27 December 2012

“On Saudi Arabia: its people, past, religion, fault lines and future” by Karen Elliott House

Karen Elliott House established her career as a journalist by winning the Pulitzer in 1984 for her piece on Middle East Peace initiatives of Ronald Reagan.  She later went on to become the publisher of Wall Street Journal.

Karen’s book on Saudi Arabia strives to provide a portrait of Saudi Arabia.  The latitude of coverage is impressive.  The depth is not impressive.  At times she succumbs to the temptation of simple but misguiding metaphors. 

Karen’s description of Saudi Arabia is comprehensive.  She says:

One, Religion has been the founding principle of Saudi Arabia for a while.  In 1745, founder Mohammed al Saud used the call for Islamic Jihad by Abd al Wahab to conquer all tribes and establish Saudi Arabia.   Since then, Al Sauds have claimed legitimacy as defenders and propagandists of Islam.  

The rulers have struck a fine balance between (a) projecting themselves as supporters of a puritanical version of Islam to win support from the masses and (b) protecting the country and its oil economy against threats from Jihadists from within and without.  

When fundamentalists occupied the Grand Mosque at Mecca in 1979, the rulers evicted the occupiers but adopted their agenda and went ultraconservative to win support from the religious right.  Saudi Arabia became a country where grand mothers could tell grand daughters what it was to drive a car or walk around without covering themselves head to toe.

Two, Succession in Saudi monarchy is not based on primogeniture.  So far it has passed from brother to brother (with 7,000 princes traced to 36 children of the founder King).  When it moves to the next generation, succession requires skillful management of the aspirations of multiple lines of progeny.

Three, Oil income has created astounding wealth; yet in a contrarian way has inhibited economic growth.  40% of citizens live in poverty; 60% do not have a home.  The number of unemployed keeps growing.  Though the country creates 550,000 jobs a year (against 200,000 required for full employment), 90% of the new jobs go to imported workers (whose substantial remittances home drain the economy).  

Of late there is some disappointment about too much religion, too much dependence on US, too much corruption and too great a gap between the rich and the poor.   

Unemployment and under-education have resulted in a pool of alienated youth ready to be recruited as terrorists – on occasions admired as Jihadists (when they murder infidels) and on other occasions branded as outlaws (when they threaten Saudi regime).

Four, King Abdullah has taken several steps to improve education, and improve the role of women in society and business.  He has also taken several initiatives to diversify Saudi economy away from oil.  He has taken several initiatives to dissuade impressionable young Saudis away from terrorism.

However, Karen’s interpretation of what the future might hold for Saudi Arabia is quite pessimistic.  She predicts three outcomes:
  1. Social explosion if status quo is maintained by risk averse elderly rulers
  2. Revitalization if society and economy are opened up and
  3. Chaos and collapse if there is reversion to religiosity and repression.
Saudi society, like every other society, has its own principles of social cohesion, religious ideals and social contract with the rulers.  Saudi monarchs are smart enough and responsible enough to maintain their part of the social contract:  stability to citizenry for loyalty to rulers.

There could be a fourth outcome of diversifying the economy, replacing foreign workers with citizens, ushering in good education and greater role for women without bringing in instability.   You don’t need to look yonder than Aramco campus in Dhahran to see what Saudi society is capable of.   Karen ignores that fourth outcome of economic and social equilibrium without political upheaval.

The book is an excellent primer about Saudi Arabia.

16 December 2012

"Engaging India: diplomacy, democracy and the bomb" by Strobe Talbott

Strobe Talbott, Rhodes scholar at Oxford, classmate and friend of Bill Clinton was Deputy Secretary of State for US for 7 years until 2001.  In this book he writes about his staying engaged with Jaswant Singh for three years to ensure the arrangements for non-proliferation of nuclear weapons stay in the aftermath of India exploding its nuclear devices in May 1998.

If ever you wonder whether an argument can be right and wrong at the same time, you do not need to go farther than the system world has to prevent proliferation of nuclear weapons.

