A year back, Lehman Brothers, the icon of Wall Street and all that it stood for, came crumbling down, in almost prophetic fashion ushered in the worst economic recession that the world has ever seen. The event was not the crash of Wall Streets premier bank, but it was perhaps the proverbial straw that broke the camels back. Economies around the world felt the economic tsunami that ensued, wave after tidal wave of what was bad news. The GGC economies, who had on the back of their liquidity, weathered previous recessions of global proportions without more than a sneeze, suddenly realized the interlinking of economies was perhaps more closely knotted than one would have imagined in the past.
The issue is what does it feel for a recession to be one year old? Well in large measure some people would say 'miserable' while others, who are prone to seeing the forest rather than count the trees, would say well 'value was created'. Indeed, its all about perspectives and its not like the world came to a standstill, even though belts were tightened and a difference emerged between those who hope it will all go away, and those who did something about it. China and India shrugged off the recession with remarkable ease, Germany and France has shown more grit than was expected. The United States has been a bit of a struggle but the stock markets are off their bottom levels, the impending collapse of some banks has been averted and in a sense there is evidence that things do have the thinest of hopes for a better recovery.
As bizarre as this may sound my guess is that the slide in the market will be arrested now and we may begin to see signs of a gradual recovery. It is more likely that this recovery will be slow with some stops and starts. In the context of the GGC and specifically the UAE I feel a little more optimistic given that liquidity levels have improved and the banks are beginning to see they have a more positive role to play and this will translate into a better economic performance. The recovery will not be euphoric but more cautious and this will be good for the overall health of the economy.
Sunday, September 20, 2009
Monday, September 7, 2009
Rachel Alexandra: A filly that was born to triumph.
I am usually writing about social, political and economic issues, so why would a 3 year old filly called Rachel Alexandra capture my attention? Well for one, I have always loved horses and owning 56 of our own I guess makes the point, but more importantly I have loved those stories of triumph against impossible odds, and this Rachel Alexandra brings to us.
I have watched every single race this filly has ran, You Tube will testify to that obsession, and when she took on the big boys at Saratoga for the Woodward Stakes, I stayed up till past 2 AM to see her run. Two days later I see the video clips and the enormity of her victory dawns on me.
Calvin Boral is a great jockey, one who understands her well, but in the Woodward Stakes, perhaps seeking the safety of the rails he moved Rachel Alexandra towards them early in the race. Half way through it was apparent that the ruse was not working, as Rachel dug deep into mud and slush and it seemed that she would finally be beaten. Then 400 meters from the end as the two other bigger and stronger colts closed on her, Rachel found not only a second or third breath of air, she found the deep courage within her and suddenly you could see her hindquarters found that extra gear of power and stretched as she was in those closing moments, Rachel Alexandra brought a new meaning to the word determination.
To me it was Rachel who wanted to win the race more than Calvin Boral, her jockey, she wanted that race and she won it, irrespective of the quicksand of mud and slush she had to trample through. I believe if she has been on the outside of the track her victory would not have been a head only, it may well have been a few lengths.
I have photographed some amazing horses, Escape Ibn Navaronne (Arabian World Champion Stallion) Bess Faizah (Arabian World Champion Mare) Pysche’s Ambergem, and Marraaj, and to me getting the beauty and spirit of the horse matters a lot. Estishama, who we fondly call Esti, has been a pleasure to capture in the desert settings, trotting off with another mare.
Now I would love to capture the essence of this horse, Rachel Alexandra, not in her role as a racehorse, but in her role as a testimony to her will, her spirit and determination. This horse speaks to us, this is not only a journey of victories, as much as they matter to some, it is a testimony to the character of a horse that just wants to be the best and not in a race machine style but with the sensitivity and heart that I would love to capture in a photo.
I have watched every single race this filly has ran, You Tube will testify to that obsession, and when she took on the big boys at Saratoga for the Woodward Stakes, I stayed up till past 2 AM to see her run. Two days later I see the video clips and the enormity of her victory dawns on me.
Calvin Boral is a great jockey, one who understands her well, but in the Woodward Stakes, perhaps seeking the safety of the rails he moved Rachel Alexandra towards them early in the race. Half way through it was apparent that the ruse was not working, as Rachel dug deep into mud and slush and it seemed that she would finally be beaten. Then 400 meters from the end as the two other bigger and stronger colts closed on her, Rachel found not only a second or third breath of air, she found the deep courage within her and suddenly you could see her hindquarters found that extra gear of power and stretched as she was in those closing moments, Rachel Alexandra brought a new meaning to the word determination.
To me it was Rachel who wanted to win the race more than Calvin Boral, her jockey, she wanted that race and she won it, irrespective of the quicksand of mud and slush she had to trample through. I believe if she has been on the outside of the track her victory would not have been a head only, it may well have been a few lengths.
I have photographed some amazing horses, Escape Ibn Navaronne (Arabian World Champion Stallion) Bess Faizah (Arabian World Champion Mare) Pysche’s Ambergem, and Marraaj, and to me getting the beauty and spirit of the horse matters a lot. Estishama, who we fondly call Esti, has been a pleasure to capture in the desert settings, trotting off with another mare.
