By Richard Komaiko and Chris Stewart
Asia Times 9/18/08

The collapse of US insurance giant AIG and its US$85 billion takeover by the US government on Tuesday takes the US financial crisis right to the heart of China's development as a capitalist country.

AIG, the world's sixth-largest company by assets and biggest insurer, according to the Forbes Global 2000 list for 2007, is one of the few US institutions to be founded in China, its roots dating from 1919 when Cornelius Vander Starr, a veteran of World War I, founded a small insurance company in Shanghai called American Asiatic Underwriters, later to become AIG.

More famously, Starr's successor, Maurice R Greenberg, built relations with China's leadership from 1975, his first visit to the country predating by several years the revolutionary moves by Deng Xiaoping to open up China to Western influences.

In this, Greenberg proved himself a master of developing guanxi, a term summarized as "connections" and now recognized as holding the key to successful development of business in China.

According to Benjamin A Shobert, reviewing Robert Buderi and Gregory T Huang's book of that name, "guanxi is commonly perceived as partnering and understood to focus the attention of Westerners on the great importance that the Chinese put on relationships. To most Westerners guanxi emphasizes personal relationships in contrast to the contractual, non-relational business practices common in America.

"While a portion of the word's meaning can simply be seen as stressing relationships, the authors emphasize that a better understanding of the word is to emphasize four things: trust, favor, dependence and adaptation - the last what the authors call 'patience and cultivation' ."

Greenberg's patience and cultivation of relations with China's leaders saw him play a key role in building links between the US and China, while his company had a front-runner' s view as it and China metamorphosed into leading players in the global business world.

Starr was the initial pathbreaker. When he set up shop in Shanghai, there were many other Westerners selling insurance in the city, then as now the country's financial hub. But these potential rivals almost exclusively concentrated their efforts on selling to other Westerners. Starr realized that the Chinese people themselves represented a vast and underserved market for insurance, with relatively low risks. This insight would enable him to become one of the wealthiest men in the world.

Within 10 years, Starr had established offices across China, Hong Kong, the Philippines, Indochina, Jakarta and Kuala Lumpur. In 1926, he opened his first office in the United States. The growth of his company was temporarily disrupted by the Chinese civil war and the general turmoil in East Asia. In 1939, Starr moved the headquarters of his corporate empire to the Empire State - New York. From there, his company and fortune grew many fold.

In 1962, Starr appointed Greenberg to head AIG's then failing North American operations. In a remarkable display of business prowess, Greenberg turned the unit around, a feat that encouraged Starr to name him his successor before passing away in 1968.

Starr bequeathed all his wealth to the C V Starr Foundation, one of the largest foundations in the United States, with over $3 billion in assets. Greenberg became the chairman of this foundation while also assuming the reins at AIG. Under his leadership, the company prospered while he himself became one of the kingpins of American foreign policy.

In 1977, he became a member of the Council of Foreign Relations, arguably America's most influential think-tank, and over the next three decades he would hold numerous leadership positions in the council, culminating in 1997 with the founding of the Greenberg Chair.

Today, the Greenberg Chair "is the senior person directly responsible for the substantive content and management" of the think-tank. Greenberg has also been a member of the board of directors of the New York Stock Exchange; a former chairman, deputy chairman and director of the Federal Reserve Bank of New York; a member of the US-China Business Council; the chairman of the Asia Society; and a member of the Advisory Committee for Trade Policy and Negotiations to the President of the United States.

With all of these roles, plus his control over the resources of the Starr Foundation and the American International Group, Greenberg's power to shape America's foreign policy was rivaled only by Citizen Kane.

Greenberg's foreign policy views were heavily influenced by two factors. One was his experience in World War II of the liberation of the Nazi concentration camp at Dachau. The other was the legacy of Starr's love for China. This latter factor would ultimately play an enormous role in shaping America's policy toward China for more than a quarter of a century.

In all of his actions and with all of his influence, Greenberg exercised a sanguine desire to foster reconciliation and cooperation between the United States and the People's Republic of China. The impact of this desire can be seen in the fingerprint that Greenberg has left on academic and policy institutions around the United States.

At his discretion, the Starr Foundation has funded numerous fellowships with the Asian Cultural Council, donated $300,000 to Columbia University's East Asian Library and considerably more to Berkeley's C V Starr East Asian Library. Most recently, Greenberg and the Starr Foundation each donated $25 million to Yale University to create the Maurice R Greenberg Yale-China Initiative.

Greenberg's lobbying efforts were a driving factor behind America's decision to support China's admission to the World Trade Organization, which it officially joined in November 2001. Undoubtedly, a fair amount of the credit for the creation of an American policy environment that is favorable to China is due to Greenberg and the resources that were generated by AIG.

AIG's own development in China took various, often ground-breaking, forms. China America Insurance Company was formed in 1980 as a 50-50 joint venture between AIG companies and the People's Insurance Company of China (PICC), the first joint venture between a foreign insurance organization and PICC. Personal ties with future leaders were also forged. In 1990, AIG financed and chaired a financial services conference in Shanghai to assist then city mayor and later country premier Zhu Rongji in introducing the international financial community to investment opportunities in Shanghai.

Two years later, AIG unit American International Insurance (AIA) established a branch office in Shanghai, to become the first foreign-owned life and non-life insurance business to receive a license from the People's Bank of China. In 1995, AIG companies won licenses to extend operations to Guangzhou, the key city in the country's efforts to open up to the outside world of commerce, and a year later it secured a lease allowing it to return in 1998 to the Shanghai Bund, home of C V Starr's original Shanghai insurance companies.

In 2003, by which time AIG's presence in the country extended to several provinces, the insurer acquired a 9.9% stake in PICC Property and Casualty (PICC P&C) when the Chinese company listed in Hong Kong. In 2005, as the Chinese government continued to ease its grip on the financial sector, AIG Private Bank became the first foreign private bank to receive approval to open a representative office in Shanghai.

One immediate effect of AIG's collapse could be on PICC P&C's stock price, which would be at risk if AIG liquidated its stake, Citigroup analyst Bob Leung said in a research note on Tuesday.

Chinese insurers also face a greater counter-party risk from the collapse of AIG than from Lehman Brothers, the other US financial giant that crumpled in the past few days. Lehman, which has filed for bankruptcy has significant exposure in Asia. "Given the very low life insurance accession rate in Asia, "if AIG loses its A- rating or its situation worsens significantly, we expect the financial impact to affect mainly P&C insurers," Leung wrote.

S&P lowered AIG's long-term counterparty rating to 'A-' on Monday.

China's insurance regulator declared that AIG businesses in the country were sound, echoing statements from the rest of the region. This is however a big concern going forward, given the large market share that AIG commands in many Asian markets, and the sheer volume of domestic securities that it holds across the region.

