Trump is Right (No Pun Here)

I am with Donald Trump on the Ukraine issue.

The West cannot win this war. Europe is an ailing military power. The EU is high on rabble and low on military power, not withstanding the exalted claims of the UK, France (both nuke powers), and Germany. The Ukraine conflict has laid bare the military vulnerability of the EU: no large arsenals and certainly none of the much-vaunted tide-turning cutting edge technology on display.

The EU, especially the larger economies of the UK, France, and Germany, in an economic shithole. They are nothing more than glorified Middle Powers, like Iran, albeit with better technology and clout. But that's about it.

The EU cannot win the war in Ukraine against the Russians. Putin may be alone, but he sure weighs heavily on the minds of the liberal establishments in most of the EU nations.

The biggest threat the world faces, which the Russophobic-EU ignores, is the rise of a militaristic China.

China represents the single biggest threat to the U.S., India, the EU, and most of the southeast Asian nations.

If the U.S. gets out of the Ukraine quagmire, it can focus on countering China, which today is hellbent on owning not just the South China Sea but the Pacific Ocean as well.

Compared with the military threat from China, Russia is small change. The sooner the Russophobic-West, especially the EU, realizes this uncomfortable truth, the better will the chances of the anti-China brigade, including the U.S. and India, in countering the rising dangers of an aggressive and militaristic China.

The MbS Phenomenon

 

In this Explainer, I will focus on the ambitious Mohammed Bin Salman, the Crown Prince of Saudi Arabia. MbS, as he is usually referred to, has, in a very short time, come to dominate the tangled political landscape of West Asia (I prefer this term to the usual Middle East).

An aside on the name: In Saudi society (and generally in the Arabian Peninsula), a man’s name includes the name of his father (pretty much like in large parts of India). Bin means ‘son of’; so, Mohammed bin Salman means son of Salman.

Also, in this article you would find ‘Mohammed’ spelt in two different ways; I have taken the Saudi government accepted spellings of the names of the leaders.  

Who is Mohammed bin Salman?

Mohammed bin Salman is the Crown Prince of the Kingdom of Saudi Arabia. As the Crown Prince, he is next in line to succeed his father and King, Salman bin Abdulaziz Al Saud. (Understanding the name of the King: Salman, son of Abdulaziz; Al Saud is the name of the ruling house/dynasty.)

Virtually unknown in the corridors of power before his meteoric rise, MbS was appointed the Crown Prince in June 2017. Soon after his father became the King, MbS was appointed the Deputy Crown Prince; his cousin and the son of King Salman’s brother Mohammad bin Nayef, was forcibly relieved of his office by MbS.  

Today he is also the kingdom’s Deputy Prime Minister, Minister of Defence, Chairman of the Council for Economic and Development Affairs, and Chairman of the Council of Political and Security Affairs.

MbS is the most powerful person in today’s Saudi Arabia. The King, his father, trusts him blindly and has stood by him even as the calls for the Crown Prince’s removal for his involvement in the botched Yemen War and the Jamal Khashoggi murder saga grow louder.

MbS is seen as an ardent reformer by his supporters, while his detractors describe him as megalomaniacal and impetuous. His supporters point to the several reforms he has ushered in the deeply conservative country: lifting the ban on women drivers, allowing cinemas and music concerts, and introducing a spate of economic reforms.

MbS’ detractors, and there are many, cite his campaign in Yemen and the ill-planned embargo against Qatar as examples of his whimsical behaviour.

They also describe him as power-hungry who cannot tolerate dissent; the jailing of thousands of political dissidents, including women activists is a case in point. It is interesting to know here that the women activists were jailed for demanding driving rights for women. Ironically, MbS lifted the ban on women drivers and yet the women activists were jailed for calling for the same reform! Now, you may find this behaviour difficult to decipher. Well, it is easy if you understand the purport of MbS’ game plan: you cannot demand rights and get them; you will get rights ONLY if the King or the Crown Prince decide to give you rights – in other words, so it is the top-down approach that’s at work here.  

Another example is his treatment of the Prime Minister of Lebanon, Saad Hariri. When Hariri arrived in the Kingdom to meet King Salman, he was bundled to an unknown location; there was a complete blackout of the news concerning Hariri, a leader of a sovereign nation. One week later, Hariri was forced to tender his resignation from the prime minister’s post of his country from the soil of a foreign nation.

