US-Iran Deal- when foes become friends

Having worked in a few multinational banks since 2002, and being at the receiving end of being forced to cut short business wherever "sanction" countries like Iran and Iraq and Syria are involved, I am delighted at the announcement of the deal between Iran and a group of international powers to freeze important parts of Iran's nuclear program in exchange for a temporary relaxation of sanctions.

The US-Iranian deal on allowing Iran to continue with its nuclear ambitions on a limited scale is one of the most epochal moments in world history and it must be lauded for what it entails - it ends Iran's international isolation, its alienation from the international banking  and will restart commercial transactions between American companies and Iranian entities. The landmark deal has raised eyebrows even in Israel because for decades, Israel and Iran were bitter foes because of irreconcilable differences in culture, religion and identity. 

This is surprising because, way back in 1943, President Roosevelt told a British Ambassador: "Persian Oil is yours; we share the oil of Iraq and Kuwait. As for Saudi Arabian oil, it's ours.". Historically, Iran was always a beligerant nation and fiercely independent in asserting itself as a regional hegemon, creating a bipolarity and sometimes tripolarity with Saudi Arabia and Iraq. I read a book by Robert Keacy in 2010 about "Iran: The Devil we know" which outlines how the country has become more liberal, less Islamist (by way of endorsing Shia regime) and built the largest ballistic missile inventory in the region. It naturally had clear ambitions to build nuclear weapons, which the US tried to thwart firing all the salvos in its range of socio-politico-economic foreign policy to check Iran. 

But nothing worked. On the contrary, instability in the region grew even as Iran, despite the international ostracisation welded itself into one voice as a nation. Lebanon, Gaza, Iraq, Afghanistan, Libya,Syria, Egypt, some say, the Arab Spring that led rebellions against extreme Islamic fundamentalism could have been a hotbed of religious and political uprisings of the Shia. Clearly, the Iranian model of re-asserting cultural supremacy and neo-liberal religious reforms have definitely dented the gambit played by US interests in middleeast region. US tried to sell more arms to the Arab countries, orient all nations ex-Iran into a powerful force called Gulf-Cooperation-Council (GCC) to become a powerful deterrant against Iran. In turn, Iran has always criticised the GCC for its pro-US slant, had territorial disputes with UAE over three islands in the Persian Gulf and even laid claim over Bahrain that it was once part of the Persian empire. 

The US had built more bridges with the GCC countries ostracising Iran  with all the sanctions possible which intensified in 2012. The alignment of interests between the US and GCC were quite understandable: the GCC countries and Iran control over 55 per cent of the world's total oil production and 41 per cent of the world's total gas reserves. US has a lot to gain being an ally to GCC than Iran. Moreover, the Arab economies are a major buyer of arms from US. All the ruling regimes of the GCC countries, to add further, were all Sunni  - and the Shia Iran had to be checked so that its influence among the region's Shia minorities doesn't grow.

To a large extent, the ostracisation had an impact on Iran's economy - its currency fell and because of the steep sanctions  - which bar banking transactions - Iran suffered. But Iran retaliated. In 2012, there was another move by the cartographers in US to even re-name the Persian Gulf as the Arabian Gulf, that didn't work. Iran was happy that didn't name (there are few countries in the world which have seas, gulfs and oceans named after them). US intensified the sanctions impact by freezing all Iranian government assets in US territories. Iran retaliated again, this time threatening to block the Strait of Hormuz  - the little "mouth" of the Persian Gulf through which 85 per cent of all the oil the world consumes passes through. It has never carried out the threat. 

As this intensified, and Iran's oil exports faltered - the main stay of their economy, Iran never cowed down on the military front and diversified its efforts to reach out to others including BRIC nations like India and China. Iran is alleged to have continued supplying WMD and even biological weapons to countries like Syria and threatened to use them in any conflicts escalated by Israel. What must have changed US views towards adopting a lenient stance against Iran is the new-found love of China towards Iran and old-world love of India, which always had historic ties with Iran, from the times of the Persian empire.

