Tuesday, August 22, 2023

China's Economic Rise and Future Prospects

 

Dr. Adil Rasheed: China's Economic Rise and Future Prospects

    • 11 November 2007

    It was Napoleon Bonaparte who had presciently warned: "Let China sleep for when she awakes, she will shake the world." However, it seems the votaries of globalization have finally managed to arouse the sleeping giant at their own peril. The result is China's growing ascendance in the world's economic, scientific, militaristic, and political spheres.

    After initiating reforms in 1978, China's economy has grown at close to 10% annually, according to official data. Unofficial estimates believe the figure to be higher. This growth rate has made China the fourth largest economy in the world when measured by nominal GDP, and the second largest when measured by purchasing power parity. Even by the former criteria, China is predicted to surpass Germany to take the third place in early 2008. Many economists also believe that at its present rate of growth, China would overtake the US in overall GDP terms by 2040.

    In addition, China is today the world's largest exporter of information and communications technology products, which is a major factor in the country's $100 billion-plus trade surplus and nearly $200 billion trade surplus with the US. It is already the world's largest mobile-phone market, and the second-largest market for personal computers. China is also the world's top producer of steel, coal, cement, cereal, meat, and cotton. It ranks among the top ten trading nations and is the second largest destination of direct foreign investment in the world. More importantly, it is the second-largest importer of oil in the world, despite being its fifth-largest producer.

    As regards its industrial production, China today produces about two-thirds of the photocopiers, microwave ovens, DVD players and shoes in the world, half the apparel and digital cameras; about one-third the mobile phones; and about two-fifths of the personal computers. To keep its economy growing, it accounts for about 20 per cent of world consumption of copper, 19 per cent of aluminum, 31 per cent of coal, about 27 per cent of steel, and about 50 percent of the world's cement. In the past twelve months alone, China has overtaken Canada as the biggest source of imports to the US, and has overtaken the US as the biggest source of imports to the European Union. The latest Forbes China's richest list has 106 US dollar billionaires, second only to the US. China's biggest company, the state-owned oil giant PetroChina, earlier this month became the largest in the world and the first to exceed $1 trillion (£480bn) in value after its shares almost trebled on their first day of trading in Shanghai. Thus, a single Chinese company suddenly enjoys a market value that is of the size of India's economy.

    Undoubtedly, China's large and fast-growing economy is expected to alter global patterns of production, trade, and pricing, if not even the global political and military order. China's sensational rise on the world economic scene, however, did not take place overnight. It all began in the late 1970s, when the People's Republic of China (PRC) converted its socialist communes to individual households for family farming, and instituted banks for financing enterprises. By the late 1990s, most state enterprises had been sold to private concerns, and banks had been transformed to operate increasingly as businesses.

    Therefore, China's economic boom is clearly founded in its government's responsive attitude to the needs of its economy. The Chinese government has focused on public investment that has resulted in the development of the country's infrastructure, such as good roads and highways, ports, airports, state-of-the-art telecommunication networks, public health, law and order, education, mass transportation, etc. This has undoubtedly propelled the performance of its private sector, which presently constitutes 70% of its economy. In fact, China's efficient financial system has helped its government concentrate its resources in these public investments. The country's directed-credit system channels funds from banks and postal deposits to policy-determined public projects. This system works alongside the usual profit-oriented and competitive financial system.

    Another reason for China's exponential growth is the astuteness of the country's leadership in opening up the economy in a phased and studied manner, without allowing major economic fluctuations or political instability to hurt economic development. The development-oriented ideology of its leadership, its ability to be pro-active and adept at taking necessary economic measures and its effective system of collaborative policy review has been important in giving its economy the necessary impetus and direction. The government has intelligently used modern technology and systems in keeping with the requirements of their economic needs and peculiarities, which its domestic institutions can easily absorb and benefit from.

    Moreover, China's economic rise has been led primarily by domestic demand. Therefore, rather than suffering from slower growth rates, like the US and Asian economies in 2002, China's GDP accelerated right through that period and is still at almost maximum overdrive. Some international parties allege that China¿s economic rise is due to unfair commercial practices, such as violation of intellectual property rights, policies affecting exchange rate levels, accumulation of foreign exchange reserves, subsidies, etc. However, the International Monetary Fund and the US Treasury Department have repeatedly expressed their satisfaction with China's compliance with global standards for fairness.

    Still, several shortcomings and weaknesses challenge China's economic prospects for the future and many international scholars even believe that the country's bulging economic bubble will eventually burst. These scholars see several fault lines in China's political and economic terrain and predict that the Chinese government may be unable to cope with the burden of its own internal contradictions.