A Luxury Prison
The incident that shook the ground beneath the feet of elite Saudis took place in November 2017. Around 200 prominent Saudis, including the former Crown Prince Muhammad bin Nayef and Bakr bin Laden, the head of Saudi Binladin Group (a construction giant), were rounded up and detained for several months at the Ritz-Carlton Palace Hotel on the orders of MbS. The entire operation was described as a campaign against corruption and embezzlement; the detained were accused of enriching themselves at the cost of the Saudi State. It is believed that a few of those detained were tortured and forced into giving up their wealth. Bakr bin Laden and his two brothers were forced to transfer their 36 per cent shareholding in Saudi Binladin Group to a state-controlled company, overseen by MbS.    

The Jamal Khashoggi Saga
Jamal Khashoggi was a Saudi Arabian journalist and an insider in the Saudi royal court. He fled to the U.S after running afoul of the current royal administration in Saudi Arabia. A vociferous critic of the Saudi Arabian royal house, especially the Crown Prince Mohammad bin Salman, he was a columnist for the Washington Post newspaper and head of an Arab news channel. MbS had accused Khashoggi of working with the Kingdom’s rivals like Iran and Qatar.

On 2 October 2018, he visited the Saudi Arabian consulate in Istanbul to collect documents pertaining to the dissolution of his marriage to a Saudi Arabian woman; the documents were necessary for him to get married to his Turkish fiancée. He was murdered inside the consulate by Saudi Arabian intelligence officials. Till date, no trace of his body has been found.

The murder of Jamal Khashoggi has since thrown West Asia into turmoil. The Khashoggi saga has embroiled Saudi Arabia and Turkey in a war of words, with the U.S. squeezed between its two important allies. The following are the major players in the Khashoggi saga: Saudi Arabia, Turkey, the United States, Iran, Qatar, and the Muslim Brotherhood.

Erdogan's Wicked Glee
Turkey directly implicated Saudi Arabia of carrying out the murder on its soil, even pointing a finger at MbS for his involvement. Turkish President Recep Tayyip Erdogan claimed the possession of unimpeachable evidence of the involvement of the Saudi Crown Prince, suggesting that the order for the murder “came from the highest authorities in the Saudi administration”.

Why did the Turkish President get so worked up about the murder of a Saudi dissident? The answer to this seemingly distasteful question lies in the ‘great power’ ambitions of the two countries.

We know that Saudi Arabia is the de facto leader of the Muslim World; however, Turkey, under Erdogan, wants to become the centre of the Muslim World, just like the Ottoman empire was before its eventual collapse in 1922. Erdogan, an Islamist, has a grand vision of becoming the voice of the Muslim World, and he has made no effort to conceal his ambitions.

Erdogan is a firm supporter of the Muslim Brotherhood, an Egyptian extremist Islamist organization with a wide support base in the Muslim World. The Muslim Brotherhood is an anti-monarchy, pro-Sharia group. The Muslim Brotherhood came to power after its newly floated political party won the Egyptian elections in 2012, a development that rang loud alarm bells in the capitals of the monarchies in the Muslim World.

The anti-monarchy, pro-Sharia core ideology of the Muslim Brotherhood raised the hackles of the Saudi monarchy who felt threatened by the hardcore Islamist who was now the president of Egypt, a neighbouring country. Alarmed by the spectre of the spread of the Muslim Brotherhood’s ideology in Saudi Arabia, the Saudi Arabia royal house instigated the Egyptian army to oust the Muslim Brotherhood from power and take over the country. Thus, in July 2013, barely a few months after coming to power, the Islamist President of Egypt was ousted and jailed on charges of terrorism.

The Saudi Arabian involvement in the ousting of the democratically elected government in Egypt angered Erdogan, a die-hard supporter of the Muslim Brotherhood. The murder of Jamal Khashoggi in Istanbul, Turkey’s largest city, came as a blessing to put the Saudis on the mat. He leaked evidence of the involvement of the Saudi Crown Prince in the Khashoggi murder case in a calibrated manner; in fact, the method was so effective that it has been called “death by a thousand leaks”.

Saudi Arabia botched its response to the Khashoggi murder saga; from firmly denying its involvement to calling it a rogue intelligence operation without concurrence of the royal house, the Saudi Arabian government came across as confused and unprepared for the massive backlash from the international community.

