Political India: Engaging America

From The Hindu

Iran is “not yet... nuclear capable,” admitted Robert Gates, Secretary of Defence, in a media interview released on Monday. Speaking during a pre-recorded interview on the NBC program “Meet the Press,” Mr. Gates said that Iran’s present position was as dangerous as it being a nuclear state given the ambiguities of differentiating between the degree to which nuclear weapons development was achieved in that country.

Alluding that it may not be clear exactly how far Iran has gone with its alleged nuclear weapons programme, he said, “If their policy is to go to the threshold but not assemble a nuclear weapon, how do you tell that they have not assembled? So it becomes a serious verification question, and I do not actually know how you would verify that,” he argued.

During the interview Secretary of State Hillary Clinton however avoided a direct question on whether Iran was nuclear capable or not. In response she said, “That's an issue upon which intelligence services still differ. But our goal is to prevent them from having nuclear weapons.”

NPR strengthens Iran deterrent

Mr. Gates further argued that the power of the U.S. nuclear capability implied by the Nuclear Posture Review would continue to serve as the policy tool and source of deterrence against Iran, rather than nuclear disarmament under the new START deal between the U.S. and Russia.

He said the NPR would put the U.S. in a much stronger position in terms of going to other countries and getting their support for putting pressure on the Iranians and the North Koreans. “I think it also has, potentially, a deterrent effect on other countries who might be potential proliferators as they look at North Korea and, and Iran,” he added.

Emphasising that the U.S. hoped to influence the calculus of Iran’s incentives for nuclear weaponisation, Mr. Gates stated that the U.S. hoped that the Iranian government would decide that “its own security is better served by not having nuclear weapons than by having them,” a position that could be achieved via a combination of economic pressure and “more missile defence and cooperation in the Gulf to show them that… we can defend against [any attack].”

Pushing for Security Council resolution

From the comments of Mr. Gates and Ms. Clinton it would appear that the Obama administration is convinced that a key goal for the U.S. is to halt any progress in Iran’s nuclear weapons development plans. Mr. Gates argued that the U.S. would probably… get another UN Security Council resolution passed. This would also serve as a legal platform for organizations like the European Union and individual countries to take even more stringent actions against Iran.

Ms. Clinton explicitly favoured the turning the tide of diplomatic pressure against Iran through the UN Security Council. She said, a Security Council resolution would send a “really powerful message”, and Iran has been “beating down the doors of every country in the world “ to try to avoid a Security Council resolution.

However, she said, due to the U.S.’s strategic patience and willingness to keep on this issue, other countries were realising that Iran had failed to cooperate and were in fact responsible for shutting the door.

Labels: EU, Iran nuclear issue, sanctions, United States, UNSC

From The Hindu

After dedicating most of 2009 to jump-starting financial markets through stimulus packages, developed countries are now turning their attention to reforming the basic architecture of those markets, especially the incentives for risk-taking. In a major step towards regulating systemic risks, the United Kingdom last week announced a one-off 50 per cent “super-tax” on bankers’ discretionary bonuses exceeding £25,000. The move could raise £550 million, which would be used to help reduce unemployment, according to Chancellor Alistair Darling. However it has generated, as expected, a torrent of resistance from financial services firms, including threats that they would mass-migrate to other countries. By way of response, an aide to the Chancellor has asserted that the solution was for the banks to “pay less in bonuses” and to realise that this tax was “about changing their behaviour, not raising revenue.” Other members of the European Union such as France and Germany have come out in support of the policy, with France imposing a similar super-tax on bonuses exceeding €27,000. Executive pay has come under fire in the United States too. Kenneth Feinberg, President Obama’s pay czar, has sharply cut cash compensation, requiring instead that 175 most-paid executives in bailed-out companies hold stock compensation for two to four years.

Yet pay is only one dimension of a culture of excessive risk-taking, which precipitated the credit crisis on the back of lax regulatory standards and the availability of cheap credit. Only a comprehensive overhaul of regulatory oversight, of the kind passed by the U.S. House of Representatives last week, stands a reasonable chance of changing deeply entrenched attitudes towards risk. The reform proposals, which mirror some of the policies enacted in the EU, include tighter regulation of derivative instruments, procedures for managing collapse at large banks without resorting to taxpayer money, and the creation of a Consumer Financial Protection Agency to monitor lending practices. The bill also seeks to empower lawmakers to oversee the functioning of the U.S. Treasury and Federal Reserve — not a bad thing considering it was these institutions, during the time of Alan Greenspan, that stubbornly held interest rates at artificially low levels, setting off credit-driven asset bubbles. Finally, the reforms seek to extend the powers of the Securities and Exchange Commission to aggressively patrol the fringes of the financial universe, including hedge funds, with the aim of foiling would-be Madoffs and Rajaratnams. Even as the U.S. and Europe struggle to get unemployment under control over the coming years, they would do well to persist in their mission to curb financial excess through serious institutional reforms.

Labels: EU, financial markets, Madoff, Rajaratnam, stimulus packages, unemployment