Playing hardball
Liu Guiling

RUSSIAN President Dmitry Medvedev declared that Russia would formally recognize the independence of South Ossetia and Abkhazia, Georgia’s two breakaway republics, on August 26. In a televised speech, he stressed that the decision was made in light of the “freely expressed will” of the people in the two regions and based on the UN Charter, the Helsinki Final Act of the 1975 Conference on Security and Cooperation in Europe, among other international instruments. The United States and other Western countries strongly opposed the move, which they believe will increase instability in the region. Medvedev, however, claimed that Russia does not fear a new cold war while calling on other countries to back the Russian policy. It was a hard choice for Russia to recognize the independence of South Ossetia and Abkhazia. The two pro-Russian regions have long been at odds with Georgia. They first declared independence in the early 1990s as the Soviet Union dissolved, sparking armed conflicts with Georgia. Russia mediated between the parties and sent peacekeeping forces to the region. While the legal status of South Ossetia and Abkhazia remained unresolved, their clashes with Georgia over independence became “frozen conflicts.”
The two regions have close ties with Russia, which provides them with economic and security guarantees. Most of the residents there hold Russian passports, while the ruble is widely used. Over the years, the two regions have been calling for independence and integration with the Russian Federation. Facing international pressure and separatist threats at home, however, Russia stayed silent. It was Georgia’s attack on South Ossetia in August that prompted it to finally recognize South Ossetia and Abkhazia as independent states. Russia made this decision for several reasons. The first is to strengthen the Putin-Medvedev regime. When the Russia-Georgia crisis broke out, Medvedev returned to Moscow from his holiday to chair an emergency meeting. He accused Georgia of aggression and vowed to protect the lives of Russian citizens and punish anyone who killed Russian nationals. Russian Prime Minister Vladimir Putin, who was in Beijing to watch the opening ceremony of the Summer Olympics, also said Russia would respond to Georgia’s aggression. Various Russian political parties reached an unprecedented consensus on recognizing the independence of South Ossetia and Abkhazia. Both the Federation Council and the State Duma voted unanimously in support of recognition on August 25. This unity is conducive to strengthening Russia’s leadership.
Second, Kosovo set an example for the two regions, when it declared independence in February with the support of major Western powers. At that time, Russia stood against Kosovo’s separation from Serbia. It warned the West of the potential consequences but to no avail. After the West recognized Kosovo’s independence, Russia found it difficult to explain to the people in South Ossetia and Abkhazia why they couldn’t gain freedom as well, Medvedev said. International relations should not have such double standards, he added. Third, Russia assumes that the United States, preoccupied with the presidential election, economic difficulties and the war in Iraq, may not be able to react effectively.
Western countries were united in their opposition. U.S. Secretary of State Condoleezza Rice called Russia’s move “regrettable” and threatened to use America’s veto power, if the issue was referred to the UN Security Council. Democratic presidential candidate Barack Obama also condemned Russia’s decision. NATO Secretary General Jaap de Hoop Scheffer and Terry Davis, Secretary General of the Council of Europe, accused Russia of violating UN Security Council resolutions and threatening security and stability in the Caucasus region. At the same time, NATO deployed a fleet in the Black Sea. The United States and other Western countries may continue to mount pressure on Russia by putting up barriers to its participation in the World Trade Organization, Group of Eight and other economic and technological cooperation. Russia’s foreign exchange reserves plummeted in August as foreign investors withdrew from the country. Russia’s recognition of South Ossetia and Abkhazia as independent states will have negative repercussions in the Commonwealth of Independent States (CIS) as well. It has already soured relations between Russia and Georgia. Apart from severing its diplomatic relations with Russia, Georgia said it would strengthen its ties with NATO and the European Union (EU) and call for the deployment of an international peacekeeping force within its borders. Georgia borders the Pankisi Valley, a former stronghold of Chechen rebels. Russia waged two costly wars against the rebels without completely resolving the Chechen issue. The possibility of future conflicts in the region cannot be ruled out. Apart from South Ossetia and Abkhazia, there are a number of territorial disputes in the CIS, such as the conflict between Armenia and Azerbaijan over Nagorno-Karabakh, Crimea’s separation from Ukraine and Transnistria’s separation from Moldova. Russia’s recognition of South Ossetia and Abkhazia is bound to disrupt international law and may lead to a new separatist wave in the CIS.