To begin with, the United States called on the Saudi Arabian royal house to come clean on its role in the Jamal Khashoggi murder. Since then, the U.S. has spoken in multiple tongues; this is because the Donald Trump White House stood by MbS, even while the Central Intelligence Agency (CIA), the U.S. premier external spy agency, pointed to the direct involvement of the Crown Prince in the murder of the journalist. It is well known that there is no love lost between Trump and the country’s numerous spy and security agencies.

So, why did the U.S. stand by Mohammed bin Salman? The most important reason for this is Washington’s Iran policy. The U.S. policy in West Asia is centred around Iran; Washington has been categorical in stating that it will do all to stop Iran’s “wave of regional destruction and global campaign of terror”.

An enemy’s enemy is a friend. This truism defines the relationship between the U.S. and the Sunni nations in West Asia. The Sunni Muslim nations, like Saudi Arabia and the United Arab Emirates, deeply distrust Shia Iran, accusing it of fomenting terrorism in their nations. So, to counter Iran, the U.S. needs Saudi Arabia, the region’s most powerful nation and the fulcrum of the Sunni Muslim World. Saudi Arabia, under MbS, is at the forefront of the anti-Iran brigade; the Saudis see Iran as an existential threat. In fact, Saudi Arabia even backs Israel (Saudi Arabia and Israel do not have diplomatic relations, owing to the Palestinian issue) in the latter’s covert and overt operations against Iran, spread across the region, especially in Syria, Iraq, and Lebanon.

What about the U.S.’ professed love for the protection of rights of freedom of expression, right to dissent, and religious freedom? Well, in international politics, respect for democracy, human rights, morality, ideology are matters of convenience; they can be expended at the altar of national interest.

 

Venezuela Crisis in a Nutshell

In this short explainer on the crisis enveloping Venezuela, I have tried to be brief and to the point.

Nicolas Maduro                   Juan Guaido

Who’s Who in Venezuela

President: Nicolas Maduro, a hardcore socialist, anti-U.S., leader of United Socialist Party of Venezuela.   

Who supports Nicolas Maduro:

    (a) Within Venezuela: Supreme Court of Venezuela, Defence Forces of Venezuela, PDVSA (state-owned oil company); 

(b) Outside Venezuela: China, Russia, Turkey, Iran, Bolivia, Cuba, Nicaragua  (last three are in the Americas).

Who does Maduro blame for the current crisis: United States of America.

Challenger: Juan Guaido, self-declared Interim President since January 2019 and leader of Popular Will, a centrist party.

Who supports Juan Guaido:

(a) Within Venezuela: Low-ranking military officials and huge popular support.
(b) Outside Venezuela: U.S., UK, Argentina, Brazil, Chile, Colombia, Ecuador, Peru, Panama, Costa Rica, Guatemala, and Honduras.

Role of Oil in Venezuelan Economy

• Oil reserves in Venezuela are said to be among the top 3 in the world.
• Oil accounts for 98% of export earnings. 
• Oil accounts for 50% of GDP
• High global oil supply, falling crude prices, and poor extraction technology have led to a big decline in oil production – all of which have drastically reduced the government’s export earnings, thereby widening revenue deficit. 
•  In 2018, GDP shrunk by double digits for the third consecutive year. 
• Government does not have foreign exchange reserves to pay for imports and loans. 
  
• Venezuela has been in default since 2017 – meaning, it has not paid back foreign loans and not paid for imports. 
  
• U.S. and other countries have a long-running embargo against Venezuela; this has shrunk market for Venezuelan products and reduced avenues for borrowings.
  

Major Problems

• Great political and economic instability 
• Mostly, a result of catastrophic humanitarian emergency. 
• Severe shortage of food, medicine, & other essentials – mostly because of hoarding, embargo, and hyperinflation. 
• Hyperinflation, meaning very, very high rate of inflation, is leading to doubling of prices of essential goods every 19 days on average. Current inflation is around 85,000%. Thousands of health professionals have left the country, leading to medical emergency. 
• Lack of access to food and healthcare have pushed 90% of people below the poverty line.  
• On average, a Venezuelan has lost around 12 kg of body weight since 2017. 
• It is believed that some 3 million have already fled Venezuela; the number is likely to rise to 5 million by the end of 2019.
  

