There were two bombs.”

In the afternoon, Amaq, a news agency affiliated with the Islamic State, issued a bulletin saying the militant group was responsible for the attacks.
“Islamic State fighters carried out a series of bombings with explosive belts and devices on Tuesday, targeting an airport and a central metro station in the center of the Belgian capital, Brussels, a country participating in the coalition against the Islamic State,” it said. “Islamic State fighters opened fire inside the Zaventem airport, before several of them detonated their explosive belts, as a martyrdom bomber detonated his explosive belt in the Maelbeek metro station.”
The attacks occurred four days after the capture on Friday of Europe’s most wanted man, Salah Abdeslam. He is the sole survivor of the 10 men believed to have been directly involved in the Islamic State attacks that killed 130 people in and around Paris on Nov. 13.
President François Hollande of France vowed “to relentlessly fight terrorism, both internationally and internally.” He added, “Through the Brussels attacks, it is the whole of Europe that is hit.”
The French government ordered 1,600 extra police officers to patrol the nation’s borders, including at train stations, airports and ports. The National Assembly, the lower house of Parliament, observed a moment of silence to honor the dead. The Eiffel Tower was to be lit with the black, red and yellow colors of Belgium’s flag on Tuesday night.
Prime Minister David Cameron of Britain called an emergency meeting of ministers. Foreign Minister Frank-Walter Steinmeier of Germany said the attacks “aim at the heart of Europe.” Pope Francis expressed condolences.

Brussels Terror: West Is Losing The War; It Has Not Learnt To Roll With Punches

R Jagannathan, March 22, 2016
Terror always inflicts more costs on the target than the terrorist. For the cost of a few lives (bodies and bombs), terrorists can do multiple times the damage to their targets. 
The only real answer to terror is to learn to roll with the punches, but this the west has not learnt to do.
No system can deter all forms of terrorism, especially in places with high footfalls. Developing a degree of social immunity to terrorism seems important to make it less attractive to terrorists.
As yet another terrorist attack rocks the western world – this time in Brussels airport and the city metro, killing over 28 people and injuring scores more – the question to ask is this: is the west losing the war on terror?
A simple answer is this: terror always inflicts more costs on the target than the terrorist. For the cost of a few lives (bodies and bombs), terrorists can do multiple times the damage to their targets. So even if the west prevents a hundred attacks, and saves hundreds of lives due to good intelligence and pre-emptive security measures, the target country/economy is inflicted with huge costs that go far, far beyond the lives and properties lost.
Economically speaking, the cost-benefit analysis of trying to prevent terror is never going to look good. The only real answer to terror is to learn to roll with the punches, but this the west has not learnt to do.
Consider what the US alone has spent in its decade-and-a-half war on terror abroad and in defending its homeland.

#1: The wars against terror in Iraq and Afghanistan have cost Uncle Sam over $1.8 trillion so far, and counting. $ 1.8 trillion is just a little less than India’s current annual GDP which supports 1.25 billion people. Put another way, the US spent the equivalent of one year’s Indian GDP fighting two wars it has not yet won.
#2: The second war is the defensive one the US has been fighting through the department of homeland security (DHS), set up to keep the mainland safe after 9/11. The DHS spends $6.75 million every hour to defend the country. That’s nearly $675 billion spent since the department was set up under George W Bush. Together, the external war on terror and the internal defence against terror has cost the US $2.5 trillion since 2001.
#3: Now look at two sets of figures to decide whether the money the US spent on fighting and preventing terror is well spent. According to a report in cnn.com, between 2001 and 2013, the US lost 3,380 lives in terror-related incidents (both abroad and inside the US, including the 9/11 deaths). As opposed to this, over 4,06,000 people were killed in gun-related deaths in the US during the same period. Less than 1 percent of the deaths were due to terrorism.
#4: Excluded in all these costs are the losses suffered by insurance companies, airlines and other industries that were impacted by the 9/11’s aftermath.
#5: The Global Terrorism Index says that the economic cost of terrorism spiked to $52.9 billion in 2014 from $32.9 billion before 9/11 in 2002.
Now, with terrorism shifting focus to Europe, what with the Paris and Belgium attacks, one can assume that costs relating to tacking terror will escalate here too.

*** Open Letter to the Next President, Part 2

MARCH 21, 2016
“Europe was created by history. America was created by philosophy.”
  – Margaret Thatcher
“Nobody in Europe will be abandoned. Nobody in Europe will be excluded. Europe only succeeds if we work together.”
  – Angela Merkel
Today we’ll continue our world tour with more advice for the next president. Speaking of whom, lLast week’s primaries narrowed the race a bit. Marco Rubio is out of the GOP running, and Bernie Sanders is lagging further in the Democratic delegate count. The next few weeks will be interesting. An open Republican convention in Cleveland is very possible, a possibility I wrote about in a recent letter from the point of view of someone who has been deeply involved in very large, raucous, and open political conventions. I was trying to give you some insight into the mechanics of such an event. While an open convention might be fun from an entertainment perspective, I think I would prefer a clean win prior to the convention. I find it really fascinating to think that the race might actually come down to California, the last state primary and one with a potentially decisive number of delegates.
One thing is sure: somebody will take the ball from Barack Obama next January 20. Whoever it is will face a world full of challenges, economic and otherwise. Last week we flew west and reviewed Japan and China. Today we’ll continue the trip.
By the way, please don’t take offense if I skip over your country or region. It likely means your problems are relatively minor on the global scale of things. You may not want whatever “help” our new president offers, anyway. Now, on with the letter.

Dear Presidential Candidates:
One of you may move into the White House next January, and you’re going to have your hands full. Last week I gave you my thoughts on Japan and China. Today we’ll take Air Force One further around the challenging world you hope to lead. I hope you’re ready.
We’ll start with a dip Down Under. Australia is an important American ally. It was also, until recently, a big resource supplier to China. Its huge, high-quality iron ore reserves and convenient location ensured Australia an important role in China’s massive infrastructure binge.
With that binge now winding down, Australia’s economy and currency are struggling. The country spent several years gearing up to accommodate Chinese demand that is now gone, or at least greatly reduced. On the plus side, wealthy Chinese citizens are finding Australia a convenient place to buy real estate, propping up what to the rest of the world looks like a housing bubble. This trend could persist for some time if China maintains its capital controls. But as you enter office, Australia will be economically fragile.