Russia on the rise
The Russia-Georgia conflict reflects Russia’s rise in international power and its efforts to fight the containment policy of the United States and other Western countries. In recent years, Russia has cozied up to Europe and the United States but failed to get a positive response from them. Its geopolitical situation has deteriorated: Not only has Russia made hardly any progress in its relations with the United States, but its relations with Europe have also shown little improvement given their strategic differences. The United States and Europe continue to portray Russia as deviant, in accordance with their longstanding policy of containing and weakening the country. Both NATO and the EU have expanded eastward, besieging Russia. The United States also fueled “color revolutions” in Georgia, Ukraine and Kyrgyzstan, worsening Russia’s security environment in the south. Against this backdrop, Russia has redefined its role in the international community by relying on its economic clout. “Russia today is a global player,” Medvedev said at the St. Petersburg International Economic Forum in June. “We want to participate in shaping the new rules of the game.” There is evidence that Medvedev and Putin are spearheading Russia’s effort to become a major world power in the new era. It was obvious that Russia was well prepared when Medvedev signed the decrees to recognize the independence of South Ossetia and Abkhazia.
Nevertheless, a cold war between the United States and Russia is unlikely, because the former has strategic demands on the latter. The two countries identified priorities for their cooperation in the U.S.-Russia Strategic Framework Declaration signed in April. In terms of promoting security, the United States and Russia will develop a legally binding post-START (Strategic Arms Reduction Treaty) arrangement, build a joint missile defense system, cooperate in defense technology and address serious differences in areas where their policies do not coincide. In terms of preventing the proliferation of weapons of mass destruction, they vowed to strengthen the Treaty on the Non-Proliferation of Nuclear Weapons, resolve the Iranian nuclear issue through political and diplomatic efforts, and realize the denuclearization of the Korean Peninsula within the framework of the six-party talks. In terms of combating global terrorism, they underlined the importance of bilateral cooperation and multilateral initiatives. Although the United States reassessed its policy toward Russia after the Russia-Georgia conflict, Washington needs Moscow’s help in dealing with non-traditional security threats and interfering in “evil regimes.” Russia believes that the United States stands to lose if it stops cooperating with Russia on such international issues as Iran’s nuclear program. With all its vested interests in Russia, Europe also cannot afford to treat Russia too harshly. Europe is highly dependent on Russia for its energy supply. According to estimates, Russia will provide the EU with 22 percent of its oil imports and 60 percent of its natural gas imports by 2015. The EU and Russia also have common security interests. Neither wants the Caucasus region to become mired in conflict or serve as the frontline in a new cold war. Russia knows well that the condemnations from Western governments are only verbal attacks, not real security threats. Russian leaders believe that NATO needs Russia more than the other way around. In April, Russia and NATO reached an agreement, under which Russia will allow NATO to ship military materials to Afghanistan via the Russian territory. Frozen relations would put a halt to the agreement, forcing NATO to explore other shipping routes. In general, it is impossible for the West to shun Russia in international affairs. Russia re-emerged and established a strong presence on the world stage during Putin’s eight-year presidency. On August 28, it successfully test-fired an intercontinental Topol missile designed to overcome anti-missile systems. On the same day, Putin announced a poultry import ban on 19 U.S. companies. With regard to the Russia-Georgia conflict, Medvedev has passed the ball to the West. “We are not afraid of anything, including the prospect of a new cold war,” he said after signing the decrees recognizing the independence of South Ossetia and Abkhazia.
 