In a nutshell, years of economic mismanagement, misdirected welfare policies (subsidizing almost everything through high revenue earned by oil exports), huge debt, massive shortage of essential stuff, hyperinflation, political instability – have all led to the current catastrophic humanitarian crisis in Venezuela.

The Explainer: Who is Mohammad bin Salman?

Muhammad bin Salman, the Crown Prince of Saudi Arabia, has come to dominate the politics of his country and the region. His policies and action (both domestic and foreign) are changing the political landscape in West Asia.

Who is Mohammad bin Salman?
Mohammad bin Salman is the Crown Prince of the Kingdom of Saudi Arabia. As the Crown Prince, he is next in line to succeed his father and King, Salman bin Abdulaziz Al Saud (who is also the Prime Minister of the kingdom). 

Virtually unknown in the corridors of power before his meteoric rise, MbS, as he is popularly called, was appointed the Crown Prince in June 2017. Today, he is also the kingdom’s Deputy Prime Minister, Minister of Defence, Chairman of the Council for Economic and Development Affairs, and Chairman of the Council of Political and Security Affairs.

MbS is the most powerful person in today’s Saudi Arabia. The King, his father, trusts him blindly and has stood by him even as the calls for the Crown Prince’s removal for his involvement in the botched Yemen War and the Jamal Khashoggi murder saga grow louder.

Reformer. MbS is seen as an ardent reformer by his supporters. They point to the several reforms he has ushered in the deeply conservative country: lifting the ban on women drivers, allowing cinemas and music concerts, and introducing a spate of economic reforms. The once all-powerful religious police have now been restricted to the barracks.   

Megalomaniac. MbS’ detractors, and there are many, describe him as megalomaniacal and impetuous. They cite his catastrophic war campaign in Yemen and the ill-planned embargo against Qatar as examples of his whimsical behaviour.

They also describe him as power-hungry, someone who cannot tolerate dissent; the jailing of hundreds of political dissidents, including women activists, is a case in point.

Saad Hariri

The Saad Hariri Incident. Another example is his treatment of the Prime Minister of Lebanon, Saad Hariri. When Hariri arrived in the Kingdom to meet King Salman, he was bundled to an unknown location; there was a complete blackout of the news concerning Hariri, a leader of a sovereign nation. One week later, Hariri was forced to tender his resignation from the prime minister’s post of his country from the soil of a foreign nation. His freedom from the clutches of the Saudi Arabian government came only after the French President Emmanuel Macron went to Riyadh to negotiate his release. Once back home, Hariri withdrew his resignation. Analysts believe that he paid the price due to his inability to stem the growing influence of Iran and its Lebanese proxy, Hezbollah, a Shia militant group.

Bakr bin Laden

Whipping the Cream of the Saudi Society. The incident that jolted the elite Saudis most took place in November 2017. Around 200 prominent Saudis, including the former Crown Prince Muhammad bin Nayef and Bakr bin Laden, the head of Saudi Binladin Group (a construction giant), were rounded up and detained for several months on the orders of MbS. The entire operation was described as a campaign against corruption and embezzlement; the detained were accused of enriching themselves at the cost of the Saudi State. It is believed that a few of those detained were tortured and forced into giving up their wealth. Bakr bin Laden and his two brothers were forced to transfer their 36 per cent shareholding in Saudi Binladin Group to a state-controlled company, overseen by MbS.

The second part of this article will appear tomorrow.

The Explainer: List of disputes between U.S. & China

A seemingly innocuous phone call between the U.S. President-Elect Donald Trump and Taiwan's President Tsai Ing-wen ignited a war of words between China and Donald Trump.

In a series of short articles, I will focus on the historic and current status of the relationships between the U.S.-China, U.S.-Taiwan, and China-Taiwan.

The following are the major issues that characterize the uneasy relationship between the U.S. and China. 

(a) Tibet and the Dalai Lama;

(b) Taiwan, especially arms sales to the island nation;

(c) Xinjiang and Uighurs;

(d) China's claims over the South China Sea;

(e) Beijing’s abysmal human rights record, including denial of political freedom to political dissidents;

(f)  disagreement over climate change, especially on measures to tackle it;

(g) trade-related disputes like currency valuation;
(h) China’s behaviour in international forums, like in the UN on the Syria issue;

(i)  Chinese espionage, especially industrial and defence, and

(j)  cyber-attacks on American corporations;.

