BRICS: The new Syndicate 1 Bi-annual Review Gateway House Quarterly Review GATEWAY HOUSE Indian Council on Global Relations Quarterly Review | October- December 2011 Bi-annual Review January – June 2012 Letter from the Executive Director Manjeet Kripalani Executive Director Gateway House: Indian Council on Global Relations his quarter was dominated by the BRICS alliance. The first BRICS meeting to be held in India was hosted Tin New Delhi on 29 March 2012. The big announcement was the possible establishment of a BRICS Bank – an alternative and supplement to the World Bank and IMF that currently dominate international development financing today. The rest of the world is skeptical about what they see as diverse developing nations trying their hand at institu- tional financial independence. But given the stresses that are threatening the most ambitious financial integration project – the Euro – a new international financial alliance that can keep in mind the lessons from the Euro’s strains, may be a worthwhile experiment for the developing economies. A key concern: Keeping the Renminbi as a partner currency, and making sure it does not dominate (page 7). Meantime, the BRICS are experiencing troubles of their own: India and China are slowing down economically, and as Gateway House points out, while China is by design, while India’s is involuntary. Putin’s re-election has evoked public protest, but there is also a new xenophobic dimension of nationalism in the country which is noteworthy (page 26). Brazil’s currency is too strong and growth has slowed significantly for the grouping to benefit from each others’ strengths, they must learn from each other – and India and Brazil provide some examples (page 31). The troubles of the Arab uprisings never far from our shores, is intensifying. The Assad regime is being cornered now, and Western support of various ‘rebels’ in West Asia has caused a full-scale Shia-Sunni split to erupt across the region (page 44). The consequences will be catastrophic. In March, Gateway House launched its first Global Stability Map, authored by our research head Akshay Mathur and interns. The map, which all our members received, is the first attempt to look at the world’s political, social and economic elements from the viewpoint of a developing country – in our case, from the shores of Mumbai. The map will be an annual feature for Gateway House members. Enjoy the summer and the mangoes that come with it. Manjeet Kripalani Executive Director Gateway House 3 Quarterly Review Table of contents Greeks do not want to leave the Eurozone 6 Beware of cheap lending from China 8 IMF interview: How the European crisis will affect India 10 What the Dimon debacle means for the world 11 EU austerity: Room to wiggle 12 The case for BRICS swaps 14 China: What Nixon wrought 17 China’s global proxy game 19 Pragmatic Populism: Learning from the new Latin America 20 India-U.S.-Iran: A tightrope walk 22 Petit, not grand geste on India-Pakistan 24 Iran: An opportunity for BRICS 25 The Bahrain formula 28 U.S.-Afghanistan agreement: A welcome start 29 Sanctions on Myanmar: Have they worked? 31 Qatar: Geopolitical Cosmopolitanism 34 Deconstructing the Muslim Brotherhood manifesto 36 Can Pakistan sustain its democracy? 40 What Iran's election means for India 41 Competitive intolerance: Reflections on Gandhi’s death anniversary 43 A significant election in Kuwait 44 Maldives: Nasheed outpaced his people 46 Rethinking human rights 48 Russia’s growing nationalism 50 India and Russia: A new Central Asian engagement 52 India-Brazil: Pioneers of a new development agenda 54 BRICS: Moving in the right direction? 56 BRICS: Their case against the U.S. 58 Gateway House 4 Quarterly Review Myanmar in the ASEAN Matrix: An opportunity for India? 59 India-Tonga: Old friends, new engagements 60 India-U.S.: More equal partners 62 BRICS: An alternate financial framework 63 West and Wahabi vs. Shia 65 UN: A return to 'mandated colonialism' 67 Hillary Clinton’s ‘Pivotal’ Moment 70 Rio + 20: Accommodating new global donors 72 Taliban in Qatar: An Afghan view 74 MMRCA: Building empires, not security 75 India: A unified defence command? 77 AFSPA: National necessity or human rights violation 79 Should India emulate China in space? 