CourcyInt Focus

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• Egypt's new orientation - CIB 31 March 2011

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  The first foreign policy move by the new Egyptian regime has been a swift rapprochement with Sudan. The fact that this has been praised in pan-Arab circles as a counter to Israel’s incursions into Africa would indicate that the world still rotates on its old axis. The Arab spring appears not to have changed the essentials.

  The view of informed observers is that the constitutional referendum of 19 March, sponsored by the Supreme Council of the Armed Forces, has boosted the Muslim Brotherhood at the expense of the Tahrir Square youthful secularists. The remnants of the Mubarak regime are now likely to reach an accommodation with the Muslim Brotherhood that will curtail genuine secular-democratic progress. It is still too early to say for certain, but that does seem to be the direction in which Egyptian domestic affairs are heading.

  On the external front, we have already seen an improvement in relations between Cairo and Hamas. For instance, Egypt allowed a Gaza delegation led by the senior Hamas figure Mahmoud al-Zahar to travel from Gaza on a trip to Khartoum, Damascus, and Ankara. This would not have been allowed by the Mubarak regime.

  Then on 29 March, following a meeting with Egypt’s Foreign Minister Nabil el-Arabi in Cairo, al-Zahar said: "We are going to witness an Egyptian revision on handling the Rafah border crossing [between Egypt and Gaza] and the Palestinian case over the next week or the upcoming days," al-Zahar said.

  The Rafah border crossing was closed by Egypt in 2007 after Hamas took control of Gaza from the Palestinian Authority based in the West Bank.

  Praising the new regime in Cairo over that of ousted president Hosni Mubarak, al-Zahar said: "The Palestinian people will never forget the position of the former Egyptian government regarding the Israeli violence against the Gaza Strip and the position of the current Egyptian government which warned the Israelis from trying to repeat their aggression against the Strip.”

  In a statement posted on the Hamas Government website, Youssef Rizqa, political advisor to Hamas Prime Minister Ismail Haniyeh, said: "For the first time in the history of the relationship, Palestinian and Egyptian ministers are communicating. This is a substantial development that did not take place in Mubarak's era." In a further sign of warming relations, Rizqa added that Hamas intended to re-open the Egyptian Consulate in Gaza, closed in 2007.

  The fact that new Egyptian Prime Minister Issam Sharaf chose Khartoum as the first Arab capital to visit is also being seen as a significant change of direction. The Mubarak regime was noticeably hostile to Sudan, even supporting the rebel movement in the south. Practical reasons for a rapprochement with Sudan include Egypt’s need for an ally against the African Nile Basin countries’ attempt to amend treaties on the sharing of the Nile’s waters. They are seeking to reduce Egypt’s share of 54bn cubic metres. Sudan takes the second largest share with 18bn cubic metres.

  It has been equally striking to see Arab praise for Egypt’s move on the grounds that it is a counter to Israeli influence in Africa. The pan-Arab al-Quds al-Arabi sees the new Sudanese-Egyptian cooperation as providing a strategic boost not only in the fight to prevent a cut in the Egyptian-Sudanese share of the Nile waters but also in opposing “Israeli infiltration into the African continent backed by the US and the West”. Accoding to the paper: “It is this infiltration that is inciting the Nile source states and is pursuing a scheme aimed at fragmenting both countries, especially Sudan.”

• Syria is the key - CIB 31 March 2011

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  Syria is the key battleground in the Middle East, and if President Bashar al-Assad manages to stabilize his regime it will be a major setback for the Western powers. It will be a huge plus for Iran, and it will have the potential to undermine any good to have come from the popular revolutions elsewhere in the region. The Middle East is becoming accustomed to dictators making too few concessions, too late, and being ousted from power. It happened in Tunisia and Egypt, and it is happening in Libya and Yemen. But there are reasonable grounds for supposing that Assad will be able to stabilize his position in Syria.

  Most people now know the basics about Syria: that it is ruled by a minority Alawite regime that has a history of brutal repression. The pessimists argue that, unlike in Tunisia and Egypt, the officer corps will stay loyal to Assad and do whatever is necessary to repress the popular dissent. For the regime and its supporters, the dangers in allowing the majority Sunnis to gain power are too great. On the other hand, the optimists say, in today’s international climate Assad cannot repeat the response of 1982, when his father slaughtered up to 30,000 Muslim Brotherhood sympathisers in Hama, and that without that option he is unlikely to survive.

  Our own experts veer towards the pessimistic view, but for more complex reasons. They say that Assad has much more going for him than just a loyal security establishment and a track record that frightens dissenters (although that is undoubtedly important, and in this regard there have been alarming reports of Iranian Revolutionary Guards and Hezbollah militants helping with the suppression of protests). Assad’s other advantages include the following:

  First, there is the position of the Kurds, who make up 10% of the population. There have been intense contacts between the regime and the Kurds to try to secure their neutrality, with the authorities playing on Kurdish fears of an Islamist takeover in Syria.

  Second, the regime has been courting the Sunni merchant class in Damascus offering them an expanded role in the economy and playing on their fears of unrest. There is some evidence that this approach has been paying off and that the merchants have been opposing protests in Damascus.

  Third, it would seem that the Syrian Sunni Arab youth is not of the same mould as its equivalent in Egypt. So far, for instance, there has been very little unrest emerging from Damascus University with its 140,000 students.

  Finally, there is the ambivalent position of the Muslim Brotherhood (MB) itself. Contacts between the Muslim Brotherhood and the regime are veiled in the utmost secrecy, but there have been suggestions that both Turkey and Hamas (the Palestinian group) have been interceding on behalf of Assad. This has the ring of truth. In recent years, Turkey has conducted a significant rapprochement with Assad, while Assad’s support for Hamas in the Palestinian territories and for Hamas/MB in Jordan will count in his favour.

  Assad’s chances
  So, as things stand today, the odds favour Assad surviving, and the significance of such an outcome can hardly be overstated. There is a strong possibility that the Arab revolutions could end up with Yemen and Libya as failed states, with Egypt under the influence of the Muslim Brotherhood, and with pro-Iranian Shia influence increased in the Gulf States. If Assad survives, Iran’s influence in Syria and Lebanon will remain undiminished, with all that means for the power of Hezbollah.

  Furthermore, Assad will need to repay his debt to Hamas by increasing Syria’s support both in the Palestinian territories and in Jordan, where the moderate Bedouin-supported regime of King Abdullah remains under pressure.

  To all these negatives can be added the fact that the Assad regime maintains an illicit nuclear programme, has a large stockpile of chemical weapons (which has been upgraded since the transfer of chemical weapons from Iraq following the US-led invasion in 2003), and has a huge arsenal of ballistic missiles and advanced artillery. Any positives to emerge from the Arab revolts are likely to be nullified if Assad survives. Iran knows this and is doing all it can to shore up Assad; it is not certain that the Western powers are yet making an equal and opposite effort. JdeC.

• Russia hints at talks with Taleban - CIB 31 March 2011

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  While the rest of the world’s attention has been focused on the Middle East and Japan, Russia has been making some interesting noises about Afghanistan.

  Russia understands that the Obama administration made a major strategic error in December 2009 when it announced that US forces would begin withdrawing from Afghanistan in July 2011. From that moment onwards, the Taleban knew that it was only a matter of a relatively short time before it could reassert its influence in the country. The Taleban’s confidence on this point was boosted by the knowledge that its supporters in the Pakistani military had drawn the same conclusions.

  This confidence within the Taleban (and Pakistan) that they would prove to have more staying power than the United States can only have been boosted by current events in the Middle East, where the challenges to the US can hardly be overestimated. They will be calculating that faced by potential strategic disaster in the Arabian Peninsula, continuing uncertainty about the futures of Egypt and Jordan, and possibly renewed difficulties in Iraq, the US is bound to have its attention diverted from Afghanistan.

  It seems that Russia has been reading the same tea leaves. At the moment Moscow has no direct contacts with the Taleban, but on 28 March Russia’s special presidential envoy to Afghanistan, Zamir Kabulov, said that Moscow was “open for discussion with them”. Kabulov went on to say that Moscow’s concerns are “terrorist, extremist, and narcotics threats” coming from Afghanistan, and he added: “We would like them [the Taleban] to know that a government that will seek ways to solve those issues would be acceptable to us.”

  Earlier this month during a meeting in Jeddah, Kabulov had told Marc Grossman, the US president’s special representative for Afghanistan and Pakistan, that Russia opposes a continuing foreign military presence on Afghan territory.

  Kabulov’s remarks were followed up on 28 March by Russia’s Foreign Minister Sergey Lavrov, who responded to questions about a continuing US military presence by saying that the Afghans themselves should decide how they will live. He aded: “I think they will take a serious look at the advantages of neutral status”. That judgement would, of course, be more certain of fulfilment under a Taleban regime.

  Interestingly, what Lavrov sees as “neutral status” does not exclude joining the Shanghai Cooperation Organization (SCO) which links the former Soviet republics of Central Asia with Russia and China. In an interview with Interfax on 27 March, Kabulov said that Russia “fully supports” Afghanistan joining the SCO.

  Behind this desire to pull Afghanistan into Russia’s sphere of influence is a belief in Russian policymaking circles that Russia is under growing strategic threat. General Makhmud Gareyev, president of the Military Sciences Academy, suggested last week that Russia’s geopolitical position is as bad as it has ever been in its history. He noted that US military forces “are present in any strategic direction – west, south, east, and north”. He is equally concerned by the rise of China.

  Russia’s strategic angst has only been increased by preliminary findings of the latest census. The full report is not due to be published until the end of 2012, but initial data suggests that in the last eight years Russia’s population has decreased by 2.2m, the equivalent of a third of the residents of the Moscow region. Some analysts think the position could be even worse as some local statistics bodies are suspected of exaggerating the size of local populations.

  Apart from the strategic issues driving a possible rapprochement between Russia and the Taleban, the drug question is a key motivator. In Moscow’s view, the US is not doing anything like enough to prevent the flow of Afghan heroin to Russia. According to Kabulov: “For the United States...Afghan heroin poses no direct threat: they have enough not only of Colombian cocaine but also synthetic drugs. That’s it. Perhaps because of this they have no direct interest.”

  The Taleban is another matter. Before the Taleban was ousted from power and came to rely upon the heroin trade to finance its insurgency, it ran an effective, if brutal, anti-heroin campaign. During the 1990s, Afghanistan was the main source of the world’s illicit heroin supply, but from July 2000 until the Taleban’s downfall over a year later, the Taleban’s ban on cultivating opium poppy resulted in the near cessation of poppy growing in Taleban-controlled areas and a fall in the global heroin supply by 65%.

  A return to such a policy would suit Moscow very well, particularly if linked to the considerable side benefit of an American withdrawal. The catch would be the Taleban’s support for militant Islam, but even here there is a template that Russia could adopt. Iran has largely refrained from supporting militancy in Central Asia, the Caucasus, and Russia in return for Moscow’s support against the US. It is likely that Moscow believes there would be no good reason why the Taleban could not reach a similar accommodation. If Kabulov does move to “open discussions” with the Taleban that will be the second item (after drugs) on the agenda.

  NOTE: According to sources in Karachi, the Taleban has created a unit based in Pakistan’s North Waziristan called Lashkar-e-Khorasan (LeKh) whose sole purpose is to identify, capture, and execute people acting as spies for the US – particularly those helping the US in its drone campaign.

• Abiding US suspicions of China - Stratint Review, 13 March 2008

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  The latest annual report to Congress by the US Secretary of Defence on the “Military Power of the People’s Republic of China” reinforces an impression of continuing US suspicion about China’s rise. The following is an abridged version of an assessment first published in SIR’s associated Asia Intelligence Service (in the March issue of AsiaInt North Asia Review).