Of the above, there are two that cause China the greatest discomfort: Tibet and Taiwan. In the coming series of short posts, I will explain some of these disputes.

The Explainer: China's Malacca Dilemma

China is already considered one of the top two global powers, the other being the United States. Its GDP, at U.S.$7.3 trillion, is already the second largest and is poised to overtake the U.S. GDP, at U.S.$15.2 trillion, by 2020, as most estimates suggest.

China’s GDP is expected to grow at 7.8% in 2012, making it the fastest growing major economy in the world. The Economist Intelligence Unit predicts that China’s real GDP growth is expected to average 7.9% a year in 2013-17.

China is the world’s largest exporter of finished goods (U.S.$1.9 trillion in 2011) and the second largest importer (U.S.$1.7 trillion in 2011). It is the biggest consumer of energy resources and as its economy expands, its energy hunger will only grow.  

Almost all of China’s external trade is sea-borne; in fact, shipping lanes are the life blood of China’s trade with the world. It is in the light of this crucial fact that we can appreciate China’s Malacca Dilemma. 

The Malacca Strait is a narrow channel of water that separates the Malaysian Peninsula from the Indonesian island of Sumatra. In geographical terminology, a strait is a narrow channel of water that separates two land territories and connects two water bodies; for one, look at the Palk Strait between India and Sri Lanka.

The Malacca Strait is one of the world’s busiest shipping lanes, with over 85000 vessels passing through it every year. Located pretty close to this is Singapore; an island City State, Singapore is separated from the Malaysian peninsula by the Johor Strait.

Singapore hosts a huge naval base belonging to the United States Navy. In fact, it is the U.S. Navy that more or less controls the Malacca Strait and other water-based trade channels in this part of the world.

It is this reality that is giving Beijing the jitters because more than 70% of China’s energy supplies move through the Malacca Strait.

                                                           

The External Boundaries of India as depicted

 in these maps are neither right nor authentic.

China has never concealed its ambitions to become a world hegemon though it often mouths platitudes like ‘peaceful rise’. It wants to convert the Pacific Ocean into a Chinese lake. Also, it is scouring different parts of the world for sourcing raw materials and to sell finished goods.

China treats the U.S. as the biggest obstacle to realize not just its ambitions of turning the Pacific Ocean into a China lake but also become the second pole in global power order. In fact, it is waging a massive low-intensity diplomatic war with the U.S. for political and economic influence around the world at large and in the Pacific in particular.

Today, despite all the superficial U.S.-China bonhomie, there is a great deal of mistrust (and distrust) between Beijing and Washington. Also, Beijing is involved in a tug-of-war with almost all maritime nations in its neighborhood, like Vietnam, Philippines, and Indonesia mainly on account of Beijing’s claims on all of the South China Sea and the resources (like oil and gas) and islands therein.

In the light of these facts, China fears that if a war with the United States (or with American allies, like Indonesia, Philippines and Vietnam) breaks out, the latter will block access to the Malacca Strait.

Such a development will stop the movement of vessels carrying energy resources (like oil & gas) and raw materials to Beijing that are absolutely central to fuel its humongous economy and waging a war.

This would place China at the mercy of its rivals, which in turn may stoke social, political and economic instability within the nation, all of which may come together to threaten the very existence of the Communist Party of China.

To avoid such an internal scenario, Beijing is trying very hard to bolster its external defences not just to secure its economy but also the communist party’s future. To resolve its Malacca Dilemma, Beijing has embarked on the ambitious Ring of Pearls strategy. We will focus on that in the next installment of The Explainer. 

Sunday Reads - Mango People & The Self-Destructive USSR

• How the Soviet Empire's ambitions contained the seeds of its destruction. (Book Review; The Economist)

• Daniel Craig on being James Bond. (Vanity Fair)

• The Economist who saves lives. (BBC)

• Mango people and media monsters. (Indian Express)
  
  Women make up half of the world (some say, the better half!). The Economist has an insightful graph on the economic contribution of women. Says the note for the graph: In the next decade nearly 1 billion women are likely to enter the global labour force. But their economic potential is largely unrealised. According to a report by Booz & Company, a consultancy, if female employment rates matched those of men, GDP would increase by 5% in America and 9% in Japan by 2020. The impact would be even larger for developing countries, home to most of the world’s women who lack adequate education and support (social and political). Increasing female employment would increase GDP significantly in countries like India and Egypt, where female labour-participation rates are below 30%. These countries rank low in Booz’s index of women’s economic empowerment.