Your challenge, Mr. or Mrs. President, will be to help Australia economically so that they can afford to continue their cooperative stance as our allies in various endeavors around the world. The same goes for New Zealand, for whom China is now an important agricultural customer. The Aussies and Kiwis I know typically want strong ties with the US, and I believe those ties will remain close. These two countries have been willing partners of the US, but their budgets are being strained, and domestic priorities are coming to the forefront.
This observation brings me to an important point. You will find as president that your power is not absolute. Circumstances are going to dictate what you can and can’t do. You won’t be able to fix everything, but you will be able to make every situation worse. Resist the urge to “do something” simply because you can.

Subcontinental Opportunity
When your predecessor, Barack Obama, promised a “pivot to Asia,” he was talking mostly about China. India is equally important, but many Americans forget about Asia’s other mega-state. You need to pay attention to it.
India and China may look like neighbors on a map, but they are worlds apart. George Friedman explained recently how the Himalayas make a China-India military conflict all but impossible. Neither country has ever been able to invade the other or even conduct very much cross-border trade across the world’s largest mountain range, so the two nations have grown to their present gargantuan size independently. India has been regularly growing at 7%-plus GDP per year.

Your Indian counterpart, Narendra Modi, is now almost two years into a much-needed economic reform plan. India does not have China’s vast export industries. Services comprise almost a third of India’s exports, mainly call centers serving the English-speaking West. Modi is wrestling with an entrenched bureaucracy, crumbling infrastructure, and a fast-growing labor force. But he is making progress. Roadbuilding has accelerated to more than ten miles a day from barely one mile a day just a few years ago. Modi is beginning to put a damper on the rampant corruption in the bureaucracy and is actually making the bureaucracy accountable. His has been a very tough job.
In an experiment to watch, India is assigning a biometric digital identity to every citizen so that the government can pay subsidies directly into citizens’ bank accounts and thus prevent the money from falling prey to a corrupt and incompetent bureaucracy. India is also putting money into its banking system, which has needed a boost. Indian banks are under pressure (a story that is being repeated all across the world, highlighting the fragility of our global financial system).
Geopolitically, India bridges South Asia with the Middle East. Its uneasy relations with Pakistan give India an interest in promoting Middle East stability and trade, but given everything else that is happening in the Middle East now, achieving that end won’t be easy.

Mideast Maelstrom
American presidents since Nixon have tried to bring peace to the Middle East. Some came closer than others. You will have to try your hand, too, but the odds are against you. The entire region remains a powder keg, and the situation you inherit will have added complexity and instability.
Saudi Arabia’s oil wealth once let it enforce relative calm on its neighbors. That era is now over, as George Friedman and I explained in our recent report. Oil prices stuck at $40–$50 per barrel are forcing a massive Saudi budget shift and draining enormous amounts from their sovereign wealth fund. By some estimates, if the country maintains its current budget, it will run out of cash by 2021. Which of course means it can’t maintain its current budget. The Saudi royal family is trying to build a cushion for the inevitable hard landing. Their success, or lack of it, will be outside your control, but the outcome will dictate your options.
Saudi Arabia has been offering major financial support to Egypt and other Middle East countries. How long the Saudis will be able to continue to do so is a question that you will need to answer in order to be prepared for whatever exigencies arise.

Across the Gulf from Saudi Arabia is Iran, where implementation of the Obama nuclear deal is proceeding at an unsteady pace. Here you have an opportunity to make something happen. There are two schools of thought. One posits that the single best way to keep Iran from threatening its neighbors, including Israel, is to reintegrate the country into the global economy, since countries that trade with each rarely resort to war. A big barrier to that process is decades-old US economic sanctions on Iran that Congress refuses to lift. The other school of thought asserts that renewed sanctions and further financial repression are required to force Iran to give up its nuclear ambitions. While most people focus on the political implications of the US–Iran deal, the economic implications might have even more far-reaching consequences. Formulate your Iran policy wisely.
The Middle East is, of course, complicated by the presence of ISIS. Fighting ISIS requires money, and the nations that have been working with us are going to be financially constrained. For the moment, fear of ISIS is spurring many in the Muslim world to flee toward Europe, a continent with its own problems. Dealing with the refugees in cooperation with the Europeans may be one of your greatest challenges as president.

Russia is another commodity exporter that is under tremendous economic pressure. The Russians are running through their dollar reserves at a rapid rate; the country is in recession; and a turnaround doesn’t appear imminent. They are reportedly cutting their budgets by 10%, including education and social welfare. Just think about how hard it would be to get through the US Congress a bill that would halt increases in spending for a few years—never mind cutting spending by 10%. Theoretically, Russia’s military budget will actually grow a bit, but the realities on the ground mean that the country’s projected 1% growth won’t go very far. Inflation in Russia is now down to just under 10% but has averaged much higher than that over the past year. Everyone is feeling the squeeze.

The fact that Russia is economically challenged does not make the country any less challenging to US interests. Ukraine is clearly in Russia’s backyard, and Russia is obviously opposed to Ukraine’s becoming a NATO member. Thus, Ukraine is now a divided country in a semi-anarchic state.

Let me offer an economic solution to Ukraine. Instead of supporting the various oligarchs who are squabbling over Ukrainian spoils, why not get Ukraine to open up its agricultural industry to outside investment? If Ukraine became productive along the lines of US farms, it could be the breadbasket of all of Eurasia. There has been enormous resistance to outside private capital, but Ukraine could become prosperous in less than 10 years if the country were opened up. This initiative would also create significant new employment and whole new industries supporting agricultural growth in Ukraine, stabilizing the country. And this objective is something that could be achieved without a shot’s being fired. It would mean that entrenched interests would have to be negotiated with, but continuing to pursue the present policy just isn’t working. Just a thought…

What is the Jihadi Threat to Belgium?

