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A third possibility is that Milei’s first 100 days point neither to a social explosion nor to a triumph of free market economics, but to a long, extended deadlock, when nothing much changes. Put bluntly the hard opposition led by the Peronists will refuse to back reforms while Milei’s combative stance will alienate the pro-dialogue opposition, creating a prolonged stalemate. The debate on the DNU and the omnibus law will simply drag on for much, if not all, of this year. Although it will still be possible to score some macroeconomic wins – such as achieving lower inflation and better fiscal management – Milei’s government could end up hamstrung by congressional opposition. Most of the government’s priorities require legislation of some kind. Without minimal congressional agreement and understanding Milei may find roadblocks at every turn.

A potential inauspicious example of how things might go in this third scenario for Argentina is given by the far-right presidency of Jair Bolsonaro in Brazil in 2019-2023. There were some achievements during that presidency, including pension reform and a limited fiscal rebalancing. But looking back on it, much time and effort was invested in fighting cultural wars (over gun ownership, education, religion, and abortion, among other issues). More damaging, the Bolsonaro government clashed frequently with the judiciary and the legislature, undermining democracy, and the rule of law, up to the point of trying to overturn the results of the 2022 elections.

It is not difficult to imagine that the Milei administration could become locked into a dispute with the congressional opposition which would turn into a wider political crisis and undermine economic reforms. Like during the Bolsonaro government, this would have toxic effects and delay much needed structural economic reforms.

Chile is widely seen as the regional leader in AI regulation. In 2024 the government submitted a comprehensive AI bill to congress. Its stated aim is to promote the development and implementation of AI systems while respecting democratic principles, the rule of law, and human rights. It is seen as applying to developers in Chile but also to foreign developers, when the output data becomes available in Chile.

Using the risk-based approach, the bill defines four categories. “Unacceptable” risk applies to AI which is incompatible with human rights and might include social scoring or subliminal manipulation. “High risk” includes content that affects health and safety but could be necessary in certain situations such as experimental data training. “Limited risk” includes content that is free from potential manipulation or error and is permitted as long as it meets transparency requirements. The fourth category is “no risk”, which is unregulated. Chile’s bill is also aligned with Unesco and OECD recommended guidelines.

Academic experts, as well as politicians and policymakers, have been involved in a long and inconclusive debate on how effective sanctions really are in achieving their stated aims. The debate is unresolved, partly because there are so many different types of sanctions being applied in pursuit of different objectives and amid different political and economic contexts. In a 2020 paper the US Government Accountability Office (GAO) cited claims by government agencies that “it is nearly impossible to assess the overall effectiveness of sanctions in lowering the amount of narcotics entering the United States” partly because of the difficulty of isolating the impact of sanctions from other US and international counter-narcotics programmes or actions. Other studies found that sanctions are more effective when implemented though international organisations such as the UN or when the targeted country has a pre-existing dependency on, or relationship with, the United States (such as a trade deal or military cooperation programme). Other studies said sanctions impact has been higher when more comprehensive in scope or severity or imposed through an international organisation.

In an article published by the New York Times in October 2021, Christopher Sabatini, a research fellow at Chatham House in London, was sceptical, arguing that “sanctions can be an important diplomatic tool when applied in a calibrated fashion…but they are rarely accompanied by clear measures of their failure or success, and criteria for their possible lifting”. Like many analysts, Sabatini is particularly critical of the long-standing sanctions against Cuba that in his view “have failed to achieve anything”. As he puts it “almost 60 years later not only does Cuba remain one of the most repressive societies in the world, but in 2018 President Raúl Castro passed the torch to the next generation, with the appointment of Communist Party apparatchik Miguel Diaz-Canel.”

Sabatini also questioned the effectiveness of sanctions against Venezuela and Nicaragua, noting that in the latter case the Trump and Biden administrations had sanctioned over 100 individuals and officials, but this had not stopped the imprisonment of seven opposition candidates in Nicaragua’s 2021 presidential elections, or the continued incarceration of over 100 political prisoners. He also cites Daniel Drezner, a Tufts professor, who says the negative economic impact of financial sanctions “are likely to trigger repression, corruption, and backsliding on human development indicators”. Some suggest that sanctions help meet the demands of electorally significant local lobbies for a sense of action – such as members of the expatriate Cuban community in Florida. Dictatorships that have catastrophically mis-managed a country’s economy may also deflect blame and attribute the shortcoming to the actions of the sanctioning power.

A paper by Cristiane de Andrade of the University of São Paulo (USP) reviews the extensive existing literature on sanctions, including analysts who have sought to assess sanctions on the basis of probabilities. Hufbauer, Schott and Elliott et al found in 2007 that sanctions are a policy instrument of limited success, reaching stated goals in only about 34% of cases. In 2005 Nikolay Marinov found that leaders that were targeted by economic sanctions were 28% more likely to be removed from power during the following year. Others have argued that sanctions have unintended and negative consequences for human rights protections because distressed leaders tend to engage in more repression.

In a 2008 paper Reed Wood found that a severe violator of human rights is 25% more likely to increase the level of repression after the imposition of sanctions by the UN. De Andrade cites the thesis that sanctions-targeted leaders tighten their repressive apparatus in order to control protests against economic hardships imposed by sanctions; the same strategy helps them secure their position in power, when faced with growing threats to their political survival. Others have examined sanctions in the context of game theory, where the most effective sanction is deemed to be the one that changes behaviour purely by being threatened but is never in fact imposed.

By way of conclusion, it is worth making four main points. First, the global economy is moving into a new phase, much more intense in its use of rare earths and critical minerals. Increased demand for these materials is likely to be a question of decades, not years.

Second, the available (but still limited) geological data indicates that after China, Latin America has an above average endowment of these critical minerals making an exploration, production, and export boom likely, with the US, China, and Europe all competing to win a slice of the action

Third, this basic imbalance between demand and supply will drive prices and investment upwards. Billions of dollars will be channelled into the industry, benefiting countries like Brazil, Argentina, Chile, and Peru. The boom will not be unconditional however. The countries in the region will have to offer a degree of economic security and predictability, a favourable macroeconomic environment, an attractive tax regime, and suitable infrastructure. Without those elements the boom will be short-lived.

The fourth point is of great importance: these are very early days in a nascent industry. Uncertainty is large. The commercial viability of reserves has yet to be widely tested. Refining techniques are new and evolving. While Latin America wants to maximise domestic value added, many technological uncertainties

Chinese car companies are experimenting with different approaches to marketing and distribution. Liverpool (not the city in UK, but a department store chain in Mexico) recently announced that it was terminating its sales partnership with BYD. The partnership had lasted for two-and-a-half years, during which time Liverpool built six showrooms and three certified service centres. In 2024 a total of 4,384 vehicles were sold through Liverpool’s national network of 320 stores and dedicated showrooms. This was widely seen as a success, making the department store one of the Chinese company’s main sales channels.