The Rise and Fall of the Mad Dog

Muammar Gaddafi is dead and buried. For a man who ruled Libya with an iron fist for nearly 42 years, the end has rather been an ignominious one. From wallowing in his luxury tent to spending his last moments in a drain pipe, Gaddafi's life and death epitomise the adage that 'those who live by the sword die by the sword'.

Gaddafi was the uncontrolled master of everything he surveyed. He never occupied any post, yet styled himself 'The Leader'. He was a megalomaniac, one who loved unbridled power but with no accountability. A paranoid, he did not trust his own shadow.

Fear and repression were his twin weapons, especially against his own countrymen. A past-master at suppressing dissent, he crushed all opposition and brooked no criticism. 

From his hideout, he claimed that he would fight an all-out war, that he was not a woman to run away. This comes from a man who had an all-female bodyguard (Amazonian women guard) who formed the ring of bullet-takers around him. So much for his manhood; did someone say, male chauvinism?
He loved women, of course. It was an open secret in Libya that he had the hots for an Ukranian nurse, named Galina Kolotnitskaya. Most of the women guards and nurses would be raped and abused by Gaddafi and his sons and their cronies. 

Gaddafi is said to have stashed away U.S.$200 billion in overseas secret accounts and investments. This money was siphoned away from the proceeds generated from Libya's biggest export: petroleum. Incidentally, Libya has the world's tenth largest proven reserves of petroleum.

He supported terrorist acts against his enemies, especially against the West, Israel, and Saudi Arabia. The 1988 Lockerbie Pan Am bombing is a case in point: Libyan intelligence agents blew up the London-New York Pan Am flight, killing all 269 passengers on board and 11 others in the village of Lockerbie where the plane debris fell.

A few weeks after the rebellion against his tyrannical rule started in the eastern city of Benghazi, he went on air to vent his threats to the rebels. He ranted that he would "how no mercy, no pity. We will come. House by house, room by room...vengeance awaits rats and dogs... It's over. The issue has been decided... We will find you in your closets." 

Unfortunately for Gaddafi, it was for him the issue had been decided. It was Gaddafi who took refuge in a rat-hole. He died a miserable death, a death of dishonour and shame - much like the way he killed thousands of his countrymen in his paranoid pursuit of power. 

The Mad Dog has been hunted and killed. 

Check out these two infographics from Reuters. (Links - for first infographic; second infographic.)

My Blogroll - Second Installment

In My Blogroll - First Installment, I brought to you the names of five of my favourite Web sites / blogs. 

This Second installment carries the names of another set of five of my favourite Web sites / blogs. 

www.foreignpolicy.com

This is the first Web site I visit every morning! FP carries the single best collection of articles on international issues, politics, economics, and conflict zones. FP and I share one common attribute: both of us are contrarian in our world view.

www.wired.com 

One of the best science and technology magazines. Wired focuses on both today's and tomorrow's technology and its impact on our lives and the world around us.

www.zerohedge.com

This is easily, along with The Big Picture (featured in My Blogroll's first Installment), one of the best financial and economics blog on the Web. It brings to life seemingly difficult economics stuff to life in a language that is at once simple and lucid. I particularly like its tagline: 'On a long enough timeline the survival rate for everyone drops to zero.'

http://wef.typepad.com/blog

If you are looking for expert views and data on a diverse range of global issues, then the World Economic Forum's (WEF) blog is a good stop.

www.tineye.com

We all Google (noun and verb). Google enables us to find information including images. But I am sure you must have wondered about some kind of Image Search Web site, like let's say, you have an image and you wish to locate its source. If that's the case, then Tin Eye is the Reverse Image Search Web site you are looking for, as it locates the source (like Web sites) for most images. Check it out!

I hope you like this short blogroll. 