    Due to the rapid pace of economic development based on capitalist principles, the Communist government of China is embarrassed to find the growing chasm between the rich and the poor, the booming industrial and the faltering agricultural sector, and the developing urban and declining rural regions of the country. The government admits that just as farmers remain poor, the number of low-income city dwellers is also on the rise and manufacturers are restrained by limited investment in products that meet the market demand.

    Several economists also see the possibility of a sudden collapse of China¿s financial sector because of non-performing loans and the slow-paced liberalization of the sector in market directions. Growing cases of corruption, lack of transparency in banking and other corporate sectors, economic crimes etc. also pose a major challenge to the Chinese economy.

    The central government is also reportedly finding it difficult to discipline the actions of local governments. Local officials have been found to promote their interests by pushing for high investment rates and output levels. The central government is concerned about the adverse consequences of such actions, which it fears could lead to excessive investments, unsold inventories, and local policies that risk nationwide price inflation.

    Finally, Chinese rapid rate of growth may itself prove to be a cause of its undoing, say many economic experts. The Chinese government has been mindful of the threat of "overheating" of the economy and its officials have been warning of introducing measures to curb "investment bubbles," overcapacity, inflation, and unsustainably high-energy consumption.

    Thus, China faces a herculean task of steering its economic juggernaut in the right direction. Moreover, the increasing dependence of the world economy on continued expansion of the Chinese investment boom means that if the Chinese economy runs into trouble it could create significant problems for the world economy as well. Therefore, there is a lot riding on the proverbial Chinese dragon, as it scales new and giddy heights of economic growth and success.

    Stock Market Flash Crashes and Risks of High Frequency Trading


    Dr. Adil Rasheed: Stock Market Flash Crashes and Risks of High Frequency Trading

      • 29 April 2013

      After hacking into the twitter account of an international news agency (Associated Press), criminals send out a message that the White House is under attack and the US President has been injured. Immediately, stock markets press the panic button and high speed algorithmic trading plunges the Dow Jones Industrial Average into virtual free-fall (dropping sharply 143 points), as stocks are dumped in the milliseconds. However, sanity is soon restored as the news is found to be false. Stock markets rebound but only not after Standard and Poor’s has fallen one percent and $136 billion in stock value has been wiped out.

      This narration is not a piece of fiction, but a report of the ‘flash crash’ that hit US stock markets on April, 23, 2013. Surprisingly, this event is also not a freak accident or an unfamiliar occurrence anymore. In today’s global financial markets, the trend of a sudden and precipitous drop, known as a ‘flash crash,’ is becoming increasingly frequent and alarmingly commonplace.

      The above mentioned ‘flash crash’ was not just the first of its kind it was also not the biggest till date. The first ‘flash crash’ took place on May 6, 2010, in which the Dow Jones Industrial Average fell 1000 points (by 9 percent). There have also been other such crashes involving stocks of major companies, including Google, Apple and Bitcoin. It has also been suggested that commodities like agricultural products, oil and gold remain as vulnerable as the stocks of companies in today’s hi-tech stock exchanges.

      Flash crashes have added a new element of uncertainty into today’s financial markets. Although still a matter of debate and speculation, the occurrence of flash crashes has been attributed to the rise of computers and their high-speed algorithmic trades that are fast replacing human traders on the floors of the world’s biggest bourses. Studies suggest that automated trading in major US and British stock exchanges already constitute over 50 percent of the total volume.

      The use of sophisticated computer algorithms to trade stocks and securities in seconds, or the fraction of a second, is known as High-Frequency Trading (HFT). In fact, HFT involves trading in and out of investment positions tens of thousands of times a day.

      With the introduction of this highly automated form of trading, the human element — particularly human assessment, judgment, initiative and enterprise — seems to be declining in global stock markets. In fact, HFT firms are not only conducting most of the trade in stock exchanges, they are doing so almost entirely with each other, as the human trader is unable to process vast amounts of information or trade as rapidly as them. Thus, even as the conventional human trader continues to look for opportunities on a weekly, monthly or longer-term basis, HFT firms take on short-term trades that involve high risks and rewards, which are often thousands of times higher in returns than those sought by their human counterparts.

      The enthusiasts of this new technology contend that HFT improves market liquidity. They cite various studies that show that transaction costs for traders have substantially decreased with the growth of these systems. They also point out that computers make for better and honest traders, have enhanced attention spans, follow instructions properly, do not allow emotions to cloud their judgment, monitor and process information from many sources simultaneously and cost a lot less.