Now I would love to capture the essence of this horse, Rachel Alexandra, not in her role as a racehorse, but in her role as a testimony to her will, her spirit and determination. This horse speaks to us, this is not only a journey of victories, as much as they matter to some, it is a testimony to the character of a horse that just wants to be the best and not in a race machine style but with the sensitivity and heart that I would love to capture in a photo.
Monday, August 24, 2009
Sizzling Summer Ending
Though from a weather perspective the summer in Dubai was not as severe as previous year, even though mid day temperatures were scorching, evenings were bearable and even the odd day was pleasant. On social scene the question most asked was about the economic situation and when did one expect the down turn to reverse, even though it was reported that events were not as frequent on the social calender was a year back, there was nevertheless, amongst us long time residents a sense of relief. Relief that the glitzy and plastic side of Dubai has suffered from the economic downturn and now those who love and appreciate the city for could actually enjoy it.
Dubai and the region has been in for some bad press for while, and this is obviously the media loves to garnish its readership with, and fine with that. I am however, also of the opinion that some of the noise has come from people who themselves were the beneficiaries of boom and now having either extended themselves out too much, or not finding enough honey in the pot are the first to condemn all that went wrong with the place. Yet let us seek some balance in the argument and we will find that economic ups and downs are the feature of any economy, but never before have I seen so many rats abandon a ship so fast, assuming it was sinking. Well the way I personally see it this was a much needed clean up of the economic and social scene.
I have spent the past week speaking to bankers, tour operators, hoteliers and people who have a good lay of the land. Here is my impression. No doubt to expect the market to go back to dizzy heights of 2007 is wishful thinking if it was expected to happen in a few months. However, there is a general consensus, especially amongst property people, and I am talking of those who are truly in the know, that the bottom seems to have been established on property prices. Bankers on the other hand are seeing a welcome return of liquidity and some banks have even opened their fists enough to show that selective funding is going on. Tour operators, and especially the cruise ship boys, have indicated that their order book for the winter is filling up and there is an inherent demand that is coming back to the market.
Hoteliers are having a more torrid time as business travel seems to have shrunk and with a world wide recession the 'business travel' dollar amount has come down significantly on a global basis. While occupancies may be a struggle to achieve, I do suspect hotels are being a bit stubborn about their rates causing some of their own grief. As we know the hotel business is about putting heads on the pillows in the room and at some stage turn over versus the average room rate needs to be balanced out.
My gut reaction is that the worst seems over, and as confidence returns, the Dubai Metro soon carries its first paying passenger and indeed people come to realize the that the fundamentals for the long term are valid a better 2010 would seem on the horizon. The charm of Dubai to the sub continent and the Arab world has not diminished and on the country level all that Abu Dhabi is doing to show its capability to weather the storm abodes well for Dubai and the country as a whole. I do predict that as suddenly as someone turned of the light on exuberance it will be almost as sudden when suddenly everything will light up and I feel a scramble to buy value in a market where not long ago people were exuberantly crazy enough to pay ridiculously high price.
The summer has sizzled past us, and as the winter approaches there is more good news on the horizon than bad news. The social scene is more likely to find a mature balance and everyone will have realized that as difficult this sounds there is still alot of fun things to do.
Dubai and the region has been in for some bad press for while, and this is obviously the media loves to garnish its readership with, and fine with that. I am however, also of the opinion that some of the noise has come from people who themselves were the beneficiaries of boom and now having either extended themselves out too much, or not finding enough honey in the pot are the first to condemn all that went wrong with the place. Yet let us seek some balance in the argument and we will find that economic ups and downs are the feature of any economy, but never before have I seen so many rats abandon a ship so fast, assuming it was sinking. Well the way I personally see it this was a much needed clean up of the economic and social scene.
I have spent the past week speaking to bankers, tour operators, hoteliers and people who have a good lay of the land. Here is my impression. No doubt to expect the market to go back to dizzy heights of 2007 is wishful thinking if it was expected to happen in a few months. However, there is a general consensus, especially amongst property people, and I am talking of those who are truly in the know, that the bottom seems to have been established on property prices. Bankers on the other hand are seeing a welcome return of liquidity and some banks have even opened their fists enough to show that selective funding is going on. Tour operators, and especially the cruise ship boys, have indicated that their order book for the winter is filling up and there is an inherent demand that is coming back to the market.
Hoteliers are having a more torrid time as business travel seems to have shrunk and with a world wide recession the 'business travel' dollar amount has come down significantly on a global basis. While occupancies may be a struggle to achieve, I do suspect hotels are being a bit stubborn about their rates causing some of their own grief. As we know the hotel business is about putting heads on the pillows in the room and at some stage turn over versus the average room rate needs to be balanced out.
My gut reaction is that the worst seems over, and as confidence returns, the Dubai Metro soon carries its first paying passenger and indeed people come to realize the that the fundamentals for the long term are valid a better 2010 would seem on the horizon. The charm of Dubai to the sub continent and the Arab world has not diminished and on the country level all that Abu Dhabi is doing to show its capability to weather the storm abodes well for Dubai and the country as a whole. I do predict that as suddenly as someone turned of the light on exuberance it will be almost as sudden when suddenly everything will light up and I feel a scramble to buy value in a market where not long ago people were exuberantly crazy enough to pay ridiculously high price.