In 1964 five countries had nuclear weapons.  (JFK predicted that this number could reach 20 in a few years).  The five championed a non-proliferation treaty that 
  1. prohibited others from developing nuclear weapons, 
  2. offered use of nuclear technology for peaceful purposes, and 
  3. undertook to dismantle their own weapons over a period of time. 
Everyone agreed; everyone except India, Pakistan, Israel and North Korea.  The treaty worked.  The number did not expand to 20.

India was under pressure to accede to the treaty.  However, India did not.

Why is NPT a good policy?  We cannot ignore the reality of five having bombs.  Their continuing to possess the bombs is not an argument to encourage others to acquire bombs.  In the end this will make the world less safe.  Most countries have acceded to the treaty.  The big five agreed to not provide nuclear technology to anyone who did not accede to the treaty.   The five had capability to destroy each other; and that capability served as a credible deterrent.  All it takes is one country to not respect the arrangement and explode a device.  It would open the floodgates for every country to acquire nuclear weapons technology.  There is a need for responsible behavior.

Why is NPT a bad policy?  The Big Five did not keep up their word.  They kept their stockpile and dragged on dismantling their weapons.  When the deadline came and went, they arm twisted everyone to extend the treaty infinitely.  In effect, they created a nuclear apartheid.  Countries that had adversarial interests against a nuclear power faced nuclear threat.

In May 1974 India exploded a nuclear device “for peaceful purposes”!  The world was shocked; and imposed sanctions restraining India from accessing sensitive technologies.  This prompted Pakistan to acquire nuclear weapons technology (with some help from China).  In May 1998 India exploded nuclear weapons.  In the same month, Pakistan followed.  Both became “de facto” nuclear powers.

President Clinton’s administration was furious.  US imposed sanctions on both; voted against any aid/loan to either in global forums.  Clinton’s desired that India and Pakistan should:
  1. Agree to not develop nuclear technology any further
  2. Agree to not conduct nuclear tests
  3. Agree to not develop further fissile material
  4. Agree to not develop ballistic missiles that usually deliver the bombs
In this book, Strobe Talbott, Deputy Secretary of State for US during that period narrates the story of diplomacy conducted with Indian envoy (and later Minister for External Affairs) Jaswant Singh to achieve the objectives.

The US game plan was to isolate and suffocate India through sanctions; and offer carrots if India accedes to the objective.

The Indian game plan was that the sanctions would wither away over time and US would align with India as a counter weight against China in Asia.  In the meanwhile sanctions would hurt Pakistan more than India providing a minor tactical advantage.

Talbott and Singh met several times in several places.  Talbott sensed “soft stonewalling” with eloquent arguments and cool reasoning by seasoned advisers. Singh was a master of “double negatives” that do not end up becoming positive.  He had the ear of the Prime Minister; but was under compulsions of a democracy to carry public opinion, and the opinions of extreme right in his own party.  Talbott recollects Singh as a sincere and reasonable gentleman.  There may not have been a negotiation; but there was engagement.

This was in complete contrast with his negotiations with Pakistan.  They missed a Jaswant.  PM Nawaz Sharif was either powerless or pretended to be one.  His advisors were happy to correct him in public and back track positions.  Everyone had to keep wondering whether the army would back any deal.  Emotions were high.  (Talbott recollects one incident when a Pakistani interlocutor rises up to ostensibly hit his American counterpart and had to be physically restrained).

There were distractions: 
  1. A poll in India (that BJP won) that suspended discussions. 
  2. An opposition in India that did not oppose the ruling party; hinting solidarity in political views. 
  3. A war that was about to escalate to deployment of nuclear devices
  4. A military coup-de-tai that replaced Sharif with General Pervez Musharraf
  5. A Senate that rejected the very restraints (on US) that US was imposing on others
  6. A terrorist attack on the Indian Parliament
  7. A terrorist attack on the World Trade Center
What happened eventually?

