Money Wars: Beating Up On Beijing?

Money Wars: Beating Up On Beijing?

Dispatches From The Edge

Oct. 25, 2010

 

 

Are the U.S. and China on a collision course? Consider the following:

 

During the 2010 mid-term elections, some 30 candidates for the House and Senate are blasting China for everything from undermining America’s financial structure to fueling the U.S. unemployment crisis.

 

The Obama Administration is accusing China of manipulating its currency to sabotage the U.S. exports trade, and the U.S. House of Representatives just passed a bill to slap huge tariffs on Chinese goods unless Beijing allows the renminbi, China’s currency, to appreciate.

 

A recent Financial Times article on the failure of the International Monetary Fund (IMF) to resolve the currency issue says, “The hostility between Washington and Beijing has escalated into something resembling trench warfare.” Last year a CNN poll found that 71 percent of Americans thought China was an economic threat, and 51 percent of those polled thought Beijing represented a military threat as well.

 

If one adds to the above the growing tensions with China in the South China Sea and the Taiwan Straits, some kind of dust up seems almost inevitable, though any “collision” would be a diplomatic one. But a major diplomatic fallout between the world’s two largest economies has global implications.

 

What is going on here? Is China indeed manipulating its currency to beggar the U.S.? Does it bear some responsibility for the high jobless rate and the inability of the American economy to recover from the deep recession?

 

The answer is both yes and no, and thereby hangs a tale.

 

The U.S. charges that China is deliberately undervaluing its currency, the renminbi, which makes Chinese export goods cheaper than its competitors and thus undermines other countries exports.

 

China is indeed manipulating its currency, although it is hardly alone. In one way or another, Brazil, Japan, Switzerland, Thailand, South Korea and others have recently acted to keep their currencies competitive. Nor is currency manipulation something new. During the 1980s the Reagan Administration and Japan jimmied their currencies to deal with a huge trade gap. Indeed, the current free market orthodoxy regarding currency is a recent phenomenon in world finances, a reflection of the “Washington Consensus” model that has dominated institutions like the IMF and the World Bank for the last two decades.

 

How one sees the current dispute depends on where one sits. With U.S. unemployment above 10 percent, Americans are focused on policies that will bring that rate down. But from China’s point of view, any major upward evaluation of the renminbi would simply transfer U.S. jobless rates to China.

 

Since it would also reduce the value of the dollar, it would lower the value of the massive debt the U.S. owes China. “And that, to the Chinese, would feel suspiciously like a default,” says Stephen King, chief economist for HSBC.

 

In short, a lose-lose deal for Beijing.

 

From the Chinese side of the equation, the U.S. is essentially trying to unload the consequences of the economic meltdown that Wall Street caused onto them. And they dispute the fact that the huge trade surplus is all that relevant to the current crisis.

 

According to Avinash D. Persuad, chair of Intelligence Capital Limited, even if China’s $175 billion trade were to somehow vanish, it would only have a 0.25 percent impact on global GDP. “The Chinese economy is one quarter of the U.S. economy, and at the peak of the U.S. trade deficit, China’s surplus was less than a third of it. David may have toppled Goliath, but he couldn’t carry him,” says Persuad.

 

Exports have certainly been important to China, but they have only accounted for 10 to 15 percent of growth over the past decade. The main engine for Chinese growth has been investment. According to the World Bank Growth Commission, of the 13 countries that have enjoyed 7 percent growth rates over the past 10 years, all had high investment rates. These countries suppressed consumption by keeping wages low, allowing them to amass enormous pools of capital to pour into upgrading infrastructure or subsidizing industry.

 

The Chinese economy is booming—it never fell below 8 percent growth during the recession—but it has some vulnerabilities. The Chinese recognize that they need to shift their economy, away from an over reliance on exports to one based more on internal consumption,. To this end, private wages and consumption have been growing at a respectable 8 to 10 percent yearly. The thinking is that as consumption goes up, China will absorb more of its own products, and thus the trade deficit will go down.

 

China’s new five-year plan is trying to do exactly this. Shifting some of the economy away from the wealthy coastal areas toward the more depressed inland part of the country will help alleviate some of the wealth gap between city and country, and encourage urbanization in the interior. All of these moves will increase consumption.