Other insurers in China meanwhile may gain from AIG's loss. "China Life, with a strong balance sheet and limited non-yuan asset exposure (less than US$3 billion and mainly in H-stock [Hong Kong listed shares] and cash) has the strongest balance sheet of all regional insurers and is likely to benefit from a 'flight to quality' perspective, " Leung wrote.

The sudden decline of AIG may lead to a reduced influence of the company in international affairs, and a cut in the amount of resources that are lavished on America's foreign policy establishment for the purpose of encouraging China-friendly policy.

As it is, Greenberg's pathfinding and influential role in China has already been superceded to a large extent by the huge influx of other Western business leaders, notable among them Henry Paulson, who as chairman and chief executive of Goldman Sachs spent much time and and effort building his own relations with the present Chinese leadership.

Paulson's appointment as US Treasury Secretary in 2006 came at a time of simmering tensions between Washington and Beijing over China's reluctance to strengthen its currency and rein in the growing trade surplus it enjoyed with the US. Demands for faster appreciation of the yen continue, but their tenor has become less strident since Paulson took up his government post, with the focus on relations changing through the Strategic Economic Dialogue to broader long-term bilateral economic interests.

Ironically, while the US Federal Reserve played the dominant role in bailing out AIG this week, it was Paulson holding key strings of power in Washington while Maurice Greenberg sat on the sidelines.

In 2005, Greenberg was accused of financial malfeasance. In the ensuing scandal, he was ousted from his leadership role at AIG. Nonetheless, he retained direct ownership of 39 million shares of AIG stock, and an additional 243 million shares through the investment company that he still controls, C V Starr and Co. At the beginning of this year, his shares were worth $15.8 billion. By the close of the market on Tuesday afternoon, they were worth a little more than $1 billion.

The links that Greenberg had cultivated over the decades with the Chinese community certainly are also looking frayed when it comes to trust in AIG products in the wake of this week's collapse.

As Chan Akya reports in Asia Times Online on Wednesday ( Waiter, there's a banker in my soup), panic-stricken policyholders lined up all day on Wednesday in Singapore to surrender their policies to secure redemption value.

In Hong Kong, where AIA is the largest life insurer with more than 26% of the market and more than 1.9 million policies sold, more than 1,700 people canceled their insurance policies with AIA on Tuesday. On Wednesday, some 170 policy holders rushed to AIA headquarters to cut their insurance or investments. The Hong Kong government has demanded AIA seek approval before it removes any asset out of the territory.

One 50-year-old woman at the hectic commercial and retailing center of Causeway Bay said she decided to surrender her insurance policy today as she was worried AIA's business might be affected.

"I was supposed to pay premiums this month but I don't want to take any risk now. I am so afraid that I will lose all my money here. To keep as much money as I have in my pocket, I surrender the policy now," she said.


Richard Komaiko researches Sino-American relations, economic policy, terrorism and national security. He holds a degree in economics from the University of Illinois and has studied Chinese language and culture at the University of Illinois, University of Chicago and the Beijing Institute of Education. Chris Stewart is the Asia Times Online Business Editor.

President Hugo Chavez gave US ambassador Patrick Duddy 72 hours notice to leave Caracas with the timeless phrase: "Yankee, go home!"

By Charley Allan - Morning Star
Tuesday, 16 September 2008

As George Bush's presidency draws to a close, progressive governments in Latin America are facing ever-greater danger.

EXACTLY 35 years after a CIA-orchestrated coup brought down Salvador Allende's socialist government in Chile, the political climate in Latin America is boiling over and now threatens to explode.

On last Thursday's anniversary of Allende's murder, between 30 and 70 peasants in the Bolivian jungle province of Pando were machine-gunned to death on their way to a protest against regional governor Leopoldo Fernandez, a fierce critic of President Evo Morales.

Right-wing rioters have burned down countless government and media buildings across the country, temporarily taken over an airport, blockaded highways and sabotaged gas pipelines, just weeks after Morales won a recall referendum on his presidency with over two-thirds of the vote. It seems that the so-called "democratic opposition" isn't taking no for an answer.

Morales has denounced the brewing "civic-business coup" and expelled United States ambassador Philip Goldberg, who was previously head of mission in Serbia's breakaway Kosovo region from 2004 to 2006, after he was caught secretly meeting opposition separatist leaders. Washington responded by kicking out Bolivia's top diplomat, tit-for-tat.

In solidarity, live on television, Venezuelan President Hugo Chavez gave US ambassador Patrick Duddy 72 hours notice to leave Caracas with the timeless phrase: "Yankee, go home!"

He also withdrew his own ambassador, insisting that, "until there is a government in the United States that respects the people of Latin America, there will be no Venezuelan ambassador in that country."

Honduran President Manuel Zelaya, an ally of Morales and Chavez, has joined in by refusing to accredit the new US ambassador there, while Nicaraguan President Daniel Ortega, himself no stranger to US-backed terror, has refused to attend a forthcoming central American summit because of Bush's presence.

South American presidents pledged support for Morales on Monday at a emergency summit in Santiago, Chile. The meeting was convened by Argentinean President Christina Fernandez de Kirchner, who warned that, "if we don't act now, in 30 years we may be watching documentaries (about Morales) like those that we see today about Allende."

Back in Venezuela, journalist Mario Silva broadcasted a recording a week ago on his programme The Razorblade of active and retired military personnel plotting the assassination of Chavez by blowing up either his plane or presidential palace. Since then, five suspected coup plotters, including a vice-admiral, have been arrested.

On the tape, former national guard general Wilfredo Barroso Herrera spells out the plan: "We're going to take Miraflores Palace, we're going to take the TV installations. All effort is towards where the man (Chavez) is. If he's in Miraflores, the effort goes towards there."

Washington responded to Duddy's expulsion by freezing the assets of three of Chavez's aides, citing Venezuela's alleged support for Colombian "narco-guerillas." Because the US is heavily reliant on Venezuelan oil, economic relations have been relatively stable, but this development raises the stakes significantly. Although Chavez has warned that oil prices would double immediately if he cut off supplies to the US, he's also insisted that he currently has no plans to do this.

Meanwhile, the mainstream media are screaming about a new cold war, as Russian bombers and warships perform joint military operations with Venezuela. The same news outlets are less vocal about the background to this show of strength, which was Bush's decision to revive the US navy's Fourth Fleet in June, almost 60 years since it was disbanded.

With the US military now all over the Caribbean, you can't blame Chavez for wanting a bit of protection. And the US can hardly complain, what with its own troops on Russia's border causing trouble. Venezuela was one of the few countries to publicly back Russia over the South Ossetia crisis and has bought military hardware from the former super-power since the US imposed an arms embargo two years ago.

Chavez has also repeated his vow to defend Bolivia militarily if Morales is overthrown, the kind of support that he could've done with himself on April 11 2002 when a US-backed coup toppled him for two days before he was restored to power by angry masses and the loyal military.