  The media coverage of the latest Pentagon report on China’s military power has focused mainly on allegations of Chinese cyber-spying, on the true level of Chinese military spending along with its rate of increase (17.6% this year), and on the development of weapons and jammers to prevent the use of space-based systems at times of conflict or crisis. The report said that China is “exploring satellite jammers, kinetic energy weapons, high-power lasers, high-powered microwave weapons, particle beam weapons, and electromagnetic pulse weapons for counter-space application”.

  These points are a good reflection of US concerns about China. However the most interesting part of the Pentagon report is the section on “understanding China’s strategy”, for it is this section that reveals US views about China’s long-term intentions rather than just its present capabilities and activities.

  The section begins with the well known quote from Deng Xiaoping known as the “24 character strategy”. Deng’s injunction was to “Observe calmly; secure our position; cope with affairs calmly; hide our capacities and bide our time; be good at maintaining a low profile; and never claim leadership.” This “24 character strategy” is seen as suggesting a strategy “to maximize future options”, and, according to the Pentagon report, President Hu Jintao’s “Harmonious World” theory, endorsed at the October 2007 17th Party Congress, “does not overturn or supersede Deng’s ’24 character strategy’”.

  The Pentagon goes on to argue that the CCP has come to rely on economic performance and nationalism “as a substitute for the failure of communist ideology to unify the population and mobilize political support”. The danger is that if economic growth falters, an even higher reliance on nationalism will be necessary.

  It also clearly believes that economic performance will indeed falter because of underlying weaknesses such as non-performing loans, inefficient state-owned enterprises, and economic disparity between urban and rural areas. The report warns: “Economic shocks, setbacks, or even modestly slower growth could lead to higher unemployment, inflation, and significant unrest, potentially giving rise to greater reliance on nationalism to maintain popular support for the CCP.”

  One interesting point the Pentagon report makes on a potential economic crisis is the fact that China’s leaders have limited experience in dealing with a correction or recession in a complex market economy, and “it is not certain whether their responses would ease or exacerbate temporary dislocations”.

  In addition to the danger of a recourse to nationalism, the Pentagon report points out that China has legitimate national interests that are pushing it towards a greater military capability, particularly in the area of energy security given that its oil consumption will rise from 7.58m barrels of oil per day to 10m-12m bpd by 2015. At current levels of consumption it is already importing 53% of its oil, with slightly over half coming from the Middle East and a quarter from Africa.

  The Pentagon notes that currently China is not capable of using military power either to secure its foreign energy investments or of defending critical sea lanes against disruption, but it then argues that China may seek to close this gap by “developing extended-range power projection, including aircraft carrier development; expeditionary warfare; undersea warfare; anti-air warfare; long-range precision strike; maritime C4ISR; expeditionary logistics and forward basing; training and exercises, especially in open water; and a more activist military presence abroad.”

• US-China competition exacerbated by suspicion - Stratint Review, 21 February 2008

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  One of Stratint’s sister publications – AsiaInt North Asia Review – reviewed this month an article on China-US relations published by Foreign Affairs, the journal of the Council on Foreign Relations. The central thesis of the article - “The Rise of China and the Future of the West” - is that while the US on its own looks vulnerable to increasing Chinese power, the West as a whole is not – and the secret to dealing with China, according to Professor G John Ikenberry of Princeton University, is to give China every incentive for integrating with Western-created and Western-dominated trans-global institutions. The review of this article in the February issue of AsiaInt North Asia Review was sceptical about this proposition. This week, China’s reaction to President George Bush’s five-nation Africa tour provides a small but nonetheless telling illustration of why such scepticism is justified.

  Ikenberry’s thesis starts with the uncontroversial proposition that periods of “wrenching hegemonic transition” are acutely dangerous. However, he argues, this time there are two major mitigating factors that should prevent the kind of conflict that has defined earlier such transitions. The first is the fact that nuclear weapons have made war between great powers unlikely, all but eliminating “the major tool that rising powers have used to overturn international systems defended by declining hegemonic states”. The second is that while the US’s “unipolar moment” will end, China only has the advantage if the struggle is between China and the US alone. “If”, Ikenberry argues, “the defining struggle is between China and a revived Western system, the West will triumph.”

  Western power
  Ikenberry provides figures to support this contention. China currently has a GDP measured in a purchasing-power-parity basis of US$9tr against the US’s US$12tr. By 2020, China will have a US$30tr to US$28tr advantage, and by 2030 this advantage will be US$63tr against the US’s US$49tr. The OECD as a whole, however, will still considerably outrank China even by 2030, when its combined GDP will be US$105tr. As for defence expenditure, by 2030 China (on US$238bn) will still be spending less than 30% of the US on its own (US$808bn) and only 17% of the OECD’s combined figure (US$1,398bn).

  We will not go into the question as to whether nuclear weapons really have made war between great powers a thing of the past (the great British historian AJP Taylor became a member of the Campaign for Nuclear Disarmament because of his conclusion that statesmen are too prone to making errors, even catastrophic errors such as those that led to World War I). It is Ikenberry’s second point that we are interested in this week.

  Ikenberry argues the US needs to understand that its most powerful strategic weapon is the ability to decide what sort of international order will be in place “to receive” China. The first thing the US must do, the professor argues, is “re-establish itself as the foremost supporter of the global system of governance that underpins the Western order”. And he concludes that while the US can’t thwart China’s rise, it can “help to ensure that China’s power is exercised within the rules and institutions that the United States and its partners have crafted over the last century…The United States’ global position may be weakening, but the international system the United States leads can remain the dominant order of the twenty-first century.”

  US self-interest
  This may be an idealistic vision, but it is not in our view a realistic one. One major reason for this assessment is that the US remains reluctant to subject itself to the rules that it wrote for lesser powers. Evidence for this ranges from its opposition to subjecting its citizens to international jurisdiction to its continuing determination to define its own interests and to act upon them, using military force if necessary, with or without international sanction. Secondly, there is little sign that the US is willing to give a rising China any but the barest elbow room, as the debate over China’s military power exemplifies. Former defence secretary Donald Rumsfeld and others have argued that China has no need to increase its military capabilities because it is threatened by no one. There is no acceptance that seeking to match military power to economic power could be a legitimate development for a power such as China.

  The hearings in front of the US-China Economic and Security Review Commission, which Stratint tracks closely, including the latest hearings on “The Implications of Sovereign Wealth Fund Investments for National Security”, amply demonstrate the US’s underlying suspicion of China and its determination not to cede relative power without a struggle.

  Even if China’s internal political development were to make it a suitable candidate for full embracing by a Western system in which democracy and the rule of law are fundamental (and there is no sign of that yet), the US’s resistance to China’s rise is as natural as China’s desire to match its military power to its growing economic power. There is an inevitability about both that Ikenberry’s idealism cannot override.

  Bush in Africa
  The small illustration of this that caught our eye this week was China’s reaction to President Bush’s trip to Africa. Bush’s trip took him to five countries: Benin, Tanzania, Rwanda, Ghana, and Liberia, and the portrayal of the trip was that the five countries had been chosen to showcase a different Africa from poverty-stricken and conflict-prone Africa that dominates the world’s media. All five are now relatively stable countries whose presidents have democratic credentials, and White House national security adviser Stephen Hadley described them as “the kinds of government that we want to partner with”. The trip was also used to highlight US projects that support hospitals, schools, and anti-Aids and anti-malaria initiatives.

  The subliminal message was that the US is a better partner for Africa than China, and this message was hardly concealed at all when Bush came to speak about Darfur while in Rwanda. Before leaving for Africa, the president had called for a greater international military effort to end what he referred to as “genocide”. Speaking on 19 February while in Rwanda, he warned countries which are reluctant to impose sanctions on Sudanese leaders that “human suffering ought to pre-empt commercial interests”. No one doubted that he was referring to China, which has invested £8bn in Sudan’s oil industry.

  China’s suspicions
  But China also has a wary view of the US’s interests in Africa. The official Xinhua news agency identified “two major characteristics” of Bush’s visit. The first was that four out of the five countries visited are coastal, and according to Xinhua the US is concentrating on “developing relations with coastal countries to facilitate going in and out of the continent”. Secondly, the news agency said, “the countries to be visited are either on important strategic locations or countries with war-ridden regions”, which, Xinhua said, showed that the US “is trying to seek opportunities from the war-ridden regions to get involved in African affairs”.

  Xinhua concluded: “The United States has a strong interest in Africa because, in the final analysis, it wants to consider its strategic interests…Now more than 10% of US oil imports come from Africa…[and] Africa will account for one-fourth of its total oil imports in 2015. Bush’s Africa tour signifies a new effort of the United States entering Africa…”

  Even if one would not want to go as far as Ikenberry with his new-world-order style vision, few would argue that a US-China relationship in which competition is mitigated by cooperation would be preferable to one in which competition is exacerbated by suspicion. But for the moment the latter is clearly the more likely evolution than the latter.

• Garcia launches "Pacific Arc" blos as counterweight to Alba - LWR 20 September 2007

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  Peru's President Alan García is championing a new political and economic bloc, known as the "Pacific Arc", comprised of Peru, Chile, Mexico, Canada and Panama. The idea took root at the Apec summit in Sydney earlier this month during bilateral talks between García and his Chilean peer, Michelle Bachelet. Last week García elaborated on the details of the new integration plan, which he described as a "modern social model" using free trade and investment to redress social inequalities. In this sense it is diametrically opposed to Venezuelan President Hugo Chávez's Alternativa Bolivariana para las Américas (Alba), a model of regional integration on principles contrary to neoliberalism which nonetheless seeks the same outcome.

  Bachelet defined the aims of the "Pacific Arc" as a trade and investment promotion initiative "allowing countries to develop economic and social policies in a coordinated way." Peru, which is clearly frustrated with the slow progress of trade negotiations between the Andean Community (CAN) and other blocs such as the European Union (EU), is president pro tempore of Apec for the next year and intends to use its position to cultivate better ties between the "Pacific Arc" and Asian members of Apec. García said he would spend the first half of next year seeking continuity to the free trade agreements between the "Pacific Arc" member countries so that they could project themselves in a unified way to Asia, which he described as "the future in terms of trade and investment".

  García was at pains to deny that the new integration initiative was a response to Alba, saying that was just the way journalists chose to dress it up, but he made several transparent allusions to the Venezuelan-sponsored project. "International messianism is not part of Peruvian policy," he said in an interview with the national daily El Comercio last week. "We do not aspire to leadership or the exporting of ideas but simply sharing common criteria with Latin American countries that belong to Apec; countries that have, or are in the process of sealing, free trade agreements with the US and countries that believe investment and trade are essential instruments to defeat poverty." García said these criteria were filled by Mexico, Chile, Peru and Colombia, which is neither a member of Apec nor as certain of getting an FTA with the US as Peru in the coming weeks. García said, somewhat optimistically, that it would satisfy both criteria soon.

  García also seemed to throw down the gauntlet to Chávez by promising that the "Pacific Arc" model of integration would deliver better development and alleviate poverty more successfully than "alternative models" driven by ideology. He said he was convinced that Apec would enable Peru to make "an enormous jump in terms of development and economic growth, and therefore the social welfare of all Peruvians."

  The launch of the "Pacific Arc" comes at a time when relations between Peru and Chile had looked precarious, with nationalist sentiment stoked on both sides of the border over the longstanding maritime jurisdiction dispute, and when relations between Peru and Venezuela appeared to be improving. The Peruvian foreign ministry recently accepted a Venezuelan explanation dissociating itself from the opening of an Alba office in the southern region of Puno despite initial shrill cries of protest against alleged interference in the country's internal affairs [WR-07-34]. Venezuela reciprocated by making no comment on Peru's decision to grant asylum to Carlos Ortega, a former leader of the country's largest trade union, Confederación de Trabajadores de Venezuela (CTV). It also mooted a return to CAN.