22 Mar 2016
The seemingly coordinated attacks on an airport and metro station in Brussels have once again drawn attention to Belgium, which is no stranger to jihadi groups.
With ISIS reportedly claiming the attacks in Brussels on the Zeventem airport and the Maalbeek metro station that killed more than 30, the seemingly coordinated assaults highlight the threat Belgium faces from jihadi militants. A toxic mix of Salafi-jihadism combined with high numbers of foreign fighters, and easy access to arms, has seen the country become an important base for radicals to launch attacks in Europe.
The investigation into the Paris attacks threw a spotlight on this challenge. The last remaining suspect wanted for those attacks, Salah Abdesalam, was arrested in Brussels on 18 March. The manhunt that culminated in his eventual arrest highlighted the relative ease with which highly publicised jihadis were able to hide in the city right under the eyes of the security services.
While investigators have welcomed his capture, describing him as being "worth his weight in gold," the attacks in Brussels show how the country's jihadi problem is broader than a few known individuals.
Abdesalam is described as having changed his mind about blowing himself up during the Paris attacks, but investigators have indicated that he was planning further attacks from Brussels. Today's bombings will no doubt lead to further scrutiny of these statements.

Belgium has become an important base for jihadis in Europe.
Belgian authorities have been increasingly concerned over the growing threat of domestic jihadi violence since the Charlie Hebdo attack in January 2015. Amedy Coulibaly, the gunman behind the attack on a Parisian Jewish grocery store in January 2015, obtained weapons used by himself and the Kouachi brothers through connections in Brussels.
Parts of Belgium have surprisingly lax gun control. The suburb of Molenbeek is notorious for a black market in assault weapons, blamed on smugglers who used the Yugoslavia conflict to build a considerable armoury.
Molenbeek, where Salah Abdesalam was captured, is also no stranger to jihadi activity. One of the men jailed for the 2004 Madrid train bombings was from Molenbeek, while Ayoub el-Khazzani, the Moroccan who attempted to open fire on a Paris-bound train in August 2015 before being tackled to the ground by bystanders, is believed to have lived there for a time.
The area has strong Salafi roots, attributable in part to Saudi Arabia's construction of mosques and the influence of Gulf-trained clerics in the largely Moroccan municipality. Deputy mayor Ahmed El Khannouss says it is not in Molenbeek's 22 mosques, but rather the more informal network of Salafi meeting places and prayer sites where radicalism is suspected to thrive.

Global Links
ISIS has recruited successfully in Belgium and it has proportionally the largest number of foreign fighters travelling to Iraq and Syria, with current estimates standing at over 500. Official estimates from the Belgian government believe that around 120 of those have now returned to Belgium and the recent events suggest they remain committed to violent jihad once home.
Proportionally, Belgium has the largest number of foreign fighters travelling to Iraq and Syria.
Many Belgian foreign fighters are linked to Sharia4Belgium, a group originating in Antwerp which recruits young people to fight in Syria and advocates for the imposition of domestic sharia law. Its leader, Fouad Belkacem, was imprisoned for 12 years last year. His trial found that members of the group not only went to fight with ISIS in Syria, but also for al-Qaeda's affiliate, Jabhat al-Nusra, as well as jihadi groups in Yemen. The judge specifically cited Belkacem's influence "for the radicalisation of young men to prepare them for Salafi combat."
This variety of different jihadi groups' presence in Belgium was demonstrated by nationwide raids in June 2015. Police arrested 16 people following intelligence reports about an attack on Belgian soil. Among those arrested were suspects with links to al-Qaeda affiliates Jabhat al-Nusra and the Islamic Caucasus Emirate, and who had travelled to Syria, Iraq, and Afghanistan to receive training.
Abdelhamid Abaaoud, said to be the leader of the Paris attacks, was an ISIS militant in Syria and was interviewed in an issue of the group's English-language propaganda magazine Dabiq. He described Belgium as being a "member of the crusader coalition attacking the Muslims" and that he and his accomplices were able to return from Syria to Belgium, obtain weapons, and setup a safe-house as they sought to carry out attacks.
But Belgium's long association with jihadism shows that the ideology and the number of groups involved goes even deeper. The focus on ISIS and the Belgian links to the Paris attacks overshadows a wider issue; the spread and incubation of the Salafi-jihadi ideology. Though welcome, the dismantling of ISIS alone in Belgium, or the rest of Europe for that matter, will only be dealing with a symptom, not the root cause of the problem.

Conglomerate Crisis: Why Tatas, Birlas & Ambanis Must Become Warren Buffetts

R Jagannathan, March 21, 2016
Some lessons for Indian Conglomerates from the debt debacles of India Inc. 
Cronyism is not a sustainable way to build a business. What you gain on the political and economic swings you lose on the roundabouts. 
Businessmen who don’t have the resources to put in adequate equity to balance the debt should not be getting into projects that are too big for them. 
Diversification worked in the pre-1991 era when obtaining a licence was the key to profitability. Not today. 
In this age of competition, all businesses should downsize and focus on their core strengths. 
Having too many companies under one roof means capital allocations can go wrong so Conglomerates should aim to become capital allocating businesses, rather than operating ones. 
India’s big business has to shift its area of competence from running a company to judging the efficiency of their capital allocations.