China, while engaging with the Arab world, deepened its ties with Iran, Syria and Turkey. China is now Iran's biggest trading partner and has been supplying arms, including missiles and aircraft, to Iran since 1981. It is also important that for China, Iran is the only energy supplier in the Gulf  for its gargantuan economy that it can reach through pipelines as well as sea routes, ensuring a diversification of supply lines in the even of a blockade or disruption in its energy supplies. Besides, in the strategic rivalry with the US, Iran is a potential ally. Which is why, China, while supporting the sanctions on Iran, it is unlikely to stop dealings with Iran. Given this and the fact that India and Russia have also been continuing trade with Iran for oil supplies (there was a window of exports and imports carried on via a select conduit offered by Indian oil companies and to some extent, by State Bank of India). 

Besides, after the march of democratic movements which are eroding the bastions of conservative Islamist traditoins in many countries across the GCC and MENA regions, it appears that this move to cosy up to Iran is driven by compulsions of foreign policy to move from the Middle East to the Indo-Pacific Ocean regions. Because thats where the action is. It proves one thing though: In politics increasingly dictated by economics and win-win foreign policy, there are no permanent enemies and no permanent friends either. The event is still a small leap of faith in taming a country that has a civilzation older than the most-powerful country in the world today but it will have benign consequences going forward for the region (in cooling off oil prices) and the world. 

India, for its part played with lot of caution on Iranian front even though culturally it is closest to the Persian Empire with links dating back thousands of years. Persian was a language spoken at Moghul Courts, trade ties were always on, and were normal since 1950 but fully formalised under PV Narasimha Rao's regime  since 1993 and strengthened under the Vajpayee regime . India has done  two joint naval exercises  with Iran in 2003 and 2006, trained their army personal in combat aircraft etc. and offered to build ports for them. Both of us dread the radical regimes of Talibans calling the shots in Pakistan and elsewhere. Both are aspiring nuclear powers although differences remain in being the signatory to NPT. With the clouds eased out on sanctions, India should revive the $7 billion gas pipeline that got stalled due to US opposition, distrust of Pakistan and doubts on viability. If US and Iran could bury their differences and move on, India and Pakistan can also move on in life. I am not an expert in foreign policy but thought this little piece will drive home again why the world is going to only get better and better with countries softening their stance against each other.

Advice from China, in lighter vein!

Advice to Sonia from China on handling Jagan:


1. To catch the tiger's cub, one must enter the tiger's den.

2. Do not use firewood to put out a fire.

3. Going too far is as wrong as falling short.

4. One tree does not make a forest.

5. When fortune flees even gold loses its luster. When fortune returns, even iron shines bright.

6. An idol-maker does not worship the gods: he knows what stuff they are made of.

7. A hundred men scrambling to fetch a gourd by cart will accomplish less than one man holding it in his hand.

8. An arrogant and complacent leader is sure to meet with defeat.

9. It is foolish to anger the majority, nor is it wise to do simply as you please. If your deeds displease the people, then disaster will surely follow.

10. A tyrannical government is worse than a man-eating tiger.



Advice to Jagan that never came from China:

1. Even oceans may at last run dry.

2. When you have wealth, why should you strive for more?

3. All questions have two sides.

4. Much property is a trap for the stupid.

5. Those whose ways are different cannot lay plans for one another.

6. When you see a straight piece of wood, you do not want to make it into a wheel.

7. Misfortunes never come alone.

8. Do not expose money to eyes.

9. In good times, the wise man works for the state. In bad times, he looks after himself.

10. Take care of the small things.



Advice from Sonia and Jagan to China:

1. Heroes are made by the times. (Jagan)

2. Though brothers may have private feud they fight as one against the alien foe. (Jagan)

3. To give peace to the Empire and suppress rebellion, a large sword and a long spear are necessary. What use is a pen? (Sonia)

4. The views of men of wise counsel are much the same. (Both).

5. Although I am thin in appearance, the Empire is fat. (Jagan).

6. It is harder to deal with the weeds once they have spread. (Jagan)

7. There is no victory in winning a hundred battles. There is a victory in subduing your enemy without fighting at all. (Jagan).

8. When the first indications of error begin to appear in the state, Heaven sends forth ominous portents and calamities to warn men and announce the fact. (Sonia)

9. Having a son is unlucky indeed. These days it is better to have a daughter. Your daughter can be married to your neighbour. Your son will be buried under the weeds. (Sonia)

10. Kingdoms rise and kingdoms fall, but its the common people who suffer. (Both)

- Compiled from the Little Book of Chinese proverbs. With malice towards none.