The summer has sizzled past us, and as the winter approaches there is more good news on the horizon than bad news. The social scene is more likely to find a mature balance and everyone will have realized that as difficult this sounds there is still alot of fun things to do.
Tuesday, August 18, 2009
Dubai: Deflation path to Recovery
Sitting on the inside, watching the economic crisis is not more a secluded exercise. This economic meltdown is a world wide episode, with ramifications that have not been quite fully understood, especially by the actors who are expected to bring about a change in this scene we stare at. As the global crisis has unfolded its own unique economic tsunami the effects of it have manifest itself in each country in a rather different way. While focus has remained on the United States in terms of the sheer size of its economy, large consumer economies like China and India has been better placed to absorb the tidal waves given that there is a basic level of consumer demand that does need fulfillment.
Dubai has received a great of attention from the world media, and understandably so; during the boom years it was the darling of the media world, and as it is learning, in the down days the same writers who showered accolades are the first ones to throw eggs. This does not mean that the entire negative press is not without foundation, but more like exaggerated to the point of sensationalist fear. For the record yes the recession has hit Dubai hard, and understandably so as it had the most grandiose of plans in the region. The debate rages over the size of its financial commitments and what it will do to revive the economy.
I would say three decades in the region, two of which were in banking, gives me more perspective than a reporter who perhaps would think of a story over a month at best. First of all Dubai has been what I have always called an 'enabling economy', whereby it has created the infrastructure for private sector to thrive. Though, understandably, over the past decade over zealous government officials donned the entrepreneurial hat and goaded the government to become in effect the biggest business conglomerate, having the disadvantage that it pushed the cautious private sector to the sidelines and yet having the advantage that government funding would ensure completion of the grand design. We must remember it was not the real estate sector that caused the problem it was a combination of financial issues within the banking sector and the effects of the global economy that started the downward spiral.
To explain this further one has to appreciate that in middle to late 2008 there was widespread speculation and debate that the UAE will delink the Dihram from the US dollar, a fixed rate that has been unchanged since 1970's. This speculation drove through most of the early part of 2008 substantial funds from Hedge Funds in Europe and elsewhere into the banking system in the UAE expecting a delinking will mean a stronger UAE Dihram. This did not happen and when in September or so last year the UAE Central Bank made its position public that there was no such delinking on the cards, billions of dollars playing this trade and sitting in the banks here too flight. Ofcourse in a sense the hedge funds had their own problems brewing with the sub prime crisis and a stock market that was not entirely comfortable.
The problem would not have been more than that it seems had some fundamental errors not taken place. So lets say $15 billion comes to the banks here, is laying in deposit waiting for the delinking, the delink does not happen the money leaves so no big deal. However, our clever bankers, and I was one of them a decade back, had lent a substantial part of these funds to domestic borrowers, so when the delink did not happen and the funds went back almost every bank was caught with their loan to deposit ratio (which is normally 80-85%) suddenly find they had more loans on their books then deposits to fund them. Well established banks with loads of liquidity were caught with a ration of close to 135% on loans to deposits. Given that international banks were stuck with their own problems even the inter bank market was struggling to fund the banks here.
The timing of all this was smack in the middle of the meltdown happening thus closing the door to the one thing that could have made this crisis less dramatic; the access to liquidity. If the banks had not been so exposed then in a nervous market more monetary moves to increase liquidity in the banking system would have given the buffer to soften the blow. This is what happened in India where huge amounts of liquidity were pumped into the banking system to make sure the consumer did not panic.
This does not mean the real estate crisis would not have happened. I am only arguing that it would not have been so serve and more importantly one has to then question was the rationale for the development model for Dubai wrong? I do not believe the model was wrong, but two things needed adjustment that just did not happen.
1. The size and scale of the development was not tuned into the sustainable demand levels.
2. The role of private sector should have been the bigger chunk of the development cake rather than end up making government owned companies the biggest competitor to the private sector.
I am often asked a question about how long this recession will last and how will Dubai come out of it?
In the first place the recession is a global event and while France, China, India and Germany have shown signs of weathering the storm better, the chances are that towards the fourth quarter of 2009 the financial elements needed for a recovery will be in better shape. This deflation we have seen globally, and in Dubai, was needed for two reasons, one to slow down an over heating economy, and secondly to bring some value back to the process of development. I believe that consumer confidence will stabilize towards the end of this year and net investments will begin to show an increase in the first quarter of next year. Yes this is totally contrary to what some leading bank researchers are saying that we have another 18 months of hardship, but trust me I know that crowd well, they are the same researchers who a year back were predicting some very exuberant predictions.
The way Dubai will come out of this is actually simpler than it looks. While the current funding of Government Bonds of $ 20 billion as a first step forward Dubai has a good collection of companies it can privatize, from airlines to hotels and property companies too. The question is the timing of such privatizations and whether this is the route to take. I believe the enabling element of Dubai's economy means in the region it is the best suited in terms of ease of business and infrastructure to be the place of first choice for regionally based companies. I believe a spending spree in Iraq on account of rebuilding the country will commence early next year, this backed up with a higher oil price will bring stability to the region and a demand led economy will emerge, but gradually. UAE and Dubai are best positioned to take advantage of the support role it will perform and this is where there base of the demand side of the equation will come to the economy.