Neither party sought to give detailed reasons for the break in the relationship. Some analysts noted that in a recent call with investors Liverpool finance director Daniel Gallegos warned of uncertainty over future tariff levels that Mexico might impose on Chinese automobile imports. 

INTELLIGENCE RESEARCH HIGHLIGHTS

TO: All Strategic Intelligence Forum members

DATE: 22 December 2006

The Strategic Intelligence Forum is part of the Intelligence Research group, and as a member of the Strategic Intelligence Forum I am very pleased to send you from time to time a selection of reports published recently by Intelligence Research Ltd that I consider to be of particular STRATEGIC significance.  Please find below my latest selection of Intelligence Research articles:

1. WHAT DO THIS YEAR'S ELECTIONS IN LATIN AMERICA SHOW? - Latin American Economy & Business, December 2006

SUMMARY: After 13 elections in Latin America in the last 12 months there are few general conclusions that apply for the whole region. It is not true to say that the region is swinging left; the powerful leftwing challenger in Mexico, Andrés Manuel López Obrador, failed; the radical in Peru, Ollanta Humala, failed to appeal to the urban working class in Lima; and the leftwing challenge in Colombia went nowhere. What this year's elections demonstrated were five points. Each point supports the contention that Latin America is becoming more politically stable and more predictable...

Link to full article: http://www.latinnews.com/leb/LEB12427.asp?instance=1

2. INDIA'S ENERGY NEEDS: IS NUCLEAR ENOUGH? - AsiaInt Economic Intelligence Review, December 2006

SUMMARY: India is now a de facto member of a very exclusive group. Due to a unilateral decision by the US government to ignore the provisions of the Non-Proliferation Treaty (NPT), which prevents nuclear trade with non-signatories, India will soon be counted alongside the US, UK, China, Russia, and France as an established nuclear-power. The decision comes at a providential moment for its energy sector...

Link to full article: http://www.asiaint.com/arl/arl12439.asp

NOTE: Links to these - and other - reports can also be found in the Strategic Intelligence Monitoring Centre, which you may access on a 24/7 basis by going to www.stratintforum.com, logging in as a member, and selecting the Strategic Intelligence Monitoring Centre option.

With best regards

JKC de Courcy
Chairman
Strategic Intelligence Forum

P.S. You may sign up for a free evaluation of any Intelligence Research Ltd services by visiting the following websites, or you may contact our Business Development Director: [email protected].

www.intelligenceresearch.com
www.stratintforum.com
www.asiaint.com
www.latinnews.com

On 28 April, the head of the International Atomic Energy Agency (IAEA), Mohamed ElBaradei, duly reported to the UN Security Council and the IAEA’s Board of Governors on Iran’s nuclear programme. He said that the IAEA has found no proof of a military application, but that it cannot confirm that Iran’s goals are peaceful. Following on from that, the United States, Britain, and France are engaged in an attempt to agree a legally binding UN Security Council resolution under Chapter 7 that would oblige Iran to give up its uranium enrichment activities and that could lead on to sanctions and even military action. But Iran appears to be confident that it can avoid draconian punishment. Why this should be so is just about the most important point in world affairs today.

One possibility, of course, is that Iran simply does not understand the trouble it is in, but our diplomatic sources say this can be dismissed. Iran’s revolutionary regime is a relatively sophisticated player on the world stage, and one of the most notable attributes of revolutionary Iran has been the pragmatism of its foreign policy and its avoidance of the colossal misjudgements that characterized, for instance, Saddam Hussein’s regime. It can be assumed, therefore, that Iran’s confidence is based upon careful calculation.

One obvious source of comfort is that Russia and China are still opposed to a Chapter 7 resolution. But Iran knows that Chinese and Russian opposition is not sufficient in itself. For a start, on 2 May the US’s ambassador to the UN, John Bolton, raised the prospect that they could be persuaded to abstain rather than veto a resolution. He said: "It is not impossible that we would proceed without them." Beyond that, the US has also said that it could impose sanctions (and, presumably, take military action) with the assistance of like-minded allies outside of the UN.

So Iran’s obduracy must be based on the belief that it can impose more pain on its opponents than they can on it. We examined this point in depth in our 2 March issue, in particular drawing attention to an International Crisis Group report that doubted the likely efficacy of a military strike against Iran’s nuclear facilities. Israel has since tried to reverse the impression that the military option is not a realistic one, but it has not been entirely convincing.

Iran, on the other hand, has been playing the opposite game, emphasizing the retaliatory damage it could cause. It hardly has to mention the destabilizing role it could play in Iraq, and with recent military exercises it has emphasized the obvious disruption it could cause to the flow of oil through the Persian Gulf.

This week it has reminded everyone that Israel would be an obvious target for retaliatory action. On 2 May, Rear Admiral Mohammad-Ebrahim, a senior Revolutionary Guards commander, said: "We have announced that whenever America does something evil, the first place that we target will be Israel."

Playing up the threat to Israel could be seen as counter-productive, partly because it will stiffen Israel’s resolve to take pre-emptive action and partly because it will rally waverers such as Germany to the more-hawkish party. However, continuously emphasizing its credentials as the most stalwart backer of the Palestinian cause is important to Iran as a counter to the Sunni Arab political establishment’s attempts portray it as an enemy of mainstream Islam. As we reported in our 13 April issue, the recent outburst by Egypt’s President Hosni Mubarak against Shia Arabs for their tendency to support Iran indicated a hardening of attitudes by the Sunni Arab establishment against Iran’s nuclear ambitions. However, we suggested that Iran was not too perturbed by this, first because of the support it received in the Arab world not just from Shias but from radical Sunnis, and secondly because of its ability to exploit the Palestine cause to its benefit.

Iran’s confidence of street-level support, despite the opposition of the Sunni establishment, would seem to be well founded. A recent opinion poll in Lebanon, conducted among 700 Lebanese and Palestinian Muslims showed 90.7% of those surveyed supporting Iran’s right to nuclear technology. Only 11.8% said Iran’s possession of nuclear technology should be of concern to the Arab world.

On the specific issue of Iranian nuclear weapons, 78.1% said that Iran’s acquiring of nuclear weapons would have a positive effect on the Palestinian struggle with Israel. 79.3% said that Iran should acquire nuclear weapons in order to balance Israel. And 76.5% said that they would support Iran in the case of war with America. 76.9% said that they thought Hezbollah would take up arms on behalf of Iran in the event of a US or Israeli attack on Iran.

