IMF, traditionally under the European control, has been busy dispensing political favors in the Balkans. To further appease the Albanian extremists in Kosovo, IMF maneuvered to declare that separatist entity a member of the IMF, a right reserved to independent nations. In return, Serbia got a promise for a $3.5 billion, or thereabouts, loan so that the cash strapped government can financially survive.

Coincidence or a conspiracy? Because someone has been arguing the case to me that the IMF auctioned off Kosovo’s membership to Serbia for 3 billion Euros with a promise to Belgrade to borrow more.

Another recent Coincidence or a conspiracy? dispute is the report by Serbian daily Blic citing some unnamed Serbian diplomat who claims that Serbia will cut a deal with the US on Kosovo where Washington will stop pressuring Serbia to recognize Kosovo while Serbia will make sure Kosovo Serbs get “integrated” into the independent Kosovo institutions.

Aside from the Balkan travails though… Britain has shown tremendous dedication to eradicate “radical” Islam by banning an American radio talk show host from traveling to the UK!

Kosovo Kosovo

Serbian central bank Governor Radovan Jelasic told the IMF and World Bank panel that he sees economic gloom for Serbia in 2009 that will extend over into 2010.

“What do I expect at the end of 2009?” asked the Governor rhetorically in his speech to the panel titled Global Crisis in Europe and Central Asia.

Then he answered:

I am afraid, nothing good.  Fiscal income will deteriorate even further while the shadow economy will gain in importance.  Governments will focus almost exclusively on financing current consumption (wages and pensions), even through accumulation of fresh debt, while capital investments will be substantially cut back.

The Governor said that banks will “face a deteriorating loan portfolio” and that their primary preoccupation will be refinancing bad loans, loan more to the government, cut its costs and hoard cash.

As there is no chapter 11 type of creditors’ protection scheme, the number of bankruptcies [the Governor probably meant liquidation] will increase as well.

The Governor also warned of a regional financial contagion and urged that Austria extends its promise not to disengage its banks from the entire region and not just Serbia.

Once we have finalized our deal, I hope in a matter of days, the deal makers should focus on all other countries as spill over effect is very large:  a rumor regarding any bank in Serbia or Croatian circulates in the region in matter of hours and could cause irreversible damages.

The Governor appealed to the politicians to stop spreading false expectations [see my previous blog].

The entire speech is available here.

Economics Economics

Serbia’s forthcoming Ambassador to the US, Vladimir Petrovic, says that he will focus on developing a close relationship with the  National Security Council in order to counterweight the State Department’s disastrous influence on the US policy making on Serbia.

So we have the NSC Affairs, for example, who prepare meetings with foreign leaders and in connection with the President’s foreign travel and advises and provides Presidential briefings on policy matters.

The presumption here is that Serbia can get more Presidential sympathy though the National Security Council (NSC) that is the tool of the President rather then with the State Department that is the tool of the Secretary of State Hillary Clinton.

So is the Ambassador Petrovic overly optimistic and if so, what are the obstacles to Petrovic’s mission?

For starters, under Obama, the NSC is packed with the Secretary of State who brings her State Department policy along with her personal baggage to the table.

Second, that the NSC sentiments of Serbia are in a shared animus with the State Department is attested in the recent book on the NSC history by David Rothkopf who, among other things, was the managing Director of the Kissinger Associates that have handled Serbia’s car import in the 1980s, the Yugo.

Says Rothkopf in Running the World:

The Albanian majority in the province of Kosovo… had been disappointed by the agreement in Dayton, which, in their view, failed to recognize their long-standing and [in Rothkopf's and NSC's view, my point] justified demand for independence. [page 372]

Rothkopf also cites the case of Carter’s VP meeting on the Iran crisis when he “lamented that there was not a single Iranian expert in the room”.

Although Rothkopf quotes General William Odom as saying that experts are inept policy makers in the high level policy meetings because they the are “in love with the people from the area” and thus prejudice the rationality… presidents still love them.

Which raises the obvious question: who gets to pick these experts and why. Witness, for example, recent “expert” testimony of Paddy Ashdown and Ivo Banac, two individuals who made a career in bashing Serbs presumably out of hatred, to the Commission on Security and Cooperation in Europe.

There are also limits what NSC staffers can do, not only because they cannot be recipients of money, but also, as Rozanne Ridgway who worked on various Reagan teams on Soviet Union says from her experience: “Unless the decision comes from the top, nothing happens. You can’t make policy from the bottom [NSC staff] up.”

Having Biden up on top sure threads heavy against what Petrovic hopes to develop with the NSC.

Finally, we do find in Rothkopf that presidents make informal agreements with other countries, or perhaps even entities such as Kosovo’s ethnic Albanian separatists. Brent Scawcoft was, for example, adamant to find out what “kinds of informal agreements we may have with other countries” as the Reagan administration was taking over from Carter.

Then, of course, there are secret executive agreements that the US presidents make with other countries and entities and such agreements do not have to be disclosed to the Congress nor the NSC.

“In year 1889 to 1939, of 1441 international compacts 917 were executive agreements and only 524 treaties,” informs us Arthur Schlessinger, a statistic that suggests the meaninglessness of treaties bunch of which Serbia signed in the past recognizing its borders to include Kosovo.

To illustrate these secret executive agreements and their potency, for example, in 1992, James Baker summoned Lawrence Eagleberger to launch a media campaign against Serbia only after the Saudi Sultan approached the Bush senior administration to aid the Bosnian Muslims against the Serbs and to warn Milosevic on attacking Kosovo (so-called Christmas warning) in time when Albanian separatists were not even armed nor did Belgrade, preoccupied with Croatia and Bosnia, have an inkling to attack Albanians.

We wish future Ambassador luck.

Politics, US Diplomacy, US

There has been a remarkable convergence of expressions of Islamic piety across the world today.

First in Israel, a Muslim kills a Jewish teenager with a pickax:

A pickax-wielding Palestinian terrorist… infiltrated the Jewish community of Bat Ayin in Etzion Bloc region near Bethlehem and murdered Shlomo Nativ, a 13-year-old Israeli boy, splitting his skull with a pickax.A terrorist group calling itself the Martyrs of Imad Mughniyeh, named for the Hezbollah terror mastermind who was killed last year, claimed responsibility for the attacks in an e-mail to The Associated Press. The same e-mail also said the terror group Islamic Jihad also was involved.

Then in Egypt, we have Muslim villagers going on a pogrom of Bahai religious group because one Muslim described that a particular village was “full of Bahais”.

Egyptian villagers have set fire to Bahai homes after a member of the religion said on television the village was “full of Bahais,”… The villagers also threatened the village’s roughly 30 Bahais with death, the official said, after which all of them fled. The arson attacks were the culmination of unrest that began with stone throwing immediately after a Bahai named Ahmed called a television talk show that was discussing the religious minority…

Reading this AFP report one gets the impression that those darn Bahai are indeed at fault, not to mention the Copts whose churches get burned down on regular basis just like the Serbs in Kosovo.