      On the other hand, the detractors of HFT bewail a long litany of grievances. To begin with, they claim that HFT often causes instability in financial markets and drains out liquidity, especially when it is most needed. They point out that high-frequency liquidity providers had withdrawn from the market, when the May 6, 2010 flash crash was unfolding.

      It has also been claimed that HFT is often used for ‘front-running’, an illegal practice wherein program traders learn about incoming orders before other traders and jump in front to make profits. A study conducted last year by Andrei Kirilenko, the chief economist at the US Commodity Futures Trading Commission, found that high frequency traders often make money at the expense of others as their algorithms are capable of gleaning investing patterns of other traders. Some traders also complain that HFT is even used to manipulate markets for economic and even political ends.

      Some market experts have also raised the alarm over the ‘technological arms race’ initiated by the HFT. In order to beat competition, they aver, each HFT firm is increasingly spending large amounts of money on new and expensive technology to outpace rival automated competitors. Many economists suggest that if this ‘technological arms race’ does not stop, average investors will become disillusioned and drop out of the stock markets, which will reduce the real volume of trade and will adversely affect economic welfare.

      But the biggest charge against HFT is that it remains vulnerable to several forms of systemic risks. For example, trading systems may at times demand too much liquidity too quickly and may cause prices to fall or rise to unreasonable levels. Again, it has been found that algorithms at times place large number of unanticipated orders or a trader misuses an algorithm by setting parameters that cause it to trade aggressively (as is alleged to have happened in the May 2010 crash). There is also the possibility of HFT trades getting trapped into a negative feedback loop in which they take turns into responding to each other. The other huge concern is that the system remains vulnerable to hacking or infiltration by terrorists or even a rogue trader betting on a meltdown. The April 23 incident offers a grim warning, as just a sentence-long tweet was picked up by the HFT computers to cause a major market sell-off. This also raises questions about the linking of HFT to social media network for information.

      Current rules and procedures to prevent a ‘flash crash’ range from using circuit-breakers (or so-called ‘kill-switches’) or effecting a five minute pause if trading is unable to occur within the price band for more than 15 seconds. However, these are not viewed as effective solutions by market experts, as the nature of high-volume, high-speed algorithmic trading, is introducing new and unknown variables in stock market operations at a rapid pace. In addition, a flash crash in times of a negative market sentiment will always have the potential of triggering a major meltdown.

      Although the impact of flash crashes has till date been manageable, there is always the possibility that a flash crash caused by automated trading systems might snowball into a major systemic crisis, particularly in times of high volatility and stressed market conditions. There is also the danger that terrorists or criminals design a computer virus that causes major structural damage to global financial markets. In the absence of any serious measure to forestall the problem, it seems an accident is just waiting to happen.

      https://www.ecssr.ae/en/reports_analysis/stock-market-flash-crashes-and-risks-of-high-frequency-trading/

      Saturday, December 8, 2018

      DR. ADIL RASHEED




      Cogito Ergo Sum! I Think Therefore I Am


      Researcher, Media Commentator, Journalist and Poet, I see the world from within and without. Having vast experience in research institutions as well as online and print media, my expertise include analytical feature writing,  conducting interviews with eminent personalities, conceptualizing as well as executing publication projects, composing poems and writing book and film reviews.

      As a journalist I have interviewed several internationally renowned personalities like former US Secretary of State Leone Panetta, former NATO Secretary Jaap de Hoop Scheffer, former prime minister of Malaysia Mahathir Mohamed, 1st Executive Chairman of the United Nations Monitoring, Verification and Inspection Commission Hans Blix, Bollywood legends Dilip Kumar , Lata Mangeshkar and many more.

      I received a Ph.D. Degree in English Literature on the thesis: ‘Cinematic Techniques in the Novels of Christopher Isherwood,’ from JMI University, New Delhi in 1995. This was an interdisciplinary study on the way narrative techniques employed in films revolutionized literary techniques of narration in the 20th century, with special reference to the novels of Christopher Isherwood.

      Thursday, October 11, 2018

      THE WORD: WHEN ABSTRACT TRANSFORMS THE PHYSICAL



      Published as: 'Napoleon's bad French to Trump's candid talk: Paradigm shift in communication?' in Al Arabiya on 30 April 2018


      There was a time when speech was considered the foremost expression of creativity. To classical scholarship, spoken or written symbols — we know as language — presented the only means for transmitting abstract intelligence onto the physical plane. The ability to condense, codify and communicate a complex idea, an ineffable emotion or a flash of imagination to others for an enhanced understanding or appreciation was considered the hall mark of an accomplished mind. In fact, all of human progress was claimed to be the handiwork of imagination employing linguistic or mathematical signs to change the shape of physical reality.