The parallels between then and now are chilling and the opposition media in Venezuela are again playing a key role, not least by their deafening silence on the new coup attempt.

"They are doing the same as they did on April 11th, covering up a bloody coup," insists Jorge Rodriguez, who is the national co-ordinator of Venezuela's governing party and a former vice-president. "The silence of the private media is the expression of its participation in the coup d'etat attempt."

The opposition mocks the latest coup threat as a fraudulent illusion constructed to shore up support for Chavez before local and regional elections on November 23, but this is a standard tactic that it employs when its plans are exposed, most memorably around the time of the coup and the bosses' lock-out later that year.

Silva, who is a candidate for state governor, argued on his programme that the coup plot proves that the opposition is afraid that it will do badly at the polls and is preparing a Plan B. But, while the lead-up to the elections will bring more danger for Venezuela, it's Bolivia that is bearing the brunt of US aggression right now.

Morales has declared a state of emergency in Pando and has accused Fernandez of being behind the massacre, calling for his arrest. He's sent in the army to restore order, but Chavez publicly accused the commander in chief of Bolivia's armed forces General Luis Trigo on Sunday of dragging his heels by ordering soldiers to remain in their barracks instead of protecting the people.

"General Trigo is like those who hid themselves when I called on the radio (in 2002) to tell them to put Plan Avila into action, which is a defence plan. The coup plotters of April, it's a very similar attitude, facilitate fascism and the destruction of the fatherland."

He went on to urge Bolivian soldiers under Trigo's command: "Don't betray the fatherland. History will hold you accountable if it happens again, as has happened on other occasions with soldiers who put themselves at imperialism's disposition."

On the subject of defending Morales, he added: "I'm not suggesting invading Bolivia, but we will not accept a coup. Bolivian oligarchy, just so you know. Gringo empire, just so you know. Bolivian soldiers who may be facilitating a coup, just so you know - we're not going to tolerate it, we're not going to accept it."

Bush may well have made it his top priority to overthrow Chavez, Morales and the other Latin American "pinkos" before he leaves office in a few months, but it looks like the "axis of hope" and its supporters around the world are better prepared than ever before. As Chavez says, "if there's a coup, the countercoup would be overwhelming."

• The Bolivia Solidarity Campaign and Hands Off Venezuela have called a picket of the US embassy in Grosvenor Square, London, today from 4pm to 6pm. At 7pm, Bolivian ambassador Maria Beatriz Souviron, Venezuelan deputy ambassador Felix Plasencia, John McDonnell MP and NUJ general secretary Jeremy Dear will be speaking at a public meeting in the NUJ headquarters, 308 Gray's Inn Road, King's Cross. All welcome.

Agence France-Presse, September 16, 2008

SOUTH American presidents holding a crisis summit here over unrest in Bolivia issued a strong statement giving Bolivian President Evo Morales their support.

The statement agreed by Morales and the presidents of Argentina, Brazil, Chile, Colombia, Ecuador, Paraguay, Uruguay and Venezuela also rejected any break-up of Bolivia's territory.
The nine presidents in the Chilean capital Santiago expressed "their full and firm support for the constitutional government of President Evo Morales, whose mandate was ratified by a big majority."

Argentine President Cristina Kirchner said after the six hours of talks that "the agreement was unanimous."

She had called the summit under the auspices of the newly formed Union of South American Nations, which is currently presided over by Chile.

The leaders also said they were looking at creating a committee to attend talks between Morales's Government and rebel governors in Bolivia's east opposing his socialist reforms.
Bolivia last week was gripped by violent unrest that left at least 18 people dead and a hundred wounded in the northern state of Pando.

The disturbances occurred in five eastern states whose conservative governors are seeking autonomy.

Mr Morales has called their push an illegal attempt at secession.

On arrival in Santiago, he accused his foes at home of mounting a "civic coup d'etat" against him.
The summit statement said the presidents "warn that our respective government energetically reject and will not recognize any situation that attempts a civil coup and the rupture of institutional order and which could compromise the territorial integrity of the Republic of Bolivia."

They also condemned the deaths in Pando and called for a commission to investigate allegations many of the victims were pro-Morales peasants gunned down in an ambush.

By Andrey Kolganov and Aleksandr Buzgalin, translated

Moscow, September 2, 2008 -- To most Russians, it was obvious from the beginning that the latest war in the Caucasus began with an attack by Georgian forces on South Ossetia, and that ultimately it was unleashed on the initiative of the United States. To the West, meanwhile, it was just as clear from the outset that the August war in the Caucasus represented an assault on small, defenceless and democratic Georgia by huge, aggressive and authoritarian Russia. This is what almost all the world media have asserted, and continue to assert. To a significant degree, this is even believed by a significant section of world civil society, including by anti-globalisation activists who for the most part have little sympathy for the US establishment.

Why are there such directly counterposed versions of the same events? Why, after nearly 20 years of warm post-Soviet “friendship”, have Russia and the US so rapidly, and in such radical fashion, taken up positions on the opposite sides of the barricades? Are the politics of Russia's Prime Minister Vladimir Putin and President Dmitry Medvedev so different from those of Russia;s first post-Soviet President Boris Yeltsin? Has Russia really become either an “enemy of democracy” (from the point of view of the West), or the “defender and hope of the anti-imperial forces” (from the point of view of Russian state officials)?

What does the conflict in the Caucasus signify? Is it the prologue to a new worldwide confrontation between the “democratic” empire of the West (with its centre in the US) and Russia’s mini-empire on the periphery? Or is it “merely” one in a series of local wars?

1. The Russian authorities demonstrated long ago that they should not be believed. This time, however, things are different.

We shall not be saying anything about the “democratic” and “pacifist” nature of the regime of Georgia’s Mikheil Saakashvili; a great deal has been written on this topic already. We must, however, address the subject of Russia, since it is no accident that so many people in the West are convinced of Russian aggression.

Concealed behind the façade of the Yeltsin-Putin administration (and Putin, we should recall, presents himself openly and officially as the successor to Yeltsin) lies a thoroughly aggressive strain of politics whose most vicious manifestation has been the bloody war against the Chechen people. Tens of thousands have been killed, and Chechnya’s capital Grozny has been reduced to ruins.

Behind the façade erected by our authorities are to be found not just increasingly anti-democratic domestic policies, but also a continuation of anti-social, hard-line market “reforms”. In Russia, Putin and Co. are putting into practice an economic and social model that is more market-liberal even than in the US, and even less socially oriented than in the US; in this sense, the Putins and Medvedevs are more than worthy pupils of the Bushes).

The Russian authorities, as is generally known, have been responsible for countless examples of “not quite precise” information. Everywhere, except in Russia, therefore, most people have refused to believe it when the Russian authorities have for once told the truth: the Saakashvili regime launched an aggressive assault on the citizens of South Ossetia.