Not to be outdone, though, the Swat Valley Muslims in Pakistan released a video of a woman being beaten publicly while two other Muslim men held her to the ground. From Associated Press:

The two minute video shows a woman in a body-covering burqa face down on the ground with two men holding her arms and feet. A third man in a black turban with a long beard whips her backside repeatedly, causing her to scream repeatedly and shout “Stop it, stop it! It is painful!”

A crowd of men watches silently in the background, and a voice can be heard saying “hold her hands tightly.”

Meanwhile, the recently indicted Sudanese President was greeted by thousands “of chanting, singing people” as he made his way at the 22-member Arab League meeting. A deserving welcome for the modern-day Saladin who conquered Sudan for Islam - never mind that he is indicted for genocide.

… and then we have Netherlands badgering Serbia because some loose general by the name of Mladic inflicted the first defeat to the Jihadist forces in Europe.

Of course Serbia is to be badgered not just by Netherlands but by England who is already seeking ways to Islamize their armed forces. From the London Guardian:

The defense minister, Bob Ainsworth, has appealed to British Muslims to joined the armed forces, saying that it was “vitally important that our army, navy and air force are reflective of the hugely diverse society in which we live”.

It is just mesmerizing what is it that the Brits are Guarding after all.

Islam Islam

Serbia got another loan, this time from the World Bank to fill up budgetary gaps caused by decrease in tax revenue caused by the economic slump.

The $34.9 million loan is amortized over 20 years, with an 8 years grace period (no payments needed) and the annual interest is the average of the six-month LIBOR rate.

Serb finance Minister Diana Dragutinovic said that the money will go straight into government account to fill up the hole in spending.

She said that the World Bank agreed in 2007 to aid Serbia and, she says, this is the first in such package.

The World Bank will approve at least one more loan to Serbia this year but did not specify the size.

World Bank’s Simon Gray, who signed the loan, said that Serbia deserves help because it already conducted successful reforms that streamlined the procedure for corporate registration, that it privatized its energy sector and insurance and is working on streamlining real estate licensing.

The World Bank loan comes hours after Serbia’s Foreign Minister got assurances from Austria that Austrian banks, hit hard by loan losses, will remain in Serbia and will not take flight with its capital.

Serbia was worried that Austrian banks may transfer some of the capital out of Serbia in order to help recapitalize the parent bank against loan losses.

On March 27, Serbia and the Austria agreed that the banks will remain in Serbia and have signed a memorandum of understanding that calls for stress testing of the Serbian banking, and for the IMF support of Serbian Central Bank that will provide support for the banks in possible danger.

“We are aware that it is in our own collective interest and in the interest of Serbia for all of us to subscribe to coordinated commitments to maintain our overall exposure to Serbia,” the agreement says but it obligates Serbian Central bank to perform bank stress tests and to fill in the holes “within the framework of the multilateral support programs, on bilateral basis with the NBS”.

Translation: The banks want Serbia’s central bank to provide them with help by borrowing from IMF.

Serbia’s escalation of debt should not set of any alarms yet because, as of the end of January, Serbian total external debt is $27.7 billion or 55% of country’s Gross National Product. Of that total debt only 8.5% is in short term loans which can cause crisis of payments and a run on the currency.

However, of the $25.4 billion that is short and medium term debt $16.8 or 66% is owed by private enterprises so any inability of the private enterprise to service such a large stock of private debt can lead to massive collapse in the economy.

In a sign of a rapid financial deterioration of Serbia’s private enterprise, the government has already asked IMF to “reprogram” some $7 billion of the enterprise loans, a code word for inability of private enterprise to pay its debts.

This is why Serbia’s private business has warned of an economic tsunami that will wipe out half the economy.

Kosovo Serbia

Last week, Serbia’s economist Stojan Stamenkovic warned that Serbia faces bankruptcy.

“Serbia needs to do everything so it can maintain its foreign currency liquidity because without that there is a threat like in 1980 when the country went bankrupt,” Stamenkovic told Serbia’s daily Politika.

Yesterday, Serbian Minister for Economy, Mladjan Dinkic, told Belgrade daily Vecernje Novosti that Serbia will not go bankrupt.

“Some countries have in this crisis, bankrupted, like Iceland, Letonia, Hungary is on the edge of collapse. We will for sure escape that,” said Dinkic.

Then again, Dinkic is the guy who, on several occasions in the past, said that, despite the global recession, Serbia will not see its economy shrink.

Serbia’s industrial production takes a dive

Today, the IMF told Serbia to expect its economy to shrink by 2% in 2009 and asked the government to freeze the wages and pensions for next 18 months if it wants IMF help to “reprogram”, euphemism for can no longer pay, about $7 billion of private debt obligations.

As of January 31, 2009 Serbia has $27.7 billion in total external debt of which some $19 billion is borrowed by private firms so the $7 billion it seeks to “reprogram” represents a rather astounding debt default rate of 37%.

Not surpassingly, from South America to Europe, politicians like Dinkic publicly claim that the government is on top of it.

“There is an intentional policy of setting positive expectations. I don’t think the government itself believes its numbers,” says Ilan Goldfajn, an economics professor at Rio’s Pontificia Universidade Católica, about the Brazilian government that, like Dinkic, belittled this financial crisis by calling it a “ripple”.

In fact, Dinkic reassured the public that the Serbian government is in the absolute agreement on how to handle the crisis, so if we are to properly understand what Goldfajn is saying, that means that Serbia will put a lipstick on the pig at every point it grows into a larger of a disaster.

“We are cutting the spending, we are pumping in liquidity in the economy, especially the private sector, because it employs 1.6 million people that feed the 550,000 that work for the government,” said Dinkic.

So why hasn’t the government spending been cut in the past when times were good? Why is the government allowing 1.6 million employed in the private enterprise to subsidize 550,000 government employees?

The politics in an economy whose population is shrinking like Serbia’s has a tendency to seek to inflate the living standard now at the expense of labor productivity which determines the wage in the long run. Hence we see, for example, that wages in Serbia increased in February by 6.4% from the previous month in real terms while the Statistical Office does not even tabulate country’s total labor productivity.

One way to inflate the living standard is by excessive borrowing, and like many other countries, Serbia hopes to get out of its deflating debt by borrowing to the maximum.

Economics Serbia

Weeks after Richard Holbrooke got appointed as the “special” envoy for Afghanistan, US got themselves a new leader in Afghanistan.

From the Wall Street Journal:

Gov. Gul Agha Shirzai, a semiliterate former warlord, has an autocratic style, a reputation for doling out government contracts to family and friends, and a personal fortune allegedly amassed via corruption and the opium trade.