      It is for this reason that in the classical view the mastery of thought through command over the language and the expression of it in proper diction and grammar was considered indispensable. As speech could work on the power of comprehension and imagination itself, it was believed that words were sacrosanct and should remain pure, precise and exalted — never base, coarse or vulgar.

      Thus, the importance of verbal communication was never lost on prospective leaders, who were trained in the art of rhetoric and in the sophistry of eloquence. The leader’s gift was not only to better diagnose and find solutions to a problem, but to also have the facility of expression to better communicate the intended command to the audience in a cogent and understandable manner.

      There is nothing fundamentally wrong about the above premise over the importance of verbal messaging in any communication, however the idea of communication in modern times has undergone a paradigm shift. History has shown many leaders to be singularly deficient in the proverbial gift of the gab.

      It is said Napoleon Bonaparte spoke bad French, Richard Cour de Lion struggled with his English and the shy Gandhi could hardly speak up. Clearly there was something more to these leaders’ ability to connect and to communicate their message effectively to their people than the supposed proficiency in language.

      These leaders were great because they became iconic representation of their message. Thus, Mahatma Gandhi became an embodiment of what he called ‘Be the Change’, exuding a persona at once true and at peace with itself that gelled with his message of simplicity, truth and non-violence. Napoleon’s commanding and imperial demeanor exuded qualities of valor and ambition that was in sync with the revolutionary temper of his times.

      In fact, the importance of non-verbal communications was only understood in the 1960s, when psychologist Albert Mehrabrain came out with his research thesis ‘Communication without Words’. Mehrabian had studied thousands of salespersons and found that their likeability and trustworthiness among customers  was determined more by their body language and the way they dressed than by their verbal persuasiveness. His research later gave us the famous ‘7-38-55 theory’ on communications, which found out that verbal communication only accounts for 7 percent of any communication, whereas voice tonality accounts for 38 percent and body language/physical appearance plays 55 percent impact on the strength of a message.

      Even today his theory stands true. In fact, an intellectually strong and convincing argument could be rejected by an audience simply because the tone of the voice may sound harsh (thereby smacking of arrogance) or too meek (lacking in conviction). Similarly, shifty eyes or a slouch may introduce deviousness into an otherwise sincere message.

      In the last US presidential elections, people felt Donald Trump was more candid and upfront with his audience even though he espoused a more radical message, while Hillary Clinton’s high chin and imperious gestures gave the impression of high-brow disconnectedness that did resonate with her left-leaning, working class voter base.

      Among the various other aspects of non-verbal communication come the steadfastness of gaze, the use of space while making a presentation, the hand gestures, the pace of the speech, the alacrity and presence of mind, the manners and the smartness, the pause and the poise.

      Thus in today’s world of mass visual communications the appeal of a leader is not restricted to the mere strength or limitation of his or her intellectual argument, but to the level of trust and confidence the leader is able to generate among the people. The charisma, the gravitas and the feeling of admiration he or she is able to evoke by the sheer virtue of his or own presence says more than meets the ear.


      US PRESIDENT GAINS POPULARITY: DO POLICIES TRUMP THE PERSON?