This does not mean that the government of Dubai should not rethink their role in the economic model. I think they should go towards being more an enabler and privatize some of the business concerns, perhaps with the timing of the first offerings to be in the early part of next year. There should also be a revisit to some of the more grand projects and these should be put on the back burner and bring back the confidence that with some projects shelved the expect financial load will be substantially less. As I said to someone the other day "You can still plan to do all you wanted but just don't do them at the pace you were trying to.'
Dubai has received a great of attention from the world media, and understandably so; during the boom years it was the darling of the media world, and as it is learning, in the down days the same writers who showered accolades are the first ones to throw eggs. This does not mean that the entire negative press is not without foundation, but more like exaggerated to the point of sensationalist fear. For the record yes the recession has hit Dubai hard, and understandably so as it had the most grandiose of plans in the region. The debate rages over the size of its financial commitments and what it will do to revive the economy.
I would say three decades in the region, two of which were in banking, gives me more perspective than a reporter who perhaps would think of a story over a month at best. First of all Dubai has been what I have always called an 'enabling economy', whereby it has created the infrastructure for private sector to thrive. Though, understandably, over the past decade over zealous government officials donned the entrepreneurial hat and goaded the government to become in effect the biggest business conglomerate, having the disadvantage that it pushed the cautious private sector to the sidelines and yet having the advantage that government funding would ensure completion of the grand design. We must remember it was not the real estate sector that caused the problem it was a combination of financial issues within the banking sector and the effects of the global economy that started the downward spiral.
To explain this further one has to appreciate that in middle to late 2008 there was widespread speculation and debate that the UAE will delink the Dihram from the US dollar, a fixed rate that has been unchanged since 1970's. This speculation drove through most of the early part of 2008 substantial funds from Hedge Funds in Europe and elsewhere into the banking system in the UAE expecting a delinking will mean a stronger UAE Dihram. This did not happen and when in September or so last year the UAE Central Bank made its position public that there was no such delinking on the cards, billions of dollars playing this trade and sitting in the banks here too flight. Ofcourse in a sense the hedge funds had their own problems brewing with the sub prime crisis and a stock market that was not entirely comfortable.
The problem would not have been more than that it seems had some fundamental errors not taken place. So lets say $15 billion comes to the banks here, is laying in deposit waiting for the delinking, the delink does not happen the money leaves so no big deal. However, our clever bankers, and I was one of them a decade back, had lent a substantial part of these funds to domestic borrowers, so when the delink did not happen and the funds went back almost every bank was caught with their loan to deposit ratio (which is normally 80-85%) suddenly find they had more loans on their books then deposits to fund them. Well established banks with loads of liquidity were caught with a ration of close to 135% on loans to deposits. Given that international banks were stuck with their own problems even the inter bank market was struggling to fund the banks here.
The timing of all this was smack in the middle of the meltdown happening thus closing the door to the one thing that could have made this crisis less dramatic; the access to liquidity. If the banks had not been so exposed then in a nervous market more monetary moves to increase liquidity in the banking system would have given the buffer to soften the blow. This is what happened in India where huge amounts of liquidity were pumped into the banking system to make sure the consumer did not panic.
This does not mean the real estate crisis would not have happened. I am only arguing that it would not have been so serve and more importantly one has to then question was the rationale for the development model for Dubai wrong? I do not believe the model was wrong, but two things needed adjustment that just did not happen.
1. The size and scale of the development was not tuned into the sustainable demand levels.
2. The role of private sector should have been the bigger chunk of the development cake rather than end up making government owned companies the biggest competitor to the private sector.
I am often asked a question about how long this recession will last and how will Dubai come out of it?
In the first place the recession is a global event and while France, China, India and Germany have shown signs of weathering the storm better, the chances are that towards the fourth quarter of 2009 the financial elements needed for a recovery will be in better shape. This deflation we have seen globally, and in Dubai, was needed for two reasons, one to slow down an over heating economy, and secondly to bring some value back to the process of development. I believe that consumer confidence will stabilize towards the end of this year and net investments will begin to show an increase in the first quarter of next year. Yes this is totally contrary to what some leading bank researchers are saying that we have another 18 months of hardship, but trust me I know that crowd well, they are the same researchers who a year back were predicting some very exuberant predictions.
The way Dubai will come out of this is actually simpler than it looks. While the current funding of Government Bonds of $ 20 billion as a first step forward Dubai has a good collection of companies it can privatize, from airlines to hotels and property companies too. The question is the timing of such privatizations and whether this is the route to take. I believe the enabling element of Dubai's economy means in the region it is the best suited in terms of ease of business and infrastructure to be the place of first choice for regionally based companies. I believe a spending spree in Iraq on account of rebuilding the country will commence early next year, this backed up with a higher oil price will bring stability to the region and a demand led economy will emerge, but gradually. UAE and Dubai are best positioned to take advantage of the support role it will perform and this is where there base of the demand side of the equation will come to the economy.