As will be explained later, the Russian authorities did not, of course, tell the whole truth this time either. Their main assertion, however, was correct: Georgian forces used rocket artillery to unleash powerful blows against South Ossetia. They attacked Ossetian villages and seized its capital, Tskhinvali. In the process, they destroyed houses, hospitals and infrastructure. They killed more than 2000 peaceful citizens, including old people, women and children. That is the truth; it has been documented, including by Western journalists and reputable public figures. It is a truth which most people in the West do not know about.

Here in Russia, almost everyone believed it immediately. This was no accident either. For many years, people in our country have longed to be able to take pride in their homeland. Most of us, meanwhile, have never learned to conceive of our homeland as anything except the state. Nor have we learned to understand the state as anything except the president and the army. This is regrettable, and monstrous, but it is a fact.

Russians have yearned for just authorities, for a “benevolent tsar”. They have longed to be complicit in some good deed or other. This is why they immediately believed the authorities, and why most of our compatriots do not even want to hear about the far-from-innocent actions of the Russian authorities in this conflict.

We have written repeatedly about the sources of this yearning on the part of the majority of Russians, and it is not this that we are addressing here. What the discussion relates to in this case is the fact that circumstances were such that the top authorities in our country, largely as a result of the actions of Saakashvili and Bush, were forced to act more or less justly and properly. The logic of these spontaneously unfolding events simply did not leave the Russian authorities any alternative. Who knows, perhaps some of them even rejoiced in the chance to finally give effect to an ex-Soviet nostalgia for things just and proper.

Whatever the case, they started defending people who really needed defending. They did this badly, using appalling methods. They will try, and are already trying, to make use of these basically justified actions to further their far from justified imperial ambitions. But they did this, and willingly or unwillingly, placed themselves in the position of an alternative to the US and NATO. Did the Russian authorities want to enter into opposition to NATO in such a radically new way? In our view, no. But the logic of events forced them to take precisely these steps, and to adopt this position.

Meanwhile the Russian people, hungering for at least something just and worthy in the actions of their state, have given this state their wholehearted backing.

We repeat that such behaviour by the official Russian authorities was almost certainly not the result of a consistently thought-out position of defending justice and the right of nations to self-determination in the world political arena. The Russian authorities have never taken this position, and are not doing so now. This position has resulted from the fact that the armed forces and ordinary people, first of all, began acting in a way that they considered just. They could not fail to resist the mass extermination of a peaceful population. The Russian peacekeepers in South Ossetia began taking armed action against the hirelings of Saakashvili, in some cases fighting to the death. The commanders of Russian army units gave them resolute backing. The majority of the Russian people gave their immediate and unconditional support to these actions.

Precisely how the Russian forces acted, and what happened in the Caucasus on the second, third and subsequent days, is a different question. A very important question, but a different one.

Almost nothing has been said in our country on this topic, but the Russian authorities, who have long aimed to make Russia out to be some kind of empire, and who have planned to do this precisely in the Caucasus region, could not fail to exploit this situation. And indeed, they exploited it.

How precisely? And were their actions always just? In our view, no.

It is a fact that the Russian armed forces struck blows against military bases outside the territory of South Ossetia and Abkhazia (in Gori, Senaki, Vaziani, and elsewhere). The results of these strikes included the destruction of civilian installations, and there were victims among peaceful residents.

It is a fact that the Russian armed forces significantly strengthened their positions in Abkhazia, substantially altering the status quo as it existed in early August.

It is a fact that the Russian authorities are seeking to exploit the new situation to strengthen their geopolitical positions in the region.

These are facts. There are also numerous questions which must be answered with facts ready to hand, and finding such facts has been almost impossible.

There have been many lies in the West about this war, but have the reports of Russian aircraft also bombing residential districts in Georgia, and of Russian troops also killing peaceful civilians, exclusively been lies?

Did the threat of an attack by Russian forces on Tbilisi, a threat which forced the Georgian military and officials to flee from Gori, represent a real danger?

Why, how precisely, and on the basis of whose decision, did Russian forces penetrate beyond the borders of South Ossetian territory? Why, in particular, did they appear in Gori? And so forth.

Then there is the supremely important question: Were the actions of Russia and (no less important) those of the US and Saakashvili justified, and were they in the interests of the peoples of the Caucasus and of Russia? What relation do these interests have to the principles of international law?

2. Why the war began: the international roots of the attack on South Ossetia

Given the degree of dependency of Saakashvili’s regime on US support, there is no doubt that armed actions could be undertaken only with the approval, and indeed on the direct instructions of the overseas sponsors of the present-day Georgian authorities. The main question, therefore, is not why Mikheil Saakashvili contrived a bloody military adventure, but why this was necessary to the US.

There are two major reasons for such actions on the part of the Bush. One of these is conjunctural, and the other more fundamental.

The conjunctural reason is associated with the forthcoming US presidential elections. The Republican administration decided to allow its candidate to “show some muscle”. To judge by a CNN poll, the overwhelming majority of Americans – despite the propaganda lies – understand who in this case was the aggressor and who the victim. Nevertheless, this same majority is highly susceptible to the jingoist rhetoric of its politicians. John McCain thus scored some points in the election race, though only a few, and in this respect the calculations of the Bush administration were borne out.

The more fundamental cause has to do with the situation in the US and world economies. There are a number of components.

In the first place, it has long been customary for many US administrations to react to economic difficulties by whipping up international tensions. This makes it possible to inject additional funds into the economy in the form of military spending, and to justify a range of unpopular measures. Will such methods work this time? It is doubtful. The US is already involved in two drawn-out military operations, in Iraq and Afghanistan, whose prospects are dim. The evidence suggests that the US is not about to give Saakashvili any direct military backing, since this would mean a military confrontation with Russia. Meanwhile, the Iraqi and Afghan problems make such a confrontation undesirable; indeed, they give the US an interest in having Russia maintain at least a benevolent neutrality in the regions involved. Arms shipments to Georgia and financial support for Saakashvili, together with loud political rhetoric, would hardly succeed in creating the effect needed to improve the economic conjuncture in the US.

Secondly, the US is not above using the situation against its European partners. In the 1990s the NATO action against Yugoslavia, by exacerbating tensions in Europe, allowed the US to slow the rise in the exchange rate of the euro and the rapid strengthening of the role of the euro as a reserve currency and as a currency for international contracts. Now, with the decline in the US economy and the growth of inflation, the European countries are losing part of the export market for their goods. The European economy is significantly more dependent on the state of its exports than is the economy of the US; this is why the decline in the European economy is already more severe than in the case of its US counterpart.