81 Piracy: A dangerous eco-system 83 Gateway House Meetings: January to July 85 Gateway House 5 Quarterly Review Geoeconomics Greeks do not want to leave the Eurozone 28 March 2012 Akshay Mathur Head of Research, Gateway House Greece holds on /Storem-Flickr he Greek debt debacle seems separation from the Eurozone may opinions but a majority, both in the Tto be over – at least for now. have enabled faster recovery. political spectrum and in society, do The crisis is fading and the dreaded want to be in the Eurozone. restructuring of Greece’s obliga- Dr. Kostas Botopoulos: I’ve never tions – sharply reduced in value for supported the idea of Greece leaving AM: This is a Eurozone crisis investors – went smoothly. Despite the Euro. I’m not an economist, but it affects the global economy. riots and strikes, Greece moreover but many research reports have Shouldn’t you engage the emerging seems willing to pay whatever price shown that it would be devastating countries? It is time to think out of necessary to stay in the Eurozone, for both the Greek and European the box. an outcome few outside experts economy if the Euro were to begin foresaw. Recently in Paris, Head unraveling. So I think this is out KB: We are thinking out of the box. of Research for Gateway House: of the question. A large majority, The world has changed dramati- Indian Council on Global Relations, around 80%, of Greeks also do not cally. The ‘G’ now has 20 countries Akshay Mathur, spoke with want to leave the Eurozone. (G20) and the emerging powers are Kostas Botopoulos, Chairman, more and more important. We are Greek Financial Services Authority, Of course, there are some parts trying to have financial partnerships on the pain and commitment of the of the Parliament that now say we with every country that is willing Greek decision. should renegotiate but they are not to work with us. We have built a in power, and if they ever came to strong partnership with China for Akshay Mathur: Why didn’t power they would change their example. It would be a very good Greece choose to default? The opinion. There are extreme right idea to have the same relationship devaluation of the currency and wing and the extreme left-wing with India. Gateway House 6 Quarterly Review Geoeconomics AM: But I have not seen any in sectors such as infrastructure. movement toward India. They were pumping money into the Greek economy without a clear KB: No, not yet. But it is important. idea of the results they wanted to I know that our stock exchange has achieve. That’s a problem. A lot of been going all over the world and money has been given but not as seeking opportunities for funds a present. It has been lent, albeit to come from foreign countries. at a very good rate, but it has been So this is an invitation for Indian lent. So this is something to keep in investors to come to Greece, see mind. What has been lacking up to first-hand what is happening, and now is a strategy to ensure that the invest here. Our tourism industry So this is an money is being put where it counts; is one obvious starting point. that is, in the real economy, and in Infrastructure, maritime and energy invitation the banks; then making sure that the sectors are also very lucrative. for Indian banks lend it to the real economy and not keep it for themselves. AM: The rest of the world is investors surprised by the slow decision- to come to AM: What are the reforms making process. Why couldn’t the demanded by the stakeholders? stakeholders agree on a deal sooner? Greece, see first-hand KB: This is a global political KB: This process has been going on program that has been imposed on for more than two-and-a-half years. what is Greece after very little negotiations, The outside world must understand happening to be frank, on a sovereign state. that it is not an easy process for us. In this program, one good thing, The procedures in the European but not popularly discussed, was Union (EU) are by essence very the series of important structural slow because you have to build KB: One hundred and seven billion reforms such as abolishing privi- a consensus with 27 different Euros have been erased from our leges for legal and pharmaceuticals countries that have different books. There is a €30 billion aid sectors that were over and above interests.We also have numerous package for the banks and another normal European standards. institutions – the European Union €30 billion on top of that will is guided by the European Council be given to combat recession in The second example of reform and the European Commission, Greece. demanded is that of the tax system. which is approved by the European This is a big problem because Parliament. In addition, the respec- The goal is to reduce debt from the we have high tax evasion. Every tive national parliaments have to private sector and restart the Greek government wants us to fix it but ratify the main political decisions. So economy. It seems voluntary but it it is very difficult to put into force. you need agreement from all stake- really is a global arrangement.