  Relations with US
  García's early moves when he assumed the presidency last year showed his propensity for shaping regional realignments. He was instrumental in bringing Chile back into CAN and by aligning Peru more with the US, acting as a counterweight to Chávez's relentless anti-US discourse. He got his due reward this week when the US published its annual blacklist of "major drug transit or major illicit drug producing countries". Peru got barely a mention, despite being the second biggest producer of coca. In his detailed presentation of the report, Christy McCampbell, the Assistant Secretary of State for Counter-narcotics, described Peru as "a very cooperating country" adding that "they are a key partner in our counternarcotics efforts and cooperation".

  Venezuela, on the other hand, and for the third year running, was singled out in the report from the other 13 countries in Latin America and the Caribbean on the 20-strong list for having "failed demonstrably during the previous 12 months to adhere to their obligations under international counternarcotics agreements". In a rhetorical gaffe, McCampbell underscored the politicised nature of the report by stressing that Venezuela had "failed demonstrably to cooperate with the United States." This is the key point. Several other countries on the list, which get no special mention, such as Haiti, Panama and Guatemala, have arguably had less success against drug-trafficking than Venezuela but they are seen to be fully cooperating with the US.

  The report adds that Venezuela be given a waiver to possible sanctions under US law to enable the US to support (unspecified) "democratic institutions" in the country. McCampbell supplied slightly more detail, adding that this support would include providing assistance to "small community development programmes for the benefit of the Venezuelan people." He also elaborated on the reasoning behind the criticism of Venezuela. He said Venezuela had taken "insufficient action against drug trafficking", and cast doubt on its claims to have developed new programmes to fight increased drug trafficking. He insisted, without providing empirical evidence, that Venezuela is "a growing transshipment point for drugs bound for the US […] a situation that has (been) exploited by corrupt officials and created a weak judicial system and allows for organised crime." The report received a predictable response from Venezuela.

  The foreign minister, Nicolás Maduro, dismissed it as "interventionist" and "abusive" and questioned why the US feels it has the right "to control and oversee the whole world".

  Bolivia gets a longer, much more specific, mention in the report but less criticism. Its counternarcotics cooperation is adjudged to have been "uneven". The report claims that the government has "cooperated closely on interdiction, and operations and seizures have reached record levels". It also says that coca eradication should reach 5,600 hectares this year, surpassing its goal by 12%. It questioned the "zero cocaine, but not zero coca" policy implemented by the Morales administration, however, arguing that it focused on interdiction while neglecting to tackle the expansion of coca cultivation, which it said had "outstripped" eradication.

  • Ecuador in drug report
    Aside from Venezuela and Bolivia, the US report on major drug transit countries also expressed concern about one other country in Latin America: Ecuador. It said that while the government had made "considerable progress in combating narcotics trafficking destined for the United States", there had nonetheless been "a dramatic increase in the quantity of cocaine transported toward the United States using Ecuadorean-flagged ships". It said this was a "serious concern" but that the effective cooperation between the US Coast Guard and Ecuadorean Navy had resulted in an increase in the amount of cocaine interdicted.

• Iran should have sufficient cards to deter US attack - SIR 23 August 2007

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  Some sources are increasingly convinced that Washington is preparing airstrikes against selected targets in the Islamic Republic, particularly after the decision was made to list Tehran’s elite Sepah-e Pasdaran (Islamic Revolutionary Guard Corps or IRCG) as a ‘terrorist organisation’. Our own assessment is that this would be a grave error as there remain good reasons to believe that the consequences of such a policy would be to put Coalition forces in Iraq in even greater jeopardy, while also bolstering the position of the Iranian ultra-hardliners led by President Mahmoud Ahmadinejad and risking a potentially disastrous impact on global oil prices.

  The following are our reasons for this assessment:

  - Ahmadinejad is currently facing rising criticism and discontent at home, but a US (or Israeli) attack is likely to result in a majority of Iranians rallying round the country’s leadership, thus strengthening the ultra-hardliners

  - Pragmatists, presently gathered around former president Ali Akbar Hashemi Rafsanjani, will be forced to throw their weight behind Ahmadinejad

  - Following a military strike against Iranian targets, what remains of the Iranian movement for moderate reform is likely to be silenced and Iranians with real or perceived links to the West will be placed at serious risk

  - Many Iraqi Shia would see an attack on Iran as an attack against their co-religionists, boosting support for militant factions within Iraq and increasing the level of threat to Coalition forces

  - Iran may retaliate by providing Shia militants in Iraq with far more sophisticated weaponry than is presently available

  - Tehran could activate ‘sleeper’ cells across the world to target US interests worldwide, thus opening a new front in global terrorism

  - There would be a risk of a major impact on the global oil market, particularly if Iran halted or restricted exports or blocked access to and from the Gulf

  As we have pointed out in our recent analysis, Ahmadinejad’s position is far from secure (see SIR 9 August). Domestic unrest and rising discontent over economic mismanagement are presenting a significant challenge to his regime. Moreover, he is in danger of losing ground to pragmatic conservatives such as his key rival Rafsanjani.

  Amid the current controversy over fuel rationing, Iran’s gathering internal crisis was highlighted earlier this week by the country’s recently sacked oil minister, Kazem Vaziri-Hamaneh, who warned that "I am ready to prove that if the fuel situation continues along current trends we will face an energy crisis in the future…The current pattern of consumption is a disaster for the country."

  It is clear to see that Ahmadinejad’s domestic policies are in deep trouble. However, that could all easily change if Iran comes under military attack from the US or, much less likely, from Israel. Confronted by a belligerent external enemy, Iranians can be expected to rally round an administration that will not hesitate to play the nationalist card. Moderates who favour dialogue and improved relations with the West will be silenced amid the inevitable patriotic frenzy.

  Although there are some voices within the White House who appear to believe that the Islamic Republic will totter and fall if elite units such as the IRGC come under attack, few experienced regional analysts share this view. Pointing to the popular Iranian reaction to the Iraqi attack in September 1980 which triggered the eight-year Iran-Iraq War, they warn that a US air campaign would not dislodge Ahmadinejad.

  And unlike Iraq before the ill-fated US-led invasion in 2003, Tehran does have a substantial arsenal which includes biological, chemical, and, in all likelihood, some form of radiological weapons. The IRCG may appear to some Washington hawks as a tempting target in terms of payback for alleged interference in the Iraqi insurgency, but the Islamic Republic has teeth and can be expected to bite back. At the lowest level, this might involve providing more sophisticated weaponry to Shia militants operating on the ground in Iraq.

  One of the key charges laid against the IRCG by the US administration is the alleged supply of improvised explosive devices (IEDs) – including some which have the capacity to strike tanks – to Iraqi insurgents. Last week, a US commander in Iraq, Maj-Gen Rick Lynch, claimed in media interviews that a unit of 50 IRCG personnel are active inside the country providing training for Shia militia members. However, when pressed, Lynch conceded that no Iranians had yet been captured in the region for which he has responsibility. He also acknowledged that some Iranian weapons may be entering Iraq via the blackmarket.

  Hard evidence of direct Iranian involvement appears hard to come by. And even if Tehran is supplying low-level weaponry there can be no doubt that Ahmadinejad’s regime – which is dominated by former IRCG personnel – could opt to provide a far greater range of military hardware, including much more sophisticated surface-to-air missiles, should it choose to do so.

  Moreover, the IRCG is a multi-faceted force – believed to have a strength of around 125,000 – of whom an estimated 5,000 are trained to be deployed on ‘unconventional’ missions at home and abroad, including the Al-Quds Brigade which supports Hamas and Hezbollah. In theory, these elite, ideologically committed forces could be unleashed across the region and beyond with a brief to strike against the interests of the US and its allies. There are also believed to be a number of Iranian ‘sleeper cells’ located around the world which could be activated with similar objectives. Against this background, it can be seen that military action against Iran would not be a low-risk strategy

  There are also wider geopolitical issues, and it is far from certain that Washington would be able to carry any of its key regional allies should it opt to launch an air campaign against Iran. As US analyst Anthony H Cordesman of the Center for Strategic and International Studies observed in a recent article in The New York Times: "Washington cannot — and should not — try to bring security to the Gulf without allies, and Saudi Arabia is the only meaningful military power there that can help deter and contain a steadily more aggressive Iran."

  Whatever Riyahd’s concerns over the growth of Iranian regional influence and the threat posed by the so-called ‘Shia Crescent’ there appears to be little or no appetite in the Kingdom for any expansion of US military activity across the Gulf. Indeed, as we have pointed out to subscribers, one of the key concerns across the Islamic world is escalating tensions between Sunni Muslims and Shias. Any hint of approval or collusion in a US strike against Iranian targets from the Saudis would inevitably fuel those flames of sectarian division (see SIR 2 August).

  And then there is the wider economic impact of an attack to consider. According to figures provided by the Iran National Oil Company (NIOC) the country produces between 3.5m and 4m barrels of crude oil per day. Disrupting this supply could be expected to lead to rocketing international prices with a knock-on economic impact across the industrialised world.

  Tehran also has the strategic muscle to close, or at least severely restrict shipping in the Gulf as the so-called "Tanker War" during the Iran-Iraq War demonstrated. It is estimated that around 546 vessels were damaged in these waters during the conflict in the 1980s, and there is no evidence to suggest that the Iranian leadership is not capable of taking similar action again. Since around 40% of the world’s crude oil shipments pass through the Straits of Hormuz, this is not a threat to be taken lightly.

  Iran is well aware of its strategic advantage. Back in March 2005, Iranian Expediency Council secretary Mohsen Rezai – himself a former IRCG commander – warned that "An attack on Iran will be tantamount to endangering Saudi Arabia, Kuwait, and – in a word – the entire Middle East oil."

  Another stark warning was given last week when Major-Gen Yahya Rahim Safavi, commander-in-chief of the IRGC, asserted that "Our coast-to-sea missile systems can now reach the length and breadth of the Gulf and the Sea of Oman and no warships can pass in the Gulf without being in range of our coast-to-sea missiles." Even if US strikes succeed in degrading some of these offensive capabilities, Iran’s ability to cause havoc for international shipping will remain one of Tehran’s principal weapons against its enemies.

  There is still room to hope that Washington’s increasingly hardline stance towards the IRCG is merely a tactic designed to increase pressure on Tehran, rather than a precursor to some form of direct military action. However, if not, the potential consequences could prove extremely far-reaching. Far from discouraging Iranian support for the Shia insurgency in Iraq, we fear that US strikes against targets in Iran would strengthen Ahmadinejad’s grip on power, destabilise the region further, and trigger an international oil crisis. SIR.

• Georgia at mercy of US, Russia, EU geopolitics - SIR 26 June 2007

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• Iran raises the stakes - SIR 7 June 2007

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  The current campaign against suspected dissidents and dual nationals by the Iranian authorities has echoes of the purges and hostage-taking that followed in the wake of the Islamic Revolution of 1979. In part, Tehran’s crackdown is a logical response to US calls for ‘regime change’, but recent events are raising fears that the Islamic Republic is about to launch a wide-ranging battle against reformers, human rights advocates, and even ordinary citizens who hold foreign passports or who have links with the West.

  The latest developments should be seen in the context of the two imperatives driving Iranian foreign policy: Tehran’s ambitions to be the key regional power amid the continuing chaos in Iraq, and the insecurity of the ultra-hardliners grouped around President Mahmoud Ahmadinejad who fear – not without reason – that Washington is plotting to foment internal instability by using Iranian proxies funded through a murky network of international charities and non-governmental organisations (NGOs). In certain respects, there are noteworthy parallels to be drawn between the prevailing point of view in Tehran and in Vladimir Putin’s Kremlin.

  There can be no doubt that the Ahmadinejad administration fears the rise of internal political dissent, although the moderate reformers who backed former president Mohammed Khatami pose little real challenge to the regime. Many of the reformers’ core supporters have become so disillusioned with the failure to achieve rapid, durable change that they have dropped out of politics altogether. Others have moved abroad convinced that reform is now impossible.