—The Daily Mail-Beijing Review Articles Exchange Item

Democratic control of economic life
Seumas Milne

FOR once, Gordon Brown’s sound bite undeniably matched the occasion Wednesday. The £500-billion breakfast bailout of Britain’s banking sector really was “bold and far-reaching” by any measure. With its announcement of the part-nationalization of the heart of the country’s financial system, the government delivered the funeral rites on the corpse of high Thatcherism — strangled to death by the very monsters it brought forth from the deep in the reckless frenzy of Big Bang deregulation more than two decades ago. Both the scale and the speed of the intervention were an object lesson in the power of government to shape and change the rules of the economic game. After a generation during which any suggestion of interference in the magic garden of City finance has been treated as destructive heresy, the rescue plan is a telling demonstration of the vast potential of public action — as well as that, in the words of the celebrated former British industrialist Arnold Weinstock, “there is no such thing as a free market”.
By taking a major public stake in the most strategically decisive sector of the economy, the government has finally broken the spell of private prerogative and the primacy of the market realm. Unlike the already-failing US Paulson plan, this rescue is based on the principle of cash for public equity. For all its weaknesses, the new package has brought the need for greater democratic control of economic life into sharp relief, as the catastrophic cost of the private sector’s stewardship of finance for the rest of the economy makes the case for the social ownership of the banking system more powerfully every day. Yes, there are to be negotiations over principles of boardroom pay and new credit support for small businesses and home ownership. But, just as they took every step possible to head off the necessary nationalization of Northern Rock earlier this year, ministers react with horror at the very thought of direct control of the banks the government will now be part-owning. While the TUC yesterday called for “fat cats to be put on a strict diet” and the surreally left-posturing Tory shadow Chancellor George Osborne pressed in the House of Commons yesterday afternoon for a ban on bonuses in the newly bailed-out banks, Brown and the one-time Trotskyist Darling were having none of it. Real life seems likely to shift them both on executive pay — at a time when a good number of bankers doubtless count themselves lucky not to be facing jail terms — and the size of the public stakes, just as it has pushed the government this week to take action that would have seemed impossible only a few months ago. But there have to be the most serious doubts whether even yesterday’s huge intervention will, like Paulson’s, in practice match the scale of the crisis — or instead end up bailing out shareholders and the city elite that brought us to this pass, at the cost of billions of pounds of public money.
The other two legs of the package —- pumping hundreds of millions into the money markets in short-term loans and guarantees — ought to keep lending from freezing up altogether in the short term. But the experience of such repeated transfusions by central banks across the world over the past year should have driven home the point that the core of the crisis is one of solvency rather than liquidity. In other words, banks aren’t lending to other banks because they (and the stock market) are convinced those outfits are sinking beneath a sea of bad debts —- as in the case of the Royal Bank of Scotland, whose share price has fallen more than 80 percent since December. The government’s planned recapitalization will be injecting cash into the riskiest institutions and the danger is that shareholders will gratefully seize the opportunity to jump ship before their banks go under at huge public expense. Even without such crashes, the public debt pressures from yesterday’s package are going to be heavy. Better surely to guarantee deposits and take over such banks once they’ve effectively failed, as in the case of Northern Rock and Bradford & Bingley, securely recapitalizing them as fully publicly owned enterprises.
They could then become the core of a newly accountable and publicly controlled banking sector able to channel investment where it’s needed, rather than into reckless speculation in debt and housing bubbles. What seems certain is that government intervention is going to have to become bolder still, as the crisis unfolds both in the financial markets and the real economy. Even if yesterday’s package eases the domestic credit squeeze in the short term, all the signs suggest we are heading into something that goes well beyond a normal business cycle downturn, as the IMF’s warnings of the most serious global crisis for 70 years underline. The threat is now of depression, not simply recession. Only a concerted government-driven expansion — including both a major public works program and a much sharper cut in interest rates than the Bank of England managed Wednesday — can seriously offset that, at both the national and global level. That means a program of public house building, home insulation and transport investment, along with intervention to control gas and electricity costs and action to turn repossessions into social renting.

—Arab News

If everything fails, resort to scare tactics
Yvonne R Davis

DESPERATE to try and distract Americans from focusing on possibly the worst economic disaster since the Great Depression, Sen. John McCain, trailing behind Barack Obama for the presidency, has given the OK to unleash their one and only weapon to try and destroy his opponent’s character. So his vice presidential candidate Gov. Sarah Palin is attacking Obama and loving it! Palin is accusing Obama of “pallin’ around with terrorists.” She specifically cites his links to Bill Ayres. Ayres is a former terrorist-turned-education professor, whose Weather Underground group bombed the Pentagon in the 1960s (when Obama was eight years old) and with whom Obama worked on community projects in the mid-1990s.
There is less than a month until the election, and McCain trails Obama in every major poll in the United States and even worse in the Electoral College — with Obama now leading in states normally reserved for Republicans. Last week, the McCain campaign suddenly pulled out Michigan, deciding it was no longer worth campaigning there. Republicans are frightened about how the economy discussion has hurt the McCain-Palin ticket and so now it is time to paint Obama as a scary black bogeyman who can’t be trusted. The McCain campaign has allowed individuals take to the podium and call out the name Barack Hussein Obama with such disdain that crowds are jeering with irrational anger. Seeming to revel in the disturbing twist of the campaign, Palin continues on her stump stirring the waters of anti-Obama attitudes as well as hatred toward Arabs and Muslims by association.
Obama, according to them, is not patriotically American because his middle name is Hussein. Secret Service is so concerned about death threats against him they are now investigating the situation.
The problem with the McCain-Palin tactic is there is no strategy in place to take on Obama at the level of issues. The Republican Party is on skid row.
Not leaving anything to chance, the Obama campaign has employed an eye-for-an-eye, tooth-for-a-tooth stratagem painting McCain as erratic, temperamental and not so steady in his decision-making. The Obama campaign launched an online offensive against McCain who was accused of improperly aiding his political patron and longtime friend, Charles Keating, chairman of the Lincoln Savings and Loan Association. The bipartisan Senate Ethics Committee launched investigations, and although he was exonerated, McCain was formally reprimanded for his role in the scandal. Many feel the financial crisis the United States is in now has similarities to the Keating scandal. The Obama campaign remembers the tragic presidential campaign failures of Sen. John Kerry and former Vice President Al Gore. Both failed to fight back against George W. Bush in 2004 and 2000 when character accusations were initiated. When the Republicans came after Kerry and Gore, they laid down like rugs waiting to be walked on. The second debate between Obama and McCain did not bode well for McCain and he is running scared. With one more debate coming on Wednesday before the election, it is quite easy to predict that Sarah “Barracuda,” a name she goes by and owns and McCain will continue to go on the strike of trying to make Obama into someone who does not see America like they do and should be stopped.

—Khaleej Times