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The development of the most challenging relationship of our times

Dong Wang, The United States and China: A History from the Eighteenth Century to the Present, Lanham: Rowman & Littlefield, 2013, 377 pp. (ISBN 978-0742557826)

The relationship between the United States and China is likely the most studied and analyzed topic of the post-bipolar world. The growing interest towards the Sino-American issue arose since the rapprochement of the two governments and the historical visit of Richard Nixon in 1972. During the last fifty years, both Western and Chinese scholars have written extensively on Chinese history and foreign relations, American history and the narrow overlapping slice of US-China Relations. Dong Wang’s book is very ambitious, because it almost covers the entire time span of the bilateral relationship but also very clearly combines history and international relations to give a powerful account of how the two countries first encountered each other and why their interaction matters so much in the present day. It could be said that the present years are a very peculiar time to revisit the history of relations between the United States and China. That could be said because Washington has arguably reached the apex of its power and is likely to decline, whereas China’s wealth and strategic power are on the rise, and the two states and systems seem destined to compete for regional and global leadership in the years ahead.

The author’s approach stems from a long historical perspective, in which the relationship between the United States and China is seen as passing through three phases, whose watersheds are roughly the mid-nineteenth and mid-twentieth centuries. Relations shifted significantly, from the interaction between an old empire (under the Qing Dynasty) and a young nation-state to the interplay between two-nation states, and then to wide-ranging encounters between a nation-state (the People’s Republic of China) and a modern empire (the post-war United States).

Consequently the book is divided into three main sections, which are set in chronological order and cover a large spectrum of topics: from the diplomatic and political realm to the social, religious and cultural fields. The first part focuses on the early stages of the relation, from 1784 to 1911, and describes the inception of the economic and political mechanisms between the two countries. The early economic relations between the United States and China reflected the pre-industrial nature of the American economy, which was yet to produce major manufactures to export. The American debut on the Chinese stage constituted the triumphant entry of a new nation into an expanding international system of politics and trade, controlled by the then hegemonic British Empire and other major European powers. The outbreak of the Opium Wars (1839-42 and 1856-60) and the consequent unequal treaties forced on China by the Western powers almost blocked the development of the bilateral trade between the US and China. Washington maintained a neutral stance and didn’t advance any requests until 1899, when the United States proposed the so-called Open Door policy, espousing equal commercial opportunity and respect for China’s administrative and territorial integrity. This policy could be seen as a major countermove against the European territorial scramble and a sign of independent diplomacy. America’s rising presence in East Asia fell within the ambit of its consistent pursuit of national greatness. This presence was reinforced by the constant work of the Christian missions, which suffered the widespread anti-Christian xenophobic violence but were also able to conquer the appreciation and achieve accommodation and collaboration with a consistent part of the population.

The second part examines the different paths followed by the United States and China in the era of the World Wars and revolutions, from 1912 to 1970. The Celestial Empire and the Qing dynasty were overthrown in 1911, marking a major shift in the East Asian environment. In this intricate scenario, the two countries were brought closer, both as a result of their divergent stages of national development and as a consequence of the adoption of particular geopolitical strategies. The author outlines the evolution of this pattern and explains how World War I stimulated the relations between China and the United States. Respect for Beijing’s neutrality and the preservation of the status quo in China were «most important in American interests» (pp. 128). The disappointment and the rejection of China’s «seven aspirations» at the Paris Peace Conference (1919) fuelled political resentment in China. The ascendency of Japanese imperialism and the rise of the Chinese Communist Party (CCP) shaped the Sino-American relation in 1930 to 1940. The Pacific War and the inability to provide a strong support to Chiang Kai-shek and his Kuomintang against the Japanese forces caused what is known in American historiography as «the loss of China». In 1949, the CCP defeated Chiang and declared the birth of the People’s Republic of China. President Truman described it as an «avoidable catastrophe» and Dong is particularly adept at describing and connecting the causes and the events that led to the final denouement. The United States and China share responsibility for the unsettled post-World War II order in the Asia-Pacific. Washington wanted to handle Southeast Asia by «liquidating colonial regimes and replacing them by new and stable independent governments» (pp. 207). The Korean War and the Vietnam War were the major sources of acrimony in the early Cold War period. However, by the end of the 1960s, both countries realized that they needed to work together and were ready to enter a new phase of their relationship.

The third and last section covers the period from 1970 until the present day, describing the rapprochement and the renewing of the bilateral relationship. The normalization of Sino-American relation was a gradual process, taking three American administrations and two generations of Chinese leaders to bring it to completion. The core of President Nixon’s strategy was to pull China back into the world community, but as a great and progressing nation and not as the epicenter of world revolution. The US offered China some tangible stakes in a future relationship, as Beijing’s entrance into the United Nations Security Council in place of Taiwan. The secret meetings between Henry Kissinger and Zhou Enlai prepared the ground for Nixon’s visit in February 1972. Despite this political breakthrough, official diplomatic relations did not become reality until 1979. The late 1970s and 1980s witnessed China’s historic domestic reforms under the leadership of Deng Xiaoping, but the impressive economic growth was almost put in jeopardy by the Tiananmen Crisis in 1989. As a result, Sino-American relations were severely strained over the issue of human rights, and the Tiananmen incident has had major repercussions, particularly in the fields of policy making and mutual perceptions, right up to the present. A spirit of wariness and anxiety on both sides characterized the geopolitical relationship between the two governments in the first decade of the 21st century. This paradigm changed after 9/11, when the US perception of China shifted from a potential military competitor to an important strategic partner in the war against terror (pp. 290). Despite the increasingly comprehensive links, in recent years, both countries have grown wary on each other, and the American-inspired rhetoric of the «China Threat» keeps emerging, adversely affecting the political environment. China’s desire to reassert itself in the Asia-Pacific region, after its «century of shame» at the hands of Western powers, has broader implications, particularly for the United States, which appears to have the most to lose if China’s emergence comes at their expense. Dong, however, states that although the two countries have quarreled, often bitterly, most of the time they have managed their uneasy relationship in a rational manner (pp. 297). Accordingly, she is confident that the ties between the two countries will strengthen rather than deteriorate, among other reasons, because strategic rivalry and military confrontation, in today’s entangled world, are not only too expansive but also bring no benefits to the countries involved.