In the end, US views changed after Bush administration came to power.  Bush did not place high value on restraining treaties; recognized India’s self restraint; and did a different deal that brought the civilian nuclear facilities alone under global inspection regime and provided full access to nuclear technology to India. 

When India tested Agni V in Apr 2012 (a missile that can reach several cities in China), and a US State Department spokesman, Mark Toner, was asked for reactions, he did not complain about an impending arms race.  He praised India for its self-restraint and for being a responsible member of the comity of nations.  India had arrived as a nuclear power.

The book provides an excellent insight into how two people with opposing views staying engaged, in the intervening moments, to achieve a common objective of making the world a better place.  One was worried about the signal India’s explosion sent to the world.  Another was protective about sovereignty and sought fairness in treatment.

14 December 2012

"Anza deception" by P R Ganapathy

I know Guns.  In two ways:  As a fellow traveller to investor conferences in the early years of last decade striving to attract/retain investor interest in the stocks we were representing; and as the son-in-law of a cherished and inspiring colleague. 

I did not know Guns.  Seems he studies military history, knows how to fly; owned an aircraft in addition to his mastery on price/earnings multiples.

The combination of interests in military history, skills in flying aircrafts, and creative communication as an IR manager is telling in the way he narrates a story. 

A story that could almost be true.  A story that involves a few missiles going missing in Pakistan; ending up in the hands of jihadists; power play by super sleuths in Pakistan, China and India; cabals who are cunning; and politicians with aspirations.  The story line is awesome, realistic and believable.  The last line is predictable; but it is fun getting to the last line all the way.

The narration is awesome too.  I read the first 25% over three/four sessions.  I had to read the next 75% in one session. 

India now has her own Robert Ludlum to write stories with an Indian background for Indian audience.

I look forward to his next book.

26 September 2012

"Hedge funds"

In the beginning, all collective investment schemes (that raised public money to invest) were regulated by Securities law to ensure full disclosure, minimum asymmetry in information between insiders and outsiders, and good corporate governance to protect investors who are not in control.  In 1949, Alfred Winslow Jones started a fund that "would raise money only from wealthy individuals" but would not be governed by Securities law.  He called it a "hedged fund".  Thousands followed and became $ 2,400 billion hedge fund industry.  Here is a great infographic from PerTrac about hedge funds:

26 April 2012

"Managing chaos: the fragility of the Chinese miracle" by Prem Shankar Jha

China’s story so far is impressive but mysterious. China’s economic growth, competitiveness in global trade and effective management of trade cycles are impressive. The seeming lack of sensitivity to social discontent, intolerance of dissent, and opacity in public policy/governance make it all mysterious.

Prem Shankar Jha, Oxford trained economist, journalist and diplomat does an excellent job in providing a peek into the good and the bad of China’s economy and politics.

China is a favorite with liberal economists. China vindicates their faith in free market. China’s is a story of relentless purposeful growth; smart management of trade cycles; and equally smart exploitation of opportunities in globalization. However, China’s is also a story of an economy trapped halfway in a failed transition suffering from inequality, corruption, and discontented population.

China grew eleven times in thirty years (1976-06). China’s trade with the world grew forty one times. Pretty impressive, by any standards.  However, while China as a whole was flourishing, large segments of its people were not. The “iron rice bowl” assuring life-long security gave way to growing inequality, unemployment, loss of land for farmers, marginalization of migrant workers, corruption, extraction, and growing social discontent. National leaders such as Deng Xiaoping in 1980s and President Jiang Zemin in 1990s preferred to chase growth rather than equity hoping that growth would eliminate the sources of discontent. Those dreams failed thanks to recessions that intervened. President Hu Jintao understood the need for equity and advocated “social harmony”. However, he is reforming the party instead of reforming the polity.  An untimely recession, likely according to Jha, would test China’s social harmony much more severely now than at any time in the past.