 

If China were to suddenly raise the value of its currency, however, it would tank a number of export industries and flood China with unemployment. Since the jobless have no money, consumer spending would fall, setting off yet another round of layoffs and plant closings. This is, of course, exactly what Americans are discovering.

 

Beijing has begun raising the value of renminbi—it has risen 2.5 percent since June—but the slow pace has not satisfied Washington.  The Americans are making other demands as well. For instance, the U.S. would like China to lower its interest rates, which the Americans argue would encourage consumption.

 

But as Michael Pettis, a professor of finance at Guanghua School in Beijing University and a senior associate at the Carnegie Endowment, points out,  “This would be terrible for China. Lower interests rates and more credit will fuel a real estate boom and boost both capital-intensive manufacturing and infrastructure overcapacity—all without rebalancing consumption.”

 

From China’s point of view the problem is not its currency, but the lack of controls over American finance that can lead to tsunamis of money flooding into underdeveloped countries. In 1997, waves of international investment money poured into Thailand, tanking the currency  and spreading a recession,  the so-called “Asian Flu,” throughout the region. The Thais took action Oct. 12 to block a similar “hot wave” of money pouring into the country by imposing a 15 percent withholding tax on capital gains and interest payments on government and state-owned company bonds.  Besides Thailand and South Korea, other countries in Asia, including Singapore and Taiwan, have also intervened to keep their financial ships on an even keel.

 

Europeans are blowing hot and cold on currency intervention. Last year and this past winter and spring, the EU had good reasons for remaining quiet about the subject of undervalued currencies. The Euro lost 17 percent of its value vis-à-vis the dollar over the Greek financial crisis, which had the effect of powering up European exports, in particular, by Germany.

 

Germany—the world’s second biggest exporter after China—is as much concerned about the dollar as the renminbi. “We expect the U.S. to continue its policy of printing money,” Aton Borner, president of the German exporters’ association, BGA, told the Financial Times. “This will trigger a currency devaluation spiral that will hit Europe the most.” The dollar has dropped 20 percent against the Euro since June, and German exports have fallen for two months in a row.

 

The Europeans are certainly concerned about the currency crisis, although they are a good deal more sotto voice than the Americans.  “It’s not helpful to use bellicose statements when it comes to currency or to trade,” says French finance minister Christine Lagarde.

 

Governments that don’t take care of their own during an economic crisis will eventually pay a price at the polls. Brazilian Foreign Minister Celso Amorim is certainly concerned about defending Brazil’s currency, but he is careful about applying pressure as a way of finding solutions. “We have good coordination with China, and we’ve been talking to them,” he said, adding, “We can’t forget that China is our main customer.”

 

China charges that the U.S. is scapegoating it for problems that the U.S. created for itself, and there is certainly a strong odor of China bashing these days, even from intelligent and thoughtful people like Paul Krugman, Nobel laureate and New York Times columnist.

 

Krugman says that while he wants to avoid “hard ball policies,” he says “China is adding materially to the world’s economic problems at a time when those problems are already severe. It is time to take a stand.” Krugman suggests the U.S. should put a 10 percent surcharge on imports from China, a move more likely to ignite a global trade war than bring China to heel.

 

Last weekend’s meeting of the G20, representing the world’s leading economies, firmly rejected an American proposal aimed at the Chinese (and also the Germans) and opted for a less confrontational approach. The meeting in Seoul, South Korea essentially asked everyone to play nice. Whether they will or not remains to be seen. The subject is sure to come up again in November when G20’s heads of states get together.

 

The solution is not a quick re-evaluation of the currency, says the Carnegie Endowment’s Pettis, but “statesman-like behavior, in which the major economies agree to resolve their trade balances over several years.”

 

“Statesman-like behavior” is not exactly what is coming out of Washington these days.

 

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Clash Of The East Asian Titans

Clash Of The East Asian Titans

Dispatches From The Edge

Conn Hallinan

Oct. 22, 2010

 

On the face of it, it is hard to explain why a minor collision between a Chinese fishing boat and a Japanese Coast Guard vessel this past August escalated to the point where Beijing and Tokyo came to the edge of breaking relations.  But the incident mirrors policies that both nations see as vital to their self-interests, and coupled with an aggressive push by the United States to defend its traditional power in the region.

