Monday, February 6, 2012

Chinese Signals to India

Battle of Se-La and Bomdi-La by Maj Gen PJS Sandhu (Retd)

Esteemed Friends,
Maj Gen PJS Sandhu (Retd) has written a very well researched and thought provoking article "Battle of Se-La and Bomdi-La" in the latest (Oct-Dec) Issue of the prestigious USI Journal.

The article throws fresh light on 1962 War with China based on Chinese documents and reports recently translated in to English. The Chinese planning and its execution to speedily overwhelm the Indian Army defences at Se-La and Bombdi-La are very well explained indeed..

In addition, the Author has carried out a very interesting comparison of Chinese attack on Se-La and Bomdi-La with the battle of CHOSIN RESERVOIR (located in North Korea) during the Korean War. In that battle in Nov 1950, the Chinese Forces attacked America led UN Forces (1st US Marine Division and some other nationality troops) and the dispositions of the UN Forces in CHOSIN RESORVOIR and those of the Indian Army in Se-La and Bomdi-La area in 1962 are comparable.

What is also very interesting is the last part of the article in which Gen Sandhu has analysed the Politico-Diplomatic Interactions prior to the 1962 War, between India and China. He has brought out how the Chinese sent signals to Indian leadership which were not interpreted correctly and taken note of.

Further, he has suggested that in the present context of our not so calm relationship with China, we should analyze the Chinese signals pragmatically in the light of what transpired between the two governments in 1962 prior to the active hostilities breaking out. As an example, Indian naval ships are sailing in to the South China Sea at times and there have been some reactions by the Chinese as also their out bursts regarding Indian companies carrying out oil exploration activities in the area need to be analysed.

You may like to lay your hands on the latest issue of the USI Journal and read the article in full. The article will be put on line only in April once the next Issue is out.
Best wishes.
Harbhajan Singh

Why India chose Rafale

The Telegraph, Clacutta Monday , February 6 , 2012 by K.P. NAYAR
Washington, Feb. 5: When Pratibha Patil travelled to Europe last October, she and others in her entourage had a pleasant surprise in the sky. At one point along the air space that the President’s flight was using, half a squadron of Eurofighters appeared on both sides of her Air India plane.

In the graceful style of these sleek war machines, they escorted the presidential aircraft to its safe landing at Patil’s next destination. Even so, those manning the Eurofighters could not resist showing off.

When the Eurofighters displayed the prowess of this advanced new-generation, multi-role combat aircraft to the President, members of Parliament and senior officials accompanying her, New Delhi’s quest for 126 planes of its kind could not have been far from the minds of their pilots.

The competition for the biggest military aviation deal in history, which began 11 years ago when the defence ministry initiated its “request for information” or RFI, had just entered its final and decisive phase.

But the impromptu decision to send the Eurofighters across European skies to impress the President was typical of what cost some rivals of Dassault Aviation — last week’s winners — the lucrative Indian Air Force contract.

It was somewhat reminiscent of Henry Kissinger’s disastrous invitation to defence minister Jagjivan Ram to visit Washington in 1971 as the sub-continent was heading into war, as recounted by Rukmini Menon, who was then joint secretary for the US in South Block.

“Why should I visit Washington?” Ram asked a non-plussed Kissinger and proceeded to tell him how American arms supplies had emboldened Pakistan to ruthlessly suppress East Pakistanis.

Partly, it was a similar approach that resulted in Boeing’s F-18E and Lockheed Martin’s F-16E being turfed out of the competition for the IAF deal earlier in the race. Not solely with the multi-role combat aircraft deal in mind, the Obama administration had made too much noise bereft of substance about the first state visit of his administration and Barack Obama’s first state dinner in honour of Prime Minister Manmohan Singh.

There was a time when India’s rulers could solely be influenced by gimmicks. But theatrics and atmospherics can no longer substitute hard policy options. This is one lesson New Delhi has hopefully absorbed firsthand from intense, albeit under the radar interaction with Israelis — especially in defence matters — in the last 20 years.

Then there was A.K. Antony, whom the losers in the bid for the IAF deal had not reckoned with. Antony, by nature, is averse to being the public face of decision-making. This has been the case throughout his tenure as defence minister, especially during scandals such as the Adarsh housing scam that rocked the army. Each time it was clear that the defence minister had made up his mind, but the decisions were put out as if they were taken elsewhere, along the proper channel.

Such an approach came through clearly in his most detailed statement on January 31 on the controversy about the army chief’s age. Ending months of virtual silence in the matter, Antony blamed the army for sitting on the problem for 36 years and then dealing with it in its own wisdom. So much so the army chief Gen. V.K. Singh had to agree with the minister.