      Special to Al Arabiya English, Saturday, 31 March 2018




      It is often hazardous to argue against conventional wisdom, particularly when there are strong beliefs and sentiments attached to a popular line of thinking. Perhaps, the best way to introduce a contrarian position in such a situation is to ingrain it in the general psyche through subterfuge, a kind of Trojan nuance that exploits any internal chink or contradiction through a plea for a morphed approach. This method is often employed by the accomplished intellectual or a suave political figure like former US President Barack Hussein Obama.
      It was through this approach that Obama could present himself as an agent of change in the 2008 elections, but managed to perpetuate the stranglehold of big banks and businesses over the US economy without any opposition from his leftist supporters. He also employed his deliberate ambivalence towards extremist uprisings during the so-called ‘Arab Spring’ that wreaked havoc on the security and stability of the Middle East. He even ramped up NSA spying, kept Gitmo going and allowed a large number of extrajudicial drone killings without sullying his image as a Nobel peace laureate. Thus, President Obama has remained a darling of the liberal bourgeoisie and one of the most popular US presidents around the world.
      In complete contrast, we have his much vilified successor in President Donald Trump. Decried as being loud and crass, this president has been called a White supremacist, a Russian agent and a disrupter-in-chief. Whatever the veracity of these charges, Trump is less devious than his predecessors and quite clear about what he stands for. Far from being unpredictable, his policies are remarkably consistent as he takes his promises to the electorate quite seriously. Many political observers may be rightly upset over his brash style and often unbecoming language and conduct, as well as his wrong choice of cabinet members and his lack of sympathy for international causes. But unlike his predecessors, Trump puts America ahead of any imperial globalist agenda and does not care about hiding his failings and shortcomings, which in itself has its benefits and drawbacks.
      In fact, President Trump who had Watergate-level opinion poll numbers at the beginning of his term has recently seen a sea-change in his job approval ratings. Two surveys conducted by US media outlets, CNN and Associated Press, have found remarkable similarity in their outcomes — with 35 percent approval ratings in February rising to 42 percent by March. One of the reasons for this notable fillip has been the good performance of the US economy.
      According to employment report from the US Bureau of Labor Statistics in March, the American manufacturing sector added 222,000 jobs, resuming a recovery that had paused in 2015 and 2016, at a rate quite strong by the standards of the last three decades. What is even more impressive is the growth in wages, which is the strongest in more than eight years, while the overall economic growth has been at its highest in 13 years. Another highlight is that this flattering picture is not limited to big business, but small business optimism, as gauged by the National Federation of Independent Business, has reached its highest level in its 45-year history.
      According to Trump himself many American and foreign companies are now setting base in the US. Thus, he stated in the State of the Union address in late January this year: “Chrysler is moving a major plant from Mexico to Michigan, Toyota and Mazda are opening up a plant in Alabama … Apple has just announced it plans to invest a total of $350 billion in America, and hire another 20,000 workers.” Trump’s tax cuts on middle class and deregulation efforts are touted as reasons for the present economic upswing.
      Even on the highly controversial ‘trade war’ bullying tactics, Trump seems to be scoring some early victories for now. Heeding the pleas of many US allies in Europe, Trump is said to have agreed to grant temporary reprieve against his spike in US steel and aluminum tariffs in lieu of help to bring down the US trade deficit. Many steel companies and car making giants, from Germany to South Korea are reportedly falling in line with US demands. Trump’s brinkmanship is also said to be taming the Asian dragon, with China of all countries urging the WTO to intervene in order to avoid tit-for-tit tariff reprisals across the globe. The fears of a global trade war have since receded with stock markets recovering, as China has started holding talks with the US to bring down the burgeoning US trade deficit, which now stands at a record $375 billion. Perhaps, Trump knew from the beginning that China would concede as the Asian giant has more to lose being largely an export-driven economy.
      The possibility of the first ever meeting by a US President with North Korean leader, after Trump’s acrimonious exchanges with Kim Jong Un on twitter over the months, is also a cause for rise in the US president’s increasing popularity in his country. The fact that the North Korean leader at China’s behest has become open to the idea of denuclearization is itself a significant development and could have major implications for other obdurate powers in the Middle East that are still adamant on opposing US demands.
      The manner in which possible US-North Korea parleys unfold would be interesting to observe. It is surprising that even though Trump’s personality is still not liked by most Americans, discount the fact that a majority approves of his policies. Perhaps, Trump can never be a popular US president around the world, simply because he openly pursues an ‘America First’ agenda. Still, the time has come for the world to understand and reconcile with Trump for what he is and accept him with all his unique strengths and flaws.


      Tuesday, October 9, 2018

      SHIFTING DIPLOMATIC GEAR IN A RAPIDLY UNRAVELING WEST ASIA



      (Published in Indian Foreign Affairs Journal Vol. 12, No. 4, October–December 2017, 277-325)