Jha has several interesting reasons why:

One, China’s growth is impressive; but exaggerated. Overstatement of growth could be in the range of 2%. That is not worrying. What is worrying is that China is in a state of denial about recessions. The published data show no recessions. However, China suffered three recessions in 1989-90, 1991-96 and 1998-01. China claims these as “soft landing” from hyper growth. However, the impact on society was quite huge.

Two, China’s growth is more due to investment in infrastructure than due to growth in consumption. These investments are not subjected to normal disciplines of market (evaluation of viability, securing funds from willing savers and bankruptcy risk to owners if things go wrong). These investments are made by those in power with privileged access to bank credit and without the burden of entrepreneurial risk; a recipe for enthusiasm prevailing over judgment.  As a result, China suffers from over-investment, excess capacity, bad debts and liquidity threat to banking system, and therefore, recession.

Three, China’s manufacturing is not efficient. The manufacturing for domestic market typically consumes for a given dollar of GDP, six times the resource required by an American or Japanese enterprise; three times that required by an Indian enterprise. (Manufacturing for export market is quite efficient; but mostly owned/operated by foreign investors).

Four, China’s growth is not due to “privatization”.  China's enterprises are anything but private. SOEs (State owned enterprises), the initial powerhouses, were weak and several of them could not survive recessionary pressure. The white elephant SOEs were rolled into profitable ones or sold to TVEs (Town and village enterprises). The TVEs were started by provincial and municipal governments using public land and coerced bank debts, and as ever, unmindful of economic risks. When recession posed challenges to the TVEs, the TVEs were “force sold” to technocratic managers and workers. Later the “nomenklatura” capitalists started thousands of enterprises. These cadre capitalists too had the same advantage: land from subservient municipalities, credit from subservient banks and freedom from the burden of entrepreneurial risk.  These enterprises are anything but private enterprise. They are born out of a coterie’s control over natural/financial resources and control over law. All these have resulted in:
  1. Overinvestment and oversupply that can lead to a deep recession,
  2. Liquidity threat to the banking system thanks to loans going bad and
  3. Shorter and sharper trade cycles that affect the poor more than the rich.
Five, China’s economic growth has not been a remedy to the society

  1. The growth started by “commandeering” arable land from farmers to set up development zones. The arable land in China has now come down to the barest minimum required to feed its population. 
  2. The growth did not create jobs. In the ten years period to 2006 the number of jobs shrank by 2 million. Migrant workers (with no security and severe challenges to peaceful existence) constitute half the urban labor.
  3. The growth punished the poor.  During good times, the controllers of SOEs/TVEs and the cadre capitalists of the so called private enterprises behaved like owners. During bad times, they behaved like political rulers and managed their resource crunch by doing away with social security benefits and imposing taxes on the peasants and the workers.
Six, China’s state and the party officials have become predators on Chinese society. Corruption has taken myriad forms when the state has access to finance; ability to commandeer resources; and ability to convert state enterprises into private enterprises.

Seven, Social discontent has been growing in China.

In summary, China’s economy is more made up of mega size investments in often unviable infrastructure projects creating surplus capacity and overinvestment. China has been prime pumping the economy to boost consumption. China may suffer inflation and recession in the near future. Social discontent, already high, can increase significantly. China lacks the political framework to buttress discontent.

Sustainable economic growth requires political stability. Political stability requires social stability. In the short run suppression can achieve social stability. In the long run, the sources of discontent need to be addressed to sustain social stability.

When China faces another recession (which according to Jha is inevitable given its circumstances) China may not be able to invest/spend its way out of a domestic recession as it did out of a global recession. Such an act may result more in inflation than in growth, triggering social discontent. Such a social discontent may be more difficult to handle in an age where 98% of population has mobile phones and 250 million people have access to internet. China cannot do a Tienanmen Square style suppression again.

On the other hand, a transparent and accountable government and rule of law may buttress the social discontent and help China achieve and sustain its destiny as a giant among nations.