In these circumstances, one of the anchors capable of saving Europe from sliding into a still more destructive crisis is represented by the relatively low prices in the long-term contracts under which Europe is supplied with energy and raw materials from Russia. To maintain these prices, Europe needs good relations with Moscow. This is why the US has made such efforts to exploit the tragedy in South Ossetia in order to force its European partners into a sharp worsening of relations with Russia. The calculations of the Bush administration are relatively simple, and there is nothing new about them: if there is a significant deterioration in the economic and financial situation in Europe, this could provoke a flight of European capital to the US, where conditions appear to be at least relatively more prosperous. This would allow the US to bolster its tottering economy.

Will this trick work? So long as Europe is inclined on the diplomatic level to make a show of Euro-Atlantic solidarity, even if not with any special zeal, the US will want to do the same. It is quite obvious, however, that Europe has no wish to go beyond verbal rhetoric. This is why the US devotes such great attention to the new members of the European Union and NATO, counting on them as clients who are able to exert pressure on the “old” Europe. In particular, this is why the US agreed so promptly to Poland’s conditions for the stationing of elements of the anti-missile defence shield on its territory. For the US, the chance to mobilise the efforts of Poland and other “novices” to advance its positions in NATO and the European Union is no less important than the anti-Russian thrust of the anti-missile system.

The chance that such schemes will be successful are not, of course, very great. By no means least important here is the tough position adopted by Russia; this has forced not only Europe but even the US to show caution in its practical moves, however sharp the tone of the speeches and declarations.

3. Georgian aggression and the position of Russia

Why is Russia’s position on the South Ossetian problem (and on that of Abkhazia) now so different from its position in the first half of the 1990s?

There is no doubt that Medvedev and Putin have taken into account the economic and political reasons why a serious confrontation with Russia would be extremely disadvantageous both for Europe and for the US. This is one of the secrets behind the Russian leaders’ firmness. But there are domestic political reasons as well.

In the course of its economic recovery Russia has grown stronger both in economic and in military respects, despite all the problems remaining in the Russian army. The Russian ruling elite are now making use of the fruits of a favourable economic conjuncture and of political stability. The economic prosperity, however, rests on insufficiently solid foundations. It is undermined by a series of profound systemic problems that include the low technical level of Russian industry, resulting in poor competitiveness; weak innovation, and consequently, technological dependence on the West; extremely obsolete and worn-out infrastructure, including the communal service networks in the towns, the energy and transport systems, and so forth; the crisis of the pension system; the loss of independence in food supplies; the growing dependence of banking and corporate capital on Western credits; and so forth.

The threat of economic shocks is growing as the world economic crisis unfolds, and as the possibility appears of a further fall in oil prices. If this happens, the techniques of political manipulation that have ensured political stability until now may not work any longer. Hence the aggressive action by Georgia against the Ossetian people has allowed the Kremlin to take on the role of defender of the general interests of Russian society, and in the process, to win additional support among the population (in the same way, it was Putin’s actions in repelling inroads by bandits into Dagestan that spurred the growth of his authority).

In the present case, the conjunctural political interests of the Kremlin administration and the interests of the overwhelming majority of the Russian people have coincided. If we add to this the growth of nationalist moods in Russia, something that has now been under way for many years, the ruling circles have made a bet they cannot lose. They are guaranteed of mass support, especially since in this case the actions of the Russian authorities have in the main been justified.

So what has happened in South Ossetia? Aggression? Genocide? A stern rebuff to presumptuous Georgian warriors?

Yes, all these have been present.

But the acute problem of the imperial ambitions and actions of Russia has been present as well, and it remains a factor.

Also present, and remaining, has been a cynical behind-the-scenes game by countries that describe themselves as free, democratic and civilised, but which unhesitatingly sacrifice thousands of peaceful citizens to their political calculations. This, undoubtedly, is the crime of the ruling elites of the US, and of its satellites and allies.

Most importantly, there remain the people of the Caucasus, who are compelled to live and develop under these circumstances.

4. The principled defence of the interests of peoples is more important than Realpolitik

It is no accident that geopolitics, like politics in general, is considered a matter for “realists”. Here it is not considered good form to speak of principles, morality and so forth. If people mention such things, it is only in connection with the need to mount one or another public relations action.

Still less has it been considered good form, especially in recent decades, to speak of interests and of the socioeconomic roots of policy in the context of geopolitics. More and more, the discussion here is of “states” and “elites”. Meanwhile, the state as an apparatus of power is identified vaguely but universally with the people of a country and with its territory, and the ruling socio-political forces with the nation’s elite in the intellectual and moral sense.

But is this really how things are?

The new war in the Caucasus has once again shown the inadequacy of such a view; in this respect, it continues the series of lessons from Afghanistan, the Balkans and Iraq (to speak only of recent decades). In geopolitics, principled behaviour has well-known foundations.

If nations or peoples want to be independent, and to have their own statehood, they must not be opposed in this. Especially with force, and especially from outside.

If peoples and nations want to enter into unions, these unions must be voluntary. And here the use of force, including economic coercion and politico-ideological manipulation, is inadmissible.

The imperial ambitions of any state or bloc of states must be resisted, and decisively.

Meanwhile, it must be remembered that nations and peoples are not homogeneous, and that under modern conditions the majority of citizens are excluded from the deciding of geopolitical questions. In some cases, clan-corporate groups interwoven with the bureaucratic state apparatus attempt to express citizens’ opinions. In other cases it is the largest private and state corporate structures, concealed beneath the trappings of liberal democracy. In yet other cases it is semi-feudal, semi-capitalist structures, hiding behind one or another set of religious ideas.

It must also be remembered that any national grouping is subject to enormous pressure (military, economic and ideological-political) from a group of states and blocs (above all, but not only, the US and NATO) that lay claim to imperial status.

This is familiar to everyone, but no less pertinent for that fact.

Precisely for this reason, in geopolitics it is especially important for states that claim to be cooperating justly and democratically in solving international conflicts to clearly formulate the principles on which they stand, while using all available peaceful means to help the majority of “rank and file” citizens of one or another social entity – South Ossetia or Abkhazia, Chechnya or Kosovo – to formulate, express and defend their positions democratically and independently. It is necessary to say out loud: What are they seeking? Is it independence? Is it membership in a union? Which union, with whom, and on what conditions?

It is especially important to support this approach through blocking external imperial or other pressure on peoples and nations that are seeking independence. This is especially true if the pressure comes from outside and takes the character of armed aggression. And if those seeking independence ask for help. And if the UN and other international institutions fail to make their presence felt, if all this is the case, then it is necessary to aid the people’s struggle for independence, including through the use of force.

After that, however, it is necessary to remove this force, promptly and without fail. To cut off the head of the dragon is a matter of conscience and honour. But to seat oneself in the dragon’s armchair is categorically forbidden; there, one will grow horns, fangs and a tail…

In this sense, Russia acted justly when it supported the aspirations of South Ossetia and Abkhazia to their independence.

But the people who do not trust the Russian dragon are also correct. Seizing the dragon’s throne by force, Russia has already turned from a liberator into an invader.