This does not mean that the government of Dubai should not rethink their role in the economic model. I think they should go towards being more an enabler and privatize some of the business concerns, perhaps with the timing of the first offerings to be in the early part of next year. There should also be a revisit to some of the more grand projects and these should be put on the back burner and bring back the confidence that with some projects shelved the expect financial load will be substantially less. As I said to someone the other day "You can still plan to do all you wanted but just don't do them at the pace you were trying to.'
Wednesday, June 17, 2009
Iran Imploding?
Iranian politics is as much about what the people in the street feel and express, as it is about the bizarre behind the scene politicking and the power play that makes Iran the strange enigma that it is. To simply view the election fraud as limited to what President Ahmadinejad manipulated misses out some key aspects of undercurrent of why such a massive election fraud was done in the first place. It simply could not have been the fear of a Reformist election victory since in 1997 and 2001 Reformists did come to power. The fact that Ayatollah Ali Khameni the Spiritual Leader intervened into the election process and clearly supported Ahmadinejad before the election and was quick to endorse the fraudulent results the day after the election might hold some of the clues as to whether a internal coup is under way in Iran.
Previously Khameni has accepted Reformist governments and in both terms of office of these governments he balanced the reformist impact by appointing ultra conservatives to the Judiciary and the Media ensuring that the reformist governments were reined in and not as effective as they would like to be. At the start of this election campaign a shift started to appear as the important elements of the clergy, especially from Qom were expressing statements that they would not support any of the candidates. For these very conservative clergy from Qom, who have supported every conservative candidate in the past elections, to say they will not support anyone was simply the politically correct way of saying they do not agree with Ahmadinejad's policies.
Keeping in the that the former President being the head of the Assembly of Experts, a power group from the parliament who advise the Guardian Council was supporting the Reformist Mousavi in the election and is known not to have a great relationship with Ali Khameni could well hold the reason why this election was allowed to be rigged and why the Grand Spiritual Leader is taking sides so openly.
Unlike his predecessor, Ayatollah Khomeni, Ali Khameni has ambitions of protecting his vast business and political interests within the country. He also wants to ensure that his son Mojtaba, has a role in the political future of Iran and it is strange that for the past year conservative media close to the clergy have been portraying Ali Khameni as 'Ali of the Age', almost giving him a special place in history and perhaps making a subtle reference to Imam Ali, the First Shia Imam who passed on the reins to his son Hassan. Whether or not Mojtaba has the standing or the support to take his fathers place is moot, but one thing is clear that Ali Khameni does wish to protect his business interests and a Reformist government with Rafsanjani heading the Experts Assembly and the clergy in Qom not happy with the way Ali Khameni has blindly endorsed the reign of Ahmadinejad all indicates that this current situation in Iran is as much a battle for the survival of Ahmadinejad as it is of Ayatollah Ali Khameni.
It is thus not surprising at in some of the street demonstrations there have been calls to also reform the Iranian system to ease power, which is absolute, from the Spiritual Leader back to the elected government. Had the Ali Khameni not taken sides the issue would have been easier to resolve by asking for an impartial inquiry and dependent on the results a re-election. Now, ofcourse, the lines are being be drawn harder by the day. The arrests and the nature of the reprisal by Ahmadinejad and his supports to the demonstrators and voices of disagreement shows that the hard liners are fully aware that the stakes are high. Mousavi supporters and his political machinery are being careful not to let the demonstrations spill over into violent clashes giving the State apparatus to impose curfews and a full scale crackdown.
The worlds response has been rather muted, calling it Iran's internal affair. This is a convenient side step if I may say, because events in other countries are not seen as 'internal affairs'. If the world does want to see the rule of the ballot box then Iran's current situation does call for the condemnation of the election fraud, and the end to the repressive measures being used against opponents of Ahmadinejad. There cannot be two ways about it and this is a matter of political and human ethics and not one of diplomatic niceties.
As far as the effect on the Middle East, it is clear that a 're-elected' Ahmadinejad will feel more vindicated, even if in his own eyes, about his past policies and may continue his policies of the past four years. There is a highly unlikely possibility that Ahmadinejad may try and become a reformed man and deal with the Middle East and the West differently to show his political acumen and in a way deflect attention from his crackdown on the reformists opposing him. His bet will be that the West accepts the dictates of political realities and if he can soften his position on some key issues he may find Washington and the West will be happier dealing with a devil they know, and who is trying ti change, rather than see further turmoil within Iran. I am afraid that with time this might well be the outcome of the situation as it seems the current impasse will not be resolved by a recasting of votes, unless ofcourse the powerful Guardian Council has a change of heart and signals that the clergy will not support Ahmadinejad. I would call this the Qom effect, where it has become clear that the Qom clergy, who unfortunately command more spiritual importance than political power, have abandoned Ahmadinejad.
Whether Ali Khanemi can come to realize the precarious situation the country is in with is partisan policies is another matter. Perhaps the pressure from the clergy itself may allow him to save face by leaving matters to the Guardian Council to decide and play more of the spiritual patriarch that he is supposed to be. This will be the only solution to the current problem, unless ofcourse the reformist tire of the demonstrations and the lack of progress and resign themselves to another four years of Ahmadinejad.