Another possible reason for Iranian confidence has been raised in the past 10 days by Russian diplomats. Speaking to Russian media outlets, anonymous Russian diplomatic sources in Tehran were quoted on 24 April as saying that it is "highly possible" that Iran already possesses a basic nuclear weapon (on the grounds that it has had no less access to the relevant technologies than North Korea) - and, as an Iranian political source added, even if Iran lacks a conventional means of delivery Tehran "can always find a dozen suicide bombers who would take them to the right place and blow them up". Not coincidentally, Iran has announced that it is recruiting "martyrdom-seekers" worldwide in order to help in its defence.

We have no intelligence ourselves on this point, but it is not a surprise to see the possibility being aired in public. It is absolutely logical for Iran to increase the level of threat to its enemies as they increase their threat to it. But this is still relatively early days, and the process is guaranteed to get more unnerving still as the crisis unfolds. Joe de Courcy, Editor

In December 2023 Argentina transitioned from a centre-left Peronist (Partido Justicialista – PJ) government to a far right, pro-market administration under Javier Millei. Some AI bills and draft regulations initiated before that date may not progress further for political reasons. But Millei’s vision of a hands off, lightly regulated sector may also face obstacles, since no party currently controls an outright majority in congress.

In 2023 the government issued a policy document titled “Recommendations for a reliable Artificial Intelligence” which incorporated ethical principles, AI transparency, and accountability. There are also draft laws awaiting consideration, proposing an AI System based on diversity, inclusion, peace, and justice, as well as one proposing the creation of a Federal Council of Artificial Intelligence. Bills have meanwhile been submitted for consideration by the senate, using European-style risk assessments. One version identifies limited, minimal, high, and unacceptable risk levels. Some also call for a national registry of AI systems with associated impact assessments.

In June 2024 Demian Reidelan, a key adviser to Milei, said the president was pitching to turn Argentina into the world’s “fourth AI hub,” promising to reduce regulation and attract top US technology companies to invest. The comments came after the Argentine president had met with chief executives from OpenAI, Google, Apple, and Meta. Reidel told the Financial Times that investing in Argentina would provide such companies with a hedge against rising regulatory risks in the US and Europe. He said: “Argentina has a president who is actually putting forth the ideas of freedom, low regulation, and free enterprise.”

The discussion of sanctions in this paper does not lend itself to sweeping conclusions. A key emerging point is that Latin America and the Caribbean is experiencing an upturn in the number and complexity of sanctions imposed, and this is likely to continue in coming years, requiring a sharp increase in corporate risk management and due diligence. Comprehensive US sanctions against Cuba and Venezuela, and more targeted action against Nicaragua, have caused significant economic pain and difficulty for those country’s governments and populations, but they have failed either to expand democracy or dislodge entrenched dictatorial regimes. Arguably sanctions can still play a role but only when coupled with other factors that are driving change. Meanwhile many of the more targeted sanctions, particularly those against narcotics trafficking, human rights violations, and corruption, can make a smaller but valuable contribution.  

The promise and peril surrounding parts of the Latin American automobile industry is brought into sharp focus by the story of Tesla’s gigafactory in Santa Catarina, a municipality west of Monterrey in the Mexican state of Nuevo León. In March 2023 Elon Musk, the owner of Tesla and the world’s wealthiest individual, announced that his company would build a giant factory there, to produce Tesla EVs for export back to the United States.

It was a clearly ambitious proposal. Musk said its output would be in addition to that of the company’s five existing gigafactories, of which three are in the United States, one in Shanghai, China, and one in Germany. Mexican officials said the plant would take 12-15 months to build and when completed would employ 6,000 workers and represent between US$5bn and US$10bn worth of investment. Mexican deputy foreign affairs minister Martha Delgado said the facility would be “the biggest electric vehicle plant in the world”. She added that it would produce around 1m vehicles a year for domestic and international markets. It would cut average manufacturing costs by 50%. Company officials were also said to be considering building a battery plant in central Mexico.

Nuevo León governor Samuel García was ecstatic over the news, posting on social media that “the richest man on earth trusted Nuevo León for his new gigafactory and his next generation vehicle. The future is bright.” Then-President Andrés Manuel López Obrador (2018-2024), a leftist who had expressed worries over the gigafactory’s impact on scarce water resources, nevertheless signalled his interest in the project. He said that in talks with Musk “I clarified that lithium has already been nationalised but that doesn’t mean we can’t reach an agreement. Lithium belongs to Mexicans but if you buy the raw material, put it in battery factories in Sonora, give work to sonorenses, to Mexicans, an agreement can be reached.” Analysts highlighted other plus factors which include competitive Mexican labour costs, well established supply chains, and a larger home market.

And yet, two years later, although the ground has been cleared and basic municipal infrastructure has been put in place, nothing has happened. A collection of factors seems to be responsible for pausing the project. Back in 2022 Tesla’s problem was that it couldn’t build cars fast enough to keep up with demand. But by 2024/2025 international EV production growth had moderated, and Chinese companies had aggressively captured market share. Oversupply was the new problem. Tesla responded by cutting its prices, but this reduced profitability. In October of 2024 Musk said, “I think we just want to get a sense for what the global economy is like before we go full tilt on the Mexican factory.”

Another critically important factor was the risk that Donald Trump, then a presidential candidate, might be elected and deliver on his campaign promises, of ending or reducing the tariff-free status enjoyed by Mexican-based companies exporting automobiles and auto parts to the United States, under the terms of USMCA (the US, Mexico, and Canada free trade agreement). With Trump talking of possible 100% tariff rates on imports from Mexico the gigafactory could end up being a loss-making disaster. Musk said he would postpone any decision until after the US elections. Tesla strategy also moved away from earlier plans to build a new generation of economy EVs, with a new focus on developing its proposed autonomous Robotaxi service.

In the event, Trump did win the elections and Musk decided to work closely with him, accepting the job of heading the newly created and deeply controversial Department of Government Efficiency (DOGE). Before he stepped down, Musk was effectively a senior member of the US government for the first five months of Trump’s administration. Yet this political involvement was arguably deeply damaging to his businesses. Tesla’s brand has been built appealing to affluent and liberal-leaning consumers, so Musk’s association with a blue collar, far-right, and climate sceptic president with a blue collar base created a clash of brand values. On the environment Trump promised to “drill baby drill”. Tesla has been damaged. This year its share price has plummeted. It also became evident that the two men had sharply divergent views on government spending, international trade, and tariff levels. They parted acrimoniously.