The disputed ownership of the tiny scatter of islands in the East China Sea claimed by China, Japan and Taiwan—the Senkakus to the Japanese, the Diaoyus to the Chinese—is less about fish than the potential energy reserves that might lie beneath the string of reefs and atolls. But for more than 30 years both sides have largely avoided the kind of confrontation that took place Aug. 7.

In 1978, then Chinese Premier Deng Xiaoping proposed that the parties defer any decision on sovereignty, thereby allowing both sides to fish in the area. In 1997, the two countries signed the Japan-China Fisheries Agreement, although the treaty does not cover the area where the confrontation took place. However, over the past decade both sides have carefully avoided challenging one another—until Aug. 7.

From the Japanese point of view, the incident reflects an increasing assertiveness by Beijing in the East and South China seas, areas that China describe as vital—or “core”—to its security.

From China’s point of view, the arrest of the Chinese captain was a provocative act that reflects a growing hostility by Japan’s ruling Democratic Party. And Beijing is certain that the Americans are behind it all.

In a sense, both side are correct.

Japan’s Democratic Party was elected on a platform of improving relations with China, renegotiating a new American base agreement on Okinawa, and distancing itself from Japan’s umbilical linkage to U.S. policies. But the Obama administration torpedoed the new Prime Minister, Yukio Hatoyama, by refusing to compromise on the Okinawa base. When Hatoyama folded under the pressure and resigned, he was replaced by a far more pro-American Prime Minister, Naoto Kan. From China’s point of view, Washington engineered a coup, marginalized the more independent-minded wing of the Democratic Party, and brought Japan back under the U.S. umbrella.

Adding insult to injury, the U.S. has scheduled joint American-Japanese naval maneuvers near the disputed islands and war games off Taiwan, the island province that China claims is part of its national territory. The U.S. recently concluded major naval war games with South Korea in the Yellow and South China seas, maneuvers that drew a sharp protest from Beijing.

“[The U.S.] is engaging in an increasingly tight encirclement of China and constantly challenging China’s core interests. Washington will inevitably pay a costly price for its muddled decision,” Rear Admiral Yang Yi wrote in the People’s Liberation Army Daily.

And yet Japan is correct that a powerful current of nationalism has made China increasingly ready to challenge the traditional balance of power in Asia. For the past century European powers and Japan routinely encroached on Chinese territory, slicing off provinces and exploiting China’s economic resources. China still nurses a grudge over Japan’s brutal 1931-45 invasion.

Historical humiliations do play a role in the current crisis, but if there is one thing that drives China’s foreign policy, it is, access to energy to fuel the country’s explosive industrialization.   To that end, China has built ties with Iran, the “Stans” of Central Asia, Latin America, and Africa. Much of the oil and gas that keeps China’s factories humming comes by sea, and Beijing is increasingly concerned about the delicacy of its energy jugular vein. Close off the Malacca Straits between Sumatra and the Malay Peninsula and those factories go silent.

Therefore, when the U.S. and it allies, Japan and South Korea, carry out naval war games in the Indian Ocean and the waters near China, Beijing responds by beefing up its navy and vigorously defending what it considers its economic zone. But that gives the U.S. an opportunity to build alliances in the region and keep its irons in the fire.

Take China’s claim on the Spratlys and the Paracels, two groups of islands in the South China Sea. The islands are also claimed by Vietnam, Taiwan, Brunei, Malaysia, and the Philippines. China has seized more than 60 Vietnamese fishing boats in the area.

The countries with claims on the Spratlys and Paracels want to negotiate with China as a bloc, but Beijing insists on dealing with the dispute nation by nation. The standoff allowed the Americans to jump in and offer to mediate the issue. From China’s point of view, the U.S. is using the dispute to inject itself into one of its “core” regions and pull Vietnam and others into an alliance against China. To the countries involved, China is being a bully, and if the U.S. wants to help out, that is fine by them.

There are other bones of contention in the region.

Future water supplies concern the Chinese, because a major source of its water is the Himalayas, where glaciers are rapidly retreating in the face of climate change. Countries that border the mountain range are supposed to consult with one another, but China is busily building dams to corner much of the runoff.

There are historical tensions in the region as well. India lost a hefty slice of territory to China in the 1962 Sino-Indian War, and, since 2005, Beijing has come to call Indian-controlled Arunachal Pradesh border area “South Tibet.” There are also reports that China is building up its military forces in this area.