The author closes her book by assuming that the US-China bilateral relationship is a major security concern for each side, but both countries need to work together on friendly terms to secure a better future, both for themselves and for the entire international community.

The monograph under review is an outstanding book that offers the first comprehensive synthesis of the history of US-Chinese relations from the initial contact to the present. Dong’s aim is not to generate new findings on specific aspects of the Sino-American relationship but to produce a very detailed epitome of the most important international relationship of our time. She has also reached her objective by grounding her analysis on a congruous number of Chinese sources in order to give a better understanding of Chinese views and behaviour.

Not only is the book addressed to students who need an introduction to the topic and academics, but it is also an extremely useful read for any educated person who might decide to approach the issue, such as journalists and media commentators.

 

The other side of the chinese economic miracle: the dilemmas of access to health care in the People’s Republic Of China

Daniele Brombal, Curarsi è difficile. Curarsi è costoso. Storia, politica e istituzioni della sanità cinese, 1978-2013, Roma, Aracne, 2015, 167 pp. (ISBN 9788854883390).

Daniele Brombal’s book focuses on an extremely relevant issue – health care in the People’s Republic of China (PRC). In some respects, health care can be seen as a litmus test of the ability of the Chinese ruling class to manage the numerous imbalances, determined by the economic miracle that resulted from the reformist policy initiated by Deng Xiaoping in the late 1970s. Beyond the astonishing growth rates and a widely recognized absolute poverty reduction, the economic miracle has in fact given rise to serious imbalances and social inequalities, as shown by the fact that the Gini coefficient has risen from 0,16 (urban) and 0,21 (rural) at the beginning of the reform era (1978), to 0,46 (national average) at the beginning of the new millennium, well above the recognized warning level of 0,4. Not surprisingly, these increasing imbalances and inequalities have fuelled widespread social unrest over the years. For the Chinese rulers, health care reform remains one of the many challenges ahead, which needs to be urgently addressed, being compounded by the challenges represented by both a rapidly aging population and increasing levels of pollution. Three decades ago, only 5% of the population was over 65; today, 123 million people, or 9% of the population, are over this age; and a report released by a government think tank at the end of 2013 forecasts that China will become the world’s most aged society in 2030. With regards to pollution, it is one of the major causes of the increase in the number of diseases within the Chinese population.

In Curarsi è difficile. Curarsi è costoso. Storia, politica e istituzioni della sanità cinese, 1978-2013 [«To Take care of one’s health is difficult. To take care of one’s health is expensive»], Brombal provides a deep and meticulous analysis of the political, economic and social changes that occurred in China since the launching of the policy of reform and opening (gaige kaifang), in December 1978, during the Third Plenum of the 11th Central Committee Congress of the Communist Party of China. The gaige kaifang included the growing political and administrative decentralization, the de facto privatization of social services. This, in turn, brought about the establishment of strong economic interests, triggered pervasive social and economic imbalances within the population and, more recently, caused the regime’s attempt to promote social equity in order to ensure its legitimacy and stability to the regime.

This complex process is analysed in Brombal’s monograph by using the evolution of the health sector as a case study. In particular, the volume describes the serious social imbalances existing in China today; the dysfunction of the health care system, the preponderance of the private interests to the detriment of the health system consumers, the central government disengagement in relation to the health sector during the 1980s and the 1990s (strictly related to the belief of the substantial unproductiveness of all social sectors), the longstanding problem represented by the lack of enforcement of central government’s regulations by local authorities when these go against their interests and the general disinterest by the local authorities towards the citizens’ well-being.

In 2000, all the above factors brought the World Health Organization (WHO) to rank PRC’s health care system at the 144th place for its general performance (behind Burundi) and at the 188th place in terms of equity (in a general classification of 191 countries). This is in sharp contrast to the fact that, only 18 years before (at the end of the Maoist era and on the eve of the abolition of the Commune system), China had been considered an outstanding example of primary health care (p. 81).

During the 2000s, the lack of coordination and the laxity of a part of the administrative machinery in the field of health care became apparent, even outside the PRC’s boundaries, with the burst of both the Severe Acute Respiratory Syndrome (SARS) and Avian flu (or «bird flu») epidemics.

The author’s choice to concentrate the analysis on the rural areas is not accidental; on the contrary, it has provided awareness that the rural areas represent the «mouthpiece» of the contradictions that affect the Chinese system today. Going beyond «the limits of the coastal cities and the big industrial centres» allows the author to observe the «raw matter/first matter by which the so-called ‘Chinese miracle’ was fed» (p. 16).