Observers of the empty site in Nuevo León might draw various conclusions. For the existing and established automobile manufacturers in Mexico, their role in local supply chains, which represent over 3% of GDP, is likely to continue but will be threatened by uncertainty over tariff and tax levels, and by moves by Trump to renegotiate USMCA to boost employment in the US. For Chinese and other new entrants it is the prospect is that they will remain shut out of the US market by prohibitively high tariff levels. The US is also likely to apply pressure on Mexico to limit the Chinese presence by closing USMCA loopholes and by increasing its tariffs. The current Mexican government will find itself trying to follow a politically difficult middle way persuading US, European, Korean, and Japanese companies to stay while equally trying to attract the new Chinese players to invest and join the sector.

SPECIAL BULLETIN

TO: All Strategic Intelligence Forum members

FROM: Alex Standish, Editor, Strategic Intelligence Review

DATE: 22 December 2006

SUBJECT: Turkmenistan after Niyazov: perils of instability

The death yesterday of Turkmenistan ’s mercurial dictator President Saparmurat Niyazov (the self-proclaimed ‘Turkmenbashi’ or father of Turkmens’) brings to an end the personal rule of a man who had created one of the world’s most bizarre personality cults. A notorious abuser of human rights who had ruled the former Soviet republic like a private fiefdom, Niyazov has failed to groom a chosen successor, raising the prospect of an impending power struggle in the energy-rich Central Asian state.

There are a number of key concerns:

1. Turkmenistan possesses the world’s fourth largest reserves of natural gas, as well as significant oil resources. It is also the tenth largest producer of cotton.

2. Russia has major strategic interests in the country, with state-controlled energy giant Gazprom handling the largest share – over 60% - of Turkmenistan ’s gas exports.

3. Moscow has every reason to interfere in the selection of Niyazov’s successor in order to install a more pliable leader than the Turkmenbashi

4. Instability, particularly a civil conflict, could have a serious impact on energy production and exports, with the potential to hit supplies to European consumers.

SERIOUS RISKS

Turkmenistan is entering uncharted political territory. Unlike most other former Soviet republics, it has never experienced any form of government other than authoritarian one-party rule – formerly by the Soviet Communist Party and latterly by Niyazov, President for Life, who ruled the country since 1985. Having been a loyal Soviet puppet, Niyazov took advantage of the disintegration of the Soviet Union in 1991 to become president and then impose his own increasingly eccentric form of Stalinism. Some critics have described the country as being akin to “ North Korea in Central Asia ”.

One key concern is that despite the rigid structure of the one party state established by the ‘Turkmenbashi’ there is no obvious successor. Although Niyazov acknowledged publicly that he was suffering from heart disease earlier this year, he left no heir and although the acting leader will be the deputy premier Kurbanguly Berdymukhamedov, few people have ever heard of him and it is thought unlikely that he will take the place of the late president.

MOSCOW ’S ROLE

Although Niyazov handed control of a substantial sector of his nation’s energy resources to Gazprom, he was at least capable of independent action on occasion. In September he even threatened to turn off gas supplies to the Russian energy giant following a dispute over the amount Moscow was willing to pay him. This act of defiance led to a rise in payments from $65 per 1,000 cubic metres to $100.

As part of the Kremlin’s increasingly centralist strategy towards energy supplies throughout the region, Moscow will be keen to ensure that there is no popular revolution against Niyazov’s one party state, particularly fearing that a more pro-Western leadership could threaten Gazprom’s economic influence in Turkmenistan . For this reason, there are concerns that Moscow will actively interfere in the process of selecting a replacement leader.

There is little, if any internal opposition to challenge Niyazov’s legacy. Political opponents and critics were ruthlessly suppressed and most of Turkmenistan ’s pro-democracy campaigners are either in exile, in prison or dead. There is no independent media or rival political parties. However, with the prospect of an end in sight to the Turkmenbashi’s bizarre personality cult may lead to a rise in popular discontent, offering the possibility that his Stalinist regime could crumble.

Although Turkmenistan is a predominantly Muslim nation, the regime has kept a tight control over religious groups. An estimated 70% of the population are Sunni Muslims, with Shias accounting for a further 20%. Despite his own Communist heritage, after independence Niyazov required that Islam was taught in schools. However, all religious leaders and teachers have been carefully vetted to ensure loyalty to the regime which has been keen to prevent the development of any kind of Islamic political movements.

Several Islamic leaders have been dismissed from their posts, including the former Chief Mufti Nasrullah ibn Ibadullah, an ethnic Uzbek, who was sacked in 2003 before being imprisoned for 22 years in March 2004 on charges of allegedly plotting the assassination of the Turkmenbashi. Niyazov also promoted discrimination against Shia Muslims. Although there has been little evidence to date, a future resurgence of Islam – including the risk of rising fundamentalism – cannot be ruled out.

Despite his appalling record on human rights and his openly anti-democratic stance, US criticism of Niyazov was muted in recent years owing to his regime’s support for the ‘international war on terror’ and the granting of overflight rights and refuelling facilities for US military aircraft. However, speculation that permission might be given to establish US military bases was denied by the regime.

CONCLUSION

At present, there is little reliable information about who will succeed Niyazov, and there is the potential for future instability, particularly if whoever replaces the man once known as the ‘iron ruler’ of Turkmenistan is too weak to hold together a regime which has largely squandered its energy revenues on grandiose projects celebrating the Turkmenbashi while much of the country faces poverty. Should the current regime lose its grip on public order – or be challenged by pro-democracy activists currently in exile, continued stability cannot be taken for granted.

At the same time as Moscow is actively seeking to install a puppet successor, the West may consider that the time has come to support movements for democratic and economic reform. The Kremlin will view such moves as part of a wider Washington-backed plot to boost the US ’s own influence in Central Asia . Moreover, Turkmenistan ’s vast energy resources and Gazprom’s controlling interest in the country’s gas production and distribution networks means that it must be expected that any moves towards liberalisation will be opposed by Moscow .

Although the West would like to see an end to the repressive Stalinist cult of the Turkmenbashi, there are wider concerns about future instability, particularly as any disruption of energy production could have a knock-on impact on European gas supplies. Equally, any upsurge in Islamist militancy would also be viewed with grave misgivings. On the other hand, a pliable pro-Moscow leader could open the way for even greater Russian involvement in Turkmenistan – a state the Kremlin considers to be very much in its sphere of influence.

