Wednesday, July 1, 2020

Yemen Stalemate – Half a decade and another unwinnable war

Aden - Steamer Point, Yemen

Victory seemed imminent when coalition led by Saudi Arabia and UAE started bombarding Yemen - a tiny country without any oil in the middle east. Coalition was impressive – Saudi Arabia, Egypt, Morocco, Jordan, Sudan, Kuwait, Qatar, Bahrain and several non-state actors and army of Academi (of Blackwater fame). US provided intelligence, logistical support and sold millions of dollars’ worth of weapon packages to coalition. Saudi and UAE got information from drones bought from China and operated by Chinese contractors, intelligence came from US drones as well. However, so far Yemen seemed to be the graveyard of coalition’s ego. Now after five years, coalition is looking forward for a graceful exit!!!

If we go back in history, Yemen was in a state of war for some time and unfortunately going to be in a state of war for foreseeable future. Former government of Yemen headed by Ali Abdulla Saleh fought and lost six wars against Houthi’s of Yemen. Houthi's took over of Sana'a in 2014 and proceeded towards Aden. It was the possible fall of Aden which prompted an invasion in March 2014.

Whether anyone was able to win or loss; war wrecked whatever left of that poor country. Inaccurate bombings led of deaths of hundreds of civilians. Even if coalition was able to exit someway, suffering is not going to end. This poor country without any natural resources, sitting at the edge of one of the richest geographical area in earth is looking forward for another possible civil war.

Aden

Aden has/had the potential to become Singapore of Middle east. She occupies a crucial position in the shipping routes between Europe to India. It was once ruled by Portuguese, then by Ottoman empire. From the end of 1830 Aden came under the control of British East India company and later under British India. After one century later, in 1937, Aden was separated from British India and became a crown colony. Independence movements forced Britain to give independence Yemen and final detachment of royal marines of UK left the city in 1967 (after 128 years). To an extend Eden' history was like that of Singapore or Hongkong. Unfortunately, similarity ends there. Aden is not going to be Singapore of east any time soon. 

Sajeev

Thursday, June 25, 2020

Petrol-Diesel price hikes will result in spectrum wide price rise

An IOC Pump in Bangalore. Photo courtesy: Wikipedia
P
etrol and diesel prices were always high in India. Tax revenue from petroleum products is one of the biggest income streams for union government; probably the biggest for state governments (apart from union government’s contribution) we well. Administrations keep on milking this cow whenever the hole in the budget is not manageable. If the price is increasing in international market, then that delta is transferred to customers; if price is decreasing, then, government increases the tax to keep it at the same level.

One may argue, hike is required to address the enormous gap in government’s balance sheet. I cannot agree with that. If we are relying on additional tax revenue from petroleum products to address the hole; then, we are no different than any country which depends on petrodollar for everything. We need to focus on other income streams as well and need to reduce the enormous wastage in government services. 

Many argue that hike affects only the rich; since they are the ones who own cars and luxury vehicles. This argument is older than independent India. People become happy when government imposes an extra tax on super-rich, but they often forget the fact that the same tax might affect them more than the targets. By the way, a car is no longer the privilege of the super-rich. Same case with bikes as well. Sub 160cc bikes are used heavily by common people. 

Then comes lorries. Lorries move commodities across India. Even if it is transported by plane or train, last-mile delivery is often through lorries. As a matter of fact, lorries run on diesel. So, a hike in diesel price will be reflected in prices for items transported by lorries – which essentially is everything. 

Then there are diesel-powered power plants that generate electricity and supply to the grid. Those government-owned generation companies may not be able to raise the price of electricity they produce; but then, after a while, those companies' balance sheets become so bad that government may end up giving budget support to it - again from public money. 

Since petroleum products are used in almost every field of human life, a price hike will result in spectrum wide price rise. In this pandemic era when economic activity is down this is not good. It is not that in international market prices are going up and up and government is forced to do the revision. After the outbreak of COVID-19 oil prices in international markets were crashing; but in that situation instead of passing the benefits to customers, government increased the taxes so that price remained the same. Now, when the price is stabilized government is increasing the price not once or twice but for 18 straight days. 

