India To Sign Strategic Port Agreement With Myanmar

Oct. 17 (EIRNS)—Virtually ignoring domestic and international pressure to act tough against the Myanmar junta, New Delhi's Manmohan Singh-led United Progressive Alliance (UPA) government has indicated that it will sign an agreement with the Burmese military junta to develop the port of Sittwe, officials in Delhi have said. They hope the port will allow easy and cheap transport of goods to India's remote, restive northeastern states. India will put $103 million into the project, despite international calls for sanctions against the military rulers of Myanmar. Sittwe is situated on the eastern shore of the Andaman Sea—an access to the Indian Ocean and Arabian Sea for a number of nations, including China.

"We are now in a final stages of negotiations and the agreement should be through within a month," said an Indian Foreign Ministry official, who did not wish to be named. Under the agreement, India will develop the port and put in place facilities to use the Kaladan River. Goods will then be easily shipped from ports in eastern India and taken to the landlocked northeast Indian states in smaller vessels. Logistics experts say it will take three years to complete the project after the agreement is signed. "Once that happens, it will hugely benefit northeast India and save transport costs to the region by 40%, even 50%," said Atin Sen of the Kolkata-based Asian Council of Logistics Management.

Benazir Bhutto Survives Assassination Attempt

Oct. 19 (EIRNS)—Within 12 hours of her return to Karachi after eight years of exile, Pakistan's former Prime Minister Benazir Bhutto survived a massive attempt on her life. The death toll from the midnight suicide attacks has grown to 136 and more than 250 injured (more than 500 according to private TV channels). Days before her planned arrival from Dubai, a provincial government official had cited intelligence reports that said three suicide bombers linked to pro-Taliban warlord Baitullah Mehsud, and to al-Qaeda, would be waiting for Mrs. Bhutto in Karachi.

The attempted assassination is symptomatic of the civil war-like conditions that have developed in Pakistan. Bhutto is considered a creature of the Americans, who are deeply mistrusted there, particularly by the Islamic militants, by a section of the army, and by the powerful Inter-Services Intelligence (ISI). Mrs. Bhutto blamed the attack on supporters of Pakistan's late military ruler Gen. Zia ul-Haq. She told Paris-Match magazine that they remain extremely powerful, and see her return to Pakistan, and her pledge to restore democracy, as a threat to their influence. In a letter to President Pervez Musharraf, Benazir named three people's involvement in the assassination attempt. She refused to identify the names in public.

One of the men Bhutto may have named in that letter is Brig. Gen. Ejaz Shah, the officer placed in charge of her security on arrival. Shah is a former officer of the ISI, and a close personal friend of Musharraf. It was Shah who orchestrated the overthrow of former Prime Minister Nawaz Sharif in October 1999, which put Musharraf in power. Shah, when he was in the ISI, was the case officer for Osama bin Laden and for Mullah Omar, the chief of the Taliban.

Preparations for China-India-Russia Meeting

Oct. 19 (EIRNS)—In preparation for the meeting of China, India, and Russia on Oct. 24 at Harbin, China, India's Ministry of External Affairs (MEA) has floated, through a favorite correspondent, some concepts on areas where discussions should focus.

Since both China and India are short of electrical power and hydrocarbons, the MEA believes the three nations must get their heads together to work out a plan. One idea should be to utilize the considerable hydropower potential in Siberia and Tibet. This could be tapped for transmitting electricity via Xinjiang and Tibet to the large Indian market just across the mountains.

Overland pipeline projects, if found technically and economically feasible, could transport Russian and Caspian Sea oil and gas to markets in India via China, as well as to global markets via India's warm-water ports. This could be cheaper and would obviate many of the risks associated with exclusive reliance on maritime energy-supply routes. China is already exploring alternative routes via Pakistan for transporting Persian Gulf oil to China. It may well find a sea-land route via India more reliable and secure, particularly if there is a reciprocal dependence—India's on Russian and Central Asian gas transiting China on its way to India, and China's on Gulf oil transiting India on its way to China.

Nuclear Future of China and India

Oct. 16 (EIRNS)—Nuclear energy is the "way forward" for China and India, International Atomic Energy Agency (IAEA) deputy director-general and head of the department of nuclear energy Yuri Sokolov said yesterday at a Chinese symposium on nuclear power plant management in Beijing, China Daily reported. "China has developed quite fast in the nuclear power industry in the past 20 years. In China, in India, you have very definite plans for increasing the nuclear capacity six to ten times for 20 years; this is really fast growth. The growth of the world is not so fast," he said. Sokolov said nuclear power has an international future: "Now nuclear power exists in 30 countries, and 30 to 40 other countries have expressed their willingness to explore nuclear power."