"Breakout Nations" by Ruchir Sharma

"Breakout Nations: In Pursuit of the Next Economic Miracles" by Ruchir Sharma published by Penguin India. Price Rs.599.00. pp. 292.

Nonfiction interests me more than fiction. Naturally, I am delighted to introduce a book of nonfiction thats creating records in India and the world. "Breakout Nations" by Ruchir Sharma is a super-racy book giving the last word on Emerging Markets, Frontier Markets and all the nations that are trying to make it to the cut in between. Who is Ruchir Sharma? His title reads as Head of Emerging Market Equities, Morgan Stanley. But for readers of "The Economic Times", Ruchir is a well-known writer on subjects of Economics. Infact, I think Ruchir's speciality is the sweet spot between Social History, Geopolitics and Economic Affairs and most often, the vicissitudes of the capital markets are self-evident in the overlap between these affairs. And Ruchir is best equipped to write on these matters. I always thought (and now a bird in Mumbai confirms) that Ruchir Sharma is recruited by Morgan Stanley only because of his ability to write on complex subjects intertwined as above and not because he has some great degrees at Yale or Wharton or that he can decode the formulae in financial mathematics or excel sheets.


Ruchir Sharma is MS's answer to other guys who can write very well on capital markets who are held in regard by the Icons of High Street Finance. Peter Bernstein (he passed away in 1995), David Darst (again from Morgan Stanley who wrote a treatise on Asset Allocation), Barton Biggs (Morgan Stanley, yet again, who wrote on the who-and-how aspects of sharing the spoils of the World War-II). Then of course, we have Jim O Neil (Goldman Sachs - the original guy who coined BRIC with Roopa Purushottaman before Roopa was lured by our own Kishore Biyani - it happens only in India!). Ruchir Sharma is different because he uses a whole lot of qualitatative yardsticks in analysing data pertaining to who will get past the round two of the next group of nations to "break out" of the orbit of middle-income trap and make the leap into the developed markets. Ruchir Sharma makes many statisitical inferences, fine examples, anecdotes and similes, cruel objectivity, and laser-sharp observations on countries from China, India, Brazil, Russia, Indonesia, South Africa to Turkey, and other frontier nations in the continents of South/Latin America, Asia, Eastern Europe, Middle East and of course, Africa. Its breezy and page-turning even for the unitiated in matters of Economics and financial markets.

Ruchir has been writing for "Newseek" and "The Economic Times" for the past 20 years and has been kicking tyres in some part of the developing world for atleast a week of every month of those 20 years. He is most qualified, therefore, to talk with conviction interlaced with consummate ease on why and what aspects are appealing about these markets. He also writes on what aspects are not. Maybe, he has a say in the rejigging of the MSCI universe of stocks across the globe from South Korea to Turkey and from South Africa to Mexico. As someone who has the license to get under the skin of every country which wants to be the next or the new G-7 nation in some time, Ruchir does a fabulous job in giving a National Geographic -equivalent picture of every nation on the radar of the FII, Endowments of developed world and the Foreign Individual Investors. I am amazed at the insights the book gives in one read about China, Brazil, Indonesia and even about our own India. Rightly so, he gives India a 50: 50 chance to be counted as a breakout nation. Swaminathan Anklesaria Aiyer, my second-most favorite columnist from "Economic Times" has already written his repartee to Ruchir in the previous week's column in The Times. But Ruchir makes a few stunning, off-beat observations about India which should make policy-makers worry and middle-classes wary. He says, bulk of India's youth get carried away by either jobs in government or Maoist movements because of growing inequalities between the rich and the poor. And unlike in China, where the top Forbes Billionaires keep changing every few years and also their combined networth is capped at $10 Billion or so, in India, much to the chagrin of the poor and the oppressed, the same list of Billionaires is displayed year after year since the 1990s and the combined networth is in excess of $70 Billion while India boasts of probably the lowest per capital income amongst all developing nations and widening inequalities. There are other telling points, mostly objective about India and China.In fact, Ruchir's commentary on China can rattle the most die-hard bulls of that country. (Jim Rogers might re-look at the title of his book on China -"A Bull In a China Shop"). I think, Ruchir has pre-empted the "India Today" magazine's latest survey on the arrogant South India vs. the Persevering North India.