While some rightist forces in India talk openly about an armed conflict with China, that seems unlikely. China has been wary of war since its disastrous 1979 invasion of Vietnam, and, while it defines its southern border with India as a “core” area, neither country can afford a war, particularly one that has the potential to go nuclear.

Nevertheless, the border dispute has had the effect of strengthening ties between New Delhi and Washington.

Taiwan is another “core” area, but the U.S. is selling arms to Taiwan and holding joint naval exercises with Japan aimed at stopping a Chinese invasion of the island. However, recent polls in Taiwan indicate that its residents have little fear of an invasion, and Taiwan and China have even carried out joint search and rescue maneuvers. China accuses the Americans of stirring up trouble, but it is China’s refusal to take a possible invasion of Taiwan off the table that allows the U.S. to keep a foot in the door.

The U.S. and Japan view North Korea as an unstable and dangerous nuclear threat. From China’s point of view, the U.S. and its allies want North Korea to collapse, which would not only flood China with refugees, but put U.S. ally South Korea on China’s southern border.

There is no question but that the Americans are trying to surround China with military forces and an alliance system hostile to what Beijing sees as its basic interests. There is also no question but that China’s need for energy, water, and security have led it to exert itself in ways it has not done in a very long time. For Japan and the U.S., that will take some getting used to.

But none of the tensions are insurmountable.

U.S. armed forces in China’s backyard are a potential threat, but Chinese belligerence in places like the Spratlys and Tibet give the U.S. a rationale for maintaining its military power in Asia.

Energy needs are global, and need not be turned into a competition.  Himalayan water is not just a problem for India and China, but Central Asia, South Asia and Southeast Asia as well.

There are signs that the sides are trying to bank the fires. The Chinese agreed to re-establish military-to-military meetings with the U.S. and Beijing, and Tokyo made nice during the recent Asia-Europe summit in Brussels.

National problems have regional consequences, as regional problems increasingly take on a global dimension.  These are the work for a strengthened and more democratic United Nations. The alternatives should keep one up at night,

 

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Of Horns & Beaks and the Afghan War

Of Horns & Beaks and the Afghan War

Dispatches From The Edge

Conn Hallinan

Oct. 21, 2010

“Troops were poised to retake the most nefarious area of all, the horn of Panjwai, an area 19 miles long and 6 miles wide where the Taliban had built up a redoubt of command posts, courts and mined areas over the last four years. Afghan and American troops mounted an airborne assault into the region last weekend.”—New York Times, 10.21.10

Dial the calendar back to April 1970, and shift the scene from southern Afghanistan to South Vietnam. Then the all important piece of turf was the “Parrot’s Beak,” a slice of Cambodia jutting into Vietnam’s Kien Tuong Province, just 40 west of Saigon. The “Beak” was the supposed dwelling place of the elusive COSVN, the headquarters of the North Vietnamese army. Take the “Beak,” said the U.S. military, and we will break the back of the insurgency.

So, following the screening of the Movie “Patton,” President Richard Nixon sent tens of thousands of U.S. and South Vietnamese Army troops (ARVN) troops into Cambodia on April 30 to turn the tide of the war against the insurgents.

But COSVN wasn’t there, nor were any North Vietnamese troops.  It seems that two weeks before the attack, COSVN sent out a memo detailing the U.S. operation and pulled everyone out. What the Parrot’s Beak operation did accomplish was to further weaken the Lon Nol dictatorship in Cambodia and pave the way for a Khmer Rouge victory. It also killed a lot of Cambodian peasants, who, of course, went into the U.S. “body count” of dead insurgents for the month.

Those North Vietnamese troops did not vanish, however, they just followed Gen. Vo Nguyen Giap’s dictum of “Disperse where the enemy is strong, concentrate where the enemy is weak.” They went somewhere else. Five years later the National Liberation Front and the North Vietnamese took Saigon.

Jump ahead 35 years to the current U.S. and NATO offensive going in Kandahar Province, southern Afghanistan.

“We now have the initiative. We have created momentum,” says British Maj. Gen. Nick Carter, commander of NATO forces in southern Afghanistan and in charge of the Kandahar operation.  The police chief of the local district, Hajii Niaz Muhammad added, “We broke their [the Talibans] neck.”

But the fighting has been low key, and few weapons have been seized. A Taliban fighter told the Times, “We are not there anymore.”