END

Last week, prompted by President Vladimir Putin’s visit to Beijing, we looked at the strategic partnership between Russia and China, and in particular we drew attention to Putin’s implicit citing of the US as the reason for this deepening relationship. Curbing US unilateralism is also a motivation for China, but it is not the most important one.

In remarks made ahead of his visit to China, Putin spelled out the opposition of both Russia and China to "double standards" in international affairs, which he said were having a negative impact on international relations and increasing the "conflict among different civilizations". He then went on to say: "It should be acknowledged that such conflict has not only been caused by terrorism and extremism but is also a result of the move of someone [the US] to handle international relations in ideology-based and stereotyped ways…"

Russia clearly sees its alignment with China as a means of diluting US global dominance. China does have similar concerns, but its primary motivation for a close relationship with Russia is more specific. It sees all the most-immediate risks to its security as coming from the east, and thus it wants to eliminate to the maximum extent possible risks that might emanate from its northern, western, and southern flanks.

Gao Zichuan, an associate professor of the PLA Naval Command Academy, said earlier this week: "The situation on the seas (that is to the east and south) is more severe than those on land (that is to the west and north). Not only have there been problems concerning China’s sovereignty and security in Taiwan, the South China Sea, the Diaoyu Island, and the continental shelf in the East China Sea, also there has been the hot issue of the Korean peninsula, which affects the overall regional situation."

He could have added that (as we pointed out in our 23 March Special Bulletin) ownership of virtually all the South China Sea is contested and that China believes the potential oil resources of the region could be as high as 213bn barrels against current proven reserves of about 7.0bn barrels. Although no one else shares such optimism over the potential reserves, the possibility of large energy resources in the disputed region increases the security concerns of everyone at a time when oil consumption by Asian countries could rise from around 15m barrels per day in 2002 to over 33m bpd in 2025.

According to Zichuan: "To effectively uphold our national sovereignty, security, and territorial integrity, we must step up the building of our defence capability on the sea. At the same time China should step up cooperation with Russia, India, central Asia, and other countries in order to ensure a security environment on the land. In turn, China should place the focus on coping with challenges from the sea. In addition…the threats facing China from the sea are very realistic, and the consequences of failing to get prepared while facing threats and dangers are beyond imagination."

No doubt Zichuan is predisposed towards such an analysis of China’s strategic imperatives by his naval connections, but as a reflection of the way in which Beijing sees its strategic imperatives, it is no less accurate for that. And it is important because it provides Beijing’s answer to the question posed last year by US Secretary of Defence Donald Rumsfeld.

Speaking at the Shangri-La conference in Singapore in early June, Rumsfeld asked: "China appears to be expanding its missile forces…[it] also is improving its ability to project power and developing advanced systems of military technology; since no nation threatens China one must wonder: why this growing investment, why these continuing large and expanding arms purchases, why these continuing robust deployments?"

The answer is that China doesn’t see things the same way as the US. It believes its vital interests in the East China Sea, the South China Sea, and Taiwan are all potentially threatened - and, even the US would agree over this, it is concerned about the stability of the Korean peninsula.

This is why China is building up its military strength on its eastern seaboard, but it is also why China is working so hard at strengthening its relations with Russia, to strengthen its strategic position in South Asia (by trying to improve relations with India at the same time as maintaining strong ties with Pakistan and building influence in Nepal and Bangladesh), and to bolster the Shanghai Cooperation Organization (SCO) as a means of improving security in Central Asia and neutralizing the threat from Uighur separatism. The fact that neither the United States nor Japan, let alone Taiwan, likes what China is doing does not mean that it lacks a rationale. Joe de Courcy, Editor.

In late 2019 Colombia’s National Policy for Digital Transformation and Artificial Intelligence was launched. In 2020 a task force for “development and implementation of AI” in the country was appointed. Among various initiatives under discussion in Colombia, Bill 059 sets out legal guidelines for AI development and use, incorporating provisions for human rights protection. A National AI commission will assess and authorise operations. There are also plans for a compliance framework with fines and penalties to be charged if it is transgressed.

A business survey carried out in Colombia by global software company SAP gave an optimistic assessment of AI uptake in the country, with 69% of companies consulted saying AI will have a “significant impact”, and 54% saying they plan to invest in AI systems this year. Medium and large-scale companies are leading the pace of adoption. AI systems are having greatest impact in customer care, marketing and communications, technology/automation, and operations, in that order. 44% of Colombian companies say they have already captured tangible benefits from using AI.

Colombian vice-president Francia Márquez addressed the United Nations in New York in April 2025 during a special forum on Afro-descendant communities. An Afro-Colombian herself, Márquez referred to recent research that shows data used as inputs for LLMs can continue to reflect racist and discriminatory content. The vice president warned that AI can “aggravate” racism and called for a “global forum” to promote a more ethical and inclusive approach to the technology.  She said that during her first year in office she had received around 12,000 racist insults and messages. Márquez said AI outputs are not “neutral nor objective” and that they can “intensify racial profiling and stereotypes that affect young afro-descendant community members”.

For multinational companies deciding where to build new plants and access supply chains, tariff levels are a major factor to consider. However, as this timeline shows, US President Domald Trump’s policies seem to be in constant flux, making forward planning a major challenge.

