British-Saudi Interplay Against U.S. in Pakistan

May 13 (EIRNS)—With the withdrawal from Pakistan's new coalition government of all nine cabinet ministers belonging to Nawaz Sharif's PML(N) party, a source of permanent instability has been introduced in the country. It is almost a certainty, that long before the National Assembly has completed its full five-year term, Islamabad will be without a government. It is not altogether unlikely that that that situation could develop even before the end of May.

Behind this instability lie two major players: Britain and Saudi Arabia. The targets were President Pervez Musharraf, nominally, and the United States, principally.

To begin with, the PML(N) leader and former two-term Prime Minister Sharif, had long been under the Saudi umbrella. He was exiled in Saudi Arabia for almost eight years (1999-2007) by Musharraf, and is close to the Saudi royal household.

Since the invasion of Afghanistan by the United States in 2001, approximately 5,000 Pakistanis have remained unaccounted for. The judges of the Supreme Court that Musharraf sacked had begun to take up the missing person cases. It became evident that Pakistani intelligence was involved in holding many of them, and also, that some of them were handed over to the U.S. intelligence services, and were taken elsewhere (a practice known as "rendering"). Neither Musharraf nor the United States wanted this investigation to go any further.

Sharif is also "close" to the Pakistani Taliban, and strongly opposes any military action inside Pakistan's tribal area, where many militants have taken shelter. The British allow this, because they have their assets in the tribal areas. Saudi support for undermining the United States could also be linked to Saudi support to fundamentalist-militants who are active in Central Asia, but based in the tribal area.

Russia-China-India Call for Security Belt Around Afghanistan

May 15 (EIRNS)—At the annual meeting of the foreign ministers of Russia, China, and India, held at Yekaterinburg, Russia, the participants issued a joint statement, which includes setting up a security belt to prevent Afghan opium and heroin from leaving Afghanistan. Around 90% of the global supply of heroin emanates from Afghanistan, with output increasing since the fall of the Taliban regime in late 2001. The Ural Region city of Yekaterinburg, where the meeting took place, has been heavily affected by Afghan opium and heroin over the years.

While the statement shows the right intent, it has not been elucidated any further. The proceeds from the opium not only sustains the Afghan militants (widely identified in the West as the Taliban); it also provides succor to the British-run terrorists who are engaged in activities against Russia, China, India, and Iran; it provides money to the bankrupt City of London, Wall Street, and other financial centers; and it reduces London's expenses in maintaining 7,000 troops in Afghanistan. Unless the foreign troops are taken out of Afghanistan, drug production will only move northward.

As a result of the "benefits" derived from the cultivation of poppy and hashish in a land which is "invisible" to the rest of the world, and dominated by "fierce Islamic outlaws," despite all the debates and promises, the 2008 opium crop in Afghanistan may exceed the record 8,200 tons (that is the official figure, although some say it was much more) harvested in 2007.

Missile Strike Disrupts Pakistan's Peace Talks with Militants

May 16 (EIRNS)—Pakistani authorities today found the body of a beheaded paramilitary soldier in Pakistan's tribal area, which is virtually under control of British-backed terrorists. A note left on the corpse said the soldier had been killed in revenge for the May 14 missile strike in the Bajaur tribal district, near the Afghan border.

The missile struck Damadola village, killing at least 18 civilians. The United States has refused to comment on missile attack, but the locals and some Pakistani officials have blamed the United States. There is no question that the missile strike has affected the ongoing peace talks between pro-Taliban militants and Pakistani government officials.

While the source of the missile strike has remained unknown, U.S. Assistant Secretary of State Richard Boucher has expressed concern over Islamabad's efforts to sign a peace deal with tribal militants. "You can't put restrictions on the military and let militants go free," said Boucher, apparently referring to a similar agreement in 2006 which led to Pakistan ending military operations against the militants.

Inflation, Hot Money Hitting China, as Trade Slows

May 13 (EIRNS)—Inflation, especially of food prices, and speculative "hot money" inflows, are rising fast in China. Inflation was up 8.5% year-on-year in April, the highest level in 11 years, the National Bureau of Statistics reported yesterday, with food costs up 22.1%. Oil imports shot up 81% for the first four months of this year, to $40.3 billion, even while the volume of oil imported was up only 9.8% year-on-year. Factory gate (finished product prices) inflation was up 8.1% year-on-year last month, the highest in four years. NBS chief economist Yao Jingyuan said on May 11 that it will be hard for China to keep inflation, which is 4.8% this year, under the government's goal.

The People's Bank of China is continuing various monetary measures, but to little effect. These include increasing bank reserve requirements and short-term bond purchases, but interest rates pose a big problem: As the U.S. has been slashing rates to just 2%, China has raised them to over 4%, and the growing gap could be a target for speculators, Chinese economists are warning. The rising value of the RMB—up 4% to the dollar this year alone—is another target for speculators.

Economists are putting out estimates of how much "hot" money is getting into China, despite the exchange and currency controls. China's forex reserves rose by $153.9 billion in the first quarter to $1.68 trillion, while the trade surplus and the actually used foreign investments in the same period was only $70 billion—less than half the inflow. At least some of the $84 billion difference, Chinese economists attributed to the influx of hot money.

China's external trade, on which the economy remains heavily dependent, is slowing down. The surplus with the U.S. rose only 4% to $13 billion, due in part to the falling dollar, while that with the EU was up much more, 34.8% to $12 billion, with the stronger euro.

China: 'Controlling Power of Oil Prices' Is in Spot Market

May 13 (EIRNS)—China's People's Daily, noting that "both oil producers and consumers ... benefit from a stable oil prices system ... and the long-term and sound development of the oil industry," indicated that "at present the control over oil prices seems beyond both of them." That is because, "since the 1980s, the controlling power of oil prices has been transferred from OPEC to the New York Mercantile Exchange. Statistics show that ever since 2004, risk capital involved in transactions in crude oil futures market has exceeded the half of the total turnover. Many analysts believe the weak dollar has driven oil prices to levels that defy supply and demand economics."