Wednesday, March 27, 2013

Arms Trade Treaty: Update

Ten months ago, this blog questioned whether the world needed an Arms Trade Treaty.  This week, the second effort at producing a treaty wraps up in New York.  The conference got off to a rocky start last week, with strong disagreements about how the text should proceed.  The conference's president put out a new draft text of the treaty last Friday, which has produced a new round of chaos this week.

As noted by Ted Bromund at Heritage, who has written extensively about (and mostly in opposition to) the treaty, many countries believe the new treaty is too watered-down.  This sentiment is shared by human rights group Oxfam, a coalition of NGOs that has strongly pushed for an arms trade treaty; Oxfam's statement on Monday said that the new text unacceptably fails to control the sale of ammunition and that its requirement for assessing the risk that arms will ultimately be used to commit is currently too lenient.  Concerns by major arms exporters have included the U.S. opposing the inclusion of ammunition, which it believes is too difficult to monitor, and China opposing restrictions on arms "gifts," which it makes to allies without any monetary exchange.

As noted in our previous post, the U.S. already a very rigorous arms control regime and transparently publishes statistics about the amounts and receiving states of its arms sales.  Countries like Russia and China do not, and although the treaty first called for transparent reporting, it now calls for closed-door reporting to U.N. officials.  This is problematic, as countries like Russia and China can continue to mis-report or not report at all their arms deals, and there will be no public record to expose their claims.  Rather, such a closed-door reporting system could possibly allow such countries (and many others) to publicly claim transparency and compliance while continuing to secretly arm dictators and other human rights abusers.

Tuesday, March 26, 2013

Musharraf Returns to Fragmented Country

Perez Musharraf returned to Pakistan this past weekend, hoping to participate in the upcoming elections this May.  Of course, he faces a slew of problems ranging from death threats, pending legal charges that include treason for his 1999 coup, and a general lack of excitement about his return.

Although not particularly popular in Pakistan, Musharraf benefits from a highly fragmented political field that includes the Pakistan Peoples Party, the Pakistan Muslim League-Nawaz, headed by former Prime Minister and bitter Musharraf rival Nawaz Sharif (i.e. the guy who was PM when Musharraf staged his coup), and former cricket star-turned-politician Imran Khan.  Khan enjoys popularity due to a disillusioned populace receptive to his anti-two party message.  If anything, the highly fragmented field with a disgraced former leader facing criminal charges and popular non-politician figure resembles another country where recent elections raised more questions than answers.

In any event, the world will increasingly begin to follow political developments in Pakistan as hopefully free and fair elections draw near and the country continues to struggle with its own identity as well as its relationships with neighbors and the world at large.

Sunday, March 24, 2013

Natural Gas in America: Views from Space

Any idea what's going on up there in North Dakota?...oh, that's just the Bakken Formation and the shale gas operations going on up there...read more at Daily Mail. Food for thought.

Saturday, March 23, 2013

Overlooked Story of the Week: PKK Calls for Dialogue

In one of the more important yet overlooked stories this past week, the Kurdistan Workers' Party (PKK) called for dialogue with the government through its imprisoned leader, Abdullah Ocalan. If Turkey can achieve peace and resolve the Kurdish rebellion in its eastern hinterlands, it could change the dynamics of a huge swath of the Middle East.

Friday, March 22, 2013

Sri Lanka: Sending the Wrong Message

Lost in the euphoria of ending the brutal 26-year Sri Lankan Civil War is the civilian cost. In countries around the world, the civilian cost is not measured by opportunity costs, economic downturns, or political bickering - it's measured in casualties and lives. Perhaps the cost was not lost then in Sri Lanka. Just... ignored.

Even at the time of its conclusion, information indicated that the end was both bloody and ruthless. Given the treatment of Tamil civilians, particularly those living in LTTE-controlled areas, throughout the civil war, it comes as no surprise that they were simply a pawn in the endgame. Revised estimated suggest upwards of 40,000 were killed in the months leading up to May 2009. Since then, numerous organizations have worked tirelessly to compile evidence of the failure of the international community to act and protect. The claim of war crimes committed by government forces is not new (Amnesty International again, two years later). Although claims now focus largely on government action, it stands to mention that LTTE forces were culpable all the same.