If the Russian authorities from the very beginning (and the beginning here was the first Chechen war, if not earlier) had taken a firm position of defending the right of nations and peoples to self-determination, the support which these authorities enjoy in the present confrontation would be incomparably broader. But that was not and is not the case. Consequently, even international democratic forces that are critical of the US do not trust the Russian authorities. And consequently, national groupings within Russia that would have been willing finally to trust the Russian authorities, do not.

Here we would like to point to a few more important elements that bear on various lessons of the August war.

First, however, a few words about international law and the principle of the inviolability of national boundaries. Over the past 20 years the world political map has changed repeatedly and radically. The borders of the USSR have vanished along with the USSR itself. The borders of the Federal Republic of Germany have moved eastward. On the territory of Czechoslovakia and Yugoslavia, independent states have arisen. More than 15 years ago, virtually all consistently democratic forces (unlike the pro-Yeltsin “democrats”) took a stand in defence of the right of the Chechen people to self-determination, even though this would have been an obvious breach of the principle of the inviolability of borders. Quite recently, the Western political establishment gave decisive support to a new breach of this principle, concerning recognition of the independence of Kosovo.

Unfortunately, the experience of recent decades shows that most of the NATO states and Russia as well regard both the right of peoples to self-determination and the principle of the inviolability of national boundaries in cynical and pragmatic fashion. If it is advantageous for them to support these principles, they will support them. If this support is disadvantageous, the principles will be ignored.

5. A few words on the lessons of the new Caucasus war

We shall begin by noting that the inconsistent geopolitical approach of the Russian authorities (who depending on what they find advantageous, either support the sovereignty of “small nationalities” or oppose it) dealt them a painful blow precisely when they did something really useful, defending thousands of people in South Ossetia. The worst of the situation is that this blow, in a sort of ricochet effect, is also being felt by the citizens of the Russian Federation and by the anti-fascist forces of most of the world’s countries.

Outside our country’s borders, the Russian authorities are not trusted, and this is bad. Far worse, however, is the fact that this mistrust extends to the citizens of Russia, many of whom aided their Caucasus comrades honestly and sincerely, at the expense of their energies and sometimes their lives.

This is bad, and bad for us. It is bad for those members of international civil society who do not distinguish between the Russian authorities and Russian citizens.

Unfortunately, this is a well-earned payback for the fact that most of us Russians did not oppose the authorities’ imperial geopolitics earlier. And it is a payback for the fact that many of us are now inclined to support these geopolitics more strongly than ever.

It is also a payback for the attempts, variously active and half-hearted, by our country’s authorities to depict themselves as the rulers of a “mini-empire”.

It is high time for us, and the country, finally to do something really worthwhile. Such as giving not only Abkhazians and Ossetians, but also Chechens the right to finally make a genuinely free decision on the question of their independence. In doing this, we should stop relying on behind-the-scenes trade-offs with the chiefs of various local clans.

We should make a clear distinction between the people of Georgia and the authorities that support Saakashvili, and we should help Georgians living in Russia to feel at home. We should take a series of steps to develop Georgian-Russian friendship in the fields of culture, education and popular diplomacy.

The West as well would be strongly recommended to start thinking about its policies, about its lack of principle with regard to questions of the self-determination of peoples. Also with regard to Russia, and to the importance of distinguishing between the citizens of Russia and the Russian authorities.

These are lessons, however, which neither the authorities nor most of the forces that practice Realpolitik are so far prepared to draw from their experience. Neither in Russia, nor in the West. Here in Russia, the tendency to support the state is growing ever stronger. In the West, formal pretexts have appeared for at last finding the “enemy of democracy”. Both of these roads lead into a dead-end.

We are certain that after having merited a certain trust as a result of actions that in their essence were genuinely correct, the Russian authorities will hardly succeed in turning this potential for trust into reality. The Russian authorities express the interests of forces which have pursued, and most likely will pursue, policies which are fundamentally anti-social, undemocratic and petty imperial. With their character as it is, the Russian authorities sooner or later will squander this potential for trust. They will squander it in the same way as the authorities of the Russian Empire, which in the late 19th century supported the genuinely just struggle by the Balkan peoples for their independence in the war against Turkey (which at that time, we should note, enjoyed the support of Great Britain, the super-empire of the 19th century).

The West will make certain that the demonisation of Russia as a country (unlike criticism of the Putins, Medvedevs and so forth) is monstrously damaging not only for the peoples of Russia, but also for the West, where the first volleys in a new cold war are strengthening conservative right-wing political forces which even without this are becoming increasingly influential. These forces support a liberal-capitalist social and economic course; aggressively imperial geopolitics; and increasingly conservative, authoritarian domestic policies, crushing the rights and freedoms of individuals, of unions and of social movements.

All this means that peaceful, consistently democratic, anti-imperial alternatives are now more important than ever. So too is solidarity between the forces advancing and defending these alternatives, in Russia and around the world.

[The authors are members of the central council of the all-Russian social movement ``Alternatives’’, alternativy@tochka.ru.]

Ecuador Giving U.S. Air Base The Boot

Going on an Imperial Bender:

Two and a half billion people

live on less than $2 a day


“The possessions of the rich are stolen property.”
-P.J. Proudhon

The World Bank reported Tuesday that in 2005 an estimated 1.4 billion people in the so-called ‘developing world,’ one-fourth of its population, lived on less than $1.25 a day, the new official poverty line. This figure is 400 million more than the Bank’s 2004 estimate of 985 million. Another 1.2 billion people live on between $1.25 and $2 a day.

The report issues from an institution correctly identified by great numbers of people around the world as a reactionary pillar of the global financial system. Despite efforts by Bank officials to put the best face on things, that more than two and a half billion people continue to live in unspeakable poverty in the first decade of the 21st century is an indictment of the capitalist system.

Martin Ravallion and Shaohua Chen, of the World Bank’s Development Research Group, in a study entitled, “The Developing World is Poorer than We Thought, But No Less Successful in the Fight Against Poverty,” note that in 2004, for the first time, the Bank’s global poverty count had fallen below one billion. They continue: “Alas the revised estimates reported in the present paper suggest that our celebrations in finally getting under the one billion mark for the ‘$1 a day’ poverty count were premature. ... We find that the incidence of poverty in the world is higher than past estimates have suggested.”

The 2005 estimates are based on surveys conducted in 116 countries and interviews with some 1.23 million households.

The most dire conditions exist in Sub-Saharan Africa. After a quarter-century (1981-2005) that witnessed the most extraordinary advances in technology, the percentage of people living in absolute poverty in that region remained unchanged; some 50 percent of its population subsists on $1.25 a day or less.

The actual number of the extremely poor in Sub-Saharan Africa almost doubled, from 200 million in 1981 to about 380 million in 2005. “If the trend continues,” notes a World Bank press release, “a third of the world’s poor will live in Africa by 2015. Average consumption among poor people in Sub-Saharan Africa stood at a meager 70 cents a day in 2005.”