The Derived Snob Value of UN Membership

The title of this post sounds like an ad-line for securing membership of one of those odd but coveted social clubs. There is always a certain snob value attached to such a club, especially if it is hard to get into. Little wonder then that people wait for years to get into hi-society clubs, if not for the real deal then for the attached snob value. 

One such club is the United Nations. Frankly, I have never been a great fan of the United Nations, a global body, with 193 members and a few territories with observer status. It is  a club with derived snob value (of the moral type), and that's why it still is coveted. However, it has little real actionable use when it comes to solving some of the world's most intractable problems, like the Israel-Palestine tangle, the crisis in the Korean peninsula, and resolving disputes between the warring factions in numerous African nations.  

The most the UN can do is to levy sanctions, especially of the economic variety, against some countries to punish the political dispensations in power. If you look at the countries where such sanctions are in place currently, like North Korea and Iran, they affect the regimes less and the common people more. So much for the collective wisdom of the global community. 

The last country (i.e. 193rd nation) to get into the UN was Switzerland. The latest one seeking the UN's membership is Palestine. I will not get into the merits of its case for membership; rather I will share an infographic (sourced from the Reuters blog) that details a few facets of the Israel-Palestine crisis and the process involved to get the membership of the UN. 

Trust me, Friends, this is the kind of serious material that can prove handy in the rigorous b-school selection process.

How the U.S. Debt Deal Will Work

After months of public wrangling over the debt ceiling and ways to reduce deficits, the Democrats and the Republicans finally reached a deal on July 31. The public spat did much to damage the global image of the U.S. and eventually led to a downgrade in its much-vaunted AAA credit rating.

The New York Times gives an interesting lowdown on how the debt deal will work. You can find more here.

Media's Double Standards & Mexico's Deadly Gangs

• Link-fest on how the U.S. debt downgrade & economic turmoil might impact the Indian IT sector. (Economic Times)
  
  
• Mexico's deadly gangs are spreading their tentacles. (BBC)
  
  
• The real solution is growth. (Harvard Business Review)
  
  
• Indian media's double standards - The Sohrabuddin Killing. (The New Indian Express)

The Explainer: Credit Rating

In the wake of the twin crises of Eurozone economy and U.S. debt ceiling, the concept of credit rating has come into sharp focus. This week's The Explainer features a Q&A on credit rating.

What is Credit Rating?

Any form of debt (i.e. money borrowed) has to be repaid. So before you lend money, you would like to perform a background check on the borrower’s repayment capacity, i.e. ability and willingness to repay the debt. In other words, this background check is used to test the creditworthiness of the borrower.

Based on the result of the background check, a credit rating is used to assess the creditworthiness of a borrower or issuer of debt.  This kind of credit rating is assigned by a credit rating agency.

Name some famous Credit Rating Agencies.

Globally, there are three famous credit rating agencies: Standard & Poor’s (S&P), Moody’s, and Fitch. ICRA, CRISIL, and CARE are some of the credit rating agencies in India.

On what basis is Credit Rating assigned?

These agencies assign ratings to issuers of debt, such as companies and governments. To arrive at a credit rating, the agencies evaluate not only current and historical information but also assess the potential impact of foreseeable future events on the borrower’s capacity to repay the debt.

While assigning a credit rating to a country (like India), the focus is on political stability, monetary stability, impact of global events on the country’s economic and political stability, and overall debt burden.

When it comes to rating a company for its creditworthiness, the factors taken into consideration are:  company’s past and current performance, industry profile, company’s position in the industry and how does it compare with its competitors in the industry, revenue model and cash flow, projected earnings, current debt load, corporate governance, and accounting practices.

If a country or company has AAA rating, what does it mean?

The AAA (triple A) rating is the highest possible rating that can be given to a country or company. S&P says that it gives AAA when there is an “extremely strong capacity to meet financial commitments” and is the least likely to default on its debt payments.

The major benefit of AAA rating is that it helps a country or company borrow at low rates of interest. This is because lenders know that lending to such a borrower comes with low risk as it would almost not default.

Important to remember:

Credit ratings reflect relative opinions about the creditworthiness of a borrower, from the strongest (AAA) to weakest (D). 

For example, a company or country that is rated 'A' is only less likely to default on a debt payment than a country or company with a 'BBB-' rating. It is not that it will not default, but only that the possibility of a default is less likely than those rated below it. 