It is a shame that the international community turned away then because an insurgency was being put down; because a terrorist group was, in a rare instance, being wholly destroyed. If the United Nations wishes to investigate war crimes, then it should do so. However, the watered down resolution endorsed by the United Nations Human Rights Council has turned this event into nothing short of embarrassment today. Four years have passed; it is high time to make clear that actions that occurred in 2009, and some since, do not represent the protocols of the international community.

It seems that every time the international community says "we didn't know" and "never again," but it happens over and over again. If nothing else, the war mentality of Sri Lankan forces is most clear in the unnecessary and blatantly illegal assassination of LTTE leader Prabhakaran's underage son in February of 2013 - nearly four years after the war ended, per the government (he would have been approximately 8 when his father died in 2009).

The time for government inquiries has passed. What evidence exists needs to be passed on to authorities beyond Sri Lanka, and those responsible prosecuted to the extent available. Otherwise, the wrong message is being sent - do what you want, so long as it's against "the terrorists."

Thursday, March 21, 2013

Raise Your Hand if You Saw Chemical Weapons

President Obama's visit to Israel this week would be an excellent opportunity for some serious, evenhanded discussion on what's going on in Syria. In fact, the President should pull in  his national security team and ask Benjamin Netanyahu to do the same. Frankly, the testy relationship between the two leaders is reflected in the countries' differing statements on Syria's use of chemical weapons.

See, the Israelis are affirming reports that Syria has begun to use chemical weapons. The Syrians, of course, blame it on the rebels. As does Russia. The United States, however, is not so sure and is not jumping to any conclusions so quickly. In fact, the United States is "deeply skeptical," which of course sits none too well with Russia and Syria, who are demanding an investigation.

What seems likely is that someone used a chemical (or biological) agent of some sort. Given the levels of frustration and the severity of factions in rebel forces, it is impossible to rule out rebel use, perhaps even to attempt to trigger larger retaliation. President Obama's line in the sand will perhaps turn out to be a moving target. Does it truly mean only if government forces use them? Do dirty agents count, or only official ones? All these questions gloss over the point - the line in the sand is meant to protect the people. If anyone uses chemical agents to any extent, the line has been crossed. Moreover, continuous retreat is seen as a sign of weakness in the region (as well as elsewhere). One must hold their ground if resolution is truly a desired result. Lastly, the relationship between the United States and Israel could further be strained if they are unable to agree on the events and repercussions of those events in Syria, much like how the relationship has been strained over Iran.

Therefore, the time for action, on some level, is on the horizon. Even nominal air support, with drones perhaps, would indicate that the United States' position is firm and the line in the sand doesn't move with the wind. Such action will, in time, bring Syria closer to resolution, as well as likely continue to repair the relationship with Israel. It is not the time to let technicalities get in the way.


Friday, March 15, 2013

Italian Marines Case: Rainbow Warrior Redux?

Last year, Italian marines on board a ship were involved in a shooting that resulted in the deaths of two Indian fisherman in international waters off the coast of India.  Two of the Italians were ultimately charged and, recently, the Indian Supreme Court ruled that India had jurisdiction to try the two soldiers despite the incident having taken place in international waters.  That jurisdiction, which Italy had challenged, is relatively uncomplicated with respect to general principles of international law; according to the passive nationality principle, a state has jurisdiction over a matter in which its citizens are harmed by a crime.

What's making headlines this week is that the two Italians who have been charged, permitted by Indian authorities to return to Italy for the recent elections, might not be coming back.  The Indian Supreme Court declared yesterday that the Italian ambassador, Daniele Mancini, is not permitted to leave the country without its permission.  India's Union Home Ministry upped the ante by alerting all airports to not permit the ambassador to leave.  In addition to being a blatant breach of diplomatic principles enshrined by the Vienna Convention on Consular Relations (Article 9 specifies the procedures for a state refusing to accept the protected diplomatic status of a diplomat; in short, the "receiving state" (India) must give the other state an opportunity to recall the diplomat to the home state), the activity is sure to heighten tensions between the two countries.