Most of the 15 poorest countries in the world—Malawi, Mali, Ethiopia, Sierra Leone, Niger, Uganda, Gambia, Rwanda, Guinea-Bissau, Tanzania, Tajikistan, Mozambique, Chad, Nepal and Ghana—are located in Africa.

In South Asia, the percentage of those living below the $1.25 poverty rate has decreased from 60 to 40 percent over 1981-2005, but the absolute number of desperately poor people did not decline; there are some 600 million in that category. In India, extremely uneven economic development reduced the poverty rate as a share of the total population from 60 percent in 1981 to 42 percent in 2005, but the number of the destitute increased from 420 million in 1981 to 455 million in 2005.

The largest factor in lowering the percentage of extremely poor people in East Asia has been the explosive industrialization of China. In 1981 East Asia was the poorest region in the world. In China the number of people surviving on less than $1.25 a day in 2005 prices dropped from 835 million in 1981 to 207 million in 2005. A quarter of a century ago, the report states, “China’s incidence of poverty (measured by the percentage below $1.25 per day) was roughly twice that for the rest of the developing world; by the mid-1990s, the Chinese poverty rate had fallen well below average.”

In the former colonial world, outside of China, the progress has been far more limited; the total number of extremely poor people has remained at about 1.2 billion. The percentage of the ‘developing world’ population living in absolute poverty has decreased from 40 percent in 1981 to 29 percent in 2005, according to the Bank. Excluding China, however, the most oppressed countries are not on track to reach the Millennium Development Goal (MDG) of halving the 1990 poverty rate by 2015.

In Eastern Europe and Central Asia (EECA), the former Stalinist-ruled countries, the picture is bleak. “The mean consumption of EECA’s poor has actually fallen since the 1990s, even though the overall poverty rate was falling.” In passing, the authors note that social inequality has grown in that region since the collapse of Stalinism: “The paucity of survey data for EECA in the 1980s should also be recalled. Thus our estimates are heavily based on extrapolations, which do not allow for any changes in distribution. One would expect that distribution was better from the point of view of the poor in EECA in the 1980s, in which case poverty would have been even lower than we estimate—and the increase over time even larger.”

The poverty rate in Latin America and the Caribbean has also declined, but not enough to bring down the number of extremely poor people.

Ravallion and Chen point to two phenomena that tend to undercut even the limited progress they cite.

First, although hundreds of millions of people have lifted themselves out of absolute poverty since 1981, the improvement has been very slight for vast numbers. While the increase in wealth at the other pole of global society, registered in the number of billionaires and the share of national incomes held by the top one or five percent of the population, has been explosive, the very poor have only inched ahead and remain immensely vulnerable.

The study’s authors point to the phenomenon of “bunching up” that has occurred between $1.25 and $2.00 a day. They observe that the number of people living at that level “has actually risen sharply over these 25 years, from about 600 million to 1.2 billion. This marked ‘bunching up’ of people just above the $1.25 line suggests that the poverty rate according to that line could rise sharply with aggregate economic contraction.”

Speaking of the same phenomenon in relation to both East and South Asia, they note that a total of some 900 million people live on between $1.25 and $2.00 a day, “roughly equally split between the two sides of Asia. While this points again to the vulnerability of the poor, by the same token it also suggests that substantial further impacts on poverty can be expected from economic growth, provided that it does not come with substantially higher inequality.”

In a press release, the World Bank notes that its estimates “suggest less progress in getting over the $2 per day hurdle. Indeed, we have seen no change in the number of people living below $2 per day at around 2.5 billion, between 1981 and 2005.”

In another press release, the Bank is also careful to point out that the new estimates “do not yet reflect the potentially large adverse effects on poor people of rising food and fuel prices since 2005.”

Or, as Ravallion and Chen write in their conclusion, “There are a great many people who have reached the frugal $1.25 standard, but are still very poor, and clearly vulnerable to downside shocks. One such shock is the steep rise in international food and fuel prices since 2005. Despite the progress in reducing the lags in survey data availability, it will probably not be until 2010 that we can make a reasonably confident assessment of the ex post impacts of the rising food and fuel prices on the world’s poor. Until then, ex ante assessments will be required, based on pre-crisis data and economic assumptions. Such assessments suggest that at least a few years of the progress reported here have been eroded since 2005.”

By David Walsh
2 September 2008

What is it about American foreign policy that constantly gets the U.S. military involved in another country or region and then winds up with our troops bogged down in a dimly understood local conflict? Are our strategists and international experts missing something?

When other countries stir up trouble in Latin America or the Caribbean, the U.S. regards this as a violation of its hegemony (the Monroe Doctrine) in its home "sphere of influence." But we seem unable to comprehend that other major countries have their own "spheres of influence" in their regions - Russia in Eastern Europe, Iran in the Persian Gulf area, China in Asia, for example - which they feel very strongly about and are willing to defend by force of arms, if necessary.

Such U.S. ignorance (which derives from a belief that America as the world's self-designated Good Guy and lone superpower can do whatever it wants) inevitably leads to big trouble. For instance, even with the U.S. spread thin and quagmired in Iraq and Afghanistan, the CheneyBush regime seems anxious to provoke a major quarrel with a resurgent Russia in a relatively minor regional dispute in the Caucasus.

In the midst of the juicy theatre of presidential campaigns, it might be wise for all of us to step back and attend to that foreign-policy reality and to consider the grim implications of a renewed Cold War between the U.S. and Russia.

The Larger Picture

I'm not just referring to the contretemps over what's happening in the Caucasus right now, especially with regard to Georgia. No, we're talking about major realignments of political, economic and military forces that, if not handled correctly, could put Russia and the U.S. into a potential active conflict.

It's clear that John McCain and his neo-conservative backers would look forward to such a confrontation; they thrive on crisis; it's where they come alive and can roll out their black/white simplicities and threats to use force, utilize an "enemy" as their way to increase their domestic power, cranking-up the old military-industrial complex. And, at least for the purposes of the election campaign, Barack Obama and Joe Biden have joined in, using Russia as a bete noir and are warning Russia to back off and back down and back away.

Part of the problem is that Superpower America continues to see the world almost exclusively through U.S. eyes and thus is not taking into account how the world appears to Russia and others. Thus, diplomacy is ignored and the Cold War, and potential hot wars, draw closer. And, of course, all this is taking place between two fading empires, as new major powers emerge in Asia/South Asia (China, India). Russia and the U.S., in effect, are battling for regional dominance before the new movers and shakers are fully up to speed. "

Scare the Hell out of American People"

To better understand the current Russia/U.S. clash in the Caucasus, and why Russia is moving so aggressively in its perceived "sphere of influence," we need a bit of historical context.