In writing the book, Brombal has availed himself of a rich bibliography – including scientific articles, laws and government regulations, policy directives, propaganda and advertising campaigns – both in the Chinese and Western languages. But the strong point of the book is represented by the material collected by the author in the field, thanks to his sinological background and his language skills. Brombal has in fact carried out quite-difficult fieldwork research, especially considering that this kind of research is still viewed in China as a «sensitive activity» (p. 130). He has conducted interviews and accepted spontaneous witnesses among medical and administrative personnel, governmental officials, researchers, students of the Faculty of Medicine and employees of the pharmaceutical industry, in three Chinese provinces (Hubei, Shaanxi and Sichuan), in the autonomous region of Inner Mongolia and in the municipalities of Beijing and Shanghai. This impressive fieldwork has been part of a research project (headed by the author himself) funded by the Italian Ministry of Foreign Affairs (in particular the general direction of development cooperation) and realized in cooperation with the PRC Ministry of Health, between 2008 and 2011.

By making extensive use of the material collected in the field, Brombal’s monograph shows that, starting from the mid-1980s, different economic interest groups have acquired a remarkable capacity to influence the definition and the implementation of health policies in order to maximize their profits. This happened often with the connivance of the local authorities in charge of the health care management. In the last decade, these trends have had a profound effect on the ability of the central government to remedy the crisis in the health industry. This crisis was made more evident by the lack of access to health care by the most disadvantaged sections of the population, the widespread impoverishment due to illness and, finally, the outburst of the SARS crisis.

Brombal’s book is articulated in three chapters and a conclusion. The first chapter describes the evolution of the Chinese health care system from 1949 until today, focusing on the role played by the Party/State in supplying health care service in three different phases (1949-1983, 1983-2002 and 2002-2012), each one characterized by peculiarities that pertain to the different financial and distribution methods of health care services. The second and the third chapters are structured as case studies of rural health in China, aimed at demonstrating the working hypothesis, i.e., the fact that, beginning with the mid-1980s, different economic interest groups – formed largely by doctors, hospital managers and pharmaceutical companies – have acquired a considerable capacity to hack into depth on the definition and the implementation of health policies, in order to maximize their own profits. In particular, the second chapter analyses the modes that have allowed the proliferation of private interests in the health sector through the exploitation of the loopholes, the weaknesses in the existing regulations and the ability to promote the maximization of profits. The third chapter focuses on the impact of private interests on the health policies adopted by the administration, led by Hu Jintao and Wen Jiabao. In the conclusion, the author reflects on the failure of the health policy measures adopted by the Hu Jintao-Wen Jiabao’s administration in order to put an end to the distortions introduced by the neoliberal policies adopted during the 1980s and 1990s, both in terms of better access to health services and in terms of protection of the rural population from the risk of illness-related impoverishment. As a result, violent attacks against medical personnel by desperate people are the order of the day (pp. 156-157).

Brombal’s monograph closes with an interesting photographic appendix that witnesses the places and the people involved in the field research. A second appendix contains the results of the targeted and spontaneous interviews (112 in total) conducted by the author between 2008 and 2011 among medical and administrative personnel, governmental officials, researchers, Faculty of Medicine students and employees of the pharmaceutical industry. Finally, the volume includes numerous diagrams, graphics and tables that contribute to make it easier to read.

Curarsi è difficile. Curarsi è costoso. Storia, politica e istituzioni della sanità cinese, 1978-2013 represents a fundamental reading on contemporary China for both students and academics and for the general public, as well, offering the keys for a better understanding of the problems bedevilling the Chinese political leadership.

 

Iran 2013-15: in the midst of Change

Iran has gone through great changes in the past two and a half years. After Hassan Rouhani’s election in June 2013, the country has reached a deal with the P5+1 (the permanent five members of the United Nations Security Council plus Germany) that promises to bring an end to the twelve-year old dispute over its nuclear program. Consequently, Iran has managed to improve its international ties, engaging in direct talks with the United States, resuming diplomatic relations with the United Kingdom, and attracting an increasing number of political and trade delegations to Tehran from all over the world. In the aftermath of the nuclear agreement, Iran has then focused on regional issues and, by securing a seat at the Syria peace talks in Vienna, has been recognised as «part of the solution» to solving current crises in the Middle East. This successful record on foreign policy issues, however, has not been matched by developments on the domestic front. Despite rising expectations by the Iranian populations after Rouhani’s advent to power, particularly with regard to political and social freedom and to the improvement of the economic situation of the country, the current government has not managed to achieve its stated goals. Starting from these premises, the present chapter explores the major changes introduced by Rouhani and his Cabinet in the past two years in the social, economic, political, and diplomatic sphere. In so doing it addresses the complexities of Iran’s political system and power hierarchy, most notably the relation between President Rouhani and the Supreme Leader Khamenei, the impact of the nuclear deal on the domestic front, the frustrations voiced by the reformists, and the recent hardliners’ attempted comeback to the Iranian political scene.