Where did they go?

PUL-E-KHUMRI, Afghanistan-The Taliban’s influence in northern Afghanistan has expanded in recent months from a few hotspots to much of the region, as insurgents respond to the U.S.-led coalition’s surge in the south by seizing new ground in areas once considered secure.”—Wall Street Journal, 10/18/10

In recent weeks the Taliban have been launching attacks in Badakshan, Balkh, and Samangan, formally among the most peaceful in the country.  “Day by day, the Taliban are advancing into new districts,” Baghlan provincial council chief Mohammad Rasoul told the Journal. Attacks have more than doubled and the Taliban recently assassinated the governor of Kunduz Province.

Disillusionment with the government has helped fuel the insurgency.

“People don’t love the Taliban—but if they compare them to the government, they see the Taliban as the lesser evil,” Baghlan Governor Munshi Abdul Majid told the Journal.

While Gen. Carter is calling Kandahar the key to defeating the insurgency, his counterpart in Northern Afghanistan, Maj. Gen. Hans-Werner Fritz, commander of NATO’s 11,000 troops in the north, sees it differently: “The northern part could become the game-changer for all of Afghanistan,”  he says, because much of the fuel for the U.S. and NATO passes through Uzbekistan and Tajikistan, as does Kabul’s electricity.

U.S. Col. Bill Burlson, commander of the 1^st Brigade of the 10^th Mountain Division, sums up the dilemma of the Afghan War: “In order to deny the terrain to the enemy, you’d have to have people all over Afghanistan in combat outposts. But since that would take hundreds of thousands of troops, “You’ve got to pick and choose where you hold.”

And when you “pick” one place, the Taliban will “choose” another.

There is always a Parrot’s Beak, a Fish Hook—yet another “strategic” battle in the Vietnam War—a horn of Panjwai, a hill, or a valley that is the “key” to winning a war against an insurgency. But there are millions of hills and valleys and horns and beaks, and they are as meaningless in Afghanistan as they were in Vietnam and Cambodia.

All this talk about the “horn of Panjwai” would be laughable were it not for the fact that this nonsense translates into a lot of pain, death and destruction.  It also tends to harden positions on both sides, make peace that more elusive.

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Ecuador: Riot, Coup, and the role of the U.S.

Ecuador: Riot or Coup?

Dispatches From The Edge

Oct. 7. 2010

A police riot over an austerity bill, or a failed attempt to oust leftist Ecuadorian President Rafael Correa from office? In the aftermath of the Sept. 30 attack on Correa by police in Quito, it is looking more and more like this was an orchestrated coup. And while there is no evidence that the U.S. was directly involved, the Obama administration’s strong support for the current Honduran government may well have encouraged the plotters to expect similar treatment by Washington.

The police attack on Correa was co-coordinated with similar takeovers in several other cities, the seizure of Ecuador’s two largest airports by army troops, and the occupation of the National Assembly. In the end the Ecuadorian Army supported the President, freed him from the police hospital where he was being held, and whisked him to safety, but only after a firefight killed one soldier and a student who had turned out to support Correa. The President’s car was struck by five bullets. According to the Latin American Herald Tribune, eight people died and 274 were wounded in incidents nationwide.

Suspicion has fallen on former president and army colonel Lucio Gutierrez, who led a 2000 coup and has called for Correa’s ouster. Gutierrez currently lives in Brazil and denies any link to the attempted coup. Correa also charges that Gutierrez’s brother Gilmar, a member of the National Assembly, supported the coup.

Last year’s coup in Honduras that ousted Manuel Zelaya has cast a shadow across the region, raising up the ghosts of a previous era when military takeovers routinely toppled governments in Latin America, including those in Brazil, Argentina, Chile, and Ecuador. According to The Guardian, Correa said in the aftermath of the Honduran coup, “We have intelligence reports that say after Zelaya, I’m next.”

After Zelaya was ousted, the coup-led government of Roberto Micheletti organized elections—boycotted by most the population—and put Porfirio “Pepe” Lobo into power. Most countries in the region refuse to recognize the Lobo government, including the region’s major players, Brazil and Argentina.

In spite of the fact that the Lobo government has overseen a wave of terror directed at journalists, trade unionists, gays and lesbians, and opposition activists, Washington is pushing hard for countries to end Honduras’s regional isolation and its suspension from the Organization of American States (OAS).