Ruchir makes some outstanding denouements  on the new headwinds of world trade that call for a lot of economic negotiations between the affluent and the emerging nations. Ruchir, by virtue, of his being in a chair to hobnob with the heads of state as well as head-honchos of corporations, is able to distill a range of reports, surveys (some of them outright exclusive) and put a fascinating menu of options for Intelligent Investors of any country. He doesn't take the burden of making hypothetical statements that needed to be proved. Instead, he gives an eclectic but largely concatenated dosage of interesting and disparate data points to drive home a point that is hard to disagree with. Maybe he is good at story-telling but this is a book that concerns four-fifths of humanity in the most convincing fashion. It has few flaws and some unprovable truths but largely, the content is open-ended to let these nations decide in a passing parade who will need what to cross the rubicon. Antoine Van Agtmael was the first guy who coined the phrase "Emerging Markets", then wrote a book "Emerging Markets Century". It was like a premature baby. Ten years back, Jim O Neil wrote BRIC report - this allowed the toddler nations to feast and grow with a 450 per cent jump in the FII allocation to these countries. Now, the teenagers are turning brash and feeling self-important and simultaneously, many toddlers are crying for attention thats legitimate. Ruchir Sharma's new book is a good wakeup call to all of them - an honest and objective, intelligent and readable report card.

Penguin publishers tell me this book is already hit the second print run within one month of launch. This is going to be the best-selling Nonfiction book for 2012. Well done Ruchir.

Obama's Re-Election campaign Starter Speech

 

Obama makes the most picture-perfect speech before Polls - giving a sense of confidence to Americans that "All izz well" - more jobs since 2005, no war in Iraq and Af-Pak, no letting Iran loose, no outsourcing to "poor" countries, veteran job school, no tax subsidies to rich, no equals in China+Germany, GM-still the best automaker in the world, reforms, in Wall Street, blah blah. Its incredible ho...w these Americans drum themselves up to the world. As a friend said, "they are like a shopkeeper who is bankrupt (US) who wants money from customers (rest of the world) so as to be able to sell the same goods again and again." But despite the truth, and despite the chinks in the logic, US rules because of a system thats created to continuously re-invent, throw up new enterprises and innovate, a democracy that looks like one and a currency that can deflate its way out of the sovereign debt. It also superb pride and confidence in everything American that each of its population with a percapita income of $43000 enjoy and revel. On the contrary, on the eve of our 63rd Republic Day, India has lot of things going for it - still 7% plus GDP growth, culture thats myriad and richest, a majority of religion that still allows minorities of religions to asssert themselves with occasional blemishes, democracy thats running with all its earthly flaws, a society thats not broken down in its innards, population that is unequal in all material possessions but richly endowed with tolerance, enthusiasm (unlike Japanese middleclass) and ability to survive its politicians and capitalists, freedom to still breathe our usual selves in the way we wanted to live, a co-existence of so many languages and religions, prides and prejudices, cinemas and festivals, a civilisation thats not dead as the Mayans or the Egyptians, a nation always in threat of a breakdown and an attack from coast or landmass from 20 directions, a nation that has so many centrifugal forces working and yet has a faint of a centripetal force thats keeping us on the edge but intact still, an Entrpreneurship and a Diaspora that continues to sizzle and furiously astound the world with good and bad intentions. I fail to understand why Indians cannot be as supremely optimistic as the Americans. The Bible says, "...The meek shall inherit the earth." It has to be definitely the Indians then, not the Americans, nor Chinese, nor Germans. Forget about the pressures of ruling the world - why can't we celebrate ourselves just the way we are? Happy Republic Day friends and Cheer up - the worst is behind us and "That used to be US" will apply to US not us. Lets move on and feel proud. My father always makes it a point to wear new dress on R-Day and I-day. I shall do the same tomorrow. Long live the Republic Day!

