Roger,
<<does anyone think India may be tempted to a pre-emptive strike? >>
The following is what the weekly analysis in the Global Intelligence Newsletter from Stratford (released today) says with regard to your question. By the way, as many of us here know, these updates are available on a free e-mail subscription basis by signing up at stratfor.com
They are fascinating and lend a credible view to many international subjects.
Best,
Stitch
Global Intelligence Update
Red Alert
June 1, 1998
Nuclear Buildup and Financial Meltdown: India, Pakistan and Russia
The past week had two major foci. The first was the decision by Pakistan
to demonstrate its ability to conduct underground nuclear tests. The
second was the sudden and fairly unexpected crisis in Russian financial
markets. The international community was transfixed by events on the
Indian subcontinent, while seeming to take the Russian crisis in stride.
From our point of view, the order of priority should be dramatically
reversed. The Russian events constitute a decisive, definitive event, even
in the history of a former superpower. The Indo-Pakistani events, while
appearing more dramatic, are actually a minor evolution rather than a
decisive break with the past.
It must be remembered that no one has doubted that both India and Pakistan
are capable of detonating nuclear devices. The fact that they have
detonated the devices has certainly attracted attention, but is merely a
statement of the obvious, this time with an exclamation point. The threat
of nuclear war on the subcontinent neither increased nor decreased because
of these tests. The threat of conflict did increase when a new,
nationalist government was installed in India and played off against an
already established, nationalist government in Pakistan. But the mere
explosion of nuclear devices simply confirmed what everyone knew, which was
that both India and Pakistan had the ability to test weapons.
It is, of course, unclear that either country, especially Pakistan, has the
ability to deliver nuclear weapons. Even the availability of delivery
systems, such as aircraft and missiles, does not mean that either country
has the ability to marry their nuclear devices to the delivery system.
Creating a device that can explode in a cavern and creating a device that
can fit on a delivery system and be detonated over a target are two
different matters. Therefore, it is important to recall that we have seen
a demonstration of the ability to detonate nuclear weapons and not a
demonstration of the ability to deliver them as weapons of war.
But let's assume the probable, which is that both India and Pakistan have
the ability to deliver nuclear strikes at each other. This leaves us in
the same position we were in a month ago. At that time it appeared
probable that both India and Pakistan could deliver nuclear strikes against
each other if they wished. Today it appears probable that both India and
Pakistan can deliver nuclear strikes against each other if they wish. We
end this cycle of tests in the same position as we began it.
Indeed, what changes have occurred tend to argue against armed conflict
rather than for it. The Indo-Pakistani conflict, which is now a half-
century old, entered a new phase with the installation of the new Indian
government. The confrontation along the entire border, and in Kashmir in
particular, increased markedly. The probability of armed conflict
increased to some extent. However, even this was limited by military
realities. Pakistan's ability to engage and defeat the Indian army is
doubtful. Therefore, a full-scale assault on Kashmir is not in the cards.
The Indian army's ability to conduct extensive offensive operations also
has some limits. Moreover, India holds Kashmir and really doesn't covet
Pakistani territory. Since it is not clear that the dismemberment of
Pakistan is in India's long-term interest, the willingness of India to
launch a general offensive, were they to judge themselves able to carry it
out, has always been doubtful.
Therefore, while border skirmishes remain possible and even likely, all-out
war makes little strategic sense for either side. With the public
demonstration that nuclear weapons are a probable factor, the likelihood of
all-out war decreases rather than increases. The one strategic
possibility, an Indian invasion of Pakistan designed to secure India's
western frontiers permanently, ceases to be possible if Pakistan has
nuclear weapons. To be precise, the presence of nuclear weapons does not
abolish conventional conflict. However, it tends to decrease the
willingness of combatants to challenge the very existence of a nuclear
state, as that is the only rational circumstance under which the use of
nuclear weapons makes sense.
If the history of the nuclear era has taught us anything, it is that
nuclear powers tend to become more, rather than less, circumspect in their
use of warfare. Neither the Soviet Union nor the United States threatened
the very existence of the other, therefore, both sides refrained from using
nuclear weapons. Indeed, the circumstance when the use of nuclear weapons
seemed a real possibility was in Israel in 1973, when it appeared that
Israel's very existence was threatened by Syrian forces on the Golan
Heights. Once the limited capabilities and intentions of the Syrians
became clear, the nuclear threat passed. Other nuclear powers, including
the United States and the Soviet Union, endured substantial politico-
military defeats without resorting to nuclear weapons because neither had
its very existence at stake.
The real significance of nuclear weapons is diplomatic and psychological.