• 20 January: During his inaugural address Trump promises higher import tariffs.
• 1 February: An executive order declares a national emergency and imposes a 10% tariff on goods imported from China, with a 25% rate applied to Canada and Mexico, effective from 4 February. However, the following day Trump agrees to a 30 day “pause” on Mexico and Canada.
• 4 February: the 10% tariff goes into effect on China, which announces a range of countermeasures.
• 10 February: Trump announces a 25% tariff on steel and aluminium imports to start on 12 March.
• 1 March: The US president asks the Commerce Department to consider whether copper, lumber, and timber tariffs are needed for reasons of national security.
• 4 March. Canada and Mexico 25% tariff rate takes effect although it is limited to 10% for Canadian energy products. China tariff doubled to 20%. All three countries impose or threaten further retaliatory measures
• 5 March. After meeting executives from Ford, GM, and Stellantis Trump agrees to a one-month pause for the automobile industry. He also announces a further exemption for Mexico after acknowledging progress on border security issues. China takes further retaliatory measures.
• 12 March. Steel and aluminium tariffs go into effect. The European Unon announces retaliatory measures as does Canada.
• 24 March: Trump says he will place a 25% tariff on imports from any country that buys oil or gas from Venezuela.
• 26 March: Trump says he is placing a 25% tariff on all automobile imports, which he claims will foster domestic manufacturing.
• 2 April: Calling it “liberation day” the US President announces a major programme of country-by-country “reciprocal tariffs”. These turn out to be based on a simple formula, disliked by most economists: the bilateral trade deficit, divided by imports from the country in question, and then halved. Using the formula tariffs will be set at 34% for goods from China, 46% from Vietnam, 20% from the EU, and 10% from Brazil. Canada and Mexico do not appear on the list because of their membership of the USMCA agreement with most of their products still able to enter the US duty free.
• 9 April: In a rapid U-turn, Trump announces a 90-day pause on the previous reciprocal tariffs announcement, saying that in the meantime there will be a uniform 10% tariff on all countries trading with the US, with an additional levy for those running a surplus in bilateral trade. He further raised the rate on imports from China to 145%.
• 11 April China, Canada, and the EU all announce further counter measures.
• 29 April: Trump relaxes some of the 25% automobile tariffs aimed at easing import taxes for vehicles made with foreign parts but assembled in the US.
• 4 May: Trump threatens a 100% tax on foreign-made films.
• 12 May:  The US and China agree to de-escalate their trade war, declaring a 90-day truce. The Trump administration says it will reduce its 145% tariff on Chinese goods to 30%, while China says it will cut its 125% tariff on US goods to 10%.
• 23 May: Trump threatens a 25% tariff on all goods imported into the US by Apple as a way of forcing the company to reshore mobile phone assembly back to the US. Apple had previously said that because of the China tariffs, the company was moving overseas production to Vietnam and India.
• 25 May: After claiming trade talks with the EU were “going nowhere” Trump threatened to impose a 50% tariff on European goods entering the US.

INTELLIGENCE RESEARCH HIGHLIGHTS

TO: All Strategic Intelligence Forum members

DATE: 15 December 2006

The Strategic Intelligence Forum is part of the Intelligence Research group, and as a member of the Strategic Intelligence Forum I am very pleased to send you from time to time a selection of reports published recently by Intelligence Research Ltd that I consider to be of particular STRATEGIC significance.

Links to these - and other - reports can also be found in the Strategic Intelligence Monitoring Centre, which you may access on a 24/7 basis by going to www.stratintforum.com, logging in as a member, and selecting the Strategic Intelligence Monitoring Centre option.

Please find below my latest selection of Intelligence Research articles:

1.  CHINA-US TIES TO GROW CHILLY, NOT COLD - China Watch Weekly Briefing, 15 December 2006

SUMMARY: It has been a general assumption of this service that a Cold War-style competition between the United States and China is unlikely because of the significant differences that exist between early-21st Century China and the Soviet Union of the mid-20th Century. We continue to maintain that view, but the fourth annual report to Congress of the US-China Economic and Security Review Commission - published last month - suggests that a less-than-friendly rivalry between the US and China is inevitable...

Link to full article: : http://www.asiaint.com/arl/arl12417.asp

2.  MEDDLING IN BANGLADESH - AsiaInt Political & Strategic Review, December 2006

SUMMARY: Bangladesh goes to the polls in January amid an extraordinary amount of foreign attention. Emissaries from across the Western world and beyond have descended on the country with one apparent goal: to prevent the ruling party gaining power for another five years...

Link to full article: http://www.asiaint.com/arl/arl12383.asp

With best regards

JKC de Courcy
Chairman
Strategic Intelligence Forum

P.S. You may sign up for a free evaluation of any Intelligence Research Ltd services by visiting the following websites, or you may contact our Business Development Director: [email protected].

www.intelligenceresearch.com
www.stratintforum.com
www.asiaint.com
www.latinnews.com

Speaking in Beijing on 14 November, former US president George Bush senior, said: "Both my oldest son, the current US President Bush, and I think that US-China relations have never been better than they are right now…[and] the best days are still ahead." This is not the impression one gets from reading the just-released 2005 Annual Report to Congress of the US-China Economic and Security Review Commission.

One of the themes we have reiterated over the years, when arguing that a Cold War-style rivalry between the US and China was unlikely, has been that the vast economic interaction between the US and China precludes any such development. The point about the US-China commission’s latest report that stuck us so forcefully was that it was this very economic interaction that was a primary cause for concern.

All the usual causes for concern were on display in the report, including "methodical and accelerating military modernization", which the report said "presents a growing threat to US security interests in the Pacific". It pointed to "China’s aggressive pursuit of territorial claims in the East and South China Seas", saying they indicated "ambitions that go beyond a Taiwan scenario and pose a growing threat to nations, including US alliance partners, on China’s periphery".

The report warned that China has accumulated "a formidable force of ballistic and cruise missiles, advanced strike aircraft, and modern naval combatants with long range and truly lethal combat power".

Other well-aired causes for concern that were emphasized in the report included:

* "Broad-ranging" proliferation activities.

* A failure to pull its weight over North Korea.

* Human-rights abuses, total media control, and the domination of the Communist Party at home.

* China’s energy-security policies, which lead it to seek "to own oil at the wellhead" (unlike the US which secures its supplies via open international markets) and to "trade influence and assistance, including weapons technologies, arms, and other aid" for access to oil and gas in "terrorist-sponsoring states such as Sudan and Iran".

* Industrial espionage and lack of protection for intellectual property rights.

* The undervaluation of the RMB currency by somewhere between 15% and 40% and a related bilateral goods trade deficit for the US which is heading to more than $200bn in 2005.

All of these are important points and serious challenges both to relations between Washington and Beijing and a stable world order. But they are issues in which, for the most part, fault can be identified and mitigated through negotiation or counter-action.

What the commission’s report shows, however, is that what really worries the US are the quite legitimate advances that China is marking in science and technology through its economic engagement with the West. In other words, it is China’s growing power per se, not the means by which it is being achieved or even the purposes to which it is likely to be put that is the main issue.

The report points out: "Science and technology development is the centrepiece of China’s comprehensive strategy to build national power. As a result the Chinese government has a comprehensive, co-ordinated strategy for S&T development, which it began to implement in the mid 1980s. Government policies encourage growth and investment in key industries, among which are the software and integrated circuit industries. Such policies include foreign investment incentives, tax incentives, government subsidies, technology standards, industrial regulations, and incentives for talented Chinese students and researchers studying and working overseas to return to China. Many of these policies make it difficult, if not impossible, to achieve a level playing field in this area of US-China trade and jeopardize long-term US leadership in this vital sphere."

The report adds: "The technology that China is developing and producing is increasing in sophistication at an unexpectedly fast pace."

It also notes that the problem is exacerbated for the US because "the US defence establishment is increasingly reliant on the private sector for its technologies", and the Chinese government’s co-ordinated strategy of utilizing incentives and subsidies to spur the development of domestic capacity and dual-use technology industries "is weakening the health of key US commercial sectors on which the US defence establishment relies".