My visit to Nepal: View from India

Nepal may not be the most glamorous destination in Asia and doesn't have the edge in class even over Thailand let alone Singapore and Malaysia or the more picturesque Mauritius, Maldives or Seychelles. But there's something about the soul that beckons you and holds your awe. We went there sufficiently under-expecting and had taken with all plan Bs - no INR 500/Rs.1000 notes as they are banned in Nepal (because of fake currency scare), enough cash bundles stacked up closer to every body corners, no woollen clothing since the snows are melting and lightest clothing and some packaged food because you may not get vegetarian food.

Landing at Tribhovan Airport actually made us go back to India - the airport was that bad - unclean and ill-maintained - it looked like a cross between Rajahmundry Airport and Old Begumpet Airport to me - everything from carry handles to carousels was archaic - the lobby looked like some dingy old Annapurna Hotel reception area and the frisking and check-in counters were not well-equipped. But Indian tourists seem to be all over the place and there are good number of folks from SAARC countries, and trekkers from Australasia, Japan, and Europe. You then realise that you are in better company. There is great deal of respect for Indian tourists inside and outside Airport and it comes because Nepalis love most things Indian - they love Bollywood music, Indian Rupees, Indian films and Indian dresses and Indian tourists - because they are spending more and seem to tip well. I have never seen anywhere else a hawker's eyes light up over a Rs.100 note - not even in India @ 8.50 per cent Inflation rate.

As you step onto the roads, you realise its no different from Indian City roads with more pollution - smoke and honking- perhaps more chaotic with less flyovers and lesser public transportation - commuting is done mostly through taxis - Maruti 800's are the ubiquitous vehicles but there are the occasional Wagon-Rs and Santros. You get an idea that all the cars we moved out of in the last ten years are being re-used in Nepal. People are friendly to tourists despite a tendency to fleece - you have to haggle for every knick-knack you buy and talk down almost fifty per cent.

Nepal is responding to tremendous upheavals internally and externally with lot of courage and faith. Its now six years since the Royal feud happened and the Maoist government has driven out King and his suriving son to Nagarjun. The day we were in Kathmandu, right next to our hotel a few blocks away in the Parliament there were massive demonstrations on re-drafting of the new constitution - we were told that the government promised to give a new version in six months time. Maoists in Nepal unlike in India are quite open and transparent in their dealings - they contest politically and are trying to build bridges with public and business community. They are fighting the corridors of power with outcry and open agitations not through guerilla warfare as in India but they get plenty of support from China - they managed to stop Dalai Lama from visiting Buddha Lumbini - the birthplace of Buddha this year. The public is very stoic and dejected with the new ways of Maoist Government after the removal of the Royal Guard but seem to be quite patient and hopeful. Agriculture which used to be mainstay of Nepalis has now given away to Tourism. Nepal declared 2011 as the year of tourism and to win public symphathy the Maoists too have said they won't interfere with business or disrupt tourism flows - that makes this year one of the safest years to still visit Nepal - which has 8 of the 20 tallest mountain peaks of the world and has still the best scenic places on earth - Jumsum (resembles Kashmir), Pasupathi Nath temple (Shiva), Mukti Nath temple (Vishnu), Mana Kamna Temple (Shakti), Bodhnath Sanctuary, Pokhra (considered Nepal's honeymoon destination) and the peaks of Mt.Everest, Gowrishankar, Annapurna Devi which see huge trekkers' interest.

Even if you are not a trekker like me, Nepal will make you walk even if you see few places that require more than a walk through the clouds. One unforgettable experience is the mountain plane trip through the peaks of Mount Everest - at 25,000 feet above the world's highest landmass - you don't get more nostalgic and euphoric with an experience that cost less than a hundred-dollars.

But coming back to the economy a bit more, it looks Nepal is getting the benefits of globalisation and tourism - last year, Nepal received about $760 Million in remittances (nowhere compares to India's $50 Billion plus) and you will find many centres of coaching for GRE/GMAT/SAT. There are plenty of institutes offering English and foreign languages coaching and an even higher number of communication skill-development institutes - it apppeared that despite low literacy rates, Nepalese families are keen to send their wards to school. So thats a good sign.

Nepal has many sects within a pronounced caste system of the Hindus (who still form the majority @ 80 per cent) and Buddhists (mostly the Hinayana sect as seen in Thailand, Cambodia, Vietnam, Taiwan, Tibet and Singapore). There are more than 100 local dialects and depending on where you are from - you cannot make out the other language.