  Internal ethnic tensions

  However, the real domestic challenge to Tehran is likely to come from the Islamic Republic’s ‘Achilles’ heel’ – the country’s substantial ethnic minority communities which together make up an estimated 40 percent of Iran’s 69 million population. These ethnic groups include Arabs and Kurds, as well as smaller numbers of Ahwazis and Baluchis. Ahmadinejad and his security chiefs are now certain that some armed separatist movements are being funded covertly by foreign donors, including the US Central Intelligence Agency (CIA), although Washington has always maintained that it does not support terrorist activity in Iran.

  Amid the growing conviction among Iranian hardliners that the US and its allies, including Britain, are intent on destablising the Islamic Republic in pursuit of eventual ‘regime change’, the recent arrests of dual nationals should hardly come as a surprise. Since May, several high profile academics and journalists have been detained while visiting Iran, including Haleh Esfandiari, director of the US-based Woodrow Wilson International Centre for Scholars’ Middle East programme, Parnaz Azima, a journalist with US-funded Radio Farda and social scientist Kian Tajbakhsh. All three hold dual US-Iranian citizenship, although Tehran does not recognise them as US nationals.

  With a wider probe of other Iranians with foreign links or passports underway, further arrests and possible trials of detainees on charges which could include espionage or what Tehran is terming "anti-revolutionary activities" cannot be ruled out. To the outside world, the detention of internationally known dual-nationals appears akin to hostage taking. However, parallels are also being drawn to the arrest of five Iranian citizens – including senior Iranian Revolutionary Guard Corps (IRGC) officials – by US forces in neighbouring Iraq in January.

  Pressure to rehabilitate the MEK

  As relations between the US and its allies on one side and Iran on the other continue to deteriorate over a range of issues – including Tehran’s nuclear programme and its alleged support for militant Shia groups in Iraq – stepping up internal pressure on the Iranian regime is increasingly high on Washington’s agenda. One school of thought among US policy makers is that the Bush administration should consider lifting the terrorist designation imposed on the Mujahedin-e Khalq (MEK) organisation. This group, which is also known in English as the People’s Mujahedin of Iran (PMOI), is believed to have several thousand armed guerrillas based in Iraq and a long history dating back to the era of the late Shah of Iran.

  One of the key problems with the MEK is that it enjoyed close relations with, and funding from, Saddam Hussein’s regime in Iraq until 2003. Although MEK guerrillas agreed a ceasefire with US forces after the invasion, the group remains listed as a Foreign Terrorist Organisation (FTO) by the US State Department, as well as by the European Union (EU). Pressure to remove the MEK from this list has recently been stepped up, and a recent demonstration in London organised by the National Council of Resistance of Iran (NCRI) – a political group of exiles opposed to the Islamic Republic – called on the British government to rethink its ban.

  Whether such groups are capable of posing a serious threat to Ahmadinejad’s regime is doubtful. Support for the MEK in Iraq has been falling and although some sources close to the movement claim that it can call on a force up to 50,000 strong, recent intelligence estimates suggest that the guerrillas’ real strength is now less than 5,000, with some analysts suggesting that the group may actually be even smaller. However, the very existence of the MEK is useful to Tehran in that it provides a conveniently shadowy entity which can be blamed for internal incidents, as well as being easy to label as consisting of ‘traitors’ and the agents of foreign powers.

  Call for ‘détente’

  Other leading analysts are calling for a more fundamental assessment of US policy towards the Islamic Republic. For example, in the March-April issue of Foreign Affairs, Ray Takeyh, Senior Fellow at the Council on Foreign Relations suggested that the long-standing US policy of ‘containment’ has failed. Instead, Takeyh proposes an alternative strategy: "Acknowledging that Iran is a rising power, the United States should open talks with a view to creating a framework to regulate Iran’s influence, displaying a willingness to coexist with Iran while limiting its excesses. In other words, Washington should embrace a policy of détente."

  According to Takeyh "despite his deep religious convictions, Ahmadinejad is not a messianist seeking to usher in a new world order; he is a canny manipulator trying to rouse public indignation in a chaotic neighbourhood". He also points out that "by offering the pragmatists in Tehran a chance to resume diplomatic and economic relations with the United States, it could help them sideline the radicals and tip Iran’s internal balance of power in their favour".

  This point of view appears diametrically opposed to the current view in Washington which seems to favour using covert measures to undermine Ahmadinejad. However, given that there seems to be no realistic prospect of triggering a widespread anti-clerical uprising against the hardline leadership of the Islamic Republic, there are serious risks inherent in channelling – directly or via proxies – funds originating in the US to Iranian opposition groups, particularly those regarded by most of Washington’s own allies as terrorist organisations. An alternative model could be to encourage and widen existing divisions between the pragmatic conservatives grouped around former president Ali Akbar Hashemi Rafsanjani and the hardline Islamist radicals loyal to Ahmadinejad whose excesses are causing mounting concern among the country’s most senior leaders, including the Supreme Leader Ayatollah Ali Khamenei.

  ‘Brain drain’ from Iran

  Another major problem for Tehran is that the recent arrests of dual nationals risks fuelling the already serious ‘brain drain’ of talent from the country. This is not a new problem. Many wealthy or well educated Iranians fled Iran following the 1979 revolution and this trend has continued with one source estimating that as many as half of the Islamic Republic’s best young scientists leave the country, with around 75% of those who leave heading to the US. A report last year for the International Monetary Fund (IMF) revealed that Iran had the highest rate of ‘brain drain’ of any of the 90 countries assessed during the study – a cost in terms of human capital that may be losing the Islamic Republic as much as $40 billion annually according to the Iranian government’s own estimates.

  Moreover, some long-term émigrés have returned home for regular visits in recent years and there has also been an upsurge in Iranians participating in programmes run by international organisations. All this could now be in doubt owing to the current detentions in Tehran.

  With the Iranian authorities seemingly set on launching a widespread purge of dual nationals – and potentially any Iranians with foreign contacts – the country may face an accelerating loss of intellectual capital. Inward investment, particularly by Iranians who are resident abroad, is also likely to decline as dual passport holders stay away for fear of being detained on suspicion of spying or treason. SIR.

• Palestinian divisions - SIR 22 March 2007

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  Most Palestinians have been campaigning for a two-state solution with Israel: an independent Palestinian state existing alongside the Jewish state. However, as internal Palestinian divisions between the secular Fatah and fundamentalist Hamas persist, the Palestinians may find themselves with a two-state solution they had not bargained for: the West Bank and the Gaza Strip separating. An SIR correspondent reports from the Middle East and examines the current strategic threat to Palestinian aspirations of statehood.

  The West Bank and the Gaza Strip, geographically separated by a 40 km-wide swathe of the Negev desert, are part of historical Palestine and were to have been joined at a point south-west of Jerusalem under the 1947 UN Partition Plan. However, they have always been distinctly different regions: before the 1967 war the former was under Jordanian authority and the latter was governed by Egypt. Jordan, which annexed the West Bank in 1950, did much to develop the region. Egypt’s rule over Gaza was notable only for its neglect.

  Since the death of Yasser Arafat in November 2004, the Palestinian National Authority (PNA) has disintegrated into feuding power factions. These days, the West Bank is dominated by Fatah – which dominated Palestinian politics since the early 1960s – while Gaza has become the stronghold of the Islamic Resistance Movement (Hamas) after Fatah forces were crushed there during several months of internecine violence. This rivalry continues to bedevil efforts to form a unity government, and only exacerbates the regional differences between the two territories.

  As hopes of a viable Palestinian state evaporate in the face of constant Israeli encroachment in the West Bank and the punitive destruction of the Palestinian economy, so too does the concept of a two-state solution, with a Palestinian entity and Israel co-existing beside each other and an end to a century of bloodshed in the region. In early March, Shalom Hariri, a leading Israeli specialist on Palestinian affairs, warned: "We’re seeing the beginning of two states – a state of Gaza under Hamas control and the state of the West Bank governed from Ramallah."

  Divide and conquer

  Israel has long sought to divide Palestinian society to prevent the emergence of a viable Palestinian state, with East Jerusalem as its capital. The former PNA planning minister, Ghassan Khatib, says this "intentional and systematic policy of separating the West Bank from the Gaza Strip" is a key Israeli strategy "vis-à-vis the occupied territories" along with the continued expansion of West Bank settlements to divide the Palestinian population and dominate it. "Separating Gaza and the West Bank from each other probably constitutes the most immediate strategic threat to the Palestinian objective of establishing an independent state," adds Khatib.

  As Yisrael Harel, who heads the Institute for Zionist Strategy in Jerusalem, wrote recently: "It is indeed in Israel’s interest that Gaza be separated from Judea and Samaria [the biblical name for the West Bank] and that Gaza be linked to Egypt and not to Judea and Samaria by means of a corridor crossing Israeli territory."

  Harel also suggested that "Gaza would be Egypt’s headache, while in areas A and B of Judea and Samaria, Israel could maintain its military rule as long as terrorism continues. And on the day that it ends, there could emerge Palestinian self-rule linked to Jordan." In other words, there would be no independent Palestinian state embracing both the West Bank and Gaza.

  The Oslo accords stipulated that the West Bank and the much smaller Gaza Strip were "a single territorial unit" that would be linked by a safe corridor. However, that arrangement collapsed when the current intifada erupted on 28 September 2000. Since Israel unilaterally withdrew from the Gaza Strip in September 2005, it has blocked all Palestinian travel between the two territories, citing security concerns.

  Confederation with Jordan?

  According to Hanna Siniora, a Palestinian publisher who was a key figure in the previous Palestinian intifada in 1987-91, this "forces us to revisit the possibility of a confederation with Jordan".

  Moreover, Yival Diskin, director of Israel’s General Security Service (Shin Bet) recently told The Washington Post that: "I’m not one of those who say there are two Palestinian peoples, but there are two mentalities. Two geographies, two economies that make the places different. We have very strong security interests in not allowing strong ties between Gaza and the West Bank. If you open channels between the areas, you’ll see an increase in terror in the West Bank."

  Amid the collapse of central authority in the Palestinian territories, accelerated by Hamas’ domination of Gaza, there are even fears that the West Bank could split in two, a northern enclave around the towns of Nablus and Jenin, and a southern region centred on Bethlehem and Hebron. This is being highlighted by Israel’s envelopment of Arab East Jerusalem and the security barrier that will to all intents and purposes slice the West Bank in two along a line running eastward from Jerusalem.

  Nablus, the main city in the northern West Bank, and other population centres in the region are already largely out of the PNA’s control are now run by clan-based warlords, and crime is rife.

  Regional animosities

  Palestinian society has always tended to be tribally-oriented, and the powerful clans in the two geographically distinct segments of the self-rule Palestinian territories have reasserted themselves as central authority has crumbled. When the PNA was established it was based in Ramallah, the West Bank’s commercial hub. Since Hamas won its landslide victory in parliamentary elections in January 2006, the seat of political authority has moved to Gaza City.

  In the West Bank, the patriarchal Hashashibi, Husseini, Ja’abari, and Masri clans dominate. These have close ties with Jordan, where more than half the population is Palestinian or of Palestinian origin. Leading Palestinian families, well integrated into Jordanian society, have controlling interests in the industrial, banking, commercial, and agricultural sectors. This prosperous elite has significant financial holdings in the West Bank.

  There has long been animosity between the peoples of the two regions. Khalil Shiqaqi, a leading Palestinian sociologist, noted in an exhaustive demographic study that there is "a psychological barrier between the inhabitants of the two territories and…mutual suspicion" that cannot be "disregarded or ignored".

  He also concluded that the more prosperous, better educated West Bankers view Gaza as "one big refugee camp" with a backward society "inclined to roughness, extremism, grimness, fanaticism, and instability". For their part, Gazans consider West Bankers to be aloof, patronising and "racist" who treat them as "third class citizens".

  Rising power of crime syndicates

  In Gaza, the influence once held by the Shawwa, Shafei, and Middein families has been largely seized by the private militias run by Palestinian security service chiefs and the clans who control organised crime in the territory such as the Dughmush and the Abu Samhadanna. These crime syndicates have largely allied themselves with Hamas.