So what is America to do about all this? On the issues on which China is seen to be at fault, the commission recommends a combination of punitive and counter measures, such as filing a WTO dispute regarding China’s exchange rate policy, imposing across-the-board tariffs to force a currency revaluation, the freezing of the assets of Chinese companies involved in WMD proliferation, and "increasing US military capabilities in the Western Pacific in response to growing Chinese capabilities and deployments in the area".

On the question of China’s growing and "unexpected" capabilities in science and technology, it recommends that the US government acts to "develop a co-ordinated, comprehensive national technology competitiveness strategy designed to meet China’s challenge to US scientific and technological leadership".

And, more generally, the commission recommends that Congress and the administration work "to undertake more active efforts to co-ordinate with the European Union, Japan, and other interested nations to address mutual trade- and security-related concerns with China."

This, of course, is the "contain China" policy, so dreaded by Beijing - and all the indications are that Japan would be a wholehearted collaborator in such a policy. Unfortunately for Washington, the signals from the European Union are the opposite. Joe de Courcy, Editor.

This report has highlighted some of the key issues around the introduction of artificial intelligence in Latin America and the Caribbean. Three major points can be made. The first is that AI has begun, and will continue, to revolutionise the economies of the region. It will impact the way companies do business, the way governments run public services, and the way millions of people go out to work and earn a living. Those impacts will not be uniform. The adoption process will be bumpy. Negative or harmful effects, ranging from job losses to invasions of privacy and political manipulation will be present.

The second point is that over the next few years the AI wave will be particularly intense and uncertain because it is coming at a time of heightened technology-based super-power rivalry between the US and China. LAC governments have to adopt AI policies and regulations at a time of a major trade war and rising protectionist sentiment. Both Washington and Beijing are seeking to control silicon chip supply chains. Both are seeking to capture AI technologies and deny their benefits to their rivals. The current situation includes the application of punitive tariffs on US-China trade and outright bans on sensitive products and services. This is causing great uncertainty for the LAC countries.

Finally, in third place, it is important to acknowledge that the LAC countries are not without agency. In fact, they have a valuable “window of opportunity” as they are drawing up rules and regulations for the nascent AI industry. AI adoption is inevitably going to have a mix of benign and harmful impacts. But a considered and well-written regulatory framework will help move that mix in a more benign direction. Governments can also tackle structural issues – and in particular investment in digital infrastructure and education, as well as the need to formalise the large pool of informal labour – in a way that optimises the benefits of AI.

There are at least two ways of assessing the current state of the Latin American automobile industry and of the competitive challenges posed by Chinese companies. The first is to conclude that there is a troubled outlook ahead. In this view the global lurch towards protectionism and tariff uncertainty led by the Trump administration looms large. At a macro level there is a significant risk of a slowdown in the US economy amid concerns over the trade war with China, the fiscal deficit, interest rates, and inflation. Washington’s tariffs will probably remain high enough to shut Chinese companies out of the US market. An erosion of market confidence will lead to a reduction in economic activity and lower car sales across Latin America. On the more micro-level, the spike in uncertainty will force individual manufacturers to postpone investment decisions. There may be more stalled projects like Tesla’s Mexican gigafactory in Nuevo León, or BYD’s re-working of the Camaçarí site in Brazil.

An alternative view is that a limited downturn in sales, while unavoidable, will still be manageable over the longer term. With mid-term elections due in November 2026, the Trump administration my lose some ground in congress and as a result rein in the tariff policy chaos that has been very damaging to the industry. As is often the case, short term recession may be accompanied by longer term reform and innovation. In this scenario Mexico will likely preserve a key role in the North American automotive supply chain, perhaps confirmed by a renegotiated USMCA treaty. Across Latin America as whole the rise of new, innovative, and keenly priced Chinese vehicles may stimulate competitive responses from incumbent US, European, Japanese, and South Korean manufacturers. Latin American governments may prove successful in balancing some degree of protection with the economic openness that delivers economies of scale, comparative advantage, and productivity.

INTELLIGENCE RESEARCH HIGHLIGHTS

TO: All Strategic Intelligence Forum members

DATE: 7 December 2006

The Strategic Intelligence Forum is part of the Intelligence Research group, and as a member of the Strategic Intelligence Forum I am very pleased to send you from time to time a selection of reports published recently by Intelligence Research Ltd that I consider to be of particular STRATEGIC significance.

Links to these - and other - reports can also be found in the Strategic Intelligence Monitoring Centre, which you may access on a 24/7 basis by going to www.stratintforum.com, logging in as a member, and selecting the Strategic Intelligence Monitoring Centre option.

Please find below my latest selection of Intelligence Research articles:

The pro-Chavez camp gains two new members: http://www.latinnews.com/lss/LSS12227.asp?instance=1 - Latin American Security & Strategic Review, November 2006

Putting China's nuclear threat in perspective: http://www.asiaint.com/arl/arl12217.asp - China Watch Weekly Briefing, 1 December 2006

China: Do the yuan's gains matter?: http://www.asiaint.com/arl/arl12264.asp - China Watch Monthly Review, December 2006

With best regards

JKC de Courcy
Chairman
Strategic Intelligence Forum

P.S.  You may sign up for a free evaluation of any Intelligence Research Ltd services by visiting the following websites, or you may contact our Business Development Director: [email protected].

www.intelligenceresearch.com
www.stratintforum.com
www.asiaint.com
www.latinnews.com

Knowing full well that the highway to Washington passes through Tel Aviv, the US-backed Musharraf government in Pakistan seems determined to go down a path that successive civilian governments in Islamabad have feared to tread as a matter of principle: recognition of the Jewish state of Israel. But there is more to the move than simply courting favour with Washington.

Israel and Pakistan do not have diplomatic ties. One was created as a state for Jews and champions Jewish causes around the world. The other was created as a state for Muslims of the subcontinent and has actively supported Palestinians and other Arabs. The absence of diplomatic ties between Pakistan and Israel is based on the fact that the Palestine-Israeli conflict remains unresolved.

However, the situation began to change when Pakistan was made to join the US-led war on terror following the 11 September 2001 attacks. Soon after joining the coalition, General Pervez Musharraf, the Pakistani president and the fourth military ruler of the country, begun urging his people to debate and discuss the possibility of having some relations with Israel.

In June 2003, after receiving a $3bn economic package from President Bush at the Camp David presidential resort, the Pakistani leader went one step further and said that Islamabad should consider recognizing Israel. He argued that given that Egypt, the intellectual capital of the Arab world, and Jordan, where the Palestinians comprise a majority of the population, have had formal peace agreements and diplomatic ties with the Jewish state for quite a while, it makes no sense for Pakistan to sit on the fence.