Government should rethink increasing prices indefinitely. Unfortunately, there is no opposition that can take on government in this issue, and even a rally on the road is not possible because of COVID. India-China border issue and COVID took over all prime-time debates (is that really debate!!!). 
You remember seeing people on the road asking for money or food? Due to COVID, there is hardly much crowd visiting temples/churches/mosques and not many people on roads. Whoever is there often reluctant to go near them due to social distancing. I often saw a lot of them buying Parle-G’s smallest pack and give to their kids using the money given by devotees etc. Now a smaller number of people giving them money and price of food items will increase due to diesel price hike… double strike!!!

Sajeev

Sunday, May 31, 2020

National Security Law for Hong Kong

Hong Kong protests against Extradition bill. Courtesy - Wikipedia

Amid all confusion, what exactly Chinese National People Congress (NPC) did?

Last week NPC voted in favor of introducing new security legislation for Hong Kong - a former crown colony of the British Empire. Rumor is that law may be passed in NPC as early as August. In their words, it is to “prevent, stop and punish” threats to national security by outlawing acts and activities of secession, subversion, terrorism, and foreign activities in Hong Kong's affairs. Beijing will most probably bypass the Hong Kong legislature and add the bill to Annex III of Basic Law (Hong Kong's constitution).

After the passage of this Law in NPC, Hong Kong administration need to set up new security institutions to safeguard National Security. This also allows mainland intelligence and other agencies to operate in the city whenever needed.

Three main pillars of the new law

1. Secession and Subversion

What will be defined as secession and subversion is a very important question. For China, anything which challenges the supreme authority of the party and its functionaries can come under that wide umbrella. In addition to that, in an authoritarian society challenging even the local arm of the party can be considered as the same. Who will try, people booked under these acts? Existing Hong Kong courts or special courts? Will the spider web of firewall of China and omnipresent security system will come into Hong Kong? Will the relatively free (compared to mainland China) Hong Kong end up as any other territory of China? Possible answers to these questions do not instill much confidence among the international community.

2. Terrorism

Just like China has its own version of everything, Terrorism with Chinese characteristics will be very different from what generally accepted as terrorism.

3. Foreign interference in Hong Kong’s affairs

I do not think any country in the world dare to interfere in Chinese affairs. Even those criticizing China for human rights violations do not dare to interfere in Chinese internal matters. Otherwise, you will hear something about millions of Muslims locked up in China’s eastern provinces. Even Islamic countries do not utter a word. Forget about Chinese internal matters, countries do not even dare to stand up to China during the South China Sea crisis.

This law might affect organizations which have democracy or human rights anywhere in their name or articles and (or) receiving donations from foreign institutions.

It is not the first time Hong Kong is facing this situation. Long back in 2003, then Hong Kong administration tried to introduce National Security bill to implement Article 23 of Basic Law. However, they were forced to withdraw the bill after severe protests by the people of Hong Kong. Even in last year, China did not take any drastic steps during the long protests in Hong Kong.

Police and Protesters in Hong Kong Streets - During anti-Extradiction bill protests. Photo courtesy: Wikipedia

But this time things are different. Why? 

1. Hong Kong elections – opposition had a landslide victory in last November for district council elections. This election was conducted after long anti-extradition bill protests. Now new elections are coming up in September for Hong Kong legislative council, in which most probably pro-democracy candidates will win.

2. China is on the back foot due to the wild spread of SARS-COV-2. Hiding the seriousness and mishandling the same early in the cycle was criticized heavily across the globe.

3. This is an election year in US. China might be waiting for US election results; to see whether Trump will go or not. As per their calculation, a new democratic administration in Washington may be more amenable to Chinese suggestions and threats.

4. Hong Kong is not the engine of growth for China anymore. Hong Kong is important, very important but its relative power viz-a-viz other Chinese cities reduced drastically over the decades.

5. For Xi this is very important; after the reverses in law introduced in last year in Hong Kong as well as setbacks in Belt and Road initiatives, he wants to show that he can still get the things done.