Just as a final note: the sub-headline of this article was "Rainbow Warrior Redux?" because of some similarites to an international incident, the sinking of the Rainbow Warrior ship and subsequent international incident over the trial of French spies who were able to largely circumvent their sentences.

*Update: The issue of competing jurisdictional claims by Italy and India is an interesting one.  Italy could certainly prosecute the marines on the nationality principle.  India could claim either passive nationality principle or the territorial doctrine based on the fact that the effects were felt on the Indian ship (an extension of India's territorial sovereignty).  While we pointed out the similarity of recent events to the Rainbow Warrior affair, the underlying principles of competing sovereignty invoke another famous international law incident -- the S.S. Lotus and subsequent 1927 decision in the Permanent Court of International Justice.  The basic rule of international law is that either party may exercise jurisdiction; having the marines around obviously makes it easier to hold a trial and execute any sentence.  An excellent analysis of the jurisdictional claims pursuant to Lotus and subsequent treaties may be found over at Opinio Juris.

Sunday, March 10, 2013

The Argentinian Chronicles, a.k.a. Lessons in How to Tarnish Your Global Reputation

Last Wednesday, the U.S. Court of Appeals for the Second Circuit heard oral argument from Argentina and holdout bondholders who seek approximately $1.3 billion in unpaid bonds.  The appeal comes close on the heels of a federal district court decision by Judge Thomas Griesa that the South American state must pay the bondholders.

Before getting into the nuances of the current federal appeal, however, a brief trip down memory lane is in order.  The bond dispute stems from Argentina's infamous 2001 debt default.  The default, in which Argentina defaulted on $87 billion of its bond debt, was devastating for Argentina; the Argentinian peso, for example, quickly went from a 1:1 parity with the dollar to a 4:1 peso-dollar exchange rate; provinces began printing their own currency, grain became a preferred currency, and bartering sustained flailing businesses.  Argentina's economy never fully recovered (but more about that later) and has spent the past decade delicately attempting to move the economy forward whilst always peeking over its shoulder to make sure the default doesn't thwart future progress.

So how, exactly, did Argentina address the default and bond crisis in 2001-02?  For starters, it reached a deal with most bondholders under which defaulted bonds were exchanged for new bonds; the new bonds were worth 25-35% of the original bond value, they were longer-term bonds, and some were indexed to future economic growth and inflation in Argentina.  Indeed, after much bluster, approximately 93% of bondholders ultimately participated in the 2005 and 2010 restructuring deals.

Those who did not take the deal, considered the "holdout bondholders," turned to the federal court system to address their grievances.  They were given this avenue because the original Argentinian bond contracts stipulated that New York contract law would govern litigation disputes and specifically granted jurisdiction to  the federal district court in the Southern District of New York (see paragraphs 22 and 23, on pgs 29-30 of the original bond agreement, which consent to jurisdiction within the confines of New York and governance of New York state law, respectively)

The holdout bondholder litigation has heated up in the past year or so.  A good summary of the history of the bond crisis, the restructuring deals, and the ongoing litigation can be found here.  Key quote below:

For the last decade, Argentina and its holdout creditors have sparred in U.S. courts over the country's 2002 debt default. The creditors are suing to be repaid in full after spurning two debt swap offers accepted by about 93 percent of bondholders.
The battle only really heated up late last year, when two courts said Argentina was discriminating against the holdouts and must pay them whenever it services the restructured bonds - raising fears of a fresh default if Argentina refused to comply.
...
The rulings gave hope to the holdouts, including U.S. hedge fund Elliott Management, who have won several billion dollars in court-awarded damages but collected very little since Argentina refuses to pay and U.S. sovereign immunity laws protect most foreign assets from seizure.
Argentine President Cristina Fernandez, a combative center-leftist, vows to never pay the holdouts but will honor the bonds issued to other investors in the 2005 and 2010 restructurings.

Last year, the federal judge handling the case ruled that Argentina must pay the full amount of outstanding bonds -- approximately $1.33 billion -- and that it cannot provide preferential treatment (as it has done to date) to the bondholders who participated in its 2005 and 2010 restructurings.  Essentially, this means Argentina cannot continue to make payments on the restructured bonds while ignoring the outstanding holdout bonds.  Thus far, Argentina has vowed to not pay the holdout bondholders.