Prem Shankar Jha presents his case in an engaging style. One must read this book to gain a fuller perspective about China.

15 April 2012

"The Leopard and the Fox" by Tariq Ali

Tariq Ali wrote this as a play for BBC.  The execution of Zulfikar Ali Bhutto by Military dictator Zia Ul Haque’s administration would have made a great story.  In the last minute BBC backed off citing concerns about libel suits (after Tariq Ali declined to remove sections alleging US involvement in green lighting Bhutto’s hanging).

The book begins like a volcano and ends like the effervescence of a pop soda (quite the opposite of a good O’Henry story).

It is not easy staging a coup.  Zia has to slowly build consensus while playing a polite general to the arrogant Prime Minister.  In the end Zia takes over as an interim administrator "only until" an elected government takes over.  Zia advises Bhutto to retire abroad.  Bhutto does not listen.  Bhutto thinks he would come back.

Zia administration slaps a murder charge against Bhutto.  Nawab Mohammed Ahmed Khan, the father of a local politician Ahmed Raza Qasuri (who was openly threatened by Bhutto in Pakistan parliament) died in a shoot out in Nov 1974.  Bhutto was named as a conspirator by Qasuri.

Trials at lower court, at high court and at the Supreme Court were more about form than substance.  The Supreme court awarded death sentence to Z A Bhutto.  Zia declined to invoke his power to show mercy.

Until this part the play appears authentic. 

The very last act alleges that Bhutto died in the cell and he was “hanged” again for form.  Author Tariq Ali confesses that this was a rumor that lost credence with the passage of years.  However, Tariq Ali ought to have used the intervening years to correct the anomaly.  History should record that Bhutto was “executed” by Zia administration.

The book lacks the powerful narrative one has come to expect from Tariq Ali and appears to be a mediocre play covering an important incident. 

Perhaps a different and excellent article covering the same subject spoils me:  “Judicial murder of aPrime Minister” 

Guess who wrote that?  Tariq Ali!

05 April 2012

"What was once East Pakistan" by Syed Shahid Husain

Syed Shahid Husain was a middle level civil servant sent from West Pakistan to work in civil administration of a district in East Pakistan.  He had sufficient seniority in the administration to provide him a front row seat to watch the events as they unfolded and an insider perspective of the events that led to the birth of Bangladesh.

Syed Shahid Husain considers it important for history to preserve various narratives to ensure right lessons are learnt and confesses to a strong bias for democracy and some antipathy against brutal military assault on an unsuspecting civilian population in his recording of the events:
  1. The 1971 event was not a civil war.  Nor was it a rebellion.  It was just a civil resistance movement and an assault on a civilian population by its own military.
  2. One cannot blame Bhutto (he was hardly in a position to influence events); one cannot blame India (it waited for 9 months for military rulers to see sense and reach a settlement with compatriots in East).
  3. Bengalis had cause to resent domination by the Western half.  In the district for which he was commissioner, debates and discussions degenerated into acrimony and civil officials from East were “not talking” with civil officials posted from the Western half.
  4. Bengalis were peaceful people.  As an administrator of a town in KP, he oversaw more than 10,000 licenses for arms.  When he moved to East Pakistan he was surprised to notice that a comparable town had less than 12 licenses.  However, the same Bengalis acquired enough arms to be capable of disrupting military movements within 3 months after the 25 Mar 1971 military crackdown
  5. The military government in East Pakistan came to a complete standstill after boycott by people (in response to the postponement of convening the elected legislature).  Husain had to shut down the district administration offices at the request of his subordinates since none of them was willing to work.  Banks stopped transferring money to the Western half; or accept Treasury notes from Federal Government.  When Admiral Ahsan resigned his position as Governor of East Pakistan in protest against military actions, no judge in East Pakistan was willing to administer oath of office to his replacement General Tikka Khan.
  6. The army did commit despicable crimes against its own people in the East:
    1. Whenever General Niazi visited an operational area, he would make ti a point to ask his troops how many Hindus they had killed.  
    2. Brigadier Abdullah Khan of 23 Brigade issued an order in writing to kill Hindus.  
    3. Major Mumtaz Khan told the author that his unit swooped upon a village and killed every one in the village (men, women and children).  A baby survived and was crying.  The Major pleaded with his colleagues to “finish off the baby”.  The colleagues refused because they felt the baby deserved to die a slow death.  
    4. Ayub Khan, in his diary entry on 11 Nov 1971, records that a “young army officer brought to the CMH Rawalpindi for psychiatric treatment had supposedly killed nearly 14,000 people in East Pakistan.  
    5. However, the author is aware that the Bengalis committed some despicable crimes as well.
  7. Popular opinion in the Western half did not have sympathy for the East.  Intellectuals in Karachi felt that “the crackdown was long overdue and probably justified”.  
  8. Nixon and Kissinger, according to the author, were devoid of any morality and ethics and failed to realize the magnitude of the crisis.
  9. To the author, 1971 was the year of national infamy for Pakistan.   
The book is a demonstration of another unconfessed bias:  a bias for truth.  The book is a testament to the author’s courage to speak truth to power.