“Now is the time for the hemisphere as a whole to move forward and welcome Honduras back into the inter-American community,” U.S. Secretary of State Hillary Clinton told the OAS.

But most countries are wary of anything that might give the appearance of endorsing a government brought in via a coup. There is also concern about the ongoing human rights crisis in Honduras. Reporters Without Borders has labeled Honduras the most dangerous country in the world for journalists—eight have been murdered in the past year—and human rights groups, including Amnesty International, the UN Office of the High Commissioner for Human Rights, and the Inter-American Commission on Human Rights have all condemned the on-going reign of terror directed at members of the Honduran opposition, the National Front of Popular Resistance.

While most nations in the region are reluctant to bed down with the Honduran government, the U.S. has opened the military aid spigot, donating $812,000 worth of heavy trucks to the Honduran Army. In the meantime, the United States Agency for International Development (USAID) is handing out $75 million for development projects, and $20 million for the “Merida” security program.

“Washington’s support for the coup government in Honduras over the past year has encouraged and increased the likelihood of rightwing coups against democratic left governments in the region,” writes The Guardian’s Latin American correspondent Mark Weisbrot.  “This attempt in Ecuador has failed, but there will likely be more threats in the months and years ahead.”

Two obvious candidates are Bolivia and Paraguay. In the case of the former, organizations like USAID and the National Endowment for Democracy (NED)—both of which gave active support to organizations behind the Honduran coup—are active.

In Honduras, NED and USAID helped finance the Peace and Democracy Movement and the Civil Democratic Union, both dominated by the country’s tiny elite, and which strongly supported the coup. Many of the Honduran Army’s officers, including coup leaders Gen. Vasquez Velasquez and Gen. Prince Suazo, have been trained by the U.S. Western Hemispheric Institute for Security Cooperation, the former “School for the Americas” that has trained coup makers and human rights violators from throughout Latin America.

According to !Presente!, a publication critical of the School for the Americas, the commander of the police barracks where Ecuador’s President Correa was attacked, Col Manuel Rivadeneira Tello, is a graduate of the School’s combat arms training course.

Bolivian President Evo Morales recently threatened to expel USAID for its role in financing opposition separatist groups based in the country’s wealthy eastern provinces. Along with the American Institute for Free Labor Development (AIFLD)—an organization long associated with the Central Intelligence Agency—USAID and NED have underwritten separatist media and organizations based in the wealthy province of Santa Cruz, where most of the country’s natural gas deposits lie.

The possibility of Eastern Bolivia declaring independence is very real and, if it happens, U.S. organizations will have played a major role in encouraging it.

In May of this year, Fernando Lugo, the progressive president of Paraguay, reported to the Union of South American Nations (UNASUR) meeting in Buenos Aires, that he had evidence of a coup aimed at overthrowing his government. Lugo had a closed-door meeting with the UNASUR members, following which UNASUR reaffirmed its full support for the Paraguayan government.

Paraguay is one of the poorest and most unequal countries on the continent, and it was long dominated by a military dictatorship. Lugo, who took office in August 2008 for a five-year term, put together a coalition that broke the 60-year stranglehold the conservative Colorado Party had over the country.

Lugo has weathered some personal scandals—he is a former Catholic Bishop who fathered a number of children—and is currently suffering from lymphoma. He is locked in a battle with his more conservative vice-president, Federico Franco, and at loggerheads with a fractious congress that has made getting legislation through a trial. Those are the kind of difficulties that might well encourage Paraguay’s rightwing military and the Coloradoans to consider a coup, particularly if they think that Washington will eventually take a position similar to the one it took on Honduras.

Of course not all coups are successful these days. An outpour of popular support for Hugo Chavez reversed the 2001 Venezuela coup, and Correa’s 67 percent positive rating—he has doubled healthcare spending, increased social services, and stiffed a phony $3.2 billion foreign debt—certainly played a role in spiking the Ecuador coup.

But U.S. organizations like NED and AIFLD, active throughout the hemisphere, were closely associated with the Venezuelan coup makers.

The Obama Administration promised a new deal in Latin America and a break from the policies of the Bush Administration. Instead it has beefed up its military presence in Colombia, sharpened its attacks on Venezuela, refused to back away from its blockade of Cuba, and played footsie with Honduran government.