(For the record, the following is in part academic because the ruling has been stayed pending appeal, but is still relevant to the extent that the Second Circuit might ultimately affirm it)
Judge Griesa's November 2012 opinion, reaffirming his February 2012 ruling, takes a hard-line approach to the repayments.   First, it notes that Argentina is scheduled to make interest payments to the restructured bondholders in December 2012.  It then notes that if Argentina makes 100% of those scheduled payments, it must in turn make 100% of the principal and accrued interest to the holdout bonds (i.e. the entire $1.3 billion that is the subject of the litigation):
In December 2012, there are interest payments of approximately $3.14 billion due on the Exchange Bonds. Presumably, Argentina intends to pay 100% of what is owed. There are currently debts owed to plaintiffs by Argentina of approximately $1.33 billion. It should be emphasized that these are debts currently owed, not debts spaced out over future periods of time. In order to comply with the terms of the Injunctions, Argentina must pay plaintiffs 100% of that $1.33 billion concurrently with or in advance of the payments on the Exchange Bonds.
The underlying principle by which Judge Griesa justifies such a formula is "pari passu" -- Latin for "with an equal step"; as Judge Griesa notes, another definition is "proportionally."  It is interesting, however,, that his opinion then strains itself to put the scheduled interest payments on restructured bonds on equal footing with the principal and interest on the holdout bonds.  The justification is simply:
[I]f 100% of what is currently due to the exchange bondholders is paid, then 100% of what is currently due to plaintiffs must also be paid.
The term "currently due" is a tad misleading, when used in this context.  One could argue that a better metric is what Argentina currently owes to restructured and holdout bondholders -- that number, in fact, might set up a better system for devising "proportionality" with respect to when and how much holdout bondholders are owed money.  Of course, on this flip side, one could argue that they staked their entire litigation, with all its attendant risks, on the possibility of a loss and the reciprocal possibility of successful litigation with its attendant benefits.  Because they opted not to take a restructured bond deal, these holdouts can lay claim to 100% of their owed principal and interest in one fell swoop -- that, the argument goes, is one of the consequences of defaulting on your debt.


This gives Argentina three options: making both payments, making its restructured bondholder payments and ignoring the court order, or defaulting on the restructured bonds and ignoring the court order.  Argentina has warned of dire consequences should the federal courts make it pay the holdout bondholders.  For example, it has claimed that such a ruling could force a default on the restructured bonds, triggering another debt crisis.  Given that Argentina has over $40 billion in foreign currency reserves, however, such claims are overstated.

Argentina (and the U.S., in a friend-of-the-court filing), also argues that a ruling in favor of the holdout bondholders could affect other state-bondholder situations around the world (note: information from this paragraph comes from the October 2012 Second Circuit ruling, which can be found here).  Essentially, the argument goes, states should have flexibility in dealing with debt restructuring and a ruling against Argentina discourages the type of bond restructuring deals that are necessary to address the unique circumstances of sovereign debt default.  Of course, a simple counterargument is that states should be discouraged from defaulting on their debt and that the court's ruling is nothing more than the simple contract law proposition that the remedy for a breach of contract is that the injured party be paid the money it's due.  Additionally, as the Second Circuit noted in its October 2012 decision (on pg 27), other states (perhaps noting the problems faced by Argentina) have negotiated better bond issuance collective action provisions that prevent holdouts from pursuing litigation when a majority of bondholders accept a restructuring.  Finally, there are institutions specifically designed to help ensure the availability of loans and funds to states in need of such funds.

...which brings us to the IMF, which currently enjoys a particularly frosty relationship with Argentina.  Last month, the IMF censured Argentina for intentionally producing inaccurate inflation records (drastically underreporting its true inflation) and gave the South American state until September 29th to take "remedial measures."  The government took over the statistics institute in 2007, and since then, the discrepancy has been "up to 15 percentage points."  As the Economist's chart notes, reported inflation is around 10% while unofficial estimates put the true inflation rate around 25%.  Why, one might ask, is Argentina working so hard (firing statisticians who don't toe the party line, for example) to keep "official" inflation down?  Well, it just so happens that some of those restructured bonds are linked to inflation:
Doctoring the number saved the government some $2.5 billion in payments on index-linked debt, according to an estimate by Miguel Kiguel, an economist in Buenos Aires.
To make matters worse, wages have unsurprisingly not risen with the inflation -- official or unofficial.  What to do in such a situation?  If you're President Cristina Fernandez, declare a price freeze at supermarkets and hope for the best.  This is just the latest in a series of anti-capitalist moves by President Fernandez; as reported in Illexum last April, she nationalized the country's largest oil company.  All in all, the latest economic developments out of Argentina are bleak.