China plans to increase installed nuclear power capacity from the current 9,000 MW in 2007, to 40,000 MW by 2020, while India plans to increase installed nuclear power capacity to 20,000 MW by then.

India Sees Danger in Derivatives

Oct. 18 (EIRNS)—India's Securities and Exchange (SEBI) is taking measures to regulate the "offshore derivative instruments" (ODIs) used by hedge funds and other hot money operations to get into the Mumbai stock exchange. When the SEBI announced yesterday that these ODIs (known as "Participatory Notes" or "P-notes") would be curbed beginning Oct. 25, the Bombay exchange plunged by 9.2%, wiping off $100 billion worth from Indian stocks. The exchange was closed down in the middle of the day, until Finance Minister Palaniappan Chidambaram put out a statement that "We have not banned P-notes. We have simply placed a cap on the proportion of money coming through these [notes]." Then, the market rose again.

Foreign investors, of which at least half are hedge funds, use the P-notes to invest, but avoid registration with the SEBI. The London Times today quotes an Indian fund manager saying that "the kind of money flows we've seen in the last couple of months has got regulators and the Government worried." Foreign investors have put $17 billion into Indian stocks so far this year, $4.6 billion just this last month, compared with a full-year record of $10.7 billion in 2005. The SEBI said foreign institutional investors should stop issuing or renewing participatory notes on underlying derivatives and extinguish existing participatory notes within 18 months. Today, New Delhi's The Hindu's lead editorial endorsed the restrictions on P-notes, saying that the Reserve Bank of India has "for long argued that the anonymity that this route provides goes against transparency and makes the task of monitoring capital inflows onerous."

Asians Pulling Out of the Dollar at Record Rates

Oct. 18 (EIRNS)—Chinese and Japanese sales of U.S. treasuries grew in August "at a pace unprecedented in the last five years, as the U.S. subprime mortgage crisis triggered the biggest sell-off of dollar assets since Russia's 1998 default," as reported in the China Daily. China cut its holdings of U.S. treasuries by 2.2% or $9 billion, to $400 billion, while Japan dumped 4% of its total holdings to $586 billion, the most since March 2000. Taiwan's ownership of U.S. government bonds fell sharply by 8.9% to $52 billion.

According to the latest statistics, $400 billion of U.S. treasuries only account for 28% of China's $1.43 trillion foreign reserves now, a sharp contrast to years ago, when most of China's foreign reserves found their way into U.S. treasuries. While the driving force is clearly the recognition that the crash is on, analysts covered by China Daily attributed the spark for the rapid exit from the dollar to the low exchange rate caused by the subprime mortgage fallout, and the Federal Reserve's decision to lower the interest rate by 50 basis points. The dollar has devalued by some 7% this year against the euro. Suspicions that the Federal Reserve would cut the interest rate again further contributed to pressure for China and other countries to reduce holdings of U.S. assets.

China's State Administration of Foreign Exchange said at a conference that foreign exchange management departments should move against hot money flows, by "regulating foreign capital inflow and foreign exchange management, preventing illegal capital inflow and short-term overseas speculation, to ensure the national financial security."

Plan Aims To Turn Taliban Leaders

Oct. 15 (EIRNS)—A plan to orchestrate the defection of Afghan Taliban leaders, reportedly spearheaded by Afghan President Hamid Karzai, is being backed by the Brits, according to the Oct. 15 Guardian. Members of the Taliban leadership council have used go-betweens to negotiate their defection, said the report. "There is a remarkable amount of contacts between senior and serious [Afghan] government figures with people who are in the Taliban movement," a senior British official was quoted as saying. "It is conceivable you could have chunks of the Taliban breaking off and giving up violence. Some have already done so," he said. Tribal elders, former Taliban ministers, and UN officials have opened multiple back channels between the two sides, the report said.

Many of the contacts were initiated by Taliban commanders themselves, dispirited by losses at the hands of NATO bombing campaign and worried about the loss of the sanctuary in neighboring Pakistan, a senior diplomatic source in Kabul said. "Effectively what some of the commanders are offering is to capitulate," he said. "They are worried for their own skins and the skins of their families."

The official refused to give any numbers, only saying they were "numerous."