03 April 2012

"War and secession" by Richard Sisson & Leo E Rose

The birth of Bangladesh (earlier East Pakistan) and the India-Pakistan conflict of 1971 were covered by many writers from India and Pakistan.  Despite best efforts, the narratives tend to differ significantly and the subject merits an objective analysis by unbiased scholars who understand the region.

Richard Sisson and Leo E Rose do just that.  Both are scholars in political sciences (Sisson headed Ohio State University and Rose taught at Berkeley); and both specialized in South Asia (with several books to their credit).

Interesting snippets from this excellent book:

The territorial disputes between India and Pakistan are the result of “a hastily devised and extremely sloppy” partitioning of India.  Contiguity, will of the ruler and will of the people were to be heeded in deciding who goes where.  Pakistan had differing principles for different regions.  Pakistan preferred will of the ruler in Junagadh and Hyderabad (where the ruler was Muslim and the people Hindus) and will of the people in Kashmir (where the ruler was Hindu and people Muslim).  India had the opposite view.  India annexed the first two by force and Kashmir in a controversial accession.  The 1949 war between the two young nations over Kashmir resulted in a ceasefire line splitting Kashmir into two parts:  Pakistan held Kashmir and India held Kashmir.  In the 1965 war, India made deep inroads into PHK; but had to give up territory gained under the Tashkent peace treaty.

The first free and fair elections in Pakistan in 1970 resulted in “a majority party with a regional agenda and a minority party with a national agenda”.  One argued for majority’s will to prevail and a weak federation.  Another argued for right to participate in government based on “concurrent majority of two separate interests”.  Bhutto represented a region and had a national program.  Mujib represented the nation and had a regional program.  Military dictator Yahya Khan could not devise a solution and unleashed armed force against Bengalis when they expressed angst at continuing inaction.  (Sisson and Rose say that while Bengalis suffered as a result, the Indian claims of “genocide” are exaggerated). 

Pakistan made several miscalculations:
  1. That the Bengalis in the East will submit quickly to armed force.  They did not.  Bengalis fought back.  Their Mukthi Bahini grew to a size of 100,000 fighters.  They liberated Bangladesh from Pakistan. 
  2. That India will not intervene in the conflict.  India intervened. 
  3. That Hindu India’s army is no match for Pakistan army drawn from the martial warrior community of Punjab Muslims.   In the end Pakistan Army surrendered to three Generals of a secular India: a Parsi, a Sikh and a Jew!
  4. That China will intervene to restrain India in the event of hostilities.  China did not.  India knew (from intercepted communication) that China promised political support but declined to provide military support to Pakistan.  Additionally India’s treaty with the Soviet Union deterred China from any intervention.  India was confident enough to move 6 of the 10 battalions from its borders with China to its borders with Pakistan.
  5. That a conflict in Western border would distract India.  It did not.  India took back several territories in PHK and the new 1971 “line of control” replaced the earlier 1949 “cease fire line”.

