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NightWatch 20110102

NightWatch

For the Night of 2 January 2011

North Korea-South Korea: In the annual New Year's editorial published in the party daily, Rodong Sinmun and broadcast by the Korean Central News Agency (KCNA) on 1 January, the North Korean leadership urged dialogue and said confrontation with South Korea should be diffused as soon as possible.

North Korea made no specific proposal for talks but said "active efforts" should be made to create an atmosphere of dialogue and cooperation by placing common interests above anything else. Pyongyang is consistent in its stand and will to achieve peace in Northeast Asia and denuclearize the entire Korean Peninsula, official media stated.

South Korean President Lee responded that the South remains open to dialogue but the North must abandon its military adventurism.

Comment: Some news services assessed the statement as a breakthrough. However, it appears to be a slightly modified reprise of the 2010 New Year's Day editorial.  It is worth noting that three months after the North broadcast a similar message last year its forces sank the South Korean corvette, Cheonan, in March 2010.

Pakistan: On 2 January the Muttahida Qaumi Movement (MQM) announced the leadership's decision to withdraw from the ruling government coalition and join the opposition in the National Assembly and in the Senate, Dawn News reported, citing an MQM spokesman.

The decision was made because the government failed to address issues important to the party, according to an MQM member. Prime Minister Gilani claimed the ruling coalition will not collapse, saying there is no threat to the government and that all parties are working to strengthen democracy in the country.

Comment: Readers will recall that the MQM withdrew from the cabinet last week but promised to remain a member of the government coalition for a time. The language always is an invitation for a new deal. Political negotiations over the weekend between the government and the MQM obviously failed to offer sufficient incentives to keep the MQM in the governing coalition.

Prime Minister Gilani's statement that he intends to govern as a "minority government" means that he assesses the opposition as too fractious to force a vote of confidence. Meanwhile, the Pakistan People's Party-led government may be expected to undertake negotiations with other opposition parties in order to restore its majority. The opposition, led by the Pakistan Muslim League (Nawaz), will do the same.

A political stalemate is in effect. The lack of a majority means the Gilani government lacks the votes to pass important legislation, especially bills that might induce the opposition to unite and, thus, force a vote of confidence.

The timing of the political stalemate could hardly be worse for US interests in Afghanistan and Pakistan. The US needs a reliable political leadership in Pakistan that is capable of providing at least minimal support for the Afghanistan effort. Promises of a minority government are not reliable because the government could fall and policy would change.

The US has invested billions of dollars in elected democracy since 2008. After three years, the Zardari-Gilani leadership has made no significant progress in making Pakistan more secure or economically stable. The Pakistani Taliban might be tempted to surge attacks and raise its visibility to further stress the political system.

Finally, the stalemate promises to confirm Indian assessments that the Gilani government lacks the ability to deliver on any political promises and is not a dependable negotiating partner. Pakistan has imploded politically.

Security Update. Reports last weekend indicated that security forces must go back to the Swat Valley and Bajaur Agency. The Pakistani Taliban have recovered and restored their bases in regions that government declared secure a year ago.

Iran: Special comment. The government in Tehran received little press coverage for a major achievement in threat theory. President Ahmadi-Nejad's government executed major cuts in the enormous and expensive government program of subsidies in 2010 without inciting riots. Civil disorder and public violence remain a threat.

The government subsidy program dates to the foundation of the Islamic Republic by Ayatollah Khomeini who promised extensive government services at no cost or low cost. Successive governments have recognized the need to reform entitlements but feared the political consequences of cutting subsidies.

Ahmadi-Nejad's government was elected on a reformist platform that was supposed to lower prices, eliminate corruption and help the poor. It has done little of any of that but has faced a fiscal crisis owing to international sanctions, mismanagement of domestic industries and graft.

According to the Iranian government, $100 billion in subsidies is paid to Iranian households. The International Monetary Fund assessed the per family subsidy averages about $4,000 per year. About half of the total is for diesel fuel and gasoline. In addition to fossil fuels, the pool of subsidized items include home heating fuel; cooking oil; electricity; a wide array of staple food items, such as rice and flour; and public transportation.

Last April the government announced it was serious about reform and circulated a subsidy reform bill to the Majlis. Public reports suggest no action was taken on the bill. In October security authorities began issuing warnings that they would deal harshly with public demonstrations to protest cuts in subsidies.

Warnings were repeated in November and December, as the lead up to the implementation of major cuts on 18 December 2010. The government is following a five-year plan of phased implementation but the economy already has received a major systemic shock in the form of a ten-fold increase in motor fuels.

The year-long threat of severe punishments, against the backdrop of the internal crackdown after the 2009 elections, appears to have deterred activists from protesting the cut in entitlements. However, the subsidy cuts affect all critical items that have acted as triggers for government overthrows in more than 75% of the overthrows since World War II.

Thus far, the Ahmadi-Nejad government has anticipated the danger of public demonstrations and acted to avert them. However the cuts have only been in effect for two weeks so their impact is slowly beginning to register. If Iran manages to avoid widespread public protests over progressive cuts in entitlements in 2011, it will join a very small club of nations whose success is worth additional study.

At this point, insufficient information is available to predict the outcome, but the odds and the precedents do not favor internal stability this year.

End of NightWatch for 2 January.

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