When domestic politics are worrisome, many smart politicians will look elsewhere to shore up nationalist sentiment.  This may well explain Argentina's recent saber-rattling over the Falkland Islands, which are set to vote in a referendum today and tomorrow over their political status as an Overseas Territory of the UK.  The vote is expected to be overwhelmingly in favor of the overseas territory status; in fact, the Islanders hope the referendum "will send a firm message to Argentina that islanders want to remain British."  Argentina, for its part, has ramped up rhetoric.  Its foreign minister stated that the Islands would be under Argentinian control within twenty years; its vice president called the locals "territorial pirates," noting
"A referendum in which the colonists will take part, the descendants of those who evicted the true inhabitants of those islands, means a disrespect to intelligence and to national and international law. . . . No brand of pirates will get hold of the sovereignty and dignity of the Argentine Republic."
President Fernandez, for her part, in January 2013 wrote an open letter to British PM Cameron in which she called upon Britain to end its 180-year history of colonialism and return the islands to Argentina -- which, she notes, "was forcibly stripped" of the islands in a "blatant exercise of 19th-century colonialism."  The actual history of the islands is much less clear, with evidence that both were engaging in colonial efforts of varying degrees of success in the first decades of the 19th century.

Of course, apart from extremely powerful and emotional nationalistic sentiments on both sides of the Atlantic, another reason for renewed interest in the Falkland Islands is the potential for oil production.  Given Argentina's recent interest in state-owned energy, it would not be a great leap of imagination to foresee Argentina desiring ownership of the Falkland Islands for an economic-nationalist-political coup.  Of course, if you were a Falkland Islander, would you really want to ride in Argentina's coattails in light of its recent economic developments?

Friday, March 8, 2013

Algeria Hostage Planner Reported Killed

Amid the hubbub of Washington politics, the French continue to participate in offensives in North Africa. No one is really paying attention, which is a shame, since, if reports surfacing last week are true, the French have proven to significantly aid US foreign policy in the region.

Chadian troops assisting in the rebuff of militant forces in Mali have claimed to have killed Moktar Belmoktar, a regional rebel leader. Belmoktar has been active in the region for years, and has been continuously linked not just to organized crime, but also al Qaeda. Of course, nothing is taken for granted, as Chadian forces also claimed to have killed another significant regional leader days earlier. Belmoktar shot to infamy as the planner of the raid on the Algerian gas facility in January, which left scores of foreigners dead and nearly ignited the region. France has, in the meantime, taken possession of the bodies and is expected to carry out definitive DNA tests in the coming days. AQIM acknowledged the death of Abdelhamid Abou Zeid (the other leader), but strongly denied Belmoktar's loss, insisting he was still alive and fighting. None of this really says anything other than some rebel fighters were killed, not yet at least.

Since his death, Belmoktar's role in regional terrorism may have grown. Sources in recent days are further reporting that Belmoktar received a suspicious phone call after the attack in Benghazi last year that may tie him to that attack. If true (though we may never know), US access to further information about AQIM operations may be weakened with Belmoktar's and Zeid's deaths. At the same time, it will make it easier for the US and the President in particular to put the incident behind them.

So what does it all mean? Not much of anything until more information is known. Clearly the Sahara is not the prime asymmetrical warfare environment that other parts of the Middle East are. Nonetheless, the killing of rebel and al Qaeda leaders elsewhere has resulted in fragmentation, but not dissolution of terrorist cells and organizations. The combination of factors may hinder AQIM operations, but without the continued development of the region's societies and governments, AQIM won't disappear. The biggest question will certainly be - will this be enough for the French, and, if so, will that make a difference when the battles are left solely to the regional forces, who have yet to coalesce into a cohesive bunch.