Shirzai, which means son of a lion, is seen as a “useful partner” for the US even though Shirzai has a track record of “of violence, corruption and a disdain for the rule of law”.

Like Washington, Afghani’s love Shirzai and have voted him as the “Person of the Year” during a national radio call-in show.

“Every politician in Afghanistan is a thief, but our governor doesn’t take all the money for himself,” Shirzais is described by the Aghanis.

Some years ago Shirzai was removed by the US as governor of Kandahar because of “allowing his personal gunmen to get into shootouts with the city’s police force”.

Shirzai also shows a profound acumen for diplomacy.

“We don’t have to rely only on fighting and bombing and jet planes. That we use only for those people who won’t talk,” says Shirzai.

Additional biographical gems are:

- He has three wives and 18 children. He smokes and tells dirty jokes. His favorite food is steak, a taste he picked up on visits to America (so, he’s been courted for a while now, eh!).

- After U.S. Special Forces installed him a governor, Shirzai “amassed a fortune, estimated at $300 million, through corrupt business dealings and the opium trade”.

- Shirzai says that he lives off his government salary of about $36,000 a year but was able to personally contribute “millions of dollars on reconstruction projects”.

- In a remarkable compassion for Afghani women, Shirzais built a “park Mr. Shirzai built for women.”

Back in 1999, Holbrooke found similar allies when he visited the headquarters of Kosovo Albanian separatist gunmen and, mindful of Islamic customs, Holbrooke took his shoes off and made a barefoot alliance, a symbol that tells the host “I’m with you”. These gunmen, today, are lords of Europe’s underworld.

Musings Afghanistan

After publishing the warning Moody’s credit rating agency issued on Austria’s Raiffeisen bank, the owner of the Serbian media outfit Kurir became a target of personal attacks by the Deputy President of the Raiffeisen Bank Executive Board, Zoran Petrovic, who exposed private information about the owner that, to be nice, stretches the accepted decorum of a client-bank relationship.

“We tried to publish a dementi, but the newspaper didn’t want to do it and we are forced to bring charges against the newspaper and the journalist who wrote the article,” said Petrovic during the Round Table organized by Ekonomist Media Group in Belgrade, a gathering designed to declare that Serbia’s banking system is liquid and that Raiffeisen leads the way in the liquidity.

Then the Raiffeisen Deputy unleashed the client’s dirty laundry saying that Kurir’s motive for publishing Moody’s findings is “because the owner of Kurir was part of the ownership structure of a company that had a loan in Raiffeisen Bank and hadn’t paid its obligations for several months already.”

Even in the more primitive days, banks were courteous never to nail lists, like Luther during his Reformation campaign, of clients who did not pay their bills. Did we only think that banks are suppose to show some modicum of respect for private personal information?

Raiffeisen’s upside-down Swiss banking where client’s dirty laundry on privileged information is exposed by a bank should red-flag anyone with a loan at the Raiffeisen that, hey, perhaps you are next unless you help us in a bail out.

And Raiffeisen is everywhere in Eastern Europe: Russia, Ukraine, Poland, Albania, Serbia, Bulgaria, Romania… so much so that 80% of Raiffeisen banking empire profit came from the region last year.

In fact, nearly 57% of Raiffeisen’s total assets are in Eastern Europe and the ex-Soviet countries and as this region implodes so has its stock price.

Of course, like any bank, Raiffeisen wants to stop the downward reinforcing loop but the revelations of client’s dirty financial laundry, at least to a stock trader, says loudly and clearly: short the stock and make more money on Raiffeisen’s misery.

Why else would Austrian government decide to pump in money into Raiffeisen unless the bank is seen as a systemic risk? Austrian banks have over $378 billion is assets in Eastern Europe while the value of everything that Austria makes is, according to the CIA, less then that ($322 billion).

Says The Wall Street Journal:

“The bank has asked Austria’s Finance Ministry to buy preferred shares of Raiffeisen valued at €1.75 billion in a capital-raising measure. The coupons would pay 9.3% annual interest and must be repaid within five years, Austrian Finance Ministry spokesman Harold Waiglein says… Raiffeisen says the loan shouldn’t be seen as a rescue package but as capitalization that will allow it to continue operations in Eastern Europe.”

So, does Raiffeisen mean to say that, right now, they cannot do business in Eastern Europe and that without the €1.75 billion it would close shop immediately? And how long will Austrian €1.75 billion keep Raiffeisen resuscitated? What about €1.75 billion from other countries Raiffeisen has presence in, some of which face national bankruptcies.

If we are to believe Nouriel Roubini, who correctly predicted the ongoing financial calamity, Raiffeisen may be one or two sovereign defaults away from a collapse.

“The banking problem in Europe is becoming more severe,” Roubini told Bloomberg and then cited Hungary, Belarus and Ukraine, all countries where Raiffeisen banks, for possible national bankruptcies.

No wonder then that the Serbian central bank came out yesterday with a stern condemnation of the media scolding “that inadequate and unprofessional presentation of reports in foreign media about the financial sector can undermine the trust that this sector is based on. Moreover, media people should assume maximum responsibility for the damage that such unprofessional writing may cause.”

Well, yeah… Serbia’s central bank may be correct that Moody’s has misrepresented risk again but the question is whether Moody’s is now behind the curve like when it protected banks from the toxic assets that are devastating the globe now or has it made a computer error!

During the scolding, Serbia’s central bank made sure to touch upon Raiffeisen talking points: that, at 23% of capital to asset ratio, Raiffeisen in Serbia is liquid, that bank deposits are coming back after “withdrawal of the substantial amount of savings in October 2008″ and “there is no reason for clients of any bank operating in Serbia to ‘fret about their deposits and the safety of transactions’.”

So why is Serbia’s central bank up in arms defending an Austrian banking outfit?

Sure enough, Raiffeisen is a leader in Serbia sporting a huge loan portfolio that, we hope, is doing many people lots of good.

Yet one should be little more weary during Deputy sit-ins at the Round Tables as the banking Deputy tells the central bank Deputy that during the last crisis in October “Raiffeisen bank didn’t have to draw finances from the headquarters in Vienna” because for the next wave of the financial crises, some banks may have to draw finances from Serbia back to Vienna.

Economics Banks

From the Wall Street Journal:

An American-backed drive to curb misconduct at the United Nations is faltering, blighted by bureaucracy and accusations of retaliation against whistle-blowers.

Story of James Wasserstrom, a 25-year veteran of the UN and a former .N official in Kosovo who become a whistle-blower last year and was placed under investigation by the UN because of that:

In February of last year, Mr. Wasserstrom, the American whistle-blower, began making reports to New York about mismanagement and possible corruption in Kosovo’s energy sector on the part of senior U.N. officials in the formerly Serbian-controlled region.He provided no concrete evidence of graft. But in communications with the Office of Internal Oversight Services, the U.N.’s main investigative unit, Mr. Wasserstrom passed on information relating to a proposed new power plant known as Kosovo C. This included claims that U.N. officials were taking kickbacks. He says he had “no way of knowing if the information was true or not, but it was at the very least very worrying and needed to be investigated.”