      The near extermination of the ISIS threat from West Asia has ironically brought a new set of challenges in its train. Major global powers thatcame together to pound the terrorist proto-state to smithereensare nowcontending with each other to carve their own geostrategic space at the expense of setting the regional orderright.
      A new power axis – Russia, Iran, Turkey and to an extent China — threatens to arbitrate the post ISIS dispensationby bringing Iraq and Syria into their expanding sphere of influence, thereby upsetting the traditional hegemonic applecartof the United States in the regionalong with its allies — Israel and Saudi Arabia.Thus, an incipient Cold War is playing out in this most fractious hub of geopolitics, with the US threatening to rescind on its commitment to the Iran nuclear deal and planning to impose fresh sanctions on Russia before its presidential elections in March.
      The crescendo of crises!
      The ferocity with which major geopolitical events have wracked West Asiaover the past year is a cause for serious concern as any of these events has thepotential of flaring up into a serious international crisis in an already fraught and destabilized region.
      To list just a few flashpoints, we havethesimmering groundswell of public discontent against the Iranian regime that manifested in the New Year protests spreading across 31 provinces, the still unravelling power struggle within the House of Saud under the garb of an anti-corruption drive led by a young and ‘inexperienced’ Crown Prince, a widening wedge within the GCC following the Saudi Arabia-led travel and trade blockade of Qatar, the continuing barrage of Scud-like missiles from Yemen landing ever so close to the Saudi capital and the US unilaterally declaring Jerusalem as the Israeli capital and preparing to move its embassy to the ‘Holy City’.
      Worsening the present scenario is the emergence of a dangerous bi-polarity in the region, with Cold War rivals the US, Israel and Saudi Arabia pitted against a ‘revisionist’Russia that is forging alliances with Turkey, Iran and now Egypt.Thus, the incidence of any geopolitical crisis in the near to medium term cannot be discounted, which in turn might have severe implications for India. With arguably more at stake than any other country outside the region, India has over 7 million of its citizens working in GCC states alone, an economy that remains vulnerable to energy price fluctuations, and a maritime trade that has critical chokepoints on its sea lanes through the Gulf region, such as the Strait of Hormuz and the Bab Al Mandeb.
      India: The cost of being mute spectator
      Therefore, the time has come for India to reconsiderthecontinuing viability of its hitherto successfulpolicy of diplomatic non-interventionin West Asia. By making full use of its well-earned goodwill among all regional players — who are cognizant ofIndia’s growing geopolitical heft and its major stakes in the socio-economic development of the region — the country needs to consider shifting its diplomatic gear into a more active peacebuilding, if not peace-making role, rather than remaining a passive fence-sitter in a presumed state of incapacity. In any case, New Delhi should at least start making arrangements in the event any sudden contingencies arise out of the worsening situation.
      The purpose of this essay is not to sound alarmist, but to debate the trajectory of the worsening situation in the region in order to prepare ourselves for dire situations. Any futuristic scenario building is always riddled with uncertainties, but the appearance of a black swan in the treacherous waters of West Asia seems less far-fetched today than ever before.In fact, many analysts aver West Asia is an accident waiting to happen!
      This paper posits that there is now a growing sense of unease among individual actorsof the region, who are faced with major internal and external challenges, which many openly characterize as being of an existential nature. In such a charged atmosphere, there is a high degree of possibility for an uncalculated, unilateral action (like many recent actions by major powers in the region)that might snowball into a major international crisis. The following sections briefly survey these inner vulnerabilities of the regimes in the region that make them susceptible to taking desperate, uncalculated risks in times of danger, thereby making a major geopolitical crisis hitting the region the most likely scenario in the near to medium term, with disastrous repercussions for the world and the Indian economy.