If countries in the region are paranoid, maybe they have reasons for it.

To read other columns by Conn Hallinan go to dispatchesfromtheedgeblog.wordpress.com

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The Obama Administration & Indonesia

Bedding Down With The Devil in Indonesia

Dispatches From The Edge

Sept. 28, 2010

Bedding down with the Devil is the only way one can describe a recent decision by the Obama administration to resume contact with the Indonesian military’s (TNI) most notorious human rights abuser, the Special Forces unit, Kopassus. Following a July meeting with Indonesian President Susilo Bambang Yudhoyono, U.S. Secretary of Defense, Robert Gates lifted the 1999 ban on any contact with the unit.

The Indonesian military has a long record of brutality toward its own people, starting with the massacre of somewhere from 500,000 to 1 million Communists and leftists during a 1965 military coup. That massive bloodletting was followed by a reign of terror against separatist groups in Aceh and West Papua and the invasion of East Timor. In the latter case, the UN estimated that as many as 200,000 died as a direct result of the 24-year occupation, a per capita kill rate that actually surpasses what Pol Pot managed in Cambodia.

But, even by the brutal standards of the TNI, the 5,000-man Kopassus unit has always stood out. It kidnapped and murdered students in 1997 and 1998, made up the shock troops for the Indonesia’s invasion of East Timor, and ruthlessly suppressed any moves toward independence in West Papua.

West Papua is the western half of New Guinea that Indonesia invaded in 1969.

“Working with Kopassus, which remains unrepentant about its long history of terrorizing civilians, will undermine efforts to achieve justice and accountability for human rights violations in Indonesia and Timor-Leste [formally East Timor],” says John M. Miller, national coordinator of East Timor & Indonesia Action Network (ETAN).

The Obama administration’s rationale for lifting the ban is that U.S. contact with Kopassus will serve to improve the unit’s human rights record. “It is a different unit than its reputation suggests,” Pentagon press secretary Geoff Morell told the New York Times. “Clearly, it had a very dark past, but they have done a lot to change that.” In any case, he said, “the percentage of suspicious bad actors in the unit is tiny…probably a dozen, or a couple of dozen people.”

The aid to Kopassus appears to violate the Leahy Law that prevents the U.S. from training military units accused of human rights violations. “Kopassus has a long history of abuse and remains unrepentant, essentially unreformed, and unaccountable” U.S. Senator Patrick Leahy (D-Vt) told the Times.

No one in Kopassus or the TNI accused of human rights violations has ever been tried or removed from their position. “We regret this development very much,” Poengky Indarti of the Indonesian human rights group Imparsial told Reuters. “There is still impunity in the Indonesian military, especially in Kopassus.” She added, “We are confused about the position of Barak Obama, Is he pro-human rights or not?”

According to ETAN, Kopassus—sometimes called Unit 81—helped organize the murder of five Australian journalists in Balibo on the eve of Indonesia’s 1975 invasion of East Timor. Kopassus is also accused of a 2002 ambush in West Papua that killed three teachers, two from the U.S. According to Australian intelligence, the ambush was an effort to discredit the Papuan liberation movement.

There is also suspicion that the attack was aimed at blackmailing mine owners into paying protection money. From 2000 to 2002, Freeport McMoRan paid the TNI $10.7 million in protection money, but the company shut down the payments shortly before the ambush.

No one in Kopassus has ever been disciplined for the unit’s role in organizing nationalist militias to terrorize the East Timorese into voting against independence. The TNI financed and led militias’ killed some 1500 people, displaced two-thirds of the population, and systematically destroyed 75 percent of East Timor’s infrastructure.

It was Kopassus’ involvement in forming and directing the militias that was responsible for the U.S. decision to stop military training for the unit.

And, rather than improving Kopassus’ human rights record, U.S. training appears to have had the opposite effect. The “worst abuses” by the Indonesian military, according to Ed McWilliams, a former U.S. State Department counselor in Jakarta from 1996-99, “took place when we [the U.S.] were most engaged.”

According to Karen Orenstein, former Washington coordinator of ETAN, “History demonstrates that providing training and other assistance only emboldens the Indonesian military to violate human rights and block accountability for past injustices.”