At the time, Mr. Wasserstrom was the head of a U.N. office in Kosovo that monitored the electricity utility and other publicly owned enterprises. He also alleged that the U.N. Kosovo mission was colluding with local politicians to undermine the independence of publicly owned enterprises.

The OIOS declined to comment on the outcome of an investigation into the corruption and mismanagement concerns raised by Mr. Wasserstrom.

At the same time that OIOS was looking into Mr. Wasserstrom’s allegations, the U.N.’s personnel department in Kosovo announced what it said was a long-scheduled decision: Mr. Wasserstrom’s job was about to be eliminated.

Facing unemployment, he signed a contract to work as a private consultant for Kosovo’s main airport and the region’s telecommunications agency. Senior U.N. officials in Kosovo — the same people he wanted investigated — accused him of violating procedure and placed him under investigation for conflict of interest.

Detained at the Kosovo border by U.N. police in June last year, Mr. Wasserstrom says he had his American passport seized and car searched. His apartment in the Kosovo capital Pristina was also searched. Investigators sealed off his office, confiscated his computer and placed a “wanted poster” at entrances to the U.N. mission’s Kosovo headquarters. It featured a mug shot of Mr. Wasserstrom and an order barring the American from the premises. Official U.N. documents on the matter reviewed by The Wall Street Journal confirm this account.

“They treated me like a common criminal,” says Mr. Wasserstrom. After an investigation lasting nearly 11 months, he was cleared earlier this year of any wrongdoing. Mr. Wasserstrom in the meantime filed a retaliation complaint with Mr. Benson’s Ethics Office in New York. The U.N. says that 45 people similarly complained of retaliation over the 12 month period up to this July and that 18 of these cases warranted preliminary review.

In a letter to Mr. Wasserstrom in April, Mr. Benson said that while some of the measures taken against him “appeared to be excessive” and involved “investigative failures,” a detailed study of his treatment by U.N. investigators “did not find any evidence that these activities were retaliatory.”

Mr. Benson says he’s not allowed to comment on individual cases. The OIOS, which investigated Mr. Wasserstrom’s claims, says that retaliation is a “very specific type of conduct” and differs from other forms of mistreatment. In response to written questions, it did not address Mr. Wasserstrom’s case directly but noted that “abuse of authority and harassment” can also flow from “interpersonal problems” and other issues unrelated to retaliation.

Kosovo Kosovo

A large portrait if Stalin has been placed next to an icon of a Russian saint Matrona Nikonova, a blind Russian woman canonized for, among other things, a prophecy she allegedly told to Stalin in 1941, just before Hitler’s invasion, telling Stalin to stay in Moscow if he wants to win.

The icon of Stalin was ordered by a Russian businessman Aleksandar Eveseev who says that he ordered the icon because he considers Stalin a great politician who won a war and made Soviet Union.

Russia Russia

On Friday, Serbian central bank governor Radovan Jelasic held another presentation on the effects of the global financial crisis on Serbian banking and he used the opportunity to admonish reporters for stirring up panic that is costing the economy.

“Inaccurate and incomplete reporting on global financial market developments,” says Jelasic has caused “belittling of facts on the Serbian banking sector” and in particular of capital adequacy, liquidity, foreign reserves that is costing “unfounded and artificial tensions” and costing 100 million Euros that has been pulled out of the system that could have been used to make loans to the public.

By requiring banks to hold in cash 40% of foreign currency deposits, Jelasic stressed that Serbia’s banking system has one of the most stringent requirements on foreign currency savings, and that makes those bank deposits very safe.

He also pointed that bank capitalization in Serbia is 28% of deposits.

Jelasic said that cheap loans are gone for good from Serbia but loans denominated in local currency are divorced from the global financial markets because they depend on inflation which he seeks to fight.

In earlier presentation, Jelasic also noted that financial contagion from abroad is limited on Serbian banking sector because “banks in Serbia are daughter banks, i.e. separate legal entities with own capital, under NBS supervision”.

The governor also pointed out that Serbia’s central bank reserves are held in ultra safe instruments.

Of 9.72 billion Euros that make up the reserves, 6.69 billion are in securities, 2.33 billion in deposits of which 2/3 is in vaults of other central banks and the rest as AAA or AA quality foreign bank paper.

Jelasic noted that, according to the Article 3 of the mandate, central bank is in charge of a price stability, financial stability and support of the government’s economic policy.

Governor is in favor of a stand-by arrangement with the IMF. A stand-by loan is when the money to be borrowed is approved but not necessarily used. Such stand-by would alleviate pressure on Serbia and enhance its credit rating, claims the governor.

The negotiations of such loan will start on October 26 and it will be available next year. IMF will likely demand drastic cuts in government spending.

Analysts believe that the governor has won a short term victory for Serbian financial stability but the longer term trend of declining foreign investment inflow does not bode well for the financial stability.

Foreign direct investments have already declined this year so the remaining source of inflows is from privatization of state owned firms. IMF is critical of handling of the privatization.

Serbia owes $29 billion to international lenders which represents about 13% of the GDP. Private sector borrowing accounts for additional $20 billion of debt of which only $2 billion is short-term debt that is often seen as the trigger of currency crisis.

Economics Economy

In the past few days, Serb central bank has spent 50 million Euros buying up its own currency amid reports that there is a great deal of demand for foreign currency.

An economist Goran Nikolic tells Serbian daily Glas Javnosti that the 50 million spent is a dramatic action and says that there is a large demand for foreign currency. He did not specify who wants out of Dinar but said that bankers in Serbia are expecting the inflow of foreign capital to slow, so just like their banking kin in the West, the bankers in Serbia maybe the first to move and hoard foreign denominated cash.

Further, with private, non government debt at $20 billion and payments for it coming due, there is a likelihood that these private firms may soon themselves move to convert their Dinar holdings into foreign currency. As the financial contagion spreads across the world, these firms may realize that moving in first to convert has the advantage because being last means no money can be converted and that will force them to default on their debt. While the decision to move first may be rational, it is often a trigger for a run on the currency.

Serbian chief central banker, Radovan Jelasic, went public in number of venues to reassure soundness of the financial system and expressed his resolve to defend the Serbian currency. Jelasic told the public today that savings in Serbian banks are safe by citing that 45% of foreign currency deposits are with the central bank and that the banks are well capitalized up to one third.

Jelasic tells Belgrade daily Vecernje Novosti that savings accounts denominated in foreign currency are near 6 billion Euros of which 30% can be withdrawn at any time, while deposits of up to one year account for 27% of that.