After more than a decade of irresponsible growth, undigested acquisitions and unrelated diversification, India Inc clearly has to downsize. Groups as big as the Tatas and Birlas are feeling the weight of debt, and they will surely be better off selling entire businesses and becoming less of conglomerates. Focus, in the post-debt world, is going to be more important to success than size and diversity.
The big groups have to redefine their core business as the allocation of capital, and not running the various businesses themselves. In short, the Tatas and Birlas have to become Warren Buffetts, and not remain primary entrepreneurs. 
While the Tatas are probably big enough to hold on to most of their behemoths and still pay off their debts, one statistic is worth noting: of the total group market valuation of around $110 billion (Rs 7,47,000 crore), two-thirds comes from just one company (Tata Consultancy Services). They should ask themselves: are we better off growing our best businesses or feeding the slackers? Should we be leaner and more profitable, or larger and less effective in what we do?
For both the Tatas and Birlas, their current problems relate to two big overseas acquisitions they made in 2007, of Corus Steel and Novelis (aluminium products) respectively. While the Birlas bought Novelis for around $6 billion, the Tatas paid nearly $11 billion for Corus, before running smack into the global financial crisis that made it impossible to generate enough profits to pay back the debt incurred for the acquisitions. Now, the Tatas are busy hiving off portions of Corus to pare down debt. 
The Birlas are on a more even keel, but they too are stretched on debt. The Hindalco share today quotes at less than half the value it had around the time of the Novelis acquisition nine years ago. 
In the case of the Tatas, just two companies (Tata Steel and Tata Power) account for more than half the group’s overall debt of Rs 2,07,000 crore; for the Birlas, Hindalco accounted for more than half the group’s overall debt of Rs 1,25,000 crore. Clearly, one difficult acquisition each has damaged the growth prospects of the Tatas and Birlas.
If this is the case with the big boys, the midi groups are faring worse. The Economic Times today (21 March) notes that the Ruias are planning to sell their refinery in Gujarat – the second biggest in the country after Reliance’s – in order to prevent debt from killing off the entire group. The group has Rs 85,000 crore of debt, and selling off a three-quarters stake in the refinery and the connected Vadinar port will reduce 40 percent of the group’s debt.
Another ET magazine report (20 March) says the default-rated debts of five groups, is as high as 65 percent for Jaypee (the Jaiprakash group), 38 percent for Lanco, 37 percent for GMR, 36 percent for Essar and 5 percent for GVK.
And so the story goes on as one descends down the pecking order of Indian businesses grouped by size. 
The interesting thing about debt-driven downsizing is this: all these groups are selling not their worst businesses, but their best. Look at the irony. Greed in good times encouraged these businessmen to overload themselves with debt, but on the downside they are not even getting to keep their best businesses.
This is true across the board.

How to Make Editors – and Journalism – Relevant Again

While editorial independence faces challenges in the traditional media environment, the digital medium today provides space for independent thought and contrarian views, says Vice President Hamid Ansari 
Sinking Credibility: “There appears to be a distinct reluctance on part of the owners to have a visible, independent and opinionated editor. The owners have also started playing a larger role in determining the news content and orientation of the newspaper or the television channel.” Delphine Savat/Flickr CC 2.0 
Vice President M. Hamid Ansari delivered the inaugural address at a seminar in New Delhi on the ‘Roles of Editors in Today’s Media’ on March 19, 2016. The event was organised by RSTV. Reproduced below is the text of his speech. 
I thank the organisers of this very relevant seminar for inviting me here today. I confess that my knowledge of the subject is that of a beneficiary of the end product rather than of someone who is familiar with the process. 
It is said that an editor’s is a thankless job. He is respected, feared, even hated. The story is related that Napoleon once shot at a magazine editor, missed him and killed the publisher; the narrator added that Napoleon’s intentions were good! 
So how should we judge a member of the species? The Press Council of India Guidelines on Ethical Norms deal at some length with editors’ discretion. It recognises that in the matter of writing an editorial, the editor enjoys a good deal of latitude and discretion. It is for him/her to choose the subject and to use the language considered appropriate, provided that in the process the boundaries of the law and norms of journalism are not transgressed and the views are couched in sober, dignified and socially acceptable language. The guidelines uphold the editor’s discretion in the selection of the material for publication, but in the expectation that, on a controversial issue of public interest, all views are given equal prominence so that the public can form an independent opinion in the matter. 

These are substantial powers. 
The media has a transmutative capacity. It not only portrays reality but can alter the perception of reality itself. The editor thus holds the key to forming public perception and by extension public opinion and thereby set the agenda for the national debate. It is not unheard for a powerful editor to take on the Government of the day, and occasionally, even to bring one down. 
There was a time, not long ago, when newspaper editors were intellectual stalwarts who acted as the brain trust of the country. The editor was the personality of the newspaper – setting its tone and tenor, as well as determining its philosophical and political line. 

The Indian Spy Who Fell for Tibet

Sent by Britain to carry out a secret survey,
Sarat Chandra Das became enchanted instead.

If it hadn’t been for a bout of malaria, Sarat Chandra Das might never have become a spy. As a civil engineer, he might have worked in Calcutta forever. But in 1874, upon recovering from his illness, he was offered a position as headmaster of the Bhutia Boarding School in Darjeeling. The mountain air would do him good, he thought, so he accepted. This was how, at 25, Das came to run a school for spies, training agents to work along the India-Tibet border, growing so besotted with Tibet himself that he made two surreptitious journeys to the kingdom.
In the European imagination, Tibet and its capital, Lhasa, were a fantasy, a fabled paradise of spirituality locked away from the world. In the late 1700s, Tibet began denying entry to Westerners, its government — under pressure from China — reluctant to play the games of imperial geopolitics. For Britain, Tibet’s inward turn was ill timed, disrupting its plans to dominate Central Asia. In desperation, as the scholar Derek Waller found, the British cultivated ‘‘pundits,’’ Indians who had helped map the subcontinent and were now dispatched, in disguise, into Tibet, equipped with compasses and 100-bead rosaries to discreetly count their steps.
Among the pundits, Das stood out, a scholar who offered his services as a spy in order to pursue his academic interests. It was as if James Bond volunteered to hunt down Blofeld, booking his own flights and hotels, all to improve his Japanese. Das persuaded his assistant, a lama named Ugyen Gyatso, to visit the Tashilhunpo monastery, in south-central Tibet, and talk him up as a theology student. The monastery’s prime minister was keen to learn Hindi, so Ugyen Gyatso, promising that Das was a fine tutor, wangled a passport for him. Presented with this document, Indian officials, now enthusiastic, gave Das indefinite leave and a crash course in spycraft. During his first trip, to Tashilhunpo in 1879, he studied Tibetan customs and so impressed the prime minister that he was invited back. In November 1881, Das returned, the vision of Lhasa glimmering before him.