1. Introduction

Iran has gone through great changes in the past two and a half years. After Hassan Rouhani’s election in June 2013, the country reached a deal with the P5+1 (the permanent five members of the United Nations Security Council plus Germany) that promised to bring an end to the twelve-year-old dispute over its nuclear programme. Consequently, Iran managed to improve ties at the international level, engaging in direct talks with the United States, resuming diplomatic relations with the United Kingdom, and attracting an increasing number of political and trade delegations to Tehran from all over the world. In the aftermath of the nuclear agreement, Iran focused on regional issues. By securing a seat at the Syria peace talks in Vienna, it has been recognised for the first time as «part of the solution» of the current crises in the Middle East. This successful record on foreign policy issues, however, was not matched by developments on the domestic front. Despite rising expectations by the Iranian populations after the Rouhani’s advent to power, in particular with regard to political and social freedom and to the improvement of the economic situation of the country, the government did not manage to achieve its stated goals.

Starting from these premises, the article explores the major changes introduced by Rouhani and his Cabinet in the past two years in the social, economic, political, and diplomatic sphere. In so doing, it addresses the complexities of Iran’s political system and power hierarchy, most notably the relation between President Hassan Rouhani and the Supreme Leader Ayatollah Ali Khamenei, the impact of the nuclear deal on the domestic front and the recent hardliners’ attempts for a comeback to the Iranian political scene. It starts with an analysis of the negotiations on the Iranian nuclear programme, assessing the steps that first led to the interim agreement and then to the Joint Comprehensive Plan of Action (JCPOA). The authors opted for starting their analysis with the nuclear dossier because this constituted the priority of the Rouhani administration since it was elected in June 2013. Furthermore, the nuclear negotiation development and outcome strongly affected the government’s room for manoeuvre on the domestic, economic, and international front. The rest of the analysis is devoted to the evolution of Iran’s foreign policy beyond the nuclear issue and to an assessment of the changes occurred in the economic, social, political, and cultural spheres in the past two years.

 

2. The Iranian nuclear issue: Steps and outcome of two years of talks

Iran started January 2014 on the right foot with regard to the nuclear issue. Only a few months after the election of President Hassan Rouhani, Iran sealed an interim deal with the P5+1, known as the Joint Plan of Action (JPOA).[2] This constituted the first agreement reached by the negotiating parties since 2004, when the E3 (the United Kingdom, France and Germany) and Iran signed the Paris Agreement.[3] The deal was the result of a number of factors. The opening of the US administration to enabling uranium enrichment on Iranian soil constitutes one of the main elements that triggered the agreement between the two sides, but being beyond the purpose of this article it will not be discussed.[4] The other main factor facilitating the sealing of the interim deal was the election of Rouhani.

On 14 June 2013, defying most expectations, Rouhani won Iran’s 11th presidential elections, succeeding to Mahmood Ahmadinejad. Rouhani is a moderate cleric who held senior positions within the establishment, who had represented the Supreme Leader Ali Khamenei on security-related issues for more than 16 years in the Supreme National Security Council (SNSC). Despite having built a strong working relationship with the Iranian leadership, Rouhani run on a campaign of «moderation and prudence», which attracted a large amount of votes from reformist sections.[5]  In his electoral programme, Rouhani highlighted the necessity to improve relations with regional and international powers, prioritising, in particular, the resolution of the nuclear issue as a crucial element facilitating rapprochement with the West.[6] The newly elected president was familiar with the nuclear dossier, which he had handled, as chief nuclear negotiator, between 2003 and 2005, when the issue first became an international concern. Rouhani’s nickname – «diplomatic sheikh» – was an indicator of the conciliatory approach the president was known for, particularly with regard to the nuclear issue. In the presidential debates before being elected, Rouhani sharply criticised the confrontational approach adopted toward the negotiating parties, the P5+1, by the previous administration and, in particular, by previous Iran’s nuclear chief negotiator, Saeed Jalili.[7] Rouhani stressed the need to return to a confidence-building approach, reversing the aggressive rhetoric adopted under president Ahmadinejad. Questions were thus immediately raised about what his victory meant for Iran’s foreign policy posture, particularly with regard to the nuclear issue.

According to Article 110 of the Iranian Constitution, the Supreme Leader constitutes the central institution with regard to all key national security and foreign policy issues, matters on which his word is final.[8] Presidential powers are, on the other hand, constitutionally limited.[9] Nevertheless, by chairing the SNSC – a key institution in shaping national security and foreign policy matters – the president can still have a strong impact on the country’s international posture and overall approach toward the West; also he can channel new diplomatic initiatives and set Iran’s tone as far as international affairs are concerned.[10]

As a cleric who covered high-ranking positions in the Iranian regime, Rouhani was expected to have the power to influence Iran’s foreign policy. To demonstrate his commitment to change Iran’s approach to the nuclear negotiations, Rouhani took two practical steps in the first few weeks after being elected. Firstly, he removed the management of the nuclear dossier from the SNSC, which had been in charge of the file since 2003, handing the responsibility to the Ministry of Foreign Affairs. The decision was due to the tighter control the president has over the Ministry’s appointees and to the need of simplifying the decision-making process over the matter.[11] Secondly, Rouhani nominated a new and more moderate negotiating team, led by the newly appointed Foreign Minister, Mohammad Javad Zarif. A US-educated diplomat who had handled the dossier between 2003 and 2005, Zarif was viewed by the international community as a «pragmatic» diplomat because of his previous post as Iran’s representative at the United Nations.[12] Shortly after the new President undertook these changes, Khamenei stated in a speech to the Iranian Revolutionary Guards Corps (IRGC) that he was not against diplomacy and supported the idea of «heroic flexibility» in diplomacy.[13] The election of Rouhani thus raised hopes about the prospects of finding a diplomatic solution to the nuclear dossier.  A few months later, once the signing of the interim agreement with the P5+1 was announced, it seemed that domestic and international expectations were going to be met.