According to these figures then, if there was a run on foreign denominated savings deposits central bank will immediately lose about 1.8 billion Euros or $2.43 billion (the 30%).

This translates into a depletion of official reserves down to $7.1 billion and that moves the debt-to-reserve ratio to the really alarming level of 52%.

An ordinary, conventional mortgage on a house in the US requires that this ratio must not exceed 37.5%.

These 3 sources as a possible trigger for a run on the currency whose effect is ballooning the debt-to-reserve ratio will cause a serious downgrade in creditworthiness of Serbia by the credit rating agencies such as the Moody’s. Such downgrade is followed by some serious consequences to the ability of the government to borrow.

Meanwhile, capital flight is collapsing the Belgrade stock exchange which has gone below 1000 from the height of 3000. The bourse is planning to introduce curbs on trading by limiting the bid-ask spreads to within 20%. Trading curbs are in effect in the US and the drastic collapse of the US Dow Jones during that time suggests that the curbs may do more damage then good.

One the bright spot in these negative news is the capitalization of the banks that operate in the Serbian market. According to Nikolic, the ratio of capital to exposure to risk is 3 times higher in Serbia then in rest of the Europe, and perhaps this conservatism in lending, may be the magic bullet that dissuades depositors from a run on their deposits.

Economics Economy

States and countries have became the latest victims of the financial hemorrhaging that is sweeping the globe.

Over the weekend the debt laden California is seeking emergency loans from Washington in order to avoid bankruptcy while Iceland is doing the same kind of begging from their neighbors to rescue them from reckless lending their banks did.

Bankers are suddenly alarmed that Pakistan may default on its debt as its debt-to-reserve ratio rose from 30% to 32%.

Turkey’s debt-to-reserve ratio of 31% is already alarming the IMF and may table that country at this week’s IMF/World Bank meeting in the US.

If what is happening to these countries is any suggestive what may await the debt strapped “developing” Serbia, the picture, at least for next several weeks, may look very alarming.

Serbia’s public debt obligations of $3.7 billion are a whopping 39% of its foreign reserves of $9.5 billion that the Central Bank has in the vault.

The larger the ratio the less money country has come bill payment time.

In addition, Serbia’s private debt is over $20 billion and to pay their payments, private firms will soon seek to convert their domestic Dinars from the Central Bank and deplete the savings even more.

The way to reduce this percent and have more money for paying bills, is for Serbia to export more, or attract more foreign investment or borrow on more favorable terms to pay its bills.

Serbia is paying only lip service to exports, globe trots for the diminishing pool of investment money and is running out of favorable borrowing terms.

IMFs recent report on its visit to Serbia assesses that “exports are not keeping up with surging imports” and has already warned of Serbia’s “unsustainable external current account deficit.”

The word “unsustainable” is often a code word to speculators that country’s currency may soon take a hit.

This outflow of reserves, says IMF, is offset by “abundant capital inflows [that] have, at least until now, largely defused macroeconomic tensions.”

But what about after now?

With borrowing terms now reduced to only 24 hours at a time, it will be a long time when banks will become willing to borrow long so that a country may pay off its short funding demands.

IMFs optimistic prognosis that Serbia’s “real GDP to continue to expand at a robust 6-7 percent during 2008-09″ is then predicated more on hopes then reality that foreign investors will have enough money in the future to pump into Serbia’s economy and keep its local currency propped up.

So, we have a 1-2-3 knock out set up on the currency - unsustainable trade deficit, prospect of diminishing foreign investment inflow and tight borrowing terms - all a culmination of an 8 year old borrow-and-spend policy.

Economics Economics

Hungary is proposing a New European Transmission System for gas that will form a regional country network including Romania, Croatia, Serbia, Slovenia, Bulgaria and Bosnia.

The rationally for this initiative is to drive the price of gas all these countries individually buy from Russia down. In addition, the network would share the risk in an event of some pipeline problems.

Croatian Plinacro, Hungarian FGSZ Natural Gas Transmission and Romanian Transgaz have signed a memorandum of understanding on this proposal, and in all likelihood, will lead the project.

Serbian Srbijagas and Slovenian Plinovidija are waiting it out to develop their own internal consensus and evaluate the strategy.

Serbia itself is trying to finalize a gas deal with Russia.

Kosovo Gas

As U.S. Republican presidential candidate Senator John McCain and South Carolina Sen. Lindsey Graham held hands with Dalai Lama recently (July 25, 2008) the constant carping drumbeat on China and a cherubic portrayal of Tibetans holds flavor similar to what was done in the media with the Serbs who opposed separatists in Kosovo in order to pave the way for Serbia’s eventual decapitation.

Now that Kosovo precedent is set so that other separatists can be recognized, Washington may be debating whether to sideline Tibet in order to woo China away from Russia, as Tony Blair recently argued, or to move Tibet on the main burner now that Moscow and Beijing do not see eye to an eye on Russian recognition of separatists in Georgia.

The decision on China may have to come soon because, in the immediate future, now that the Olympics are over, it is likely that China will seek to avenge the deaths of their 16 policemen and inflict some playback for being embarrassed by Tibet. The looming prospect of violence in China could force a definitive decision on China policy.

McCain with Kosovo Albanian separatists

For China, intervention in Tibet could definitively remind them of CIAs involvement with Dalai Lama, alas through his older brother as the proxy.

The story below, substituting “freedom movement” as euphemism for separatism and decapitation of China, may very well be the preemptive media blitz prior to shifting the action away from Georgia.

With the main point of the story below being CIA’s involvement in destabilization of China up through the end of the 1960s, the subtler message is that the destabilization of China, like of Serbia in the 1990s that led to its later dismemberment, could be repeated again because, after all, CIA would have something to prove here after “Most of the agents the CIA sent into Tibet were captured or killed,” by the Chinese.

Revolt of the Monks

How a Secret CIA Campaign Against China
50 Years Ago Continues to Fester;
A Role for Dalai Lama’s Brother

By PETER WONACOTT
August 30, 2008; Page A1

DARJEELING, India — Chodak, an 83-year-old former monk, fled Tibet in the wake of a bloody Chinese invasion more than 50 years ago. Today, he spends his days trimming wool carpets at a refugee center perched above the tranquil tea plantations of this Indian hill town. The plight of Tibetan exiles like Chodak, and their Buddhist message of nonviolence, has drawn world-wide sympathy to their cause.

But Chodak’s story has a twist. He’s one of the last surviving guerrilla fighters who took up arms against the Chinese during a little-known chapter in Tibet’s history. His life has been one of war, not peace.

Starting in the late 1950s, the U.S. Central Intelligence Agency trained scores of Tibetans, many of them monks, and then air dropped them back to their country with weapons and wireless radios. The linchpin of the operation was an older brother of the Dalai Lama, the spiritual leader of 2.7 million Tibetans and today a Nobel Prize-winning symbol of peaceful resistance.

