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.