Previously Khameni has accepted Reformist governments and in both terms of office of these governments he balanced the reformist impact by appointing ultra conservatives to the Judiciary and the Media ensuring that the reformist governments were reined in and not as effective as they would like to be. At the start of this election campaign a shift started to appear as the important elements of the clergy, especially from Qom were expressing statements that they would not support any of the candidates. For these very conservative clergy from Qom, who have supported every conservative candidate in the past elections, to say they will not support anyone was simply the politically correct way of saying they do not agree with Ahmadinejad's policies.
Keeping in the that the former President being the head of the Assembly of Experts, a power group from the parliament who advise the Guardian Council was supporting the Reformist Mousavi in the election and is known not to have a great relationship with Ali Khameni could well hold the reason why this election was allowed to be rigged and why the Grand Spiritual Leader is taking sides so openly.
Unlike his predecessor, Ayatollah Khomeni, Ali Khameni has ambitions of protecting his vast business and political interests within the country. He also wants to ensure that his son Mojtaba, has a role in the political future of Iran and it is strange that for the past year conservative media close to the clergy have been portraying Ali Khameni as 'Ali of the Age', almost giving him a special place in history and perhaps making a subtle reference to Imam Ali, the First Shia Imam who passed on the reins to his son Hassan. Whether or not Mojtaba has the standing or the support to take his fathers place is moot, but one thing is clear that Ali Khameni does wish to protect his business interests and a Reformist government with Rafsanjani heading the Experts Assembly and the clergy in Qom not happy with the way Ali Khameni has blindly endorsed the reign of Ahmadinejad all indicates that this current situation in Iran is as much a battle for the survival of Ahmadinejad as it is of Ayatollah Ali Khameni.
It is thus not surprising at in some of the street demonstrations there have been calls to also reform the Iranian system to ease power, which is absolute, from the Spiritual Leader back to the elected government. Had the Ali Khameni not taken sides the issue would have been easier to resolve by asking for an impartial inquiry and dependent on the results a re-election. Now, ofcourse, the lines are being be drawn harder by the day. The arrests and the nature of the reprisal by Ahmadinejad and his supports to the demonstrators and voices of disagreement shows that the hard liners are fully aware that the stakes are high. Mousavi supporters and his political machinery are being careful not to let the demonstrations spill over into violent clashes giving the State apparatus to impose curfews and a full scale crackdown.
The worlds response has been rather muted, calling it Iran's internal affair. This is a convenient side step if I may say, because events in other countries are not seen as 'internal affairs'. If the world does want to see the rule of the ballot box then Iran's current situation does call for the condemnation of the election fraud, and the end to the repressive measures being used against opponents of Ahmadinejad. There cannot be two ways about it and this is a matter of political and human ethics and not one of diplomatic niceties.
As far as the effect on the Middle East, it is clear that a 're-elected' Ahmadinejad will feel more vindicated, even if in his own eyes, about his past policies and may continue his policies of the past four years. There is a highly unlikely possibility that Ahmadinejad may try and become a reformed man and deal with the Middle East and the West differently to show his political acumen and in a way deflect attention from his crackdown on the reformists opposing him. His bet will be that the West accepts the dictates of political realities and if he can soften his position on some key issues he may find Washington and the West will be happier dealing with a devil they know, and who is trying ti change, rather than see further turmoil within Iran. I am afraid that with time this might well be the outcome of the situation as it seems the current impasse will not be resolved by a recasting of votes, unless ofcourse the powerful Guardian Council has a change of heart and signals that the clergy will not support Ahmadinejad. I would call this the Qom effect, where it has become clear that the Qom clergy, who unfortunately command more spiritual importance than political power, have abandoned Ahmadinejad.
Whether Ali Khanemi can come to realize the precarious situation the country is in with is partisan policies is another matter. Perhaps the pressure from the clergy itself may allow him to save face by leaving matters to the Guardian Council to decide and play more of the spiritual patriarch that he is supposed to be. This will be the only solution to the current problem, unless ofcourse the reformist tire of the demonstrations and the lack of progress and resign themselves to another four years of Ahmadinejad.
Monday, June 1, 2009
Winning the peace
The Pakistan military has been scoring some much needed military victories against the Pakistan Taliban in the region of Swat. Indeed the ferocity of the Pakistan army has been boosted by discovering bodies of Pakistani soldiers with their throats slit bringing about an attitude to yield no quarter to the Taliban. In a sense this does mean that the Taliban and the Pakistan army have now started to carry grudges and there are reports of Taliban being meted out a bit of their own medicine in terms of the harshness with which they are being dealt.
However, the Pakistan military is being asked to reverse the tide of the Taliban given that the Taliban gained control not because of the military failure but due to the spineless of the current government in Islamabad. The tricky question is that winning ground from the Taliban is one thing but winning the peace is another. I feel there are two major threats to the current series of victories of the army.
Firstly, the Taliban may well be giving up strategic towns like Mingora and others in the Swat valley, but lets not forget some of these Taliban are fading into the country side in smaller bands and mingling with the population. While this is not that easy its never the less an army of zealots who can feed of the population without necessarily having the contraptions of a standing army.