“We were fighting to protect Buddhism from those who wanted to harm it,” said Chodak in an interview, his eyes now clouded with cataracts.

These days, armed with little more than his message of peace and the occasional chortle at Beijing’s expense, the 73-year-old Dalai Lama enjoys the upper hand in an international public-relations war. He inspires protests that embarrass the Chinese government around the world, including during the recently concluded Beijing Olympics. He also provokes over-the-top denunciations from Chinese officials. During the unrest in March, Tibet’s Communist Party Secretary, Zhang Qingli, accused the Dalai Lama of sabotaging the region’s stability and described the Buddhist leader as a “a wolf in monk’s clothes, a devil with a human face.”

The Dalai Lama deflects such accusations with dry humor, saying repeatedly that if Tibet’s freedom movement ever became violent, he’d step away from politics. “Please investigate,” he said of the charges that he inflamed Tibetan protests in March. “If we are really the instigator, we are awaiting punishment.”

He has said that he wasn’t aware of the 1950s-era armed resistance in the beginning, and that upon learning about it, he didn’t encourage Tibetans to join it. He also disavows any plan to see Tibet become independent, pressing merely for China to allow Tibetans more local autonomy to preserve their customs and language.

But the history of the resistance movement — and the Dalai Lama’s close family connection to it — remains very much a part of the ongoing tensions with China. It helps explain why even rudimentary reconciliation talks — the next round is expected in October — have gone nowhere.

* * *

John Kenneth Knaus, a retired CIA officer who led a covert Tibet command center from New Delhi in the 1960s, remembers the Dalai Lama as torn — personally sympathetic to his brave compatriots but unwilling publicly to support a bloody rebellion that ran counter to his Buddhist belief in protecting life.

“The Dalai Lama knew everything that was going on, but he couldn’t give his blessing,” says Mr. Knaus, author of the 1999 book “Orphans of the Cold War: America and the Tibetan Struggle for Survival.”

Gyalo Thondup, one of the Dalai Lama’s brothers and the former resistance leader, declined to be interviewed for this story. “It’s a very sensitive and inopportune time to talk, from the points of view of many different parties,” said one of his sons, Tempa Thondup, in a message conveyed from the elder Mr. Thondup. People who answered the door at Gyalo Thondup’s residences in New Delhi and Kalimpong, India, said the 80-year-old wasn’t at home.

Stories recounted by Tibetan resistance fighters, including six surviving guerrillas, demonstrate the deep involvement of Mr. Thondup in the CIA-backed operation.

Mr. Thondup came to the resistance movement with rare qualities for Tibetans of his generation — a fluency in Mandarin and an understanding of China’s history. In 1949, he was studying in the wartime capital of Nanjing when the People’s Liberation Army vanquished the Nationalist forces. Mr. Thondup and his Chinese wife, the daughter of a Nationalist general, eventually settled in Darjeeling, near the Indian border with Nepal.

When the CIA made contact with him in the early 1950s, Mr. Thondup had been organizing escape routes for Tibetans fleeing Chinese rule. His wife, Nancy Chu, helped establish the center where refugees learned handicrafts so they could make a living on Indian soil.

A spokesman for the CIA declined to comment on the Tibetan operation.

The refugees arrived with tales of misery and horror. Tsering Dakpa, a Tibetan farmer, says in 1954 he watched Chinese soldiers drag suspected rebels outside a village and force them to dig a trench filled with freezing water. The men were stripped, thrown into the trench and — when they didn’t answer questions satisfactorily — shot, according to Mr. Dakpa.

“My heart stopped,” the 77-year-old says of the execution. “I decided then I’d join the resistance.”

That same year, the Dalai Lama had gone to Beijing to meet with China’s leaders, including Mao Zedong, in hopes of securing more religious and political autonomy for Tibet. But back home, in the Tibetan region of Kham, an anti-China resistance had already taken root.

The Battle at Litang

It was in Kham, in 1956, that one of the most violent clashes occurred, a days-long battle at the Litang Monastery. One of the Litang monks was Chodak, who now works at the refugee center in Darjeeling. He recalls a meeting in which a Chinese general urged them to abandon their weapons. The monks carried weapons to defend themselves from bandits. Chodak says the general threatened to burn down the monastery if they didn’t comply.

“The Chinese said they were protecting us, and that there was no need to carry weapons,” says Nawang Datha, another monk. “We refused.”

Instead, the Litang monks sneaked up at night and attacked a nearby Chinese camp, according to Mr. Datha and Chodak.

The Chinese army responded by charging the monastery in a pre-dawn raid. The Tibetans fought back with homemade pistols, antique rifles, axes and knives.

“Everybody was rushing here and there,” says Chodak. “We didn’t know who we were killing.”

Mr. Datha’s younger brother, Tenlay Tenzing, managed to flee the monastery earlier on the family’s black horse. Chinese troops shot the horse, but the monk kept running. Coming upon the horse carcass later, Mr. Datha feared his younger brother had been killed — only to be reunited later at their parents’ home. When bombs from Chinese airplanes were dropped on the monastery, Chodak fled to Tibet’s capital, Lhasa, a weeks-long walk, but far from the fighting in Kham.

China’s official history of the fighting at Litang says the monks reacted violently to Chinese efforts to abolish a “feudal serf system” and “slavery,” according to the Web site of the Ganzi Tibetan Autonomous Prefecture People’s Government, a part of Sichuan province that includes Litang. The government accused Tibetan rebels in the area of attacking military and government officials, damaging roads and bridges as well as raping, looting and killing. As a result, the Communist Party of China extended “important orders for the suppression of unrest,” the Web site says, calling it a “war of liberation.”

The events at Litang inflamed passions across Tibet and helped fuel the resistance movement. Many monks, left without a monastery, shed their robes to fight the Chinese. Warring Tibetan clans set aside grievances to unite in battle. The CIA later would gain several recruits from Litang, who wanted to match China’s soldiers with modern firepower and military training of their own.

Flight to Darjeeling

One of the Litang monks, who went by the name Lhotse and was the older brother of Messrs. Datha and Tenzing, fled to Darjeeling, posing as a trader. When he arrived, he knocked on the door of Mr. Thondup.

The brother of the 14th Dalai Lama, Mr. Thondup was already a prominent figure among Tibetans and his political sympathies were well known. After listening to Lhotse recount the failed uprising, Mr. Thondup responded with a proposition.

“If you want to go for training,” he said, “I may have a place to send you.”

The monk agreed to the secret mission, according to interviews with his two surviving brothers, whom he later told about the conversation.

In addition to Lhotse, Mr. Thondup recruited five Tibetan fighters and sent them in early 1957 for training with CIA instructors on the Pacific island of Saipan. The Tibetans learned how to operate a radio transmitter, fire modern weapons and set up ambushes.