This pattern is not confined to Indonesia. A recent study by the Fellowship for Reconciliation found that Colombian army units trained by the U.S. were the troops most likely to be associated with human rights violations.

“There are alarming links between increased reports of extrajudicial executions of civilians by the Colombian army and units that receive U.S. military financing,” John Lindsay-Poland told the Inter Press Service. Lindsay-Poland is a research and advocacy director for the Fellowship and an author of the two-year study.

Called “Military Assistance and Human Rights: Colombia, U.S. Accountability, and Global Implications,” the report examined 3,000 extrajudicial executions by the Colombian military. “We found that for many military units, reports of extrajudicial executions increased during and after the highest levels of U.S. assistance,” Lindsay-Poland told IPS.

The U.S. “School for the Americas” has trained numerous Latin American leaders associated with human rights abuses and death squads.

ETAN points out that Maj. Gen. Hotma Marbun, a senior Kopassus commander, has just been appointed regional commander in West Papua. Marbun was a highly placed officer during a particularly bloody period in East Timor from 1983-86, and was also involved in military operations in West Papua in 1982 and 1994.

Human rights organizations are reporting that the INF has stepped up its counterinsurgency operations in West Papua, including numerous sweeps aimed at “separatists.” The Indonesian military tends to describe any West Papuan who objects to Indonesia’s military occupation as “separatists.”

Some 22 non-governmental organizations from Indonesia, Australia, Germany, Britain, Timor-Leste, and the Netherlands have written a letter to President Yudhoyono protesting the imprisonment of scores of Papuans arrested for  peacefully demonstrating or expressing their opinions. Some of these activists have been sentenced for “rebellion” under the criminal code that goes back to the Dutch colonial period.

According to the NGOs the use of the criminal code to imprison dissenters is a violation of the Indonesian constitution that guarantees citizens the right to “freedom of association and expression of opinion,” and the right to right to “seek, acquire, possess keep, process and convey information by using all available channels.”

Sentences have ranged from three to 15 years, and human rights groups say that the prisoners have been mistreated.

More than 50 members of the U.S. Congress recently sent a letter to President Obama stating that the Indonesian government may have committed “genocide” against West Papuans. “Genocide is usually difficult to document since leaders are often reluctant to state their intentions to destroy another nation, race, or ethnic group,” the letter stated. “Even still, in 2007 Col Burhanuddin Siagian, who was then the local commander said, ‘If I encounter elements that use government facilities, but still are betraying the nation, I will destroy them.’”

Members of the congressional Black and Hispanic caucuses are prominent in the group of 50. The Congress members urged President Obama to meet with representatives of the West Papua during his upcoming November visit to Indonesia and to make the island “one of the highest priorities of the American administration.”

West Papua groups have called for an “international dialogue” on the current situation, and Komnas Ham, the Indonesian government’s official human rights commission, recommends withdrawing military forces from the island to encourage an atmosphere for talks.

In the meantime, ETAN and the West Papua Advocacy Team (WPAC) have asked the Obama administration to reject Indonesia’s new ambassador to the U.S., Dino Djalal. The groups claim that Djalal has been a tool for the Indonesian military and that he blamed the violence in East Timor on the Timorese.  ETAN and WPAC say that Djalal was “a dogged critic of international journalists and human rights organizations who sought to report these atrocities.”

Why is the U.S. bedding down with these thugs?

According to the New York Times, Indonesian “officials dropped hints that the unit [Kopassus] might explore building ties with the Chinese military if the ban [against training] remained.” With the U.S. taking a more aggressive stance Asia—the recent U.S.-South Korean war games, and the immense pressure the Obama administration put on Japan to let it build a new Marine base in Okinawa come to mind—the U.S. clearly saw a Chinese incursion into Indonesia as a threat.

Of course, there might never have been a Chinese offer. Indonesia learned long ago that all one had to do to open the U.S. aid spigot was to become chummy with Beijing.

The U.S. has a long and sordid relationship with Indonesia’s military. According to documents uncovered by George Washington University, the U.S. fingered leftists for military death squads during the 1965 coup. During the Ford administration, then Secretary of State Henry Kissinger gave Indonesia the green light to invade East Timor. And the Americans acquiesced with Jakarta’s torpedoing of a UN-sponsored referendum on independence following Indonesia’s 1969 invasion of West Papua.

It looks like we are about to once more bed down with some pretty awful characters.

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