  In contrast, the more secular West Bankers, who number about 2.5 million, see little benefit in being tied to the anarchic Gaza Strip and its 1.4 million population. One million of the latter are refugees who have largely transferred their allegiance to Hamas.

  The late King Hussein of Jordan relinquished responsibility for the West Bank in July 1988, but his son, King Abdullah II, has been showing a revived interest in the region of late. Leading West Bank families have bombarded Amman with appeals to send security forces to help restore law and order in the region.

  In 2005 Abduallah agreed to send the Badr Battalion of the defunct Palestine Liberation Army, whose forces in the Hashemite kingdom were under the control of the Royal Jordanian Army, to the West Bank to help bolster Palestinian President Mahmoud Abbas’s forces, although to date it has still not shown up. Interestingly, Abbas maintains a home in Amman and enjoys close ties to Abdullah.

  Moreover, the Jordanian royal family itself has strong links to the West Bank. Queen Rania’s family hails from the west Bank town of Tulkarem, and in February 2005, the monarch replaced his half-brother Prince Hamza as crown prince in favour of his own 10-year-old son, Prince Hussein, who has Palestinian blood through his mother.

• US opens up new front in Iraq war - 25 January 2007

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  US President George W Bush has opened a new front in the Iraq war, this time against Iran. The immediate objective is to curb Tehran’s covert campaign to destabilise Iraq, but the long-term strategic aim is to thwart Iran’s drive for dominance in the Middle East. An SIR correspondent reports from the Middle East on why it has taken the US administration so long to tackle Iran’s clandestine operations which began at the time US-led forces invaded Iraq in 2003.

  Iraq has long been a prime target for Iran’s intelligence services, whether during the reign of the late Shah Mohammad Reza Pahlavi or under the Islamic regime that toppled the monarchy in 1979. Iranian penetration has been extensive and deep, particularly since Saddam Hussein was overthrown in April 2003 and security along the 1,200km border between the two states collapsed.

  Surprisingly, the Iranian campaign to destabilise Iraq has received little attention outside the region, apart from occasional allegations of infiltration, gun-running, and mischief-making by the Bush administration. There have been occasional arrests, but Iranian agents have hitherto operated with virtual impunity, presumably because the US authorities did not want to antagonise Tehran further at the same time as the West is seeking to persuade the regime to abandon its nuclear weapons programme.

  Getting tough with Iran became necessary when Bush decided, as part of his new "surge doctrine", to go all-out against the Shia militias slaughtering Iraq’s Sunnis and undermining US efforts to stabilise the country. These forces are backed, funded and armed by the government in Tehran - or at least the ultra-hardline faction within it - and crossing swords with Iran thus became inevitable.

  Some critics in the US Congress fear the new policy has the potential to trigger a war with Iran. Just how far the US administration is prepared to go – including hot pursuit of suspects across the border and into the Islamic republic itself – remains unclear, but there is no doubt that the risks of such a conflict escalating have now increased significantly.

  "It’s going to have some serious consequences," warned former US Assistant Secretary of State Martyn Indyk, a Middle East specialist. "Since the president has taken the gloves off, I would expect that they [Iran’s leaders] would respond by taking the gloves off too."

  ‘Killing Americans’

  US Secretary of State Condoleezza Rice has stated that Bush authorised a wide-ranging US offensive against Iranian intelligence agents in Iraq "several months ago" because they were aiding attacks on US troops. According to the US military, nearly 200 US and British soldiers have been killed, and more than 600 wounded, by advanced explosive devices made in Iran and smuggled into Iraq through the southern marshes and along the Tigris.

  The first US swoops were not announced until late December, although US military sources said other covert operations against the Iranians had been carried out earlier. The US authorities have confirmed that five Iranians were arrested in two raids in the capital on 24 December. Two more raids took place in the northern Kurdish-controlled city of Irbil on 4 January, with six arrests.

  According to the ad-Dawa Party, a Shia faction with strong links to Iran, the Iranians arrested in Baghdad were liaising between Iran’s National Security Council and the Badr Organization, the military wing of the Tehran-backed Supreme Council for the Islamic Revolution in Iraq (SCIRI), the most powerful of the Iraqi Shia groups.

  Two of the five were arrested with the Badr commander, Hadi al-Ameri, at his home in a compound owned by the SCIRI head, Abdul Aziz al-Hakim, on the east bank of the River Tigris. Before 2003, Ameri served with Iran’s elite Islamic Revolutionary Guards Corps (IRGC). Hakim, who held talks with Bush in Washington in early December, ensured that Ameri - who is also chairman of the Iraqi parliament’s security committee - was quickly released.

  The two Iranians in question are believed to be Brig-Gen Mohsen Chirazi, ranked No 3 in the IRGC’s highly secretive Quds Force, which deals with foreign militants and handles covert operations abroad, and one of his aides, Colonel Abu Ahmad Davari. If Chirazi has been detained, he would be the highest-ranking Iranian officer ever seized by the US.

  Ansar connections

  US intelligence also reportedly seized plans for attacks from the other Iranians arrested, along with contact numbers for key members of Ansar al-Sunnah, a Sunni jihadist group that emerged from the Iraqi Kurdish Ansar al-Islam organization, a movement that had operational links with Tehran before the US-led invasion in March 2003. Ansar al-Sunnah operates in the Kurdish zone.

  The Patriotic Union of Kurdistan, one of the two main Kurdish groups, is headed by Jalal Talabani, Iraq’s first non-Arab president, who has links with Tehran that date back to the Kurds’ decades-long rebellion against the Baathist regime. Two of the five Iranians held in Baghdad in December had been personally invited to Iraq by Talabani, who was incensed by their arrest.

  Tehran has vehemently rejected the US allegations and it remains unclear whether Iranian activity in Iraq has diminished in the wake of the US raids. Most analsysts suggest that it is unlikely that that the Iranian leadership will allow itself to be drawn into a war with the US at this time, despite Washington’s military overstretch. This view has been reinforced by evidence of mounting domestic pressure on Iran’s hardline President Mahmoud Ahmadinejad over his provocative stance towards the West.

  The Islamic Republic clearly believes that time is on its side when it comes to bleeding the Americans in Iraq. However, stepping up covert activities in Iraq, where intelligence reports suggest that Iran has established an elaborate, deeply entrenched covert infrastructure, in order to maintain pressure on Washington, is an option that Tehran may find attractive.

  Iran’s network in Iraq

  The presence of Iranian militants in Iraq goes right to the top. Iran’s current ambassador in Baghdad, Hassan Kazemi Qomi, also served with the IRGC throughout the 1980-88 war with Iraq. In 1988-90, he was deputy chief of the IRGC unit that trained the almost entirely Shia Iraqi opposition forces based in Iran.

  According to an April 2004 interview with an Iranian described as a former intelligence officer involved in Iraq by the Saudi-owned As-Sharq al-Awsat newspaper, Tehran has established a vast network of agents throughout Iran over the last two decades. This Iranian source, who was not identified, alleged that the Quds Force was responsible for the assassination of Ayatollah Mohammad Baqr al-Hakim in August 2003. Al-Hakim founded SCIRI in Iran early in the 1980-88 war. However, he co-operated with US forces after they invaded Iraq in March 2003. SCIRI was politically aligned with Iran’s hardliners during that war and maintains close links with the IRGC.

  The ayatollah, Abdul Aziz’s older brother, perished in a massive bombing at the Imam Ali Mosque in the holy city of Najaf along with more 80 others, an attack widely attributed to the Sunni jihadists allied to Al-Qaeda in Iraq. The source interviewed by As-Sharq al-Awsat also indicated that hardliners in Tehran considered that at the time it was prudent to weaken the politically moderate and nationalistic Shia leadership in Iraq in order to bolster Iranian influence over the soon-to-be empowered Shia majority, with the aim of steering Iraq’s political future towards Tehran’s advantage.

  Moreover, the Iranian informer claimed that the Quds Force uses at least 18 charitable organizations as cover in major Iraq cities, including Baghdad, Basra, Najaf, Kufra, and Nasiriyah. He also alleged that there are around 2,700 safe-houses in Baghdad alone, while up to 300 Iranian media representatives are also used as agents or intelligence assets.

  Controlling Karbala

  More recently, the Baghdad daily newspaper Iraq al-Ghad claimed that Iran’s Ministry of Intelligence and Security (MOIS) now controls the levers of power in Karbala, a Shia holy city south of Baghdad. The paper asserted that during the time of the interim government Prime Minister Ayad Allawi, a secular Shia and former CIA operative, more than 420 Iranian agents were arrested in Karbala.

  Iraq al-Ghad also suggested that a tactic used by MOIS agents to secure support for Iran in Karbala – and presumably in other Iraqi cities – is the cutting off of electricity supplies. Its agents then step in to distribute portable generators and food provided by Tehran.

  Once a Shia alliance, dominated by Iranian protégés SCIRI and ad-Dawa, was in power in Iraq following the January 2005 elections, the Badr Organisation, with some 20,000-25,000 Iranian-trained fighters, took over many of the interior ministry’s intelligence and security functions. Its elite units were infiltrated en masse into the ministry.

  According to both US and Iraqi officials, these and other Shia militias such as the Mahdi Army led by firebrand cleric Moqtada al-Sadr, have been responsible for slaughtering Sunnis. The notorious Wolf Brigade, blamed for the killing of hundreds if not thousands of Sunnis, is a Badr offshoot formally under the ministry’s control and commanded by senior Badr officers.

  If this intelligence estimate is accurate, the Iraqi interior ministry has effectively become an Iranian fifth column within the US-backed government, and US forces are in the invidious position of fighting to defend a Shia-dominated regime in thrall to Iran, a member of Bush’s "axis of evil".

• China's espionage becoming a major threat - SIR 21 December 2006

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  Intelligence community sources in both the US and Europe are warning that the recent spate of prosecutions of individuals on charges linked to Chinese espionage are likely to represent only a fraction of a much wider threat to the economic and security interests of Western nations. And they are also highlighting the increasing use of ‘non-traditional’ intelligence assets in Beijing’s battle to win economic advantage over foreign competitors.

  Key pointers include:

  - A marked rise in suspected cases of industrial and technological espionage during 2006

  - The rising numbers of Chinese academics, students, and visiting delegations suspected of involvement in information gathering on behalf of the Chinese state

  - Reports of pressure being placed on Chinese nationals resident abroad to assist Chinese intelligence agents gather material

  - China’s continuing economic growth – an average of 10% per annum over the past four years, with projected growth for 2007 only down slightly to 9.5%

  - Beijing’s ambitions to increase its export market share of high technology products and components

  Although there has been increasing concern over Chinese economic espionage against the West for a number of years, some intelligence community specialists are now suggesting that the current focus of Western intelligence agencies on what are seen to be ‘more pressing’ issues – particularly counter-terrorism – means that counter-espionage has not been prioritised by domestic intelligence agencies, either in the US or in Europe. However, given the enormous economic threat posed by Chinese industrial espionage there are signs that the risk is now being taken far more seriously.

  One recent case was the prosecution of two US-based engineers (one a US citizen of Chinese ancestry and the other a Chinese permanent resident of the US) who have entered guilty pleas on charges of economic espionage to benefit a foreign nation – the first time such prosecutions have been brought by US authorities. Both men were apprehended by US Federal Bureau of Investigation (FBI) agents shortly before they boarded a flight to China.

  The case is particularly significant because the FBI actually found highly confidential – and commercially valuable – material stolen from four Silicon Valley companies. According to US prosecutors, the espionage was part of a plan to set up a Chinese government-backed microprocessor operation in China. The two men face maximum terms of 30 years in prison when they are sentenced in late April 2007. However, the actual sentences handed down are likely to depend on the extent of the intelligence they are willing to provide to US investigators.