Secondly, the Internally Displaced Persons, or IDP, as they are being labeled, are more restless than before as they seek to go back but to their destroyed homes and start to rebuild their lives. A failure of the Government and the international donors to Pakistan to deal with the pressing issues of these people will result in a back lash that the country can ill afford to witness at this stage.
The military is not equipped with the mindset to seek the quick rehabilitation of the IDP's and the government is woefully inexperienced to gather the resources to rebuild the infrastructure and the homes destroyed during the fighting. Historically the government machinery is not geared up for the quick response that the situation demands.
If long lasting goodwill is not created with the displaced people of the Swat valley then clearly the battle for the hearts and minds of the people will suffer an irreparable setback. The Taliban's tactics of revenge attacks in the cities of Peshawar and Lahore have not won them any friends in the country and the government should not consider this as enough reason to be winning the war against the Pakistan Taliban. On the contrary it is a matter of urgency that the Swat Valley towns should be rebuilt and essential services restored showing that defeating the Taliban is only the first step to building the confidence of the people in the government.
However, in terms of the Taliban roll back one has to not rejoice too much considering that the Taliban tactic is that after a major defeat they lie low and regroup, usually taking two to three years before they come back into the forefront. Thus to say a military victory will have rid the country of the Taliban menace would be too optimistic. The strategy has to be clear that while the Taliban burrow down over the next couple of years, the government and all other positive segments of society should accelerate education, economic reforms aimed at the grass root level and widespread engagement of the people in the areas at risk to the next Taliban encroachment so that the Taliban cannot feed of the dissatisfaction of the people.
However, the Pakistan military is being asked to reverse the tide of the Taliban given that the Taliban gained control not because of the military failure but due to the spineless of the current government in Islamabad. The tricky question is that winning ground from the Taliban is one thing but winning the peace is another. I feel there are two major threats to the current series of victories of the army.
Firstly, the Taliban may well be giving up strategic towns like Mingora and others in the Swat valley, but lets not forget some of these Taliban are fading into the country side in smaller bands and mingling with the population. While this is not that easy its never the less an army of zealots who can feed of the population without necessarily having the contraptions of a standing army.
Secondly, the Internally Displaced Persons, or IDP, as they are being labeled, are more restless than before as they seek to go back but to their destroyed homes and start to rebuild their lives. A failure of the Government and the international donors to Pakistan to deal with the pressing issues of these people will result in a back lash that the country can ill afford to witness at this stage.
The military is not equipped with the mindset to seek the quick rehabilitation of the IDP's and the government is woefully inexperienced to gather the resources to rebuild the infrastructure and the homes destroyed during the fighting. Historically the government machinery is not geared up for the quick response that the situation demands.
If long lasting goodwill is not created with the displaced people of the Swat valley then clearly the battle for the hearts and minds of the people will suffer an irreparable setback. The Taliban's tactics of revenge attacks in the cities of Peshawar and Lahore have not won them any friends in the country and the government should not consider this as enough reason to be winning the war against the Pakistan Taliban. On the contrary it is a matter of urgency that the Swat Valley towns should be rebuilt and essential services restored showing that defeating the Taliban is only the first step to building the confidence of the people in the government.
However, in terms of the Taliban roll back one has to not rejoice too much considering that the Taliban tactic is that after a major defeat they lie low and regroup, usually taking two to three years before they come back into the forefront. Thus to say a military victory will have rid the country of the Taliban menace would be too optimistic. The strategy has to be clear that while the Taliban burrow down over the next couple of years, the government and all other positive segments of society should accelerate education, economic reforms aimed at the grass root level and widespread engagement of the people in the areas at risk to the next Taliban encroachment so that the Taliban cannot feed of the dissatisfaction of the people.
Tuesday, May 12, 2009
Obama's Open-Minded Middle East Solution
Washington Post discussion
The Current Discussion: Are Israeli Prime Minister Netanyahu and President Obama on a collision course over Iran and the Palestinian problem? What would be the consequences of a breach between the United States and Israel?
One of the assurances that Israel has always had is the unwavering support of Washington, both when Israel is harmed and when it acts to harm others in response to its own perception of threat. President Obama, it would seem, is taking a slight detour from this established principle of U.S. foreign policy; keeping Israel as the cornerstone of U.S. policy in the Middle East, but effectively seeking a dialogue with Iran and at the same time wanting to push both Israel and the Palestinians to work out peace. While on the face of it there is nothing new in this approach, look at it in the rhetorical context of how past American administrations have handled Middle East policy. President Obama's approach is more open-minded and more interesting. His call to lead the world through example and deeds rather than simply by bullying has resonated well with many countries.
The Israeli position, as much as it professes the need for peace, takes as a starting point that peace must meet Israeli demands, which of course include the immediate cessation of all nuclear activity by Iran and a dismemberment of Hamas in Palestine. Yes, Iran must stop any activity related to the procurement of nuclear weapons and open itself up for international monitoring. But by the same logic Israel, too, must come clean on its own nuclear weapons, which it does possess, and to come to an agreement with the IAEA on how it intends to dismantle its own nuclear arsenal. If the logic is that it needs them for its defense, then clearly other countries, be they Iran or Mongolia, can make the same argument. As for Hamas, we often forget that it was elected into power. While it does resort to violence, which it too must renounce, the fact remains that its political future must be decided by the ballot box and not by pressure from abroad.