Under the JPOA, the two sides committed to reaching a comprehensive agreement on the Iranian nuclear issue within six months, closing the dossier that had been on the radar of the international community for more than a decade by 20 July 2014. Few days into 2014, on 20 January, the provisions of the JPOA entered into force. Iran started to scale back parts of its nuclear programme, while, in return, the United States and the European Union agreed to relax some of their unilateral sanctions against Tehran.[14] This represented a major breakthrough, not only for the resolution of the nuclear dossier but also for the improvement of Iran’s relations with the West.

Few months after the implementation of the interim agreement, the nuclear watchdog of the United Nations, the International Atomic Energy Association (IAEA), issued a report, which highlighted how Iran was meeting its end of obligations under the JPOA, in what constituted the first group effort with the Agency since 2008.[15] Once the report confirmed that Iran was curbing its most sensitive nuclear activities, in line with what agreed with the six powers in November 2013, international confidence over the ability of the Rouhani administration to deliver on its promises on the nuclear issue further increased.

Despite the positive momentum, the P5+1 and Iran missed twice their set deadline to reach a comprehensive nuclear agreement in 2014. In July, after the negotiators spent three intense weeks in Vienna’s Palais Coburg, attempting to meet the original expiry date, it was eventually decided to extend the JPOA and talks for four additional months.[16] On 24 November, the negotiators announced a second extension, which, however, required the parties to reach a political agreement within four months and to complete the necessary technical annexes by the end June 2015.[17] The failure to find a compromise was perceived as a setback by most observers, a signal that, despite the initial hopes, a peaceful solution to the nuclear issue remained far away.[18] The Iranian administration grew increasingly impatient with the subsequent extensions of the JPOA. Since the resolution of the nuclear issue was depicted by Rouhani and his team as the first priority of the administration and a precondition to gain a bigger margin of manoeuvre on other matters, both domestic and international, the presidency and the foreign ministry increasingly found it difficult to maintain their legitimacy and support from within Iran. Beginning with spring 2014, as the Rouhani administration was getting close to celebrate one year in power, the government was consistently subject to forceful criticism by the hardliners. In May, a newly established group of right-wing Members of Parliament, which called itself «We’re Worried», complained about the posture of Iran’s negotiating team and their disregard for national interests in the nuclear talks.[19] The level of pressure exerted on the negotiating team further increased in the following months. When the second extension of the JPOA was announced in November, the Iranian ultra-conservative newspapers Kayhan ran the headline «Village headman [United States] wasn’t trustworthy, sanctions extended», indicating not only that Iran did not gain any concessions from talks with the P5+1, but also that the international sanction regime against Tehran did not halt.[20] Another hard-line newspaper, Vatan-e-Emrooz, titled his cover page «Nothing», and argued that the talks with the six powers did not translate into the results Rouhani wanted to achieve.[21]

Criticism toward the negotiating strategy of the new administration started to increase also because, despite the limited and reversible sanction relief granted under the JPOA by the EU and the United States, Iran did not gain the economic benefits it was expecting.[22] A large number of trade delegations, especially from European countries, visited Tehran once the interim agreement came into force to explore opportunities in the Iranian market and to assess whether new deals could be arranged.[23] However, because of the nature of the US legislation against Iran still in place, no new contracts were signed.[24]

Despite the increasing rants about the outcome of negotiations, the Rouhani administration managed to avoid any interference of hardliners on talks with the P5+1, an achievement, which in itself was remarkable. To rebuff the criticism, Foreign Minister Zarif stated that his team had the full mandate to pursue negotiations according to the guidelines set by Khamenei.[25] In a televised address to the nation, Rouhani stated that as a result of engagement with the international community «no one in the world ha[d] any doubt that Iran must have nuclear technology, including enrichment on its soil, and no one ha[d] any doubt that sanctions must be lifted».[26]

2015, therefore, started with less optimism with regard to the chances of the Iranian government to close the nuclear dossier once for all. However, on 2 April 2015, 18 months after the JPOA was signed, the P5+1 and Iran announced that a «framework» agreement was reached, and made public the key points of a comprehensive deal.[27] The agreement, which was the result of complex negotiations and of an unprecedented number of consecutive days spent by the parties in Lausanne discussing the remaining sticking points, was defined by Zarif and EU High Representative Federica Mogherini as a «decisive step», and constituted the basis of discussions on a comprehensive nuclear deal for the following three months. The announcement was welcomed with celebrations in Tehran, ranging from cars driving through the streets and honking horns, to citizens welcoming the negotiating team at the airport or chanting «Thank you, Rouhani».[28] In spite of few exceptions, the agreement was also supported by hardliners previously critical of engagement with the West, because it enabled Iran to meet Iran’s two red lines – the preservation of existing centrifuges and the acceptance of the country’s «right» to enrich uranium on its soil.[29]

Only three months after the Lausanne agreement, Iran and the P5+1 reached the Joint Comprehensive Plan of Action (JCPOA).[30] The agreement was a complex document which sets out 5 different phases after which, in about 10 years time, the agreement will be terminated. The «finalisation day», namely day when the deal was announced, was followed by the approval by the UN Security Council, the US Congress, and the Iranian Parliament (the Majlis) of the agreement.[31] On 18 October 2015, once all three steps were made, the parties announced the second phase of the deal, «adoption day».[32] In the last months of 2015, Iran moved toward meeting its obligations under the JCPOA, curbing its most sensitive nuclear activities and cooperating closely with the IAEA to address concerns about the military nature of the country’s nuclear programme.