In Kathmandu and in Pokhra, it surprised me that shoppers are spoilt for choice on all the wares that are available in India and any other Southeast Asian country. You cannot miss out on the lovely Buddha statues in various postures and lovely pendants and exquisite handbags and paintaings. For those who love books, you get them at every nook and corner - almost one bookshop every fifteen "other" shops which is a surprise to me. One owner told me there is a good reading culture in Nepal - public libraries are well-thronged and the mountaineers also sell their books on their way to the peaks or descent down. Besides, most bookshops offer a unique facility - you can buy book and sell the same book at fifty percent of the original price. I thought I should henceforth buy books only in Nepal - besides one INR gets you One Nepali Rupee and Sixty Paise - that's 1.6 times more purchasing power. I didn't miss out buying my music either - Nepal has a very eclectic range of music - mountain music, Tibetan Buddhist music, world music, film music and western, classical and Indian music. Bijyoya Vaidya is one of the rock stars of Nepali music but even they listen to Ravi Shankar or Yanni or Indian legends as of Western composers. Music CDs - here is a tip- are available at throwaway prices - you can pick any CD for less than Rs.150 (INR). But books were a revelation - I found some enchanting books you don't get in Sunday bazaars in Hyderabad - that rare book of William Styron, that missing book of Pico Iyer or Amit Chaudhari or the rare banned book on the Gorkhas or the Karmapa or the more informed reportage on Nepal's political climate. In most streets when you shop, you can bike your way through motorbikes or bicycles charged per hour. Spirituality and materialism go hand in hand in Nepal but you won't find a synthetic culture here - the Nepalis have lived through so much tumult in the last ten years that nothing can dent their psyche further - many just eke out their living and want to put in an honest day's labor.

Food is quite good in Nepal not just for non-vegetarians as LoneyPlanet guide warned us. We found good food for vegans like us. You find plenty of jain, marwari, Indian restaurants and Chinese restaurants and must visit some exceptional mo-mo and other platter-rich cuisines - especially Nepalese and Thai cuisines. We found a restaurant that employs only deaf and dumb waiters and struggled to place orders in sign language. Playing Dumb Charades the previous day in transition to Pokhra helped a bit.

The public mood keeps swinging from despondency to realism and some optimism because the local economy is almost in shambles - so most people turn to tourism - there are others who are forced into drug-traffiking and sex-tourism and others who are "recruited" by the Maoist government to be infomers. There's great admiration for Indians in Nepal contrary to what the media projects outside - but somewhere I feel India is losing grip over Nepal - the momentum is with China now because of the Maoist Government. Massive Debt is being raised by the government with loans from IMF, China, Japan to build infrastructure for the country and the average debt is INR 15000 per capita today. The newspapers usually do not try to rabble-rouse but there seems to be a quality English and vernacular press that listens to what the people are saying. There are diversions for the people though - many folks work in India and China for low-skilled labor, that's what goes back as remittances and those that remain are happy to be bystanders to the passing parade of democracy. Others watch movies - Nepali movies are all about what can easily be done on screen that's why you have titles like " Himalaya" and "Sahasi" - sesi versions of Gladiator and Robin Hood. The fastest growing relligion in Nepal is Tibtan Buddhism and it was evidenced after a visit to Bodhnath Sanctuary. When oppression is rampant and the people have few outlets (many temples of Nepal have been closed down after the Royal Family massacre) and cultures are clashing, I expect Nepal to bounce back faster than the counterparts like Pakistan, Bangladesh, Bhutan or Sri Lanka but for that India must come forward and not allow China to infiltrate Nepal the way they did in Tibet - where the cultural identity of Tibet is lost to the world and Tibet is more of an idea than geography (and thank God that idea is buzzing in Dharmashala, California, Japan etc.

I do not know when Good times will return to Nepal - I definitely see green shoots of them in the eyes of the people, their undying optimism, their root-centeredness and the spirit of patient self-struggles, but I and my family had a wonderful time. And I think, Nepal is one of the places to see before you die. It connects you to your roots better than air-conditioned atmosphere cities.