The two reports Das wrote about his second, 14-month journey were kept confidential until the 1890s and then published, with severe redactions, in small print runs. In 1902, they were compiled into a book, ‘‘Journey to Lhasa and Central Tibet.’’ The opening pages are tough going, brimming with place names: ‘‘On ascending about 3,000 feet above the Kalai valley, we enjoyed distant views of Pema-yangtse, Yantang, Hi, Sakyang, and other villages.’’ Still, all this was valuable information. In those days, so little was known that even the most quotidian details — the appearance of houses, the location of a pasture — shone with significance.
The first month wasn’t easy. The Himalayas are punishing in early winter. ‘‘How exhausted we were with the fatigue of the day’s journey, how overcome by the rarefication of the air, the intensity of the cold, and how completely prostrated by hunger and thirst, is not easy to describe,’’ Das writes. Das’s guide is frequently drunk. Suspicions must be allayed everywhere. One village council permits his party to pass only after testing Das’s knowledge of Buddhism; even so, someone hollers, ‘‘That Hindu will surely die in the snows.’’ But Das makes it to Tashilhunpo, where he remains for five months, absorbing the news. China is flexing its muscle. Tibetans who rebuff a Chinese official’s attempts at extortion receive ‘‘four hundred blows with the bamboo.’’

* Cheaper renewable energy soars past nuclear power in India


Renewable energy in India has overtaken nuclear power as the country seeks carbon-free sources of energy to balance its reliance on coal.
Renewable energy generation in India is higher than its nuclear power generation and is growing at a much faster pace because it is cheaper and quicker to install. The cost of renewable energy is now lower than the cost of nuclear power and does not come with attendant risks, such as last week’s radioactive fuel leak in Gujarat.
Renewable energy generation in India was 61.8 billion units, versus 36.1 billion units of nuclear power generation during the financial year 2014-'15. Renewable energy accounted for 5.6% of electricity generated in India, against 3.2% for nuclear power.

Renewable energy has been growing at a faster pace than nuclear power over two years. During 2013-'14 and 2014-'15, renewable energy grew at 11.7% and 16.2%, respectively, while nuclear power growth has been almost flat over the same period.Source: Central Electricity Authority
Meeting targets
The bulk of India’s renewable energy comes from wind, but solar energy is growing faster, with installed capacity reaching 5,775 megawatts in February 2016. The national solar mission has set a target of 100,000 MW of solar power by 2022. If this target is met, renewable energy will become the second-largest source of power for India, after coal, and ahead of hydropower, natural gas and nuclear energy.

Nuclear power capacity in India is 5,780 MW; another 1,500 MW is under construction and another 3,400 MW has been cleared – a total of 10,680 MW by the end of the decade.

Renewable energy’s growth is propelled by the falling costs of solar and wind energy, as reported earlier.
In November 2015, US-based SunEdison offered solar electricity in India at Rs 4.63/unit. In January this year, this was followed by a Finnish company, Fortum Finnsurya, offering solar power to the National Thermal Power Corporation for Rs 4.34/unit.
At these prices, solar electricity is already cheaper than electricity coming from newly built hydro and nuclear power plants. For instance, India is now starting work on a Rs 39,849-crore expansion (2 units of 1,000 MW each) of the Kudankulam Nuclear Power Plant, Tamil Nadu, due to be completed by 2020-21. Electricity from these reactors – if they are completed on time – will cost Rs 6.3/unit.

Past experience in India and elsewhere suggests this is unlikely.
Slow progress
Work on Units 1 and 2 of the Kudankulam Power Plant began in 2001 and was supposed to be completed by 2007 and 2008. Unit 1 began commercial operations in December 2014 while Unit 2 is yet to be commissioned.
This experience is mirrored in other countries: a power plant being builtby the US firm Westinghouse is more than three years behind schedule; a French company, Areva, is building a reactor in Finland, about nine years behind schedule. Both, Areva and Westinghouse, are among four foreign companies that want to build reactors for the Nuclear Power Corporation of India.

While nuclear power plants typically take more than a decade to build, solar farms and wind-mills can be erected in a few weeks to a few months, with capacities that range from 0.1 MW to 1,000 MW.
Also, nuclear power plants are owned and operated in India by one company, the Nuclear Power Corporation of India. Solar and wind-energy installation have been set up by private individuals, airports, banks, oil companies and educational institutions.
Apart from shutdowns – such as this and this in Kudankulam, and the one we referred to in Gujarat – making nuclear power more expensive, there is also the issue of nuclear liability: Who pays in case something goes wrong? Foreign companies want to build reactors in India, but don’t want to face resultant liabilities.

The drawbacks
The single biggest problem of renewable power is its intermittent nature. The sun does not always shine, and the wind does not always blow.
So, 1 MW of renewable energy generated 1.43 million units of electricity from April 2015 to January 2016. Over the same period, 1 MW of nuclear power generated 5.85 million units of electricity. A nuclear power plant can operate round the clock and can supply electricity at night.
There is currently no cost-effective answer for supplying renewable energy round the clock.
An interim solution can be to use renewable energy when it's available, and turn to natural gas, a fuel much cleaner than coal, at other times. India has more than 24,000 MW of natural gas-fired power plants – enough to supply almost 10% of current electricity demand – mostly idle due to lack of cheap fuel. The drop in international gas prices offers an opportunity to fire them up again, as IndiaSpend has reported.
Solar power also needs a lot of land. Putting up 1 MW of solar powerrequires two hectares of land. This means large-scale solar power plants should only be put up on land that has no value for agriculture or wildlife. This restricts large-scale solar power to the arid areas of Rajasthan, Gujarat, Himachal Pradesh and Ladakh. Small-scale rooftop solar plants can, however, be installed in cities.

This article was first published on IndiaSpend, a data-driven and public interest journalism non-profit.