Also, note that different credit rating agencies may assign different credit rating depending on its analysis of the company or country's situation.

In the space below, you will find three different graphics: 

(a) Types of Credit Ratings and what they mean:

(b) Current Global Credit Ratings

(c) Current Credit Ratings assigned to Eurozone countries:

The Greece Mess

As you can deduce from the last graphic, Greece is on the verge of a default while Portugal runs a substantial risk of default. 

For want of space, I will share only a short backgrounder behind the credit rating assigned to Greece.

Just look at Greece's financial condition: its external debt is at U.S.$380 billion, which is 142% of its GDP! Its economy is not doing well; in fact, its GDP contracted by 10.2% last year (i.e. its GDP fell below previous year's amount). Some of its debt was due for payment; however, it does not enough money to pay back the huge debt it has accumulated over the years. Hence it had needed bailouts (emergency funds) to overcome the debt payment crisis. In fact, you could apply, more or less, the same reasons for both Ireland and Portugal. 

I know this was a difficult topic to deal with; but I am sure that since I have used pretty little jargon, you will understand most of this complex stuff.

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100 Years of IBM

Today's short post features of one giants of the technology world. IBM, one of the pioneers of the IT world, has completed a century! Before you check out this Reuters infographic that details the milestones in the eventful hundred years of IBM, here are some basic details about the technology behemoth: 

• Founded: 1911
• Originally name: C-T-R (Computing Tabulating Recording)
• CEO, Chairman & President: Sam Palmisano
• HQ: Armonk, New York
• Nickname: Big Blue
• Turnover: U.S.$99.8 billion (2010)

Three Decades of HIV

Today's post is neither on economics nor on politics. However, it is in many ways a malaise that is symptomatic of the society's and government's rotten attitude toward a disease called HIV.

Ever since its discovery, HIV has been described as a 'modern day scourge'. While it is only a disease, its occurrence, unfortunately, often brings ostracism and social stigma. 

While no single effective cure is available, anti-retroviral drugs often slow down its spread and are effective in prolonging life. However, such drugs are very expensive and are beyond the reach of most HIV patients, especially in Sub-Saharan nations, where the incidence of the disease is widespread.

HIV can devastate not just a country's social fabric but also its economy. The African nation of Botswana is a case in point. For nearly two decades (1980-90s), it experienced one of the fastest economic growth rates in the African continent. In its wake, it generated employment, brought higher incomes, helped gain access to education, sanitation, and healthcare; all these brought about a general improvement in the overall quality of life for lakhs of people in Botswana.

However, all these benefits of economic growth are threatening to unravel because of the widespread prevalence of HIV in Botswana. The current national prevalence rate, i.e. rate of incidence, among 15-49 years old is 24.8%! 

As an entire generation falls victim to HIV, families have to spend more money on buying medical care for the afflicted, thus reducing the family's access to a better quality of life (including reduced expenditure on food).

Also, as productive people contract HIV, they can no longer work (because of health conditions and social stigma), thus robbing the economy of its productive workforce and the family of its breadwinner. In fact, to put the matter in perspective, by 2020 Botswana would lose 20% of its farm labour to HIV. To this, add another fact: between 1999-2005, the country had lost 17% of its healthcare staff to HIV. 

A few years ago, the UNDP had estimated that by 2010, nearly 20 per cent of all children in Botswana will be orphaned. The situation for the children is likely to get worse as the primary care-givers (in the absence of dead parents) - the current generation of grandparents - begin to die. To compound the misery of these children, they will have to drop out of school to work and earn to contribute to family income. 

If you believe that faced with a tragedy of such gigantic proportions, people in Botswana would be sympathetic to people living with HIV, then you are mistaken. Social stigma and boycott continue to dog the victims of HIV. Most people are socially boycotted; they suffer economically too as they are denied jobs.

Here is a graphic that captures the history of the HIV. As the graphic shows, I sourced it from Reuters.

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The Lowdown on the U.S. Debt Deal

What is the Debt Ceiling and other pertinent questions. (ProPublica)

Reaching a Deal (BBC)

Democrats & Republicans: Who got what in the U.S. Debt Deal (WaPo)

Has the bitter acrimony preceding the debt deal done lasting damage to the U.S.'s global standing? (NYT)

Click here for an interactive feature on who owns the U.S. debt.