My area of concentration in graduate school was the origin of the Cold War, and my dissertation was on the "Truman Doctrine," the governmental policy that declared for the first time that the U.S. would launch a global struggle against what was seen as a monolithic Soviet Empire bent on worldwide communist domination.

Actually, President Truman in 1947 was mainly interested in a much smaller issue - sending financial and military aid to Greece and Turkey, to keep them safely within the Western fold - but was informed by Senate Republican leaders that the only way he'd get a large-scale aid-appropriation through Congress was to "scare hell out of the American people." So Truman refashioned his message by talking about a Soviet Union moving toward "worldwide domination" through the use of force, a red menace that had to be stopped in its tracks before it conquered the globe.

Thus the Truman Doctrine was born, Greece and Turkey got their money, and the U.S. from that time forward was locked-into battling "world communism" wherever it seemed to be raising its head. The result was that the U.S. sent massive cash infusions to dictators all over the globe who claimed they were "fighting communism." (Similar today to any tinpot dictator who claims to be "fighting terrorism.") In reality, much of that anti-communist U.S. money went into Swiss bank accounts or was used to crush reform movements in those countries, the effect of which was to push reformers toward revolutionary options. The debacle in Vietnam can be traced back to the ramifications of that earlier Truman Doctrine.

Please don't misunderstand me. Stalinist communism (like fundamentalist Islam today) was a despicably brutal, totalitarian system. And Stalin was a monstrous authoritarian leader, who did entertain theoretical/ ideological dreams of communist uprisings abroad. But, though he was a certifiable paranoid, Stalin was not a madman in how he related to the outside world. Despite the conventional myth, he had no desire or ability (don't forget that 20 million Soviet citizens lost their lives in World War II) to take over the world by force.

Soviets' Need for a Buffer

My research confirmed that Stalin was an old-style national leader who wanted, at all costs, to protect the homeland and home base of communism, which is why he was so desirous of controlling the Eastern Europe countries and Baltic states as part of the Soviet empire. They would serve as a protective buffer between the Soviet Union and Western Europe, from whence three Euro. Whenever confronted elsewhere, Stalin tended to back away, abandoning local Communist Parties to the tender mercies of their enemies, the example of the Greek Communist Party being a case in point. (My Master's thesis, by the way, was on the Greek Civil War of that period.)

There was so much misunderstanding, misreading, among the Allies that led to so much Cold War misery when WWII was over. And we're repeating the pattern today. Just one contextual episode, which I've written about previously.

Stalin couldn't understand why Truman and other Western leaders were screaming so loudly about his harsh treatment of the Eastern Europeans absorbed into his satellite-states buffer zone after the end of the war. After all, he reasoned, the Americans and British had recognized his right to control those states in the so-called "percentages agreement" or "spheres of influence" agreement worked out in a secret Moscow meeting in October 1944.

The "Percentages Agreement"

Short history: At that meeting, Churchill gave Stalin a piece of paper on which he had written percentages of which allies in the post-war period would control which countries in their "sphere of influence." Since the Red Army was (or soon would be) effectively in control of most of Eastern Europe, and neither the Americans nor Brits had the wherewithall (or desire) to fight another massive war right after defeating the Germans, they recognized the reality of Soviet boots on the ground and gave Stalin 90% control of Rumania and so on, while the Brits got 90% control in Greece, Yugoslavia was 50-50, etc. Stalin began acting under this agreement during the final year of the war, and the Americans and Brits likewise honored the percentages pact, seemingly unconcerned about the brutal way Stalin was absorbing Eastern Europe into the Soviet empire.

Upon the death of FDR, President Truman took over. After war ended and with anti-communism affecting domestic politics, Truman began objecting to the Soviet Union's harsh behavior in Eastern Europe. Stalin interpreted the strong Western reaction to his unbridled use of power in that "sphere-of-influenc e" region as reneging on a solemn agreement; his paranoia convinced him that the West was out to try to overthrow him, so he conceded that the "percentages agreement" was no longer in place and began making life more difficult for America elsewhere in the world. So there was that gross misunderstanding from the Soviet side. What about the U.S.? Americans, including most government officials, had just fought a war against one set of totalitarians and now were confronted with another, in the form of Stalin's Soviet Union. They tended to see this movement as monolithic and as aimed at world domination, so anything the Soviets did was interpreted in that light. "

Nationalist Communism"

The Soviets talked such a good game about "international communism," centrally directed from Moscow, that the Americans had no inkling that something called "nationalist communism" existed, or even could exist. If they had, they might have altered their foreign policy accordingly, recognizing that Tito's communism in Yugoslavia was distinctly different from Stalin's in Russia, from Mao's in China or from Ho Chi Minh's in Vietnam. Antagonisms among and between Communist regimes abounded, and nationalism almost always was stronger than a monolithic ideology. (An analogous distortion today would be America viewing radical Islam through the lens of a monolithic Al-Qaida, supposedly pulling all the militant and terrorist strings around the world. If it ever was, it's not that way now.)

After communism imploded in the Soviet Union and its satellite states in the late-1980s, Russia went into a decade-long psychological and economic tailspin. But Russia has climbed back, economically and militarily stronger and determined to re-assert what it considers its rightful superpower status in its "sphere of influence" and in the world. And, once again, it sees its major threats coming from the West, engineered mainly by the United States.

Russia Nervous About Missiles, NATO

The U.S., for example, is luring former Soviet-satellite countries (Georgia, Ukraine, Poland, the Baltic States, etc.) toward the European Union and, especially frightening to Russia, into NATO, the military pact originally set up to stop the Soviet Union from even thinking about moving westwards. Putin, like Stalin, sees his country's "sphere of influence" being violated, with Russia being ringed by potentially hostile enemies, effectively controlled by the U.S. and other Western powers.

This growing split between Russia and the U.S. has been building since the early 1990s, with Putin, for example, warning the U.S. not to position its missile-defense system in the former Warsaw Pact states in Eastern Europe. But just the other day, Poland signed an agreement to do just that (as did the Czechs earlier) and the Russians are furious. The U.S. claims that the system is aimed at stopping incoming missiles from rogue states like Iran, but few believe that unlikely rationale. The Russians, not unrealistically, are convinced that the missile-defense system is aimed at them, and is provocative in the extreme, placed as it is right next to its borders. (Look how freaked out the U.S. got in the early-1960s - ready to go to war - when the Soviet Union put nuclear missiles in Cuba, just 90 miles off the American coast.)

When President Saakashvili ordered Georgian troops into South Ossetia and Abkhazia, two ethnic-Russian regions inside Georgia that wished to break away and be annexed by their Russian neighbor, Putin and Russian president Medvedev ordered their "peacekeeping" troops (there under a U.N. resolution) to resist and sent tanks and troops across the Georgian border to occupy large parts of Georgia. Putin said he's convinced that the Americans approved of their ally Saakashvili' s invasion since the U.S. has been building up Georgia for years with military weapons and training.