President Obama will face the wrath of many of the hawks in the U.S. State Department on his foreign policy initiatives as he tempers threats with dialogue in the Middle East. While it may not win him friends on the right of the political spectrum, it will certainly bring back fairness to the attempt for peace on the region. The chief complaint for the past three or more decades has been that the U.S. government has never really been balanced and fair in its handling of the Arab world, especially when it came to the issue of Israel. I am not suggesting that President Obama will or should abandon Israel, though the sad truth is that when he does ask for moderation in U.S. support and seek fairness and dialogue, many will assume that Israel has been abandoned.
Israel's preferred solution for Iran would be to first bomb their suspected nuclear sites, as they did with Iraq in 1981. But the world is different place than it was then. It is also well known that after Pakistan acquired nuclear weapons capabilities, Israel drew up a contingency plan to use Sri Lankan airbases for which they had operational rights, to see if they could disable Pakistan's nuclear capability. The fact that all this never happened does not mean that Israel was never planning such moves. It highlights the underlying mindset of how Tel Aviv would wish to resolve things in the Middle East. Obama has a sincerity of purpose and a resolve for showing the way without force which his predecessor grossly lacked.
While people might assume a U.S.-Israel falling out with the new Obama policy, that's highly unlikely. Strains will appear, but a complete breakdown will not happen. It would be helpful if Israelis also understood that the constraints of world policy are complex. While peace in the Middle East is of paramount importance, there is a need to consider a strategic peace effort which is good for all, not just for a few. The consequences of these changes in U.S. policy will at worst mean a sulking Israeli Prime Minister and at best a realization that the road to peace in the Middle East does not only lead through Tel Aviv. If anything, it goes through all the capitals of the Middle East.
The Current Discussion: Are Israeli Prime Minister Netanyahu and President Obama on a collision course over Iran and the Palestinian problem? What would be the consequences of a breach between the United States and Israel?
One of the assurances that Israel has always had is the unwavering support of Washington, both when Israel is harmed and when it acts to harm others in response to its own perception of threat. President Obama, it would seem, is taking a slight detour from this established principle of U.S. foreign policy; keeping Israel as the cornerstone of U.S. policy in the Middle East, but effectively seeking a dialogue with Iran and at the same time wanting to push both Israel and the Palestinians to work out peace. While on the face of it there is nothing new in this approach, look at it in the rhetorical context of how past American administrations have handled Middle East policy. President Obama's approach is more open-minded and more interesting. His call to lead the world through example and deeds rather than simply by bullying has resonated well with many countries.
The Israeli position, as much as it professes the need for peace, takes as a starting point that peace must meet Israeli demands, which of course include the immediate cessation of all nuclear activity by Iran and a dismemberment of Hamas in Palestine. Yes, Iran must stop any activity related to the procurement of nuclear weapons and open itself up for international monitoring. But by the same logic Israel, too, must come clean on its own nuclear weapons, which it does possess, and to come to an agreement with the IAEA on how it intends to dismantle its own nuclear arsenal. If the logic is that it needs them for its defense, then clearly other countries, be they Iran or Mongolia, can make the same argument. As for Hamas, we often forget that it was elected into power. While it does resort to violence, which it too must renounce, the fact remains that its political future must be decided by the ballot box and not by pressure from abroad.
President Obama will face the wrath of many of the hawks in the U.S. State Department on his foreign policy initiatives as he tempers threats with dialogue in the Middle East. While it may not win him friends on the right of the political spectrum, it will certainly bring back fairness to the attempt for peace on the region. The chief complaint for the past three or more decades has been that the U.S. government has never really been balanced and fair in its handling of the Arab world, especially when it came to the issue of Israel. I am not suggesting that President Obama will or should abandon Israel, though the sad truth is that when he does ask for moderation in U.S. support and seek fairness and dialogue, many will assume that Israel has been abandoned.
Israel's preferred solution for Iran would be to first bomb their suspected nuclear sites, as they did with Iraq in 1981. But the world is different place than it was then. It is also well known that after Pakistan acquired nuclear weapons capabilities, Israel drew up a contingency plan to use Sri Lankan airbases for which they had operational rights, to see if they could disable Pakistan's nuclear capability. The fact that all this never happened does not mean that Israel was never planning such moves. It highlights the underlying mindset of how Tel Aviv would wish to resolve things in the Middle East. Obama has a sincerity of purpose and a resolve for showing the way without force which his predecessor grossly lacked.
While people might assume a U.S.-Israel falling out with the new Obama policy, that's highly unlikely. Strains will appear, but a complete breakdown will not happen. It would be helpful if Israelis also understood that the constraints of world policy are complex. While peace in the Middle East is of paramount importance, there is a need to consider a strategic peace effort which is good for all, not just for a few. The consequences of these changes in U.S. policy will at worst mean a sulking Israeli Prime Minister and at best a realization that the road to peace in the Middle East does not only lead through Tel Aviv. If anything, it goes through all the capitals of the Middle East.
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