They are a tool for appearing to increase the stakes without increasing the
risks. The very fact that India and Pakistan have focused the world's
attention on their subcontinent by doing fairly little, demonstrates the
utility of nuclear weapons in this regard. Not only is the United States
suddenly interested, but the apparent failure of the CIA to provide warning
of the blasts means that there will likely be a major shake-up in the
intelligence, defense, and diplomatic strata responsible for India and
Pakistan. This gives both countries added visibility in the U.S. analysis
and policy-making communities and marvelous opportunities for manipulation
as the bureaucratic struggle mounts in the coming months. They have gotten
the attention of the only country that counts. The real issue is what they
will each try to do with it. In the meantime, skirmishes will continue,
each side will practice brinkmanship and each side will court favor in
Washington.
The one danger is that the Indo-Pakistani conflict will be dragged into the
general Middle Eastern conflict. Iran has not had good relations with
Pakistan because of differences over Afghanistan. The Iranian Foreign
Minister will arrive in Pakistan on Monday to discuss these differences.
Pakistan now has something Iran badly wants. The entire dynamics of these
discussions could shift. The real issue is: is this a Pakistani bomb or an
Islamic bomb? The Iranians will be far more interested in the answer to
that question than in Pakistani relations with India. And so should we.
In the meantime, the collapse of the Russian financial markets was noticed,
but not sufficiently. This was not a transitory hit by foreign
speculators, but a massive vote of no confidence in Russian economic
policy. Foreign capital, which had stopped arriving in Russia, now is
withdrawing. The Russian Central Bank said that foreigners withdrew
between $500 million and $700 million from the government bond market
during the past two weeks. It said that foreigners held about one third of
the bank's outstanding instruments, about $20 billion. The total market
is valued at $60 billion. This would mean that the stampede out of the
markets was led by Russians, since we find it difficult to believe that a
withdrawal of about 1 percent ($500million-$700million) of the total market
could cause the market to crack.
In actuality, we suspect that the Russian Central Bank has no real idea as
to what happened over the past week, since its ability to track who holds
government bonds is limited. This also means that the RCB's brave
declarations that the ruble is in no danger because foreigners are staying
in the market, should comfort no one. There is no way that the Russian
markets crumbled as they did without major foreign liquidation. That means
there are a great many rubles in foreign hands still waiting to be
converted, and that the RCB's declarations that the ruble is in no danger
of devaluation is unsupported. Particularly given the weakness in the
energy-related markets, Russia's hard currency reserves must be dwindling.
The pressure to bring the ruble to more realistic levels is irresistible.
Without a currency crisis, the only alternative is a general financial
crisis. Given the Russian track record, we will probably see both.
The problem is that no one really knows the extent of the situation. As in
much of Asia, corruption and inefficiency beyond imagination have rendered
Russian financial statements meaningless. The state is spending money it
doesn't have, and its ability to raise money in foreign markets has become
doubtful. The crisis: what will the Russian state do for money? The
Russians have focused on tax collection, firing the old head of the service
and promising a complete overhaul, going after the largest companies first,
since they are also the largest deadbeats. The problem is twofold. First,
the entire economy has been built on tax evasion. Second, we suspect that
most of these enterprises couldn't pay their taxes, even if they wanted to.
After seven years of failing to deal with fundamental problems in the
economy, the Russians have hit the same brick wall as the Asians. This is,
of course, only phase one. The next sixty days will bring other calamities
galore.
As in Asia, we are brought to the social and political consequences. The
Russian economic problem, like the Asian economic problem, has become
insoluble. As the tax situation shows, even obvious reforms can't be
implemented. The question remaining is, how will Russian society respond?
We continue to feel that the massive failure of liberalization for all but
a narrow stratum of Russian society will lead to the return of traditional
Russian authoritarianism, both to contain unrest and to respond to it. We
expect the regime, with or without Yeltsin, to crack down on unrest while
focusing that unrest on the only group that can be dispensed with: foreign
bankers and their Russian allies. They can be dispensed with because they
are dispensing of themselves. No sane foreigner will invest in Russia
today. Their dilemma is how to get out in one piece. Blaming them for the
crisis is safe and well within the Russian tradition for coping with policy
failures. The real losers, of course, will be the Russian bankers who made
their living peddling their connections to Western banks. The lucky ones
already have their money in the United States. The rest will be driving
cabs in New York, if they are lucky enough to get out.
With repression, comes more traditional Russian foreign policy. Indeed,
one of the more interesting aspects of the Indo-Pakistani crisis is how the
Russians, traditional allies of India, will respond. As with the recent
Iraqi crisis, we expect Russia to place itself in a more familiar role than
it has in recent years: a thorn in the side of the United States. Next
week, the focus should still be on Russia and the subcontinent. We expect
it to be in a more rational ratio than this past week. |