  Similar charges have also been brought in a separate case involving the alleged theft of military equipment data which was to be used to "benefit the foreign governments of China, Thailand, and Malaysia" according to the official US indictment. In this case, the individual concerned – a Canadian citizen of Chinese origin – has denied any wrong doing.

  Using students and academics as assets

  Another current case in the US involves the alleged sale of microprocessors with potential missile applications by a Chinese academic to the Chinese state. In all, US investigators are currently probing around 400 suspected cases of economic or technological espionage involving illegal transfers to China.

  Of even greater concern, however, is that many of those suspected of involvement in these activities are not professional Chinese intelligence agents. Many are visiting academics, students enrolled in Western universities and colleges, or members of official trade delegations. In some cases, investigators have discovered evidence that fake companies are being created to facilitate illicit technology deals. Some estimates have put the number of suspect firms operating in the USA at over 2,600.

  Australia also targeted

  The recent upsurge in prosecutions and indictments in the US demonstrates that Washington is facing up to a threat that many within the international intelligence community have been warning is escalating. There are wider parallels with events in Australia in June 2005 when Chinese consular official Chen Yonglin defected amid claims that Bejing had "up to 1,000 spies" operating within Australia and was also using its network of agents to "kidnap" Chinese dissidents in order to return them to China.

  Although Beijing condemned its former official’s claims as "fabricated" and "purely fictitious", the affair shed rare light on the extent of China’s alleged intelligence activities abroad. Chen’s assertions were backed shortly afterwards following confirmation of certain details by another defector, this time a former security officer named Hao Feng Jun.

  Hao’s claims focused mainly on Beijing’s operations to spy on dissidents in Australia. However, whilst the Australian authorities were reluctant to grant either man political asylum – or give their claims any official credence – amid concerns that the controversy might damage Australian-Sino relations, the US appears to be willing to take a much tougher line in order to safeguard its economic interests.

  Concern over Chinese espionage activities in Britain have been mounting since warnings were given by the country’s domestic Security Service MI5 in late 2005 that the level of intelligence gathering by Chinese agents was becoming a threat to national economic security. Likewise, a defection in Belgium in 2005 led to the exposure of various front organisations for Chinese espionage activities such as the "Chinese Students’ and Scholars’ Association". Similar concerns have been raised in Sweden, as well as by national intelligence services across the EU.

  We predict that with increasing numbers of Chinese students enrolling for courses abroad – one leading UK university’s business school recruits over 60% of its postgraduate students from China, most of whom are sponsored by the Chinese state or firms with close links to the government – the threat posed by Chinese economic intelligence-gathering is likely to remain a key risk. At present, the US seems willing to prosecute individuals involved in economic espionage, but other countries have not yet demonstrated the same determination to launch their own crackdowns against Beijing and its networks of intelligence agents and assets. SIR.

• Apocalyptic power struggle in Iran - SIR 30 November 2006

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  The international focus on Iran’s nuclear programme and its alleged activities in neighbouring Iraq is diverting attention from a crucial power struggle inside the country. Ahead of two elections scheduled for mid-December, an SIR special correspondent in the region explains what is really happening inside Iranian politics.

  The two polls – one for municipal councils and the second for the powerful assembly that oversees the regime and its military – are shaping up to be a trial of strength between Iran’s hardline President Mahmoud Ahmadinejad and the Islamic Republic’s conservative supreme leader, Ayatollah Ali Khamenei. The municipal election scheduled for 15 December is being seen as a litmus test of popular support for Ahmadinejad, particularly within the conservative camp which has become increasingly divided since the former Revolutionary Guard’s unexpected victory in the 2005 presidential elections.

  On the same day as the local polls there will be elections for the Assembly of Experts, an 86-member body of senior clerics whose task is to monitor the supreme leader and to choose his successor. This contest will be the more crucial of the two tests.

  Khamenei and his allies, including former president Ali Akbar Rafsanjani, currently control the assembly, whose membership is selected every eight years. However, Ahmadinejad is pushing hard to seize control of this key centre of authority in a power struggle that is set to intensify.

  Ahmadinejad’s chosen candidate to head the assembly is Ayatollah Mohammad Taghi Mesbah-Yazdi, the president’s spiritual guide and the leader of an extreme Islamic society known as the Hojjatieh. According to Iranian insiders, this group has been steadily gaining influence for several years and is increasingly seen as a threat to the conservative camp led by Khamenei.

  The Hojjatieh – an emerging power

  The president relied heavily on support from the Hojjatieh when he won the presidential election in June 2005. Since then he has appointed members of the society to key positions in government, the diplomatic service, and the military in order to consolidate his - and the society’s - grip on the centres of power in Iran.

  Mesbah-Yazdi, Hojjatieh’s chief ideologue, founded the ultra-conservative Haqqani seminary whose list of alumni reads like a who’s who of hardline Islamic fundamentalists. Many of the clerics who graduated from his establishment now hold senior government positions. They include the Iranian Intelligence Minister, Hojatoleslam Gholam-Hussein Mohseni-Ezhei, who has played a key role in crushing dissidents, and the current Interior Minister Hojatoleslam Mustafa Pour-Mohammadi. Both of these hardliners are alleged to have masterminded the assassination of dozens of Iranian dissidents and intellectuals in the 1990s. First Vice-President Parviz Davoudi is another Haqqani alumnus.

  The Hojjatieh was founded in 1953 by Sheikh Mahmoud Halabi, a preacher from the holy city of Mashhad in northeastern Iran. Its core belief is that true Islamic government must await the return of the Hidden Imam, or Mahdi, the 12th descendant of the Prophet Mohammed. That meant it opposed even Ayatollah Ruhollah Khomeini’s concept of Islamic government, velayat-e faqih (the Guardianship of the Supreme Jurist).

  The society maintains that a functioning Islamic government actually delays the return of the Mahdi, who according to Shia beliefs went into hiding as a child 1,300 years ago. Members also believe that causing chaos will accelerate his reappearance. The Hojjatieh opposes religious involvement in political affairs, although it has set that precept aside when it suits its purpose to subvert the political establishment, as it now seems to be doing.

  Planning for an apocalypse?

  If Mezbah-Yazdi succeeds in taking over the Assembly of Experts, he could promote the Hojjatieh concept of the apocalypse needed to bring the return of the Mahdi and the dawn of a New Islamic world. This frightening vision is apparently shared by Ahmadinejad who has taken a tough line on Iran’s drive to become a nuclear power.

  Relatively inactive during the reign of Shah Mohammed Raza Pahlavi, the Hojjatieh enjoyed a revival during the 1979 Islamic revolution. The society temporarily set aside its opposition to Khomeini’s rule because it feared a communist takeover.

  However, Khomeini became increasingly intolerant of the society and its secretive ways, and on 12 July 1983 he ordered it disbanded. It went through the motions, but many of its members simply joined the conservative Islamic Coalition Association and kept their infrastructure intact clandestinely.

  For several years, Iranian conservatives have been warning that the Hojjatieh was quietly infiltrating the centres of power. According to such diverse political figures as former president Mohammad Khatami, a leading reformist, and Ayatollah Mohammad-Reza Tavassoli, Khamenei’s former chief of staff (and no ideological liberal), the Hojjatieh pulled off a "silent coup" by getting their man, Ahmadinejad, elected in 2005.

  It is worth noting that the new president’s first list of cabinet nominees included Hojjatieh members and old comrades from his days as a commander of the elite Islamic Revolutionary Guards Corps (IRGC). Although Khamenei, through parliament, was able to block the appointment of some of Ahmadinejad’s associates, the cabinet that emerged remains arguably the most militant since the early days of Khomeini’s rule. At least 17 of the 21 nominees had held senior positions in the IRGC or in the intelligence community.

  The conservatives strike back

  Soon after the presidential election, Tavassoli delivered a broadside against the Hojjatieh at a meeting of the Expediency Council, a powerful body that adjudicates in legislative disputes between parliament and the Council of Guardians. According to Mohammad-Ali Abtahi, a cleric who was Khatami’s deputy for legislative affairs until he resigned in October 2004, Tavassoli "voiced alarm that the leaders of the Hojjatieh group were now practically in control of the executive branch of the government and the Revolutionary Guards, and that the new president-elect was under their domination".

  Although conservatives controlled every centre of power in Iran for the first time in a decade, in the opaque world of Iranian politics in which the various factions are constantly vying with each other for dominance, Khamenei saw Ahmadinejad and his associates as a potential threat to his authority and Iran’s political equilibrium at a particularly delicate moment in the republic’s dealings with the West.

  The new administration’s uncompromising position in the nuclear stand-off with the US, along with its populist economic policies, violent rhetoric, and lack of experience in foreign affairs, are causing alarm within the political establishment, especially among the old guard who spearheaded the Islamic revolution with Khomeini. In some respects this confrontation is as much a generational clash as anything else. Ahmadinejad, widely seen as an incorruptible man of the people, campaigned on a populist platform for economic and social justice and against rampant corruption in the clerical and ideological establishment.

  The supreme leader’s strategy

  Khamenei has sought to outflank Amhadinejad and curb what many Iranian leaders see as his impulsive tendencies. In late 2005, the supreme leader turned to his old revolutionary comrade, and sometime political rival, Rafsanjani in a bid to counter the young president’s self-proclaimed "second revolution".

  Khamenei also amended Iran’s power structure by giving the Expediency Council, a non-elected political arbitration body chaired by the pragmatic Rafsanjani, sweeping new authority to supervise parliament, the judiciary, and the executive. This move created, in effect, a parallel supreme authority.

  Mesbah-Yazdi, who has long advocated so-called "martyrdom operations" to combat the enemies of Islam, is the new president’s ideological mentor and a Shia marja’a-e taqlid (object of emulation). His hand was seen in Ahmadinejad’s meteoric rise in Iranian politics, from provincial governor to high-profile mayor of Tehran, both appointed posts, to president in just two years.

  Before the June 2005 elections this firebrand cleric issued a fatwa – religious decree – instructing all the members of the Basij, an Islamic paramilitary force popularly known as "the army of 20 million" that supports the IRGC, to vote for Ahmadinejad. No doubt similar pressure will be exerted by the Hojjatieh’s cadres during the December polls.

  At the same time, General Yadollah Javani, chief of staff of the IRGC - whose officer corps largely supports Ahmadinejad - has been publicly exhorting his forces to back the president’s candidates in the forthcoming elections. In contrast, the government-controlled media has been denouncing Rafsanjani’s candidate in the assembly election, Mesbah-Yazdi’s main rival, as a pro-Western stooge.

  The outcome of December’s elections will prove crucial for Iran’s foreign policy. A victory for the Hojjatieh would undermine current diplomatic moves, thus propelling the Islamic Republic towards a direct confrontation with the West.

• Moscow's role in failed Georgia coup - SIR 14 September 2006

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  Amid rising tensions between Russia and Georgia, the arrest last week of 29 people during the investigation of an alleged plot to launch a coup d’etat against the Georgian government has highlighted the Kremlin’s continuing interference in the independent states that broke free from the old Soviet Union. In fact, according to Strategic Intelligence Review’s intelligence sources in the region, the current crackdown follows several years of destabilising activities by one of Moscow’s proxies: Lt-Gen Igor Giorgadze, former head of Georgia’s intelligence service.

  Our analysis of the situation includes the following key points:

  · The Kremlin remains determined to destabilise the pro-Western government of Georgia

  · For the past decade Moscow has supported and financed pro-Russian Georgian political parties, but there is mounting evidence that this is being stepped up as tensions between Russia and Georgia escalate

  · As Russia’s proxy, Giorgadze has recently stepped up his demands for a second, pro-Russian revolution aimed at ousting the present Western-orientated administration of President Mikhail Saakashvili

  · Russia’s recent embargo on the importation of Georgian wine and mineral water is adding economic pressure

  · Having succeeded in manoeuvring a pro-Russian candidate into the premiership of Ukraine, Moscow has longer-term ambitions to reverse Georgia’s current pro-Western, pro-NATO policies.