      Iran: Regional strengths, internal vulnerabilities
      In the nearly four decades of its history, the theocratic regime of Iran has never enjoyed a more commanding presence across West Asia than it does at present. However, it has also never felt equally vulnerableinternally, with the Supreme Leader Ali Khamenei drawing flak from both hard line and reformist groupsas well as from a growing cross-section of the public as seen during the January protests that spread to over a hundred towns and cities across all provinces.
      For a very long time, the country has remained under severe international sanctions, which has seriouslyimpaired its economic progress, thereby making its people increasingly frustrated with the regime’shighly touted foreign policy.
      In fact, the Iranian government appears to have been cognizant of the rising public umbrage for a long time, which compelled it to forge a nuclear deal (JCPOA) with the P5+1 countries in 2015, which it then sold to its people as a foreign policy breakthrough that would pave the way for the lifting of sanctions, the facility to sell oil worldwide and the ‘unfreezing’of Iranian assets in various international financial institutions.
      However, the precipitous fall in oil prices and the election of an inimical US President following the deal did not deliver the Iranian economy the promised reprieve it was looking for. With President Trump not certifying the nuclear deal with Iran, a substantial segment of the Iranian population — particularly the economically challenged sections — have grown increasingly disillusioned with the theocratic dispensation.
      Anticipating public unease, the re-elected Rouhani government in May last year formed a cabinet filled with members from the regime’s unpopular intelligence agencies. Many of its new ministers are said to have had dubious human rights record and their inclusion had to be made at the expense of the first woman minister and leaders from ethnic and religious minorities that Rouhani promised in his pre-election campaign.
      Thus, many eyebrows were raised when Alireza Avaii was appointed justice minister last year although he is said to be involved with the infamous ‘Death Committee’ that supervised the alleged execution of thousands of political prisoners in 1988. Even Communications Minister Mohammad-Javad Azari-Jahromi and Labour Minister Ali Rabiei are alleged to have been intelligence officials in charge of interrogations, torture and censorship.
      These cabinet appointments by the Iranian government are indicative of its increasing sense of insecurity on the internal front, which in turn makes it susceptible to engaging in militaristic misadventures abroad in order to secure greater authority and control within.
      It is important to note here that Iranian Defence Minister said a few months ago that if the Saudis did anything “ignorant”, his country will leave “no area untouched”in that country except Mecca and Medina. The Iranian Revolutionary Guard Force also issued a threat to Israel last year that “Hezbollah and the revolutionary youths of the Muslim world can target the fake regime of Israel anytime they decide to do so.”
      Saudi Arabia: The bogey of Iran’s sectarianism
      A similar existential angst bedevils the Kingdom of Saudi Arabia. As internal squabbles increase among a new generation of princely claimants to the throne (with King Salman bin Abdulaziz being the last of Ibn Saud’s many sons), Saudi Arabia has been externalizing its internal insecuritiesby successfully demonizing the Shiite theocratic state of Iran in the eyes of the West. As sectarian bitternessspews out of its religious institutions and media outlets, Saudi foreign policy and military debacles remain shrouded from the gaze of the domestic audience, including setbacks in Yemen, Syria, Iraq, Lebanon, Bahrain and Qatar.
      Saudi Arabia is also in the midst of a major socio-political change. With the ascension of the octogenarian King Salman bin Abdulaziz to the throne in 2015 and the rise of his 32 year-old-son Mohammed bin Salman (popularly known as MBS) as the Crown Prince, Saudi Arabia has sought to modernize its economy under Vision 2030 programme, giving more freedom to its women population, has opened up its cultural centers and entertainment outlets, etc.
      These measures are in response to an increasingly restive Saudi population facing economic challenges following a secular decline in oil prices and a large unemployed youth bulge rising fromthe fat that 70 percent of the population being under the age of 30. In an increasingly unpredictable global economic environment, the new leadership’s plan to transform Saudi Arabia from an oil-revenue dependent country into a modern knowledge-based economy by 2030 appears too ambitious to say the least.
      Meanwhile, the Saudi leadership appears increasingly isolated and beleaguered not only in the region (given its poor relations with Iraq, Syria, Turkey and now Egypt) and among certain members of the GCC, but even within the walls of the royal household. Having learnt that its proxies often turn rogue, Saudi Arabia has started flexing its own diplomatic and military muscle — such as in Yemen and Qatar — with disastrous consequences. It is in the context of these inherent insecurities and fractiousness that Saudi kingdom appears more susceptible to takingextreme decisions, mainly against its formidable rival Iran that might put regional security in jeopardy.
      A New Cold War Heats Up in West Asia
      Many US experts claim that US hegemony in West Asia is seriously challenged by Russia these days. In recent years, Kremlin has managed to rope in NATO member Turkey, Iran and now Egypt into its expanding regional orbit. With the assistance of Iran and the grudging acceptance of Turkey, it has helped Bashar Al-Assad reclaim most of his lost territories in Syria, much to the chagrin of his hapless adversaries in the US, Saudi Arabia and Israel.
      Many US strategists view the Obama administration’s muddled policies in the Middle East, particularly the abandonment of its own ‘red lines’ over chemical weapons use in Syria, as the turning point in the geostrategic game that allowed Moscow to step in and increase its diplomatic clout.
      The drubbing received by the Trump administration at the UN vote against its decision to recognize Jerusalem as the capital of Israel, followed by the poor US showing in another UN vote over Iran’s crackdown during recent protests, has done little  to salvage US prestige and influence in the region.
      One can only expect and even more bellicose response from an embittered and beleaguered Trump administration in the event of another regional showdown with Russia or Iran in the near term. Perhaps, the only beneficiary from a prospective geopolitical calamity involving most global players would be China.
      US-Israeli right-wing governments
      Much like Saudi Arabia, Israel too considers Iran as a real and present danger to its existence. On the one hand, it is wary of Iran’s role in stirring a Palestinian uprising given Tehran’s stated support for Hamas and Islamic Jihad, with the head of Iran’s Quds Force Qasem Solaimani recently claiming to be in direct contact with the military commanders of the two Islamist groups. On the other hand, Israel is concerned about the growing military strength of Iran’s Lebanese proxy Hezbollah, following the latter’s successful experience in conventional warfare in the Syrian conflict and its ability to now fully focus on confronting Israel in southern Lebanon and southwestern Syria.
      In order to overcome these challenges, Israel has reportedly signed a secret agreement with the US in December last year, following talks between Israeli national security advisor Meir Ben-Shabbat and his US counterpart H.R. McMaster, for the two sides to take action and devise scenarios against Iran on several fronts. The news of the agreement was released by Israel’s television outlet Channel 10 and points to a growing commitment to address the Iranian challenge.
      Suggestions for a pro-active Indian engagement
      It is generally assumed that most options discussed in India for addressing issuesrelated to West Asia have been so thoroughly explored that there appears no point in revisiting them. There is a critical wariness that appears dismissive of any new proposal, let alone revisiting the earlier explored options in a new light. Still, the paper would like to submit a few suggestions for consideration:
      a)     Diplomatic pre-emption versus post-crisis damage control: As argued earlier, India has more at stake in West Asia than any other external power in the region. Although our unstated policy of diplomatic disengagement has served us well till date, we may need to re-evaluate the cost of letting the dangerous melee undermine our vital national interests right before our eyes or taking a more pro-active approach for promoting peace in the region, in a way thatit does not violate our carefully cultivated relations with any of the contending parties. The recent French intervention in reinstating Sa’ad Hariri to the position of premiership — after the latter had resigned from that position during his protracted sojourn in Saudi Arabia — helped diffuse a major political crisis in Lebanon. Thus, proactive peaceful interventions can prove to be less costly than post-crisis disaster management and the time has come for Indian leadership to step up to the challenge.