The authors observe a few ironies:  Decision making in India was institutionalized and controlled by incumbents “who had been there before”.  Decision makers in Pakistan labored under severe and self-admitted stress.  Democratic India had “strong and consistent” control over the crisis.  Authoritarian Pakistan was relatively “weak and inconsistent”.  India was the “hard” state; Pakistan was the “soft” state.   Pakistan’s policy (with Awami League and later with India) was reflexive and more focused on denying India satisfaction than achieving a domestic resolution – an incorrect priority that lost the country a region, a border and some reputation.

24 March 2012

"Pakistan on the brink: the future of America, Pakistan and Afghanistan" by Ahmed Rashid

Ahmed Rashid, rebel (who organized uprisings against Ayub Khan and Yahya Khan governments) turned journalist (20 years with Daily Telegraph out of Lahore), provides a balanced analysis of the end game scenario in the US, Afghanistan and Pakistan imbroglio.  You dont need to have read his previous masterpieces ("Taliban" and "Descent into Chaos").  You can read any chapter at random.  I had to read the entire book in one go.  Quite an engaging analysis.

United States is in a logjam.  US has to exit Afghanistan soon.  Popular support for the war has decreased.  The adventure is a drain on national purse at the time of recession.  In order to make elegant exit US needs a legitimate government acceptable to various ethnic groups in Afghanistan that is capable of enforcing law and order.  The bets US made on (a) armed force (b) friendly Afghan government (c) animosity with Taliban and (d) trusting Pakistan to support its war efforts in destroying Al Qaeda are all not working.  Throwing money into Afghanistan or Pakistan did not work either.  Can US exit Pakistan elegantly?  Or will it just “switch off the lights” and make for the door unmindful of the post exit mess?

Afghanistan is in a logjam.  It is an ethnically divided society where Pashtuns (the majority) and non-Pashtuns (Tajiks, Uzbeks etc) do not get along well.  The current government came to power in a sham election with insufficient representation for the majority Pashtun; and is very corrupt.  The Afghan army is not well balanced (disproportionately low number of Pashtuns); is weak and suffers high desertion.  Government maintains rule with the help of US led forces.  In the last ten years, thanks to US money, the non-Pashtuns have gotten rich; and the Pashtuns have remained poor.  97% of the economy depends on international military spending.  When US exits, Afghanistan will slip into a deep recession.

Afghan Taliban is in a logjam.  They are Afghan nationalists; not global jihadists.  Their only fault was supporting Al Qaeda.  They are willing to talk and participate in the Afghan government.  However, they were removed from power by US army and are residing in Pakistan based sanctuaries under the control of Pakistan’s ISI.  ISI pressured them to launch fresh insurgencies against US army from Pakistan (providing them money, ammunition and training).  They suffer US retaliation.  It has become a war of US drones v Taliban IEDs.  Both are losing.  Germany and Qatar organized clandestine peace talks between Taliban and US without the knowledge of Pakistan.  This has stalled.  Taliban paid a price for their friendship with Al Qaeda; and are paying a price for their friendship with Pakistan.  US is interested in fighting them; Pakistan is not.

Pakistani Taliban are not in a logjam.  The group was born when Afghan Taliban started recruiting from Pakistan Pashtuns to provide manpower support.  They were joined by militants from Kashmir (who found life boring after Pakistan made a temporary truce with India to deal with the mess in Afghan border) and by militants from Punjab, Sind and other provinces.  Pakistani Taliban killed more than 1,000 traditional tribal leaders friendly to Pakistan State.  They see Pakistan State as an enemy (for having provided tacit support to US drone attacks) and pursue terrorism within Pakistan (with a sophisticated, educated and urban edge thanks to their Punjab/Sind brethren).  Their aim is to establish an Islamic caliphate ignoring political borders.  Pakistan is interested in fighting them; US is not.