Antony has maintained in public throughout that the multi-role combat aircraft acquisition process is a technical matter that would be decided by professionals in uniform. But such a public position overlooks the reality that Antony’s core support team in his ministry is much more ideological than in any other wing of the present government. Like civil servants, men in uniform are not immune from ministerial winds blowing in a particular direction.

Ideological considerations have prevented Antony from visiting Israel and from signing at least three defence agreements with the Americans which his core team views as compromising India’s strategic autonomy.

If the Russian plane on offer, MiG-35, had not clearly failed the tests, it was conceivable that it would very much have been in the reckoning. With the Russians out of the way, it did weigh with the political leadership in the defence ministry that France favours a multi-polar world and that India is a beneficiary of such an approach.

France won the bid for the entire order because it supplemented the requirements of the global tender with sweeteners that in the real world of strategic engagement, only three countries can offer India: Russia and Israel, in addition to France itself.

Friday, February 3, 2012

The Financial War Against Iran

The Financial War Against Iran
By James Rickards January 30, 2012

In March, 2009, I joined a group of sixty officials from the armed forces, intelligence community, U.S. Treasury, think tanks and Wall Street at a top-secret weapons laboratory near Washington, D.C., to conduct the first ever war game in which the weapons were not missiles and bombs but stocks, bonds, and currencies.

The Pentagon wanted to understand how adversaries could inflict harm on the United States and expand their own power using financial weapons. My mission was to play for the China team, although I had recruited allies on the Russian and Swiss teams also. Over two days of moves and countermoves the Chinese and Russians played a gambit in which a new gold-backed currency created by them would replace the dollar as the medium of exchange for Russian natural resources and Chinese manufactured goods. Many of the established academic economists in the war room were appalled at the audacity of the move to gold and some ridiculed it openly. That was then.

As a global-macro analyst, I am frequently asked if war with Iran will come and, if so, when. My answer is the war has already begun. It's not a shooting war—yet. What the United States and Israel are now waging with Iran is what experts call unrestricted warfare. This is warfare that consists of sabotage, assassination, special operations, psychological operations, attacks on critical infrastructure, cyber warfare, and—the most recent addition to the arsenal—financial warfare.

The United States has applied financial and economic sanctions to Iran for over 30 years—sanctions are nothing new. But a few weeks ago President Obama moved to choke off Iran's oxygen supply by imposing sanctions on the central bank of Iran. International banks were told if they did business with Iran's central bank, they would be barred from doing business in the global dollar payments system controlled by the United States. Of course, the banks complied.

The result was an immediate isolation of Iran from the dollar system and an acute shortage of dollars in Iran. The Iranian currency, the rial, crashed in value 40 percent against the dollar in a few days. Since many goods in Iran are imported, local prices doubled as merchants demanded more rials in order to acquire whatever dollars might be available on the black market to buy imported goods. Iranian banks responded by raising local interest rates to over 20 percent in order to keep rials from flooding out of the Iranian banking system.

In a matter of days, the United States had isolated Iran from the world banking system, destroyed the exchange value of Iran's currency, injected hyperinflation into the local economy and caused a stratospheric increase in interest rates. That this happened just weeks ahead of Iranian elections at a time when the United States is promoting regime change in Iran is no coincidence.

What came next was surprising to many but not to those who gathered at the financial war game in 2009. India is one of the largest buyers of Iranian oil, which it needs to fuel its own economic growth. Reports from Israel indicated that India and Iran have worked out an "oil-for-gold" swap in which India would pay for Iranian oil exports with gold. At today's prices, the swap would equate to 17 barrels of oil per ounce of gold. Other reports suggested that China would also continue its Iranian oil imports but would work on alternative non-dollar payment mechanisms possibly including gold but also making use of Chinese, Russian, Central Asian and other non-Western banking systems, currencies and commodities.

In these and other developments we may be witnessing the end of the dollar standard that has prevailed since the collapse of the gold standard in 1971. Any monetary standard—be it gold or dollars—only works so long as the participants trust that the leading parties will maintain the value of the unit on which the standard is based. A strong dollar can be the basis for a global dollar standard. When the U.S. Federal Reserve debases the dollar—as it has over the past three years with $2 trillion created from thin air—it comes as no surprise that global and regional powers such as Russia, China, India, and Iran take steps, however fitfully, to exit the dollar system once and for all.

What began as an exercise in financial warfare against Iran using dollars as a weapon may end in a dollar defeat because the Fed has abused the trust placed in it by dollar holders everywhere. It is ironic that the U.S. national security community has come to appreciate the role of finance as warfare at exactly the time the Fed has allowed the dollar weapon to degrade due to debasement and derogation of trust. A strong national security posture cannot be pursued with a weak currency. Let's hope someone reminds the Fed before it's too late.

The Financial War Against Iran