  A former Soviet KGB colonel, in 1993 Giorgadze was appointed as minister of state security and head of the State Security Service in post-Soviet Georgia. However, while in power, he sought to rebuild close links with his Russian intelligence and security counterparts.

  In August 1995 Giorgadze was implicated in what was alleged to be a Russian-backed plot to assassinate the then president of Georgia, former Soviet foreign minister Eduard Shevardnadze (who had himself come to power in 1992 following a coup d’etat against Georgian President Zviad Gamsakhurdia). Facing treason charges, Giorgadze fled to Russia where he has remained. He has been protected and groomed by Kremlin hardliners as a dependable pro-Moscow challenger to any Georgian administration that is determined to preserve the country’s independence.

  Whilst in exile, Giorgadze formed openly pro-Russian political parties. The first, Samshoblo (the All-Georgian Patriotic Alliance), actively campaigned for the ousting of Shevardnadze, a politician who was loathed in the Kremlin because of his role in the disintegration of the Soviet Union.

  After Russian President Vladimir Putin came to power in 1999, Giorgadze’s cause received a major boost, and from mid-2002 onwards he and his supporters were active in undermining Shevardnadze’s administration. One of Moscow’s key charges against Shevardnadze was that the government in Tbilisi was providing shelter for Chechen separatists opposed to Moscow’s military campaign in Chechnya.

  The national crisis which followed the Georgian parliamentary elections in November 2003 could have provided Giorgadze and his Russian backers with an opportunity to seize power from the embattled president, and there were fears that Moscow might even intervene in order to restore order. However, the so-called Rose Revolution which finally ousted Shevardnadze also backfired spectacularly on the Kremlin since the new government of Mikhail Saakashvili, who was elected as president in 2004, has been firmly pro-Western in its policies. Saakashvili has also incurred the Kremlin’s displeasure by his renewed efforts to deal with the Russian-backed separatist region of South Ossetia.

  Clashes within the past week between Georgian police and South Ossetian separatists have followed a recent attack against an Mi-8 helicopter carrying Georgian defence minister Irakli Okruashvili after he overflew territory claimed by the separatist regime headquartered in the town of Tskhinvali. The subsequent armed clashes on the ground this week have left several dead, including three members of the rebel South Ossetian police force.

  Economic pressure is also being applied. Earlier this year Moscow restricted imports of Georgian wine and mineral water citing concerns over "sanitary" quality and the alleged presence of pesticides. The Georgian government has denounced the move as being politically motivated and designed to undermine the country’s economy.

  Presidential ambitions
  As tensions between Moscow and Tbilisi have been rising, Giorgadze has become more vocal in his calls for the overthrow of Saakasvili’s administration. In May he called a press conference in Moscow to outline the political programme of his latest pro-Moscow vehicle, Samartlianoba (Justice Party), a movement that appears to enjoy little, if any real support in Georgia. Perhaps predictably, the key policies of his party are opposition to Georgia’s links with Nato and a call for much closer ties with Russia, including greater political and economic integration – effectively establishing a puppet regime allied to Moscow.

  Meanwhile, in early July, Giorgadze gave a controversial interview to Moscow News in which he predicted another "revolution" in Georgia. When asked by the interviewer whether he had ambitions to seek the Georgian presidency, Giorgadze observed that: "I will be [president] only in the case, when such is the will of the people."

  In fact, given that he is considered to be a fugitive from justice, Giorgadze has twice been blocked from trying to stand as a candidate for the presidency in the elections held in 2000 and 2004.

  Russia’s sphere of influence
  Moscow’s support for Giorgadze is clear from the Kremlin’s repeated rejections over the past decade of Tbilisi’s demands, backed by Interpol warrants, for the former intelligence chief’s extradition on treason charges. The Russian strategy is based on the conviction that Georgia is within Russia’s sphere of influence. Post-independence moves towards the West by both Shevardnadze and Saakashvili – particularly closer ties with Washington – are regarded as a threat to Russia’s regional interests.

  Concerned over the activities of Samartlianoba, a party whose leader is wanted on charges of treason and who is calling for the overthrow of the democratically-elected government, Saakashvili has moved to neutralise Giorgadze’s supporters inside Georgia. Leaders of allied parties, including the Conservative-Monarchist Party, were also arrested. Of the 29 initially detained following last week’s police raid, 13 have so far been charged under Article 315 of the country’s criminal code – "plotting against the state and overthrowing the government". Georgian interior ministry sources have also claimed that they have uncovered evidence of a plot to bomb the main offices of the ruling United National Movement.

  Commenting on the arrests, Saakashvili accused Moscow of backing the group. "Certain forces in Russia decided that this autumn is the last time when it is still possible to stop the process of Georgia’s formation," Saakashvili observed. In response, Russian presidential aide Sergei Prikhodko denied these claims. "I, of course, know of no Russian plans to overthrow the Georgian leadership." AS.

• Maturing US attitudes towards China's rise - 10 August 2006

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  Just over a year ago, in July 2005, we issued a Special Bulletin on US-China relations. Reviewing testimony to the US-China Economic and Security Review Commission, we concluded that the overriding impression was of US fear of China. The testimony given last week to the same commission on "China’s role in the world" gives a very different impression of US-China relations and reveals a significant maturing of US attitudes.

  At the July 2005 hearings, we were particularly struck by the testimony of Dr Marvin C Ott, Professor of National Security Policy at the National War College, who argued with regard to China in Southeast Asia that Chinese foreign policy was being driven by geopolitical ambition and nationalism and that it was intent on establishing a "pre-eminent sphere of influence" in the region. He said: "There is a strategic contest (a Great Game) underway and one player has developed a sophisticated strategy and has already collected a number of chips; the other player does not have a strategy and acts like it is unaware the game has started. So far the US is losing the game."

  Last week’s testimony on China’s policy in Southeast Asia, given by Karl D Jackson of the School of Advanced International Studies at John Hopkins University, was far less alarmist. His view is that Southeast Asia is accommodating the rise of China with little problem and that "rather than being drawn totally into China’s economic and security orbit, Southeast Asian nations continue to maintain balanced economic relationships with non-Chinese markets while continuing to play a sophisticated diplomatic game that hedges the rise of China with the continued presence of the United States, the on-going importance of Japan, and the rise of India."

  Jackson admits that China is now treating Southeast Asia "seriously" and that the US faces a much more skilled and competitive Chinese diplomatic corps than in the past, but this just means that "a healthy US policy should adjust itself to increased competition". In Jackson’s view, the desire of Southeast Asian nations to maintain their independence will ensure that they will continue to hedge between the main centres of power. The idea of Southeast Asia inexorably becoming part of a new Chinese hegemony is dismissed.

  Robert Sutter, of the School of Foreign Service Georgetown University, adopted the same line of argument, pointing to the degree to which the many independent-minded countries of Asia hedge in reaction to China’s rise. He said: "These governments work quietly among themselves and with the United States to ensure that their independence and freedom of action will not be negatively affected as China rises in prominence in the region. Such actions reinforce US leadership in Asia as China rises."

  On Northeast Asia, Rear Admiral Michael McDevitt took at equally relaxed view, saying that China’s relations with its neighbours are dictated by "its grand strategic objective of preserving peace and stability in its ‘near abroad’ so that economic development can proceed". He argued that China is acting in "a discrete and benign way" in its pursuit of this objective, and he said "it is a fact that Chinese power (economic and military) and the lure of the China market has underwritten a decade and a half of very adroit diplomacy aimed at eliminating points of tension and disputes with its contiguous neighbours".

  Even on the Shanghai Cooperation Organization (SCO), which many see as a major challenge to the US, McDevitt was relaxed, saying: "The SCO is a multilateral manifestation of Beijing’s single-minded strategy aimed at ensuring good relations with its neighbours." And he ruled out any future confrontation between Russia and China over natural resources or China’s need for lebensraum on the grounds that it would be "counter to Beijing’s desire for a peaceful neighbourhood" and because "changing international norms and Russia’s massive nuclear arsenal make it very unlikely that a weakened Russia will suffer the same fate as China in the 19th century".

  On North Korea, McDevitt was also understanding, arguing that China is sincere in its desire to end Pyongyang’s nuclear programme, but "it is not concerned enough to apply serious economic pressure that could cause the Kim regime to collapse…Its goal is to maintain a reasonably stable situation."

  Closer to home, the two testimonies on Chinese influence on Latin America continued this far more relaxed approach to China’s rise. Last year the commission heard Al Sanatoli of the Asia-America Initiative argue that "Chinese geo-strategic practices of asymmetrical warfare…have been steadily and effectively growing during the past decade in Latin America." He added: "Chinese tactics are being used to gain political and economic influence, as well as military alliances and bases for cyber-electronic warfare. These developments are a critical challenge to the United States in a vulnerable resource-rich area on our doorstep that we have too often taken for granted."

  Last week, Cynthia Watson of the National War College put an entirely different viewpoint, saying: "I do not believe China currently poses a significant threat to the United States in Latin America." She argued that China’s relationship with the US was too important to Beijing to risk by upsetting Washington in Latin America, and she said that - in any case - the Chinese were well within their rights to view Latin America as coming within their global interests and that it was "acting as any great power would act".

  Not even China’s relations with Venezuela’s President Hugo Chavez seem to cause serious concern any longer. William Ratliff of the Hoover Institution first of all dismissed Chavez as an example of "that cyclical Latin American phenomenon of the macho anti-American caudillo who is far more remarkable for his crude punchy personality and popularity (with some) than for his progressive politics". He then argued that China’s interest in Venezuela is economic rather than political and that it is "more put off than enthusiastic about Chavez political campaigns which could result in turmoil in the region or conflict with the United States". He also pointed out that Hugo Chavez’s attitude towards the United States preceded any relationship with China "and is in no way a result of that relationship".

  Underlining this apparent shift in perceptions from seeing the rise of China as an inevitable threat towards seeing it as something natural that needs dealing with in a grown up way, Dr Ernest J Wilson III, from the University of Maryland, made the point that China is behaving no differently to any other nation in using all the tools of statecraft to advance its multiple interests, including its interest in obtaining natural resources and energy. As he pointed out: "All governments tend to pay more attention to resource-rich countries than to resource-poor ones."

  The view of the US administration towards China was put by Thomas J Christensen, Deputy Assistant Secretary for East Asian and Pacific Affairs, and this also showed a shift in attitude over recent months. He said that he believed the prospects were "good" for China playing "a more positive role in the global system", and he said that there was evidence that the more China becomes a major part of the global system, "the more its interests align with those of other major stakeholders, including the US".

  On North Korea, Christensen had particular praise for China, saying: "In the past few weeks we have seen China take unprecedented actions to express concerns to North Korea over its provocative missile launches." And he praised China’s support for UNSC Resolution 1696 requiring Iran to suspend its uranium enrichment programme. He also had some mildly positive things to say about China’s contributions on Iraq and Afghanistan and even on Myanmar and Sudan.

  However, criticism of China’s energy policy was implicit in Christensen’s comment that: "We are encouraging China to realize that the best way for it to pursue its energy security is to help strengthen global markets not to seek preferential equity deals with irresponsible and, ultimately, unstable regimes."

  He was critical of China’s performance on human rights, trade, and non-proliferation. And he again reiterated US concerns about China’s military modernization - although he accepted that military modernization was in part "a natural consequence of China’s growing economic means and the comparatively outdated nature of its armed forces".

  He also opened his remarks with a false dichotomy which spelled out perfectly a difficulty that is likely to continue to plague US-China relations. He asked: "Will China use its rising influence in ways that are compatible with US interests, or will it seek to advance interests that undermine the global system and the peace and prosperity it has provided for so many around the world?"

  Clearly China, and many others (including many European powers), would argue that it is possible to pursue policies that are not necessarily "compatible with" US interests but which do not automatically undermine global peace and prosperity. Differing views on how best to resolve the current crisis in Lebanon would be an obvious example - as, indeed, would be the wider question of the war on terrorism.