The Dalai Lama’s oldest brother, Thubten Jigme Norbu, served as a translator on Saipan. Mr. Norbu, a retired professor of Tibetan studies at Indiana University, is now in poor health and unable to respond to comment, according to his youngest brother, Tendzin Choegyal.

After six months in Saipan, Lhotse and a monk named Athar parachuted back into Tibet. Traveling with other rebels, the pair relayed radio requests for weapons and supplies and kept the CIA apprised of the resistance inside Tibet.

Arms Deliveries

Mr. Knaus, the former CIA officer, testified in writing to the U.S. Congress in 1999 that the CIA made two arms drops into Tibet in July 1958 and Feb. 1959. These included 403 Lee Enfield rifles, 60 hand grenades, 20 machine guns and 26,000 rounds of ammunition. By the late 1960s, Mr. Knaus estimates, the CIA had dropped 700,000 pounds of supplies to the rebels.

China’s attempts to quell unrest around Lhasa worsened tensions. In March 1959, the Dalai Lama sneaked out of the city’s Potala Palace and headed for India on horseback. The CIA-trained rebels hooked up with the Dalai Lama, sending radio updates on his whereabouts to Washington.

As Tibet’s spiritual leader was about to cross safely into India, the rebels cheered and waved. The Dalai Lama waved back.

Chodak interpreted the wave as “a long-distance blessing,” he says. “Then we went back to fighting.”

The Dalai Lama’s aides say that at the time the Tibetan leader didn’t have a good grasp of the resistance, or of how the CIA was involved. “His brother really kept him in the dark — for his own sake,” says Tempa Tsering, the Dalai Lama’s representative in New Delhi.

Secret Training

As Mr. Thondup filled out the ranks of the CIA-backed resistance, Mr. Datha and his brother Mr. Tenzing also enlisted. Mr. Tenzing recalls arriving in 1959 at a secluded training base in the Colorado Rockies called Camp Hale. He gazed at the pine forests and snow-covered peaks. “I felt I was back in Tibet,” he says. Tibetans would train secretly in Colorado until 1964, according to Mr. Knaus’s written testimony to Congress.

Mr. Thondup traveled extensively to publicize Tibet’s plight, recruit fighters and forge links with foreign intelligence agencies, according to another of his sons, Khedroob Thondup, who acted as his private secretary.

During Mr. Thondup’s rare breaks at home, the family went on picnics in the misty hills of Darjeeling. The children practiced shooting Mr. Thondup’s old Winchester rifle. He also taught them how to prune his prize roses.

But inside Tibet, the resistance was wilting. China’s superior radio communications allowed it to outmaneuver fighters. Its air power crushed Tibetan fighters. Most of the agents the CIA sent into Tibet were captured or killed.

In disarray, the rebels retreated to a mountainous base known as Mustang just beyond southern Tibet inside Nepal. Fighters at Mustang say Mr. Thondup showed up periodically to rally spirits. “You don’t have to worry about food and supplies. We have sponsors that will take care of that,” Mr. Thondup said, according to Nyima Namgyal, one of the rebels who heard the Dalai Lama’s brother speak at Mustang.

“We had an idea it was America,” added Mr. Namgyal, now 65 years old and living in a retirement home in Dharmsala.

So many arrived at Mustang that supplies were stretched thin. Chodak says he sold his sword and charm box — an amulet he wore around his neck — to buy provisions. The rebels raided farms inside Tibet for sheep that would provide food and wool to fend off the cold.

Infighting posed as grave a threat to the Mustang operation as the Chinese army. Several of the Tibetan fighters complained that the commander was pocketing funds, according to Mr. Tenzing. In 1968, disgusted with what had become of the resistance, Mr. Tenzing returned to Darjeeling and opened a dumpling restaurant.

For the Americans in the late 1960s, the operation was reaching the end of its usefulness. The CIA had closed training camps years earlier and was winding down supply runs. Mired in Vietnam, the U.S. government worried about getting drawn deeper into another Asian conflict. In 1972, President Nixon met with Chinese leader Mao Zedong, ushering in a new era of the U.S. and China relationship.

For the Dalai Lama, a new stance toward China would take shape, too. In the early 1970s, he sought to disband the rebels and end the bloodshed. Chodak says he concluded his war with the Chinese after a tearful 1972 meeting with the Dalai Lama in Dharmsala.

Not everyone agreed to leave Mustang. Some fighters shot themselves or slit their own throats rather than disobey the Dalai Lama’s orders, according to his spokesman Tenzin Taklha.

By then, the fighting with China was essentially over. In 1974, the Dalai Lama huddled with aides in a sunlit meeting room at his residence. “We made up our minds that, sooner or later, we would have to talk with the Chinese government,” he said in a recent interview. “Independence was no longer relevant.”

The man who would serve as the go-between with the Chinese government was someone both sides knew well. He was the Dalai Lama’s older brother, Gyalo Thondup.

Write to Peter Wonacott at peter.wonacott@wsj.com

Politics China, Kosovo

Islam’s latest global swipe on liberty, peculiarly enough, starts from Serbia where the western media has been telling us, despite the evidence, that Muslims do not exhibit militancy but tolerance.

To the delusions in the Western media, particularly UKs, the ‘I told you so’ moment came yesterday when a Serbian book publisher Aleksandar Jasic pulled a book after the official Islamic Community in Serbia attacked Sherry Jones’ novel The Jewel of Medina set to go on sale this week.

Jasic apologized but the chief Imam in Serbia went public pretending to be the sage of a human soul and said that the apology is not enough and that he needs to “sincerely repent”.

Similar calls for sincerity in atonement were also heard in Denmark or Holland in prior cases where authors of books and artwork did not repent sufficiently enough in the eyes of the Muslims who beheaded them.

Of course, Imam Zukorlic of Serbia never read Jones’ novel and some more sane do understand that the Imam is just part of the world-wide Islamic mob mentality, the Umma, that has one of the lowest number of books published per head.

To compensate for their own bliss of stupidity, wealthy Muslims buy the intellectual allegiance to Islam by funding “scholars” in western universities that are in the perennial shortage of money. Several Muslims from Serbia are on faculty boards of some of those purchases.

So may be the case of the University of Texas in Austin associate professor of Islamic history Denise Spellberg who started this latest Islamic mob attack after she read Jones’ advanced copy, phoned her influential Islamic blogger and her friend, Shahed Amanullah, frantically alerting him that the book has “made fun of Muslims and their history”.

Amanullah then sent an email to a listserv of Middle East and Islamic studies graduate student saying that he knows nothing about this book but a trusted source, who cares for Islam, told him that it was offensive.

The triumph of the ignorant comes after another blogger, Shahid Pradhan, who also hasn’t read the book, posts a headline on a Shiite website: “upcoming book, ‘Jewel of Medina’: A new attempt to slander the Prophet of Islam” to which, two and a half hours later, another Muslim by name of Ali Hemani responds with a 7-point plan on a strategy to ensure “the writer withdraws this book from the stores and apologize all the muslims across the world”, a plan that an Imam in Serbia is now executing.