Haqqani network is not in a logjam.  Jalaluddin Haqqani's network enjoys Pakistan's support; is held in high esteem by both Afghan Taliban and Pakistani Taliban; is a friend of Al Qaeda; and is clear about inimical interests against US.  US is unable to defeat the network since US is unable to pursue the network’s warriors into Pakistani soil.  US is keen to fight them; Pakistan is not.

Al Qaeda is not in a logjam.  They are global jihadists.  They inherited all training camps for militants in Afghanistan from the Taliban.  They provided inspiration, training and equipment to a multitude of radical youth (some from US/Europe).  Their leader Osama bin Laden was killed.  However, they have morphed into a network of tiny cells and can cause damage if they are provided a place to stay.  Pakistan, under pressure from US, has been “outing” Al Qaeda leaders.  However, Pakistan are unable to explain whether bin Laden’s residence near Pakistan’s capital is due to culpability or incompetence.  Mystery remains.

Pakistan is in a logjam. 
  1. Pakistan is continuing to be dominated by its army.  Civil government is weak, corrupt and powerless. Democracy is made difficult since all parties, other than PPP, are ethnic or regional.  Punjab (thanks to constituting 60% of population) dominates civil service and army and others feel underprivileged.
  2. Pakistan political elite have failed to create a national identity that unifies the country.  The army’s anti-India security paradigm has filled the void to define national identity making the army the most important component of governance.
  3. Army commandeers 30% of Pakistan budget, 70% of all aid and has grown to be an empire of tax free industries and real estate with motivation and ability to exercise power over defense and foreign policy.
  4. Pakistan army has been using proxy forces (tribals and jihadists) to achieve security objectives.  Pakistan army used proxies in its attempts to liberate Kashmir in 1947 and 1965; to subdue secession in 1971; to evict (this time with success) Soviet Union from Afghanistan in 1988; and to unleash insurgency in Kashmir in 1989.  Pakistan sees Afghan Taliban as a very useful proxy to retain influence in Afghanistan and an assortment of militant outfits as very useful to bleed India in Kashmir.  However, these initiatives have created the 40,000 strong Pakistani Taliban, which is not under state control and is attempting to destroy Pakistan state itself.
  5. Pakistan, in attempting to secure a strategic depth against India has destabilized Afghanistan by supporting one ethnic group (Pashtuns) and antagonizing other groups.  Pakistan is dreaming of an Afghan state that is neither too weak (to be dominated by inimical interests) nor too strong (to threaten Pakistan’s borders and claim sovereignty over Pashtuns in Pakistan).  Pakistan is dreaming of an Afghan state where Pashtuns dominate.  Pakistan is dreaming of an Afghan state where Iran will not have influence over the Shias (Iran has invested significantly into nation building in Afghanistan) and India over Tajiks/Uzbeks (India has invested significantly into nation building; 50% of goods leaving for India now use roads to Iran and bypass Karachi).  Pakistan is an impediment to Afghan stability; and therefore to Pakistan’s stability.
  6. Pakistan army and civil government have been feeding popular opinion with false narratives against US, Israel and India whipping up paranoia about the very existence of Pakistan being at stake.  This prevents evolution of a good choice of policies for Pakistan.
  7. Pakistan can no longer depend upon US as a hedge against India.  Nor can Pakistan rely on China for monetary support.  China is not known to give cash; nor is China comfortable with terrorism as state policy.
It would take a confident President, a wise General and a compassionate Mullah to break the logjams and bring stability and end to the “New Great Game”.  Until then, everyone would suffer in each other's duplicity.

Ahmed Rashid provides an excellent insight into the tapestry of interlinked and conflicting motivations; an insight reinforced by personal knowledge of and discussions with Obama, Karzai, and Musharraf.