Since the Camp David accords, he said, the Arab world has been interacting with Israel on the diplomatic front and has begun seeking a negotiated settlement to the Arab-Israeli conflict. "Instead of staying out of this process, Pakistan should play an active role in the Middle East peace process", he added.

Historic meeting in Istanbul

Out of this came the 1 September 2005 historic meeting of the foreign ministers of Pakistan and Israel in Istanbul - the first formal contact between the two governments. The Istanbul meeting was not a one-on-one affair between the two foreign ministers but a delegation-level interaction. Tel Aviv is now on Islamabad’s radar officially and openly.

The foreign ministers’ meeting was followed by General Musharraf’s 18 September address to the American Jewish Congress in New York, where he declared: "Pakistan has no direct conflict or dispute with Israel. We pose no threat to Israel’s security and we trust that Israel poses no threat to Pakistan’s national security". Musharraf then indicated that if Israel were to give to the Palestinians what is their right, then Pakistan and Israel could engage fruitfully and to mutual advantage.

The communication that began in Istanbul is set to unfold further to meet all the ends to which Pakistan has formulated its latest Israel policy. As things stand, it is no longer relevant to ask whether or not Pakistan will recognize the Jewish state. The question to be asked is: when? Available evidence, which points to outside pressure upon Islamabad to speed up the process, shows that the imprint on the Pakistani passport that says ‘Valid for all countries of the world except Israel’ may well become redundant in the near future.

But prior to that, Musharraf wants to test the ground, making sure that the political risk involved will be adequately rewarded. In his own words, "when I do something, I consider what is the worst that can happen? And if I can live with it, I go ahead and do it."

Just a few years ago, it would have been unthinkable for any Pakistani ruler to publicly mention the issue of recognizing the Jewish state of Israel. Even now public opinion in Pakistan is strongly opposed to recognizing Israel, and thus, while conceding that recognizing Israel is a very contentious issue, Musharraf has been urging the Pakistani media to start an open and non-emotional debate on the issue.

He has justified raising the issue on the grounds that Pakistan does not have any dispute with Israel, and also on the grounds that the Palestinians themselves are edging towards peace with the Israelis and have already recognized Israel.

"Do we have to be more Catholic than the Pope or more Palestinian than the Palestinians themselves?" he asked recently in an interview to a private television channel in Pakistan. "Is that the correct attitude? Or should we make a change? We must reach a national consensus on the subject, rather than leaving it to the emotionalism of the extremists," he added.

The road to Washington

Like all the previous military rulers of Pakistan, Musharraf recognizes that the access road to the United States passes through Israel. This has already become a slogan for many regimes, especially in the Third World and Islamic and Arab worlds. Chanting this slogan, Pakistani military dictators have often reached the heart of Washington, a capital that has bestowed upon them financial, military, economic, and political support to further its own agenda. However, there are many neo-conservatives in the Bush administration who describe Pakistan as a militant Islamic state with weapons of mass destruction and argue that the recognition of Israel should be put forth as a test of the country’s moderation in foreign policy.

The Bush administration has thus been pushing General Pervez Musharraf to befriend Israel and demonstrate that Pakistan is indeed the moderate Islamic state that he pledges he wants it to be.

By doing so, the Bush administration believes, Islamabad can demonstrate that it is fully mindful and supportive of Washington’s vital security interests, which in the Middle East are represented by Israel.

Musharraf’s initiation of a debate on the issue is also motivated by the Pakistani establishment’s pre-occupation with external affairs at the cost of domestic developments. The establishment’s scheme for Pakistan has always rested on gaining foreign concessions - be these loans, debt waivers, or aid packages - that are usually obtained in exchange for harmonising Pakistan’s foreign policy with that of donors, mainly the US.

Therefore, it would seem that Islamabad’s change of heart on Israel has more to do with tactical considerations, rather than representing a strategic re-appraisal of its overall direction.

The need to regain ground against India

There are, however, also deeper strategic considerations at work. Pakistan’s ruling military establishment has realized that cordial relations with Israel will help regain the lost ground against India. Indian propaganda about Pakistan’s fundamentalist Islam portrays the country as the naughty boy of the region that supports anti-US and anti-Israeli movements. This has contributed to Pakistan’s strategic isolation in South Asia. As a result, the military leadership believes that despite extending fullest support to the US in its war on terror, Pakistan fails to get the status - and incentives - it deserves.

At the same time, a key factor propelling the present leadership in Pakistan is the growing Indo-Israeli strategic relationship.

Pakistan’s military strategists point out that over the past few years, a level of nuclear deterrence has been achieved between them and India with the development of nuclear-capable long and short range missiles. And although this nuclear deterrence has prevented the two neighbours from going to war in the past, India has begun seeking to neutralize Pakistan’s nuclear threat by other means, such as the Patriot system and Mirage 2000-5 fighters.

India is offering Israel a big outlet for its arms industry so that Israel can push down its high defence budget-to-GNP ratio – currently a whopping 10%. Israel’s defense industry needs to export 75% of what it makes to be viable. And being a big buyer in the field, India could actually bail it out economically. Thus, in the post-9/11 era, Indo-Israeli cooperation has grown swiftly.

Today, Indo-Israel trade is touching $4.5bn, and India is already buying $2bn worth of high-tech arms from Israel. Islamabad, therefore, wants some of the same military aid packages and loans - and it believes that the only way to do this is by neutralizing the Israel lobby that has worked against Pakistan’s vital interests in the past.

Why Pakistan could be more important to Israel than India

On the other hand, establishing normal diplomatic ties with Pakistan, the only Muslim country which has nuclear capability, appears to be an important strategic goal for Israel which hopes that gaining diplomatic recognition by a key Islamic country with considerable influence in the Islamic world would help undermine hard line opposition towards Israel in other non-Middle Eastern Muslim states.

As a Muslim state, Pakistan could become strategically more important to Israel than India as a buyer of arms. India has offered itself as a partner in war; Israel actually needs a partner for peace in the Middle East.

As Pakistan moves forward to facilitate an Israeli-Palestinian rapprochement on the final settlement, it can also effectively prevent Israel from creating a military imbalance in South Asia through the supply of strategic weaponry to India. So, the establishment of diplomatic ties between Islamabad and Jerusalem may turn out to be a measure for the augmentation of peace and stability in South Asia, not just a means of improving Israel’s standing in the Muslim world. Joe de Courcy, Editor.