Completion of the Iranian obligations constituted a real priority for the Rouhani administration, which, after having sealed a historic nuclear agreement in July 2015, thus fulfilling one of its key electoral promises, now wanted to deliver on its second priority, the improvement of the Iranian economy. This was intertwined with ending the international isolation from the global financial market under which the country found itself since 2010, when EU and US unilateral sanctions were imposed.[33] Under the JCPOA, these sanctions were going to be lifted only once Iran met its end of obligations, triggering phase three of the JCPOA, known as «implementation day». Since Rouhani aimed at countering any remaining opposition toward his nuclear diplomacy and the negotiations’ outcome, Iran moved quickly toward curbing its nuclear activities, aiming at having sanctions lifted at the beginning of 2016.

Because of its successful nuclear diplomacy, Iran found itself in a very different place compared to two years before. The administration gained the trust and respect of the international community, and this in turn affected Tehran’s relations with the West on regional issues, as discussed below. Rouhani and the nuclear team also gained the support of the Iranian population that, attracted by the prospects of better standards of life and normalisation of ties with the West, endorsed the outcome of the negotiations, strengthening the administration’s support basis. Much of this outcome was the result of the unprecedented political capital invested by both the US and the Iranian administrations in reaching the deal. The commitment of US president Barack Obama to prioritise diplomacy in solving the nuclear dossier has played a crucial role in containing the efforts of some influential regional actors, Israel in particular, to derail the negotiation process. By pushing back on issues such as the «breakout time» – the time required to produce enough weapons-grade uranium for one single bomb – and by emphasising how the deal increased the security of all countries in the Middle East, the Obama administration has made it possible for Rouhani to sell the deal at home, side-lining domestic criticisms.[34] As explained in the following sections, the administration’s success on the nuclear front was not matched in other issues.

 

3. Iran’s foreign policy beyond the nuclear issue

The signing of the nuclear agreement with the P5+1 affected Iran’s foreign policy in various ways. First and foremost, the deal had a profound impact on the country’s relations with the West, notably the United States and some key Western European countries. Rouhani entered office stressing the importance of re-opening the dialogue with his Western counterparts, a step he considered vital for the resolution of the nuclear crisis and the normalisation of Iran’s relations with the international community.[35] The president’s so called «charm offensive», including his phone call with President Obama and his conciliatory remarks before the UN General Assembly in September 2013, can be placed in this context.[36] In his efforts to win the trust and respect of those who continued to look with suspicion at Iran’s new international posture, Rouhani was assisted and supported by his Foreign Minister, Mohammad Javad Zarif, whose diplomatic experience and soft manners soon earned him a widespread popularity. As the Iran and the P5+1 worked towards a comprehensive agreement that could finally solve the dispute over Tehran’s nuclear programme, a few bricks of the decades-old wall of distrust began to fall. However, it was not until the signature the JCPOA in July 2015 that this new climate of hope started to translate into a new political phase: the failure to meet two deadlines for the final agreement in July and in November 2014 suggests that many obstacles remained on the road to a deal and that success was not to be taken for granted.

Yet, the goal was eventually accomplished. The agreement achieved in Vienna undoubtedly represented a game changer in Iran’s relations with the West. The JCPOA and the determination shown by the parties in overcoming the difficulties that arose during the negotiations, though not meaning the complete dismissal of reciprocal suspicions and concerns, have undoubtedly inaugurated a new phase in Iran’s relations with its Western counterparts. By the end of 2015, the new atmosphere of collaboration resulted in mounting interest by European companies in re-entering Iran’s market, in the improvement of ties with EU countries, and in a timid rapprochement with the United States.

Already in the months following the signature of the interim agreement, Western companies, particularly from European countries, organised a large number of visits to Tehran to test the ground on re-entering Iran’s attractive market. In February 2014, for instance, more than 100 French companies visited Iran, including major names such as Total, Renault, and Peugeot, car manufacturers that were active in Iran before sanctions were imposed. Other countries, such as Belgium, Germany, Italy, and Austria, soon sent their trade delegations to Tehran. As a consequence, also political ties between Iran and European countries have intensified since the beginning of 2014. Trade delegations were often accompanied by political ones, in many cases of senior officials visiting Iran for the first time in many years. Furthermore, the UK decided to re-open its Embassy in Tehran that had been closed since November 2011, after it was stormed by an unidentified crowd of Iranian protesters. The French embassy in Tehran subsequently reversed the decision to cut its personnel. The improvement of ties between Iran and the West extended even to the United States. Besides the cooperative attitude showed throughout the nuclear talks, facilitated by direct talks between Kerry and Zarif’s negotiating teams, the Obama administration for the first time recognised Iran as «part of the solution» of current crises in the Middle East, offering, after years of hesitation, a seat at the Syria peace talks in Vienna to Tehran. The choice represented the first time in which the United States chose to formally engage the Iranians diplomatically on this issue, a decision that denotes a gradual but undeniable shift in Washington’s strategy in the region and in US-Iranian relations.[37]