Under Modi, India May Be Generating Less Black Money Than Before

R Jagannathan, March 21, 2016
Given the escalation in the hunt for illegal wealth abroad, both by the Modi government and the Supreme Court-appointed Special Investigation Team (SIT), it is unlikely that more black money is being shipped abroad. 
Given the sharp fall in profitability in domestic businesses, and also because of the high level of debts, it actually makes sense to overinvoice exports so that money is brought in and used to bolster local businesses that are at risk of going under.
One of the less remarked features of today’s Indian economy is the probability that it is generating less black money than before.
The big areas for black money generation have traditionally been in real estate and construction (both down in the dumps), big bank lending to cronies (where bribes are paid to bankers so that money can be siphoned out to finance the promoters’ equity), misallocation of scarce resources (now gone, as mining and telecom spectrum leases are being auctioned and thus rendered less capable of generating illegal “rents”), and marketing of liquor (now coming increasingly under foreign domination, and hence less prone to cash deals). 
Black money generation from adulteration of diesel and fuels is gone as prices have been deregulated. The scope for small ticket black money generation is also being gradually eliminated by the use of direct benefits transfers in subsidised products like LPG, which will soon be extended to kerosene, fertiliser and food at some stage.
The Great Export Crash of 2014-16, where we have seen exports fall for 15 months in a row, may be yet another pointer to the deceleration in black money growth. Underinvoicing of exports and overinvoicing of imports have been major sources for the creation of illegal black wealth abroad, and these may be coming down. 
The April 2015-February 2016 export fall of 17 percent has many causes: one, of course, is the global slowdown, which has reduced overall demand; another is the relative overvaluation of the rupee, which makes Indian exports relatively uncompetitive; and, third, of course, is the possibility that businesses may be selling more in the domestic market, which may be more profitable than selling abroad right now.
However, there is also a possibility that the shrinkage of the Indian black economy market is impacting export figures. Logically, if your balance-sheets are impaired, it is better to bring in cash by overinvoicing exports than sending it out to tax havens by underinvoicing it. But the export crash suggests that this may not be happening.

Raja-Mandala: Bridge to China

A rising China and the anti-India resentments of Kathmandu’s hill elite, however, have the potential to neutralise, over the longer term, some of Delhi’s natural strategic advantages in Nepal.
Written by C. Raja Mohan | Updated: March 22, 2016 
As Beijing serenades Nepal’s Prime Minister K P Oli in China this week, should New Delhi be concerned about the expanding partnership between our two northern neighbours? Geography and kinship tie India and Nepal in an inextricable but not necessarily happy relationship. A rising China and the anti-India resentments of Kathmandu’s hill elite, however, have the potential to neutralise, over the longer term, some of Delhi’s natural strategic advantages in Nepal.
Realists in India can’t object to a good neighbourly relationship between Nepal and China. Pragmatists in Beijing know the dangers of moving too far and too fast and provoking an Indian reaction. But miscalculations and misperceptions often generate outcomes no one wants. For his part, Oli made a political gesture to India by visiting Delhi before heading out to Beijing. That significant differences remain, especially on the question of Madhesi rights in Nepal, was reflected in the inability of the two sides to issue a joint statement at the end of Oli’s visit last month. If India-Nepal relations are never too tidy, Beijing-Kathmandu ties are rich in their affirmation of high principle.
Beijing revels in extending strong support to Nepal’s territorial sovereignty. If Delhi claims a “special relationship” with Kathmandu, Beijing tends to emphasise “equality and non-intervention” in its engagement with Nepal. Underlying that rhetoric is the proposition that Beijing can’t accept any claim that the subcontinent is Delhi’s exclusive sphere of influence.
As a writer in China’s Global Times put it in the paper’s Monday edition, “New Delhi should wake up to the fact that Nepal is a sovereign country, not a vassal of India”. The commentator was a lot less harsh in stating that the only sound choice for Nepal is in maintaining good relations with both China and India. “Instead of being forced into becoming a strategic barrier against China,” Global Times concluded, “Nepal should be better treated and act as a bridge between Beijing and New Delhi”.

* NBC Weapons: Getting From Wanting To Doing

March 16, 2016: In mid-February there was alarm in Iraq and throughout the Western world, over the theft of some industrial radioactive material (used in oil exploration). While not highly lethal, this stuff was still dangerous and could be used by Islamic terrorists for a dirty bomb (high explosives coated with radioactive material). By March 21st it was revealed that the thieves had abandoned their briefcase full of radioactive material in southern Iraq, apparently after failing to find a buyer. This is a common outcome in cases like this, yet you rarely see this angle mentioned much in the mass media.
For decades politicians and mass media have relied on the threat of dirty bombs to scare people. This was mostly about money as the politicians wanted more cash for their favorite counter-terror programs and the media needs attention to sell advertising. But now more people are asking why this ideal weapon for terrorists, made from widely available materials, has not yet been used at all, anywhere. That is an embarrassing question. Also embarrassing is that the fact that a dirty bomb terrifies not because it would kill more people than chemical or biological weapons, but because anything associated with the word, "radioactive" is simply more terrifying to people. Terrorists are more interested in scaring you than killing you so it makes sense that some terrorists somewhere would have made and used one by now.

This failure was not for want of trying. Every year there are incidents where gangsters are caught trying to sell stolen radioactive material to terrorists. Some of those sales probably have taken place but so far that has not led to someone actually setting off a dirty bomb somewhere it would be noticed. This is largely due to the Islamic terrorists recruiting from a low (or no) skilled population. That accounts for the general lack of attacks in the West despite large Moslem populations and many young Moslem men who openly talk of backing Islamic terrorists and wanting to get involved. Getting from wanting to doing is more than most Islamic terrorist wannabes can handle. The easiest to steal radioactive material is the low level stuff found in hospitals, labs, oil exploration sites, universities and factories. All these operations use nuclear material as a tool for getting done whatever they do. The heavy duty stuff (plutonium and uranium) is very heavily guarded.