      b)    The needfor clear, coherent West Asia policy: In times of crisis, the apparent deference of any country from enunciating a clearly stated policy creates more problems for it and not any perceivedbenefits. For one, the country is not respected or even trusted in the larger international community as expediency often leads to embarrassing, poorly understood and even self-defeating choices.The statement of clearly stated policy informs not only the external players but brings clarity to government in the pursuance of stated goals. If the government comes out with a White Paper on West Asia that it wants all sides to resolve their differences, conform to international conventions and that it shall be open to mediate if desired by contending parties, India will be able to project itself as a trustworthy power and a force for good in the region.

      c)     Teaming up with Europe for mediating role:The growing bi-polarity in West Asia, with the Trump administration aligning itself more closely with traditional regional allies Israel and Saudi Arabia against a resurgent Russia, joining forces with Iran and Turkey, makes the region a veritable powder keg. The absence of any influential mediating power bloc that might keep the contending parties at bay from potentially disastrous geopolitical outcomes worsens the prospects of peace in the medium to long term. Perhaps, India needs to take a bold and imaginative leadership position to safeguard its vital interests in the region by teaming up with other major world powerswho may have the influence, respect and credibility like India to bring all the contending sidesto a better understanding.

      In this respect, the role of European nations — such as France, Britain and Germany — who have stuck to internationally agreed positions on the Iran nuclear agreement (JCPOA) and the status of Jerusalem in a non-partisan, statesmanlike manner, could be engaged by India for a wide variety of well-coordinated peaceful initiatives — involving various diplomatic means and channels including bilateral and if multi-lateral efforts to restrain the US and Russia from getting trapped  in any contentious row or conflict from which they might find themselves difficult to disengage.

      India and Europe have strong trade links (EU being India’s biggest trading partner), most of which find passage through the chokepoints on the sea-lanes throughWest Asia and have critical geostrategic, cultural, demographic and economic interests tied to peace in West Asia and as exponents of liberal democracies and multiculturalism would prove ideal peaceful intermediaries in diffusing any untoward escalation.

      India’s intervention would re-establish the nation’s credibility as a constructive player among all parties and to an extent forestall growing Chinese influence in the region.

      d)    The Need for Leveraging the Indian Diaspora:It is generally assumed that the Indian diaspora in West Asia, particularly in the Gulf countries, mainly constitutes blue-collar workers. Few recognize the presence of eminent Indian business tycoons like Khimji Ramdass (the only Hindu Sheikh in the GCC), Mukesh Jagtiani, Yusuff Ali M.A., and Sunil Vaswani, along with B. R. Shetty, Sunny Varkey, Ram Buxani etc. Some of them like Mohan Jashanmal (spokesperson for the Indian diaspora, founder of India Club in Abu Dhabi and chairperson of the Indian Business Group) have done a lot for promoting the interest of India and the Indian community abroad. Perhaps, the time has come to develop stronger linkages with these leading Indian luminaries in the region, not only for promoting the welfare of the Indian diaspora, but also for promoting Indian outlook and interests in the region. Various forums, cultural centres, think tanks and direct channels of communications should be developed for closer exchange between the Indian government and non-resident Indians.

      There is no denying that the diplomatic tightrope India has walked for decades in West Asia has served the country well till date. However, the growing geo-political and economic interdependence with the region now necessitates greater peaceful engagement to secure India’s long term interests and to fulfil the dreams of our aspirational population, which can never be realized without making West Asian peace and security integral toIndia’s grand strategic geopolitical and economic design.