This brings us to the second set of consequences produced by the nuclear deal on Iran’s foreign policy: those related to the regional scene. During Mahmood Ahmadinejad’s eight years in power, many commentators showed increasing confidence that Iran was on the verge of becoming the new regional hegemon: Tehran’s dynamism in Central Asia, its decades-long alliance with Hezbollah in Lebanon and with Assad’s regime in Syria, its expanding support to Hamas, and, even more, its growing influence in neighbouring Iraq and Afghanistan seemed enough to prove its gradual but incontestable transformation into a regional power. In the past few years, however, some new developments altered this scenario, first and foremost the rise and rapid expansion of the Islamic State (also known as ISIS or DAESH). Tehran did not reduce the nature and the extent of its commitments abroad. Nevertheless, the situation changed; in the words of a well known American academic: «its forces have lost more and more territory in Syria […] in Iraq, the government that they backed went from controlling the country, nominally all of the country to actually losing control of large parts of it. And then even if you looked at Lebanon, the combination of refugee crisis which has changed the demographics of Lebanon, it actually has put Hezbollah in a very complicated situation of being engaged in a very unpopular war in Syria where there has been quite a lot of bleeding in Hezbollah.»[38] Despite the territorial losses and military toll Iran had to pay, the rise of ISIS did not mean only a deterioration of Tehran’s position in the region. The strengthening of the Islamic State and the escalation of tensions in the Levant provided the Iranian authorities with a further justification to keep their forces both in Syria and in Iraq. The defence of Baghdad by the Shia militias trained and financed by Tehran received Washington’s de facto endorsement, something that would have never been possible until a couple of years ago. The fate of General Soleimani offers a revealing case in point in this regard: leader of the special forces unit of Iran’s Revolutionary Guards responsible for their extraterritorial operations, the Quds forces, the so-called «Shadow Commander» shifted from being seen as one of the main threats to the regional and international security to receiving US protection and support in its war against the Islamic State. In this sense the emergence of the ISIS threat represented both a setback and a strategic advantage for Iran.

In this situation, the achievement of the JCPOA produced two sets of effects: on the one hand, it further exacerbated the tensions with the countries that opposed the deal, particularly with Israel and Saudi Arabia. Both felt that they were not given enough say in the negotiations that led to the Vienna agreement and were clearly unhappy at the loss of their leverage vis-à-vis the United States concerning the management of regional crises, most notably their vetoing power regarding Iran’s participation to the negotiations over the future of Syria. On the other hand, Tehran’s boosted legitimacy, epitomised by its aforementioned inclusion in the Vienna talks, reinforced Tehran’s standing and diplomatic role in the region, encouraging the Iranian leadership to present itself as an indispensable partner in the fight against ISIS and to improve its relations with the other regional players.

The rapprochement with Washington and Western Europe and the end of Iran’s diplomatic isolation provide encouraging signs for the future of Tehran’s relations vis-à-vis the international community. However, it is also important to notice that these efforts still fall short of indicating a complete reintegration of Iran in the international community and a full acknowledgment of its role by other states in the region. Despite reports on Tehran’s coordination on the ground with US forces to deal with ISIS in Iraq,[39] obstacles remain for instance when it comes to the country’s collaboration with the West on issues such as Yemen or the future of the Assad regime in Syria. The conflict in Yemen, in particular, is one of the most contested terrains of Iran’s involvement in the Middle East. The country, where the Zaidi Shia community represent more than 40% of the population, witnessed in the past two years a revival of the conflict between the government in Sana’a and the Houthis, a Shia insurgent group originally from the north of the country.

In September 2014 the Houthis took control of the capital and of a significant part of Yemen’s territory, leading to the fall of the Saudi backed government. Their military successes triggered Saudi reaction: Riyadh intervened to contrast the advance of the Houthis, and launched a campaign, together with the Yemeni government, to denounce Iran’s alleged support to the group. Such allegations contributed to growing speculations about the fighting in Yemen as a proxy war between Iran and Saudi Arabia. These speculations appear, however, exaggerated: while it’s true that reports have increasingly proved Tehran’s military and financial help to the Houthis, Iran’s leverage on the local actors continued to be limited, especially in comparison to what claimed by the Saudis. «Its [Iran’s] support for the Houthis – has argued Rouzbeh Parsi – has not been a game changer nor has it influenced the group in any particular direction since, irrespective of Tehran’s ambitions, the conflict in Yemen is home grown and structural, having played out over several decades. What this support has achieved is of course to cement Saudi fears and draw Riyadh further into a quagmire it has been skirting around for many years.»[40] As for Syria, the country remains an integral part of Iran’s «forward defense policy.»[41] Tehran did not withdraw his presence on the ground. However, Syria has been costly to Iran – both financially and in terms of reputation – and Iranians, particularly within the Rouhani administration, have seemed more inclined to consider a transitional process which would not require them to compromise the country’s national interests.[42] This confirms the idea whereby Iran’s actual behaviour is «much more pragmatic and reactive than the accompanying rhetoric would let on.»[43]

In other words, the deal with the P5+1 did not assure a more cooperative attitude by Iran towards a series of problems, from the fate of Bahar al-Assad to human rights, nor did it prevent a further escalation of tensions with its regional enemies, as testified by the recent storming of the Saudi Embassy in Tehran in reaction to the execution of Sheikh Nimr al-Nimr, a leading Shiite cleric who had criticised the kingdom’s treatment of its Shiite minority.[44] However, the settlement of the nuclear crisis has made it possible to shift from seeing a rise in Iran’s stature as an entirely hostile development to acknowledging the possibility of using Tehran’s influence to lay the bases for a new policy in the Middle East. This, in turn, encouraged the most pragmatic elements of the Iranian leadership to act as viable and credible partners in the search for new paths for the pacification of the region.