A dirty bomb would likely use low level material that would be used. This stuff would be vaporized by an explosion and spread over a wide area if there was enough wind blowing. The material would also disperse as it spread from the spot where the bomb went off. Thus hundreds, or over a thousand hectares (each 2.5 acres) might be contaminated. The trouble is, and perhaps many terrorists eventually figure this out, that the actual impact of low level radiation would, physically at least, be minimal. Perhaps terrorists have concluded that the threat of a dirty bomb is more useful than using one. An actual explosion would demonstrate the ineffectiveness of a dirty bomb and destroy the terror effect. Then again Islamic terrorists are not noted for such deep thought.
The Strategic Attractions of Djibouti
Ben Ho Wan Beng, March 18, 2016 

Security analysts would do well to cast their gaze on Djibouti. While the eastern African nation has a land area of only 23,000 square kilometres, a population of barely 830,000 and no natural resources to speak of, it is becoming a significant actor in the international security arena. Three foreign military powers—the United States, France and Japan—have forces stationed there and another two—China and Saudi Arabia—are set to establish bases on its soil.
The United States has the largest foreign military contingent in Djibouti withCamp Lemonnier—the sole permanent AFrican base in Africa—hosting some 4000 personnel. The second-largest foreign military presence in Djibouti is that of its former colonial power, France, with about 1,900 troops. As for Japan, about 600 members of its Maritime Self-Defense Force rotate between a land facility and naval vessels operating from Djibouti's ports. 
Recently joining the fray are China and Saudi Arabia. In January, the People's Republic concluded a deal with Djibouti over the establishment of military logistical facilities, China's first ever overseas military base. And earlier this month, Djibouti agreed to the establishment of a Saudi installation on its soil.

Significance for the World Economy
Djibouti's geographical location is arguably what attracts foreign powers most. For one, being situated just beside the maritime chokepoint of Bab el-Mandab, Djibouti is a key node in the Gulf of Aden-Suez Canal trade route (refer to map below). This route is crucial to the health of the world economy as 20,000 ships, and a not insignificant 20 percent of global exports, go through it yearly. In addition, the route is a conduit for the world's hydrocarbons trade, with almost10 percent of the world's oil exports negotiating the Bab el-Mandab.
Also worth noting is that the Gulf of Aden-Suez Canal trade route is particularly important for the two Asian powers interested in Djibouti: China and Japan. To illustrate, out of the 20,000-odd ships that ply the route yearly, a good 10 percentare Japanese. Similarly, China's trade with the EU amounts to $1 billion daily, most of which is seaborne and therefore has to use the Gulf of Aden-Suez Canal route. It is hardly surprising that these two Asian nations have a vested interest in protecting the sea-lanes of communications off the Horn of Africa, and this was why they sent naval forces to regional waters where piracy was rampant in the late 2000s.

The CIA Just Declassified the Document That Supposedly Justified the Iraq Invasion

By Jason Leopold, March 19, 2015 | 
Thirteen years ago, the intelligence community concluded in a 93-page classified document used to justify the invasion of Iraq that it lacked "specific information" on "many key aspects" of Iraqi President Saddam Hussein's weapons of mass destruction (WMD) programs.
But that's not what top Bush administration officials said during their campaign to sell the war to the American public. Those officials, citing the same classified document, asserted with no uncertainty that Iraq was actively pursuing nuclear weapons, concealing a vast chemical and biological weapons arsenal, and posing an immediate and grave threat to US national security.
Congress eventually concluded that the Bush administration had "overstated" its dire warnings about the Iraqi threat, and that the administration's claims about Iraq's WMD program were "not supported by the underlying intelligence reporting." But that underlying intelligence reporting — contained in the so-called National Intelligence Estimate (NIE) that was used to justify the invasion — has remained shrouded in mystery until now.
The CIA released a copy of the NIE in 2004 in response to a Freedom of Information Act (FOIA) request, but redacted virtually all of it, citing a threat to national security. Then last year, John Greenewald, who operates The Black Vault, a clearinghouse for declassified government documents, asked the CIA to take another look at the October 2002 NIE to determine whether any additional portions of it could be declassified.

The agency responded to Greenewald this past January and provided him with a new version of the NIE, which he shared exclusively with VICE News, that restores the majority of the prewar Iraq intelligence that has eluded historians, journalists, and war critics for more than a decade. (Some previously redacted portions of the NIE had previously been disclosed in congressional reports.)
'The fact that the NIE concluded that there was no operational tie between Saddam and al Qaeda did not offset this alarming assessment.'
For the first time, the public can now read the hastily drafted CIA document [pdf below] that led Congress to pass a joint resolution authorizing the use of military force in Iraq, a costly war launched March 20, 2003 that was predicated on "disarming" Iraq of its (non-existent) WMD, overthrowing Saddam Hussein, and "freeing" the Iraqi people.
A report issued by the government funded think-tank RAND Corporation last December titled "Blinders, Blunders and Wars" said the NIE "contained several qualifiers that were dropped…. As the draft NIE went up the intelligence chain of command, the conclusions were treated increasingly definitively."

* China’s Military Reorganization – and America’s Window of Opportunity

June Teufel Dreyer, March 2016
In September 2015, as part of the festivities marking the 70th anniversary of victory in World War II, Chinese President Xi Jinping announced that the People’s Liberation Army (PLA) would cut 300,000 troops. A spokesman for the country’s Ministry of National Defense (MND) described the cuts as “fully showing China’s sincerity and aspiration to join hands with the rest of the world to maintain peace, pursue development and share prosperity. And also demonstrates China’s active and responsible attitude toward the [sic] international arms control and disarmament.”

Fewer Cooks, More Cruise Missiles
The spokesman’s subsequent comments, however, seemed to indicate that the reforms aimed less at demonstrating China’s sincerity toward peace and disarmament and more toward producing a leaner and meaner fighting force: he noted that even with its size reduced, the PRC would still have the world’s largest military, be fully prepared to cope with risks to the nation’s security, and would result in a better and more efficient military. The cuts, meant to streamline the PLA, would mainly target troops equipped with outdated armaments, office staff, and personnel of non-combat operations. China would maintain an “appropriate” scale of defense expenditure, to be accompanied by many reform initiatives.
These changes, which have been described as tectonic, do not bode well for global security. Foreshadowed by a vaguely worded statement by Xi at the 3rd Plenum of the party’s 18th Central Committee in November 2013 about the need for reform, they were fleshed out in a far-reaching reorganization that was announced on New Year’s Eve. 2015. The country’s seven military regions have been replaced by five theater commands---the latter sometimes translated as combat zones--one each for east, west, north, south, and central China. According to Chinese sources,[1] areas of responsibility for the respective commands are:

Eastern Theater Command 
Taiwan and the contested Diaoyu/Senkaku Islands 

Western Theater Command 
Central Asia (exercising vigilance against infiltration by radical and separatist elements) 

Northern Theater Command 
Northeast Asia (Japan, Korea) 

Southern Theater Command 
South China Sea and Southeast Asia 

Central Theater Command 
Defense of the central authorities and the “great rear for delivering reinforcement and support to the other four theaters” 

The decision was motivated by a conviction that the previous military region organization was ill-equipped to meet the demands of joint war-fighting. According to the official state news agency Xinhua, the previous system was characterized by institutional barriers to winning wars such as unclear functions and ineffective joint command systems. The four general departments had developed autonomous tendencies that were inappropriate to the demands of future informationized war, a term that has become a mantra in PLA literature over the past decade.[2] Command and control is henceforth to go directly from the CMC to these five zones. [3]
A second major component of the reorganization involves replacing the PLA’s four military departments--the General Command, General Political, General Logistics, and General Equipment departments—with fifteen groups, dispersing their functions and placing the successor groups under the direct control of the party’s Central Military Commission (CMC), headed by President Xi Jinping. The impetus for this change was concern that the four departments had been behaving independently of one another. A Japanese newspaper, the conservative Sankei Shimbun, advanced yet another reason: to weaken the power of Chief of the General Staff Fang Fengfei. Fang had been appointed to his position by previous president and head of the CMC Hu Jintao just before Hu left office and hence Xi regarded him as loyal to Hu rather than himself.[4]


So far, few other nations have been eager to accept the global leadership of a nationalistic dictatorship run by the Chinese Communist Part
As tensions rise between the United States and China in the South China and East China Seas, many Western observers fear that China may claim a restored hegemony in the region, one rooted in either China’s Maoist or Confucian imperial past. Yet despite those historic periods of Chinese glory and dominance, a question remains: does the People’s Republic of China have what it takes to be a hegemon in the 21st century?
Over the past 30 years, China has built the most successful capitalist economy in history — led and managed, paradoxically, by a communist party. Since embarking on major economic reforms in 1978, Beijing has emerged as a new superpower. But global economic success or even overwhelming material power does not automatically qualify a country to become a hegemon. A successful hegemon is a civilizer state, representing a persuasive model for a way of life that others want to adopt, share, and participate in.
In the past, China was accustomed to playing the role. Chinese history is the story of the Middle Kingdom, from the rise of the Han in 200 BCE through a cascade of different dynasties — the Tang, Song, Yuan, the glorious Ming, and finally the Qing Dynasty — all the way up to the start of the Republic in 1912.

In 1949, the Communist revolution transformed China into a different kind of civilizer state, terrifying Westerners who were already worried that Maoist hegemony in the non-West might encircle “the cities of the world” with communist power. By the late 1960s, Maoist slogans were heard in protests throughout the West, whether by radical American students who occupied their universities, or by protesting Parisian strikers who, in May 1968, almost overthrew the French government.
But after the terrible costs of Mao’s Great Leap Forward and commune experiment — 30 million Chinese dead — became known, and after the disastrous Cultural Revolution that soon followed, Maoism lost its capacity to mobilize popular support, either in China or abroad.
Since Mao’s death in 1976, the Chinese Communist Party has built its claim to legitimacy on an opportunistic combination of promises to provide the Chinese people with growing economic prosperity, political stability, and nationalism — all in a moral vacuum characterized by rampant corruption, mass protests, growing income inequality, and serious environmental degradation.
Material power may be sufficient to force compliance from other nations, buthegemony requires something more.

China Makes Advance Payment for Russia’s S-400 Missile Defense Systems

China could receive the first batch of the long-range anti-aircraft missile systems in the first quarter of 2017. 
By Franz-Stefan Gady, March 22, 2016
China has made an advance payment under a contract made public in April 2015 for the procurement of four to six Russian-made S-400 Triumph (NATO reporting name: SA-21 Growler) missile defense systems, Rostec CEO Sergei Chemezov said in an interview with TASS.
“We still have to go through a whole number of formal procedures, which we have not yet completed, although we have already received an advance payment. I believe we’ll settle these procedures by the end of the year,” Chemezov, who heads Russia’s largest defense industrial conglomerate, explained.
Furthermore, Chemezov revealed that the firstatch of S-400 air defense systems could be already delivered in the first quarter of 2017. China is the first international customer of Russia’s most advanced medium- and long-range antiaircraft missile system.
The head of Rostec did not disclose additional details about the weapons deal estimated to be worth $3 billion. As I noted previously, one of the major questions is what types of missiles Russia will sell to China for the three-tier air defense system.
For example, the 40N6 missile has an estimated operational range of 400 km (248.5 miles), however, the 48N6 missile has a more limited range estimated at around 250 kilometers (155 miles). It is not certain that the 40N6–developed by the Fakel Machine Building Design Bureau–is operational yet. The S-400 air defense system can also launch 9M96E and 9M96E2 medium-range ground-to-air missiles.

Should the 40N6 be operational by next year and should Russia decide to sell the missile to China, it would have major implications for Chinese force posture in the East China Sea and South China Sea, as Defense Newsexplained back in April 2015:
The 400-kilometer-range system will, for the first time, allow China to strike any aerial target on the island of Taiwan, in addition to reaching air targets as far as New Delhi, Calcutta, Hanoi, and Seoul. The Yellow Sea and China’s new air defense identification zone (ADIZ) in the East China Sea will also be protected. The system will permit China, if need be, to strike any air target within North Korea.
However, in an analysis for The Diplomat, J. Michael Cole points out that the 40N6 missile would have to operate at the very edge of its range to cover the cities and places named above. Even if the 40N6 will not be sold to China, the stationing of S-400 batteries with more limited range–each S-400 unit consists of eight surface-to-air missile launchers, each equipped with 32 missiles–will substantially upgrade China’s overall anti-access/area-denial capability.