So what are all these Muslims upset about?

Jones’ attempt to write historical novel about Aisha, wife of the prophet Mohammed, is described by Spellberg as a book that plays “with a sacred history and turn[s] it into soft core pornography”.

For her part, Jones says that she is devastated adding “I wanted to honor Aisha and all the wives of Mohammed by giving voice to them, remarkable women whose crucial roles in the shaping of Islam have so often been ignored - silenced - by historians.”

Consider the passage that honors Aisha’s consummation of marriage to the 40-something Mohammed:

the pain of consummation soon melted away. Mohammed was so gentle. I hardly felt the scorpion’s sting. To be in his arms, skin to skin, was the bliss I had longed for all my life.

It may be “soft core pornography” as Spellberg says only until one realizes that Aisha novelized here was only 9 years old!

How many 9 year olds, including Jones, fantasize about “scorpion’s sting” by a 40 year old murderer?

Is child-rape really the “sacred history” of Islam?

Then again, a book that may answer this curiosity will, in all likelihood, get pulled off the shelf just like this Jones’ glorification of pedophilia.

Islam Islam

“The Russian army is trying to enforce peace, and to do that, we have to attack the Georgian military,” which is shelling South Ossetian villages and towns from outside the region’s nominal border, Sergei Ivanov, Russia’s deputy prime minister, said on CNN.

Are there any additional reasons, usually ones denied?

“We don’t want regime change in Tbilisi. Our goal is the peaceful settlement of the conflict,” said Russian Foreign Ministry spokesman Boris Malakhov. “However, the fate of Saakashvili is in the hands of his own people.”

“I’d like to say straightaway that regime change is an American expression. We do not use such an expression. But sometimes there are occasions, and we know from history, that there are different leaders who come to power, either democratically or semi-democratically, and they become an obstacle,” says Ambassador Vitaly Churkin.

Could a reverse-Milosevic await Saakashvili…

“We have to stop the genocide,” said Sergei Ivanov, Russia’s deputy prime minister.

 

Saakashvili aside, but for now…

Georgian collapse “certainly raised concerns about Georgia’s reliability as a transit route” says Julian Lee, a specialist on the Caspian at the Centre for Global Energy Studies in London so, as a result of Russia’s proximity bombing of the pipeline, British Petroleum duly closed down the pipeline it operates in Georgia, days after having BPs CEO driven out of Russia and the defeated UKs Prime Minister Gordon Brown can only wield a rhetorical scimitar that “Russia’s military actions would damage its relations with other countries.”

Such as which?

“This is clearly part of a bigger game, which is the expansion of NATO,” Italian Foreign Minister Franco Frattini said. “Today Georgia’s entry [into NATO] is more complicated,” he said. “It doesn’t behoove us to pit ourselves against Russia. Russia is a strategic partner.”

 

Could Sarkozy’s Moscow visit confirm this?

“I think what you have confirmed here is good news,” that Russia stopped the opertions. “A cease-fire now has to take shape… We must draw up a rapid calendar so that each side can go back to the positions of before the crisis.”

Is Russia backward looking as Sarkozy?

“I cannot see us accepting this French draft of the resolution,” says Vitaly Churkin although Russia’s deputy chief of General Staff, Col.-Gen. Anatoly Nogovitsyn suggested that “some sort of international mediation effort to watch how both sides comply with a cease-fire agreement” is in the offing.

So who is to blame?

“It was Germany that led the opposition …for Georgia… not [to] be allowed to enter NATO. We presumably won’t know for some time what the precise calculations were inside the Kremlin when it came to the decision to send troops into Georgia, but one can surely assume that the German position did nothing to discourage Russia’s plans,” write Gary Schmitt, director of the American Enterprise Institute’s program on advanced strategic studies and Mauro Lorenzo, an AEI resident fellow.

However, unnamed sources paraphrased in the media say that “many officials in the U.S. government who have worked on the Russia relationship in recent years said, President Bush lionized Mr. Saakashvili as a model for democracy in the region to a point that the Georgian leader may have held unrealistic expectations about the amount of support he might receive from the U.S. and the West.”

“The Bush administration didn’t in any way encourage Saakashvili’s move against the Russians, but it didn’t do enough to rein him in,” said Charles Kupchan, a senior fellow at the Council on Foreign Relations. “It encouraged the creation of a Georgian president who was too big for his britches.”

Politics Georgia

For the West, warfare in Georgia is a wonderful opportunity to impose itself as a mediator in matters in the region and thus reduce Russia to a status of an aggressor to whom it will be dictated.

As we see no NATO troops bombing Russia on Saakashvili’s behalf, as NATO did on behalf of Kosovo Albanian separatists, Russia would be foolish to accept Western “mediation” whose nature and objectives are amply evidenced on Serbia, since Dayton through Rambulliet and as recently as with supposed talks on the Kosovo status.

On the other hand, events in Georgia are a perfect opportunity for Russia to demonstrate that it is a great power and to successfully do that it should squash Saakashvili like a worm, establish a new ruler in Georgia, then find another country that is totally innocent of anything, accuse them of something, apropos Iraq, then overthrow its ruler quicker then Saddam hung on the string… to postpone Desert Storm like armada on its southern flank which may come there anyway once Iran is taken out.

Politics Georgia

John Kerry opens Islamic gab-fest at the Yale University where, among other Islamic dignitaries, Bosnia’s Muslim Chief Imam Mustafa Ceric preached that Europe must stop genociding Jews and Muslims.

Well, Newt Gingrich has it wrong when he says, in his Winning the Future, that the “Western civilization joins us at this crossroads” because he may be all alone at that intersection.

John Kerry, a man who wanted to rule over Americans, has already crossed and surrendered to those that Newt correctly describes as ones that “would censor our civilization and accept[sic] lectures on tolerance from theocrats who oppress women and outlaw all religions but their own.”

Below we see John Kerry with his friends.

Videos of all speeches are available here:
http://www.yale.edu/divinity/video/commonword/video.shtml

Bosnia, Jihad

Hana Hadžiavdagic, Bosnian Muslim socialite, halo on the picture, claims to be a heterosexual as much as George Michael.

In the picture above, recently shot, she is enjoying some feminine palpation that quickly turned into a public tongue-fest (see below).

Muslim Hana says that she is not involved with the Serbian singer Marija Serifovic, a winner the Eurovision song contest in 2007 not known to be in any specific lesbian relationship.

“Marija Serifovic was not the only female I kissed in the mouth,” Hana said.

As an aside though, Bosnia’s Islamic leaders are rather silent on these lesbian liaisons by one of their own.

Bosnia Islamic lesbian