The events that, at the very beginning of 2016, led to the occupation of the Saudi Embassy in Iran on 3 January and to the rupture of the diplomatic ties between Riyadh and Tehran are relevant in this regard. Not only they demonstrated the extent of Saudi hostility towards the inclusion of Iran in the inner circle of regional diplomacy, and the risks that this hostility poses for the pacification of Yemen and Syria. They also indicated the numerous ramifications of Iran’s domestic power struggles and their potential consequences on Tehran’s foreign policy. Especially in the months after the nuclear agreement was signed, the Supreme Leader felt it had to balance the legitimacy gained by the Rouhani administration, allowing radical forces to bring Iran’s policy back on a path of confrontation with actors outside the country, both within and outside the region. Because of that, for instance, despite the participation of Iran’s Foreign Minister Javad Zarif in the talks on Syria, the dossier has remained largely in the hands of the Iranian Revolutionary Guards, who have made of the survival of the Assad regime their main priority. In spite of Rouhani’s determination in reinforcing the country’s cooperative stance with the international community, which resulted in Iran’s inclusion in the Syrian talks, together with the improvement of Tehran’s ties with the West, the Rouhani administration did no manage to gain the room for manoeuvre hoped for. The rupture of relations between Riyadh and Tehran, followed by similar initiatives by the United Arab Emirates, Bahrain, and Sudan among others, indicated that a complete shift of Iran’s stance in the region remains hard to achieve. Similarly disappointing has been the outcome of the administration on the domestic level.[45]

4. The social sphere and the fog of change

Whereas when looking at the nuclear issue and, more broadly, at Iran’s foreign policy, the benefits of Rouhani’s pragmatic attitude in 2014 and 2015 have been evident, when it comes to the social, political, and economic spheres, the progress made by his administration has been slower and seems to be caught in what Robin Wright calls the fog of change. «It’s tempting simply to credit a visionary leader, the human spirit, or a historical trajectory», Wright pointed out. «Change, however, is often foggier. It takes a convergence of causes also selfish, crudely commercial, strategically pragmatic, and more reactive than altruistic.»[46] The reasons are manifold, and include the complexities of the decision making process in Iran, the position of power enjoyed by conservatives and hardliners within some of the key institutions such as the Assembly of Experts and the Judiciary, and the very notion of change from within. It is not by chance that most of the comparisons that have been made in the past two years with regard to Rouhani’s plan of reform are with one of the most celebrated example of reformers from within: Mohammad Khatami.[47] However, the comparison hides substantial differences: as many observers pointed out, Rouhani is not a reformism à la Khatami, as he was hastily defined in many Western media[48]; nor he wants to reinvent the foundations of the Islamic Republic. According to the authors of a 2013 interview to Iran’s president: «Rouhani is more technocrat than cleric. He belongs to the conservatives’ pragmatic wing that considers diplomatic engagement rather than confrontation essential to the survival of the Islamic Republic. He makes little reference to religion and is said to be particularly fond of studying statistics tables.»[49]

At the beginning of his mandate, Rouhani emphasised the importance of de-securitising the atmosphere in the country, i.e. reversing the process that has enabled the state to use extraordinary means in the name of security. De-securitisation meant, first and foremost, the freeing of some prominent political prisoners and the lifting of house arrest for Mir Hossein Mousavi and Mehdi Karroubi, key figures in anti-regime street protests after the disputed 2009 presidential election. Yet little was achieved: the situation of political prisoners remained unvaried, also as a result of Khamenei’s public condemnation of the government’s initial call for the release of Mousavi and Karroubi;[50] moreover, the annual report on the death penalty in 2014 showed that the Iranian authorities had executed more than 1.193 people since the election of President Rouhani in June 2013, marking an increase rather than a drop compared to the last phase of Ahmadinejad’s mandate.[51] The campaign of repression did not target only the reformists or the opponents of the regime, but came to involve one of the founders of the Islamic Republic: Ali Akbar Rafsanjani. In August 2015, after years of attacks from the hardliners, his son Mehdi Hashemi presented himself at Tehran’s Evin prison to serve a ten-year sentence on charges linked to embezzlement, bribery and what state television called «anti-security issues». The media coverage and the social media commentary of the episode were a testament not only to the polarising position the Rafsanjani family holds in Iranian politics today, but also to the intensity of the political struggle and the pervasive role of Judiciary in it.[52]

Ayatollah Ali Khamenei showed limited but crucial support for Rouhani’s initiatives on the nuclear issue, which included curbing hardliners from sabotaging nuclear talks. However, he did not give the same backing to Rouhani’s government on other issues, particularly on the domestic level. Furthermore, constitutionally, prisons are controlled by the