  For China, this is more than a quibble, because as Christensen said: "We need to maintain strong US regional capabilities in case China does not eventually move down a path consistent with our interests."

  Christensen also emphasized the importance - to the US - of China moving towards a liberal democracy. He said: "We…urge China to move more quickly toward strengthening respect for human rights and religious freedom, as well as introduce democracy to its system."

  For China, there are two problems with Christensen’s analysis. The first is that the US administration defines its concept of being a responsible global stakeholder as being synonymous with acting in accordance with US interests. The second is that the US wants to go further than this. Turning China into a responsible global stakeholder (as defined by the US) is not the only objective. Transforming China’s political system is a parallel objective.

  Nevertheless, Christensen’s remarks were broadly positive, particularly given previous administration criticisms of China’s military build-up and its policies towards North Korea.

  The one testimony that was unequivocally critical of China concerned its policy towards Sudan. Eric Reeves argued: "There is in Africa no more destructive bilateral relationship than that between China and Sudan…Beijing’s relentless military, commercial, and diplomatic support of the National Islamic Front regime has done much to ensure that Sudan remains controlled by a vicious cabal of genocidaires."

  This was powerful - and undoubtedly accurate - testimony. But it didn’t do much to undermine the thrust of the other testimony: namely that China’s rise is normal and need not be overly threatening provided the US is careful and diligent in its diplomatic reactions.

  There were, however, two extremely important caveats to this general rule. The first - a point we have made many times - concerns Taiwan. It remains all too easy to see how this issue, which is of visceral importance to Beijing and is hardly less important to Washington, could escalate towards conflict. And it was noteworthy that Christensen ended his remarks with some warning comments on Taiwan. He said: "We…note the rapidly growing capabilities arrayed against Taiwan that risk disrupting the status quo. We respond to those increases in accordance with our obligations under the Taiwan Relations Act."

  The second is Japan. In his generally measured testimony, Admiral McDevitt looked in some depth at Sino-Japanese relations, and he made the very important point that there is a unique historic circumstance in Northeast Asia today. It is the first time in history that a powerful Japan and a powerful China are facing one another, and this unique circumstance is compounded by fundamental sources of friction, including competition for regional leadership, growing nationalism in both societies, territorial disputes, Taiwan, military modernization in both countries, perceptions of threat in both capitals, and the growing competition over potential energy resources in areas close to both countries, especially in the East China Sea and Siberia.

  This is serious enough in its own right, but it also causes problems for the US because it has no option but to lean towards Tokyo - a fact which, McDevitt points out, "contributes to [Beijing’s] views that Washington is ‘complicit’ in Japan’s more assertive policies". We agree both caveats. The direction of US-China relations is more likely to be dictated by how Tokyo-Beijing relations evolve and by policy decisions in Taipei than by real or perceived Chinese incursions into traditional US spheres of influence. JdeC.

• Iran's lack of judgement most alarming part of latest crisis - 20 July 2006

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  The most alarming part of the latest Middle East crisis is what it says about the nature of the present regime in Tehran. The most important aspect is what is to be done with Lebanon once the fighting stops.

  Of all the participants in the crisis, Israel’s position is the easiest to fathom. It wishes to force the Palestinians to into a ceasefire that holds, while it resumes its unilateral withdrawal from Palestinian territories. It wants to destroy the power of Hezbollah in Lebanon and force the Lebanese government and army to take responsibility for security in south Lebanon and along the border with Israel (even though Lebanon’s army is 50% Hezbollah, Israel believes that the fact that they are in Lebanese Army uniforms limits their ability to act independently of official Lebanese policy). It wants to prevent any return of Syrian power to Lebanon and to keep Damascus isolated. And it wants the major powers to take the toughest possible line with Iran over its nuclear programme.

  For the most part it is achieving these goals, albeit at some reputational cost. For a start, Hezbollah’s strength is being seriously degraded. It is thought that about 30% of Hezbollah’s operational capabilities and about 50% of its rockets (in particular the Fajr rocket launchers) has been destroyed. Nor is that the end of it. The full IDF plan for reducing Hezbollah has not yet been completed. It is still going after some 600 Hezbollah storage bunkers, and it is still attempting to decapitate the organization.

  Israeli sources say that the IDF is targeting the 12 most senior members of the group, who are thought to be hiding in bunkers in the Dahiya quarter of southern Beirut. These targets include Secretary General Hassan Nasrallah, Ibrahim Akil, and Imad Mughniye.

  There have even been some diplomatic gains for Israel, with the G-8’s statement on the crisis being seen as a significant achievement as it provided support for Israel’s basic position that Hezbollah and Hamas should stop launching attacks on Israel and return the abducted soldiers. It also called on the Lebanese government to implement UN Security Council Resolution 1559, which calls for Beirut to disarm Hezbollah.

  As one of the Haaretz newspaper’s columnists put it: "It took nearly 40 years for Israel to be seen in a just war…a global diplomatic bonanza. This is the second time since 1948 that Israel has been defending its territory rather than occupied territory, or, as in 1956, engaging in a fraudulent conspiracy to safeguard the interests of the West in the region. This time it’s classic: blows of justice aimed at an organization that is ignoring an agreement over an international border, and is running rampant under the protection of its government and those who pull its strings from Damascus and Tehran."

  There has also been very strong domestic support (86%) for Ehud Olmert’s government and the drive to destroy Hezbollah’s power.

  On the other hand, the belief in the West and elsewhere that Israel tends to react to attacks with disproportionate force has been strengthened. And Hezbollah’s success in attacking targets deep inside Israel, and even an Israeli naval ship, has dented its image of military invulnerability. Furthermore, everyone living north of the Haifa to Afula line, that is 20% of the Israeli population, is having their lives hugely disrupted.

  The Arab position is more complex. Arab public opinion is strongly behind Hezbollah and Hamas, but the principal Sunni Arab powers of Saudi Arabia, Jordan, and Egypt are opposed to any increase in Iranian power and influence in the Arab world, and they particularly do not want the confrontation between Israel and Hezbollah to distract the major powers from the need to curb Iran’s nuclear ambitions.

  Saudi Arabia has come out with a surprisingly public criticism of Hezbollah, despite (or perhaps because) of the fact that Arab public opinion is rallying behind Hezbollah and Hamas. Arab public opinion knows that these non-state actors are doing what their governments (with the very marginal exception of Saddam Hussein) have singularly failed to do since 1973: inflict military pain on Israel.

  Saudi clerics have been deployed to counter public support for Hezbollah, with leading hardline cleric Nasser al-Omar saying: "We should not raise our hand in respect to just anyone who fights the Israeli-American forces. Hezbollah is not fighting on behalf of Sunni Muslims in Palestine or elsewhere, it is a tool in the hands of the Iranian Revolutionary Guard let loose to realise an Iranian agenda."

  Syria is a separate case. It is close to Hezbollah and has allowed Iran to use Syria as a conduit for arms supplies to Hezbollah. But Bashar Assad has lost control of the process. His father Hafez used Hezbollah to try to force Israel into negotiations over the Golan Heights. Bashar is just being used by Hezbollah and Iran. This weakness alarms Israel and could lead to a review of policies towards Damascus. Regime change will be climbing up the agenda again.

  Which brings us to Iran. There has been much speculation over the degree to which Iran intended to precipitate the current crisis. There has also been almost opposite speculation that Iran intentionally sparked the crisis to divert attention from its nuclear programme by precipitating a clash on the Lebanon-Israel border. This latter suggestion seems unlikely, as the one certain result of all this has been to reinforce in Western and Israeli minds just how dangerous the current regime in Tehran is.

  Our view is that the crisis is further proof that Iran under President Ahmadinejad is a far less predictable - therefore far more dangerous - proposition than under any previous leader of revolutionary Iran since the death of Ayatollah Khomeini. The surprisingly pragmatic statecraft that has often characterized Iranian foreign policy has been replaced by something much less predictable.

  Iran’s strategic position has been immeasurably strengthened by the fall of Saddam Hussein, and the sensible and pragmatic policy would be to consolidate those gains. Instead it has precipitated a crisis, which far from strengthening its position could lead to the near destruction of Hezbollah, the increasing isolation of Syria (its only Arab ally outside of Iraq), a hardening of Western (and of course Israeli) opinion against its nuclear programme, and the open animosity of the main Sunni Arab powers.

  The only gain to Iran will be increased support on the Arab street, but that is not something that can be easily banked, and does not in any case outweigh the other losses.

  It would seem, therefore, that Iran has done Israel a considerable favour. It has damaged its own international standing even further, and it has provided a justification for attacking Hezbollah that is satisfactory to almost all the leaders that count (except for France’s President Chirac).

  But the problem, as ever, is the aftermath. When Israel withdrew its forces from southern Lebanon in 2000, the Lebanese government was unable to reassert its authority and allowed Hezbollah to establish a state-within-a-state. It will be the same this time around unless there is a concerted international effort (based on Saudi Arabian money and Western military force) to bolster the Lebanese state.

  The nightmare scenario, for Israel, is that the Hezbollah leadership survives the onslaught intact and emerges from its bunkers bloodied but unbowed. Hezbollah’s rank-and-file will certainly survive as, like all guerrilla armies faced by overwhelming conventional force, it has just melted away to avoid a confrontation it cannot win. And although its arsenal will have been seriously depleted, if Hezbollah still controls southern Lebanon more or less unmolested by the Lebanese state, it can rebuild with the help of Syria and Iran. In the meantime its reputation as the only organization capable of taking on the Israeli state and surviving will have been enhanced throughout the Arab world - and so, too, to the horror of Riyadh, Cairo, and Amman, will Tehran’s reputation. JdeC.

  NOTE: The crisis in Lebanon has not come out of the blue. As the following chronology shows, it is the end result of six months rising tensions.

  - 25 January: Hamas wins Palestinian parliamentary elections

  - 30 January: Hamas rejects the call from the Mideast Quartet for it to renounce violence and recognize Israel.

  - 19 February: Israel halts its monthly transfer of millions of dollars to the Palestinian Authority ahead of the formation of a Hamas-led government.

  - 29 March: Hamas Prime Minister Ismail Haniyeh takes office.

  - 10 April: Hamas says that it considers Israel’s severing of contacts with the Palestinian government to be "a declaration of war". The EU severs political contacts.

  - 9 June: Hamas’s armed wing calls off its 16-month truce following the killing of seven family members on a Gaza beach by Israeli shells.

  - 25 June: Militants from Gaza launch a raid into Israel and capture Corporal Gilad Shalit.

  - 28 June: Israeli forces push back into Gaza.

  - 29 June: Israeli troops in the West Bank arrest a third of the Palestinian cabinet and more than 20 Hamas parliamentarians.

  - 3 July: Israeli forces move into northern Gaza. Three days later the offensive is intensified after Hamas fires a rocket at the Israeli city of Ashkelon for the first time.

  - 8 July: Prime Minister Haniyeh calls for a ceasefire with Israel. Israel says that Hamas must first free Corporal Shalit.

  - 12 July: Hezbollah guerrillas capture two Israeli soldiers and kill up to eight in an attack across the Lebanese border.

  - 13 July: Israeli aircraft bomb runways at Beirut airport, and the navy blockades Lebanese ports.

  - 14 July: Israeli warplanes attack the Beirut-Damascus highway. The air and sea blockade is intensified.

  - 15 July: An Israeli missile in southern Lebanon kills 20, including 15 children.

  - 16 July: Hezbollah rockets kill eight in the Israeli city of Haifa, bringing to 12 the number of Israelis killed.

  - Israel attacks Beirut’s Shi’ite southern suburbs.

  - Over 110 people have been killed in the five-day offensive.

• Iran's street-level Arab support negates establishment hostility - 4 May 2006

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  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

• China's strategic calculations - CIR 30 March 2006

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  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.

• US fears of China's scientific advances - CIR 17 November 2005

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  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.

• Behind Musharraf's overtures to India - CIR 22 September 2005

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  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.