6. When the entire world is trying to fight COVID with tooth and nail, many countries are not in a position to fight China. I do not think most countries will do anything other than issuing some statements with carefully chosen words.

7. Chinese power viz-a-viz US is on the rise in the South China Sea region, South Asia, Africa etc, and in numerous multi-lateral agencies. With US isolationist policies under Trump administration, not many countries want to cross the line with China.

8. China is not a party to the International Courts of UN, so there is no point in someone challenging China there. By the way, China already defied another international court order on the South China sea and hardly faced by the backlash.

9. I think most countries already accepted the fact that if not today then tomorrow Hong Kong will be part of China - just like any other Chinese provinces. It is just a matter of time.

10. China thinks that setbacks due to the loss of special trading status and other relations of Hong Kong with the US, UK, and EU are affordable.

11. China may also be testing the waters on how the world will react to the eventual integration of Hong Kong with mainland China and abolishing ‘One country two systems’ policy.

Sajeev

References

1. What safeguards are needed for Hong Kong’s new national security law? Who could get caught by it? Legal eagles flag concerns - SCMP

Falling Chinese Currency amid rising US-China tensions, Hong Kong crisis and COVID

People's Bank of China HQ- Beijing; Photo Courtesy: Max12Max, Wikipedia


When the dragon starts dancing wildly, it is going to make others nervous and markets volatile. Currently, when the world economy is crashing due to COVID related lockdowns and production losses, China is adding more fuel to fire by voting a plan to introduce new security laws to Hong Kong - former Crown colony of the British Empire. Hong Kong Crisis and rising tensions with US is causing yuan to fall farther - lowest level against USD in eight months [1].  Chinese central bank was intervened for the 9th consecutive trading day [1] in the market to release the downward pressure on yuan.

Just after US Secretary of State's declaration to the US Congress that, they do not consider Hong Kong suitably autonomous from mainland Chinese rule; National People's Congress voted in favor of introducing new laws. Whether the city is autonomous or not is an important factor in deciding whether Hong Kong will continue to get preferential economic and trade treatment from the US. Losing this status will force a lot of companies operating there to reevaluate their strategy; this can even threaten Hong Kong's future as Asia's financial hub.

The ironic fact is, depreciation in yuan hurts the US, European and other nations which imports Chinese products much more than it affects China. However, it is very risky for the Chinese to let the currency slip as other countries will declare China a currency manipulator and add penal tariffs on imports from China.

The question is will China's central bank defends yuan’s fall and stabilize it; if yes, then how long?

References

Friday, May 29, 2020

COVID Migrant Crisis - Congrats Railways

As per the latest release, "Indian Railways has distributed more than 85 lakh free meals and about 1.25 crore free water bottles to migrants travelling in Shramik Special Trains since 1st May 2020... As on 28th May 2020, 3736 “Shramik Special” trains have been operationalized from various states... Till now, around 50lakh migrants have been transported through Shramik Special Trains in 27 days. It may be noted that trains running today are not facing any congestion.

...top five States/UTs from where maximum trains originated are Gujarat(979 Trains), Maharashtra(695 Trains), Punjab(397 Trains), Uttar Pradesh (263 Trains) and Bihar (263 Trains)... top five states where maximum trains terminated are Uttar Pradesh(1520 Trains), Bihar(1296 Trains), Jharkhand(167 Trains), Madhya Pradesh(121 Trains), Odisha (139 Trains). In addition to Shramik specials, Railways are running 15 pairs of special trains connecting New Delhi and plans to start 200 more time tabled trains on 1st June.

Previously Railways converted numerous coaches to isolation wards and made other facilities available to the common public. One can always say, they could do more. But it is time for us to thank railways for transporting those 50 lakhs plus people stranded across the country to their hometowns and states. During this migrant crisis, this is a great ray of hope. This shows that someone can get their act together and do something to alleviate the stress on migrants who are otherwise traveling to their hometowns located hundreds(if not thousands) of kilometers away on foot and cycles.

Sajeev