The Unintended Consequence of Charlie Wilson's War
By Riaz Haq CA
The latest Hollywood movie "Charlie Wilson's War" tells the story of behind-the-scene activities that led to the massive CIA backing of the Afghan resistance against the Soviets in the 1980s. Based on a book of the same title by late George Crile, it focuses on the efforts of a "scandal-prone, womanizing" US Congressman Charlie Wilson and "out-of-favor, blue-collar" CIA operative Gust Avrokotos who both found a willing partner in Gen Zia-ul-Haq of Pakistan. Wilson, a congressman from East Texas with almost no Jewish constituents, was a strong supporter of Israel as he saw Israelis as the underdogs surrounded by Arab enemies armed by the Soviets. His support for the Mujahedeen in Afghanistan was motivated by his hatred of communism and the Soviet Union that he saw as the evil empire. That may also be why he ignored any concerns about the unintended consequences of his actions in supporting a strongly religious band of Islamic fighters who disliked Western values and culture as much as they hated communism. George Crile connects the dots from the CIA's supply of weapons and training to the Muslim fighters in Afghanistan to the fall of the Soviet Union and then the terrorist attacks of Sept 11, 2001, concluding that the terrorism we face today is the unintended consequence of our actions in Afghanistan back in the 80s. Crile starts with this conclusion at the very outset and then spends the rest of the book backing his conclusion with facts and figures he gathered in his research. Having been a producer of CBS 60 Minutes, Crile was well equipped to write such a book. Let's wait and see if this movie does justice to a great story. With the star-studded cast including Tom Hanks, Julia Roberts and Philip Seymour Hoffman, it should be a big draw at the box office. The big question that will continue to loom for Americans and the world is whether we have learned any lessons to avoid even greater and more disastrous but unintended consequences of our current actions in the ongoing "war on terror".
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The Ailing US Economy: Can Asians & Arabs Rescue It?
As the widening sub-prime crisis and the resulting credit crunch in the US become serious, there are many Asian and Arab sovereign funds coming forward to help major US and European financial institutions. Citigroup, UBS and Morgan Stanley clearly stand out as the recipients of their largess. Here's a brief run-down of these three deals:
Abu-Dhabi-Citigroup Deal
Abu Dhabi Investment Authority agreed to purchase 4.9% stake in Citigroup for $7.5b in convertible debt. It's a rather complicated deal but the interest rate on this investment by Abu Dhabi works out to about 11%, an unusually high interest rate that speaks to both the risk and the reward of this arrangement. Part of the concern by the oil-rich country is based on the fact that Abu Dhabi's reserves are held in dollar-denominated assets and the US dollar is continuing to lose ground against other major currencies, including the Euro. The other concern is the impact of a US economic slowdown leading to worldwide slowdown that causes reduced demand for oil and lower prices.
Singapore-UBS Deal
The Government of Singapore Investment Corporation(GIC) announced it is purchasing 9% stake in Swiss Bank UBS for about $10b. The identity of a second investor, believed to be Saudi, was not disclosed. The rapid Asian growth has helped balloon the size of the Singapore reserves and they are looking for opportunities to invest. The other factor is that the Singaporean wealth is mainly tied to international finance and trade which they would like to support.
China-Morgan Stanley Deal
Chinese government is buying a 9.9% stake for $5b in Morgan Stanley, one of the largest investment banks on Wall Street. China has been accumulating US dollars at an unprecedented rate with its rapidly expanding manufacturing exports to the United States and the rest of the world.
Conclusion
These three deals are likely to spur other, similar deals. As the rapid Asian economic growth and the commodities boom create tremendous wealth in Asia and the Middle East, these regions have a stake in maintaining this phenomenon by making larger investments in their own economies and supporting the consumers in the West. The Asians and the Middle Easterners are likely to continue this investment/purchase strategy in the foreseeable future in spite of concerns about the growing deficits in the US and the falling value of the US currency. The only uncertainty here is how the US Congress reacts to it.
(PakAlumni Worldwide, created and launched by NEDian Riaz Haq, is a social network designed for all Pakistani alumni and students to connect, share and collaborate. It serves Pakistan Alumni at home and abroad. Riaz Haq's Blog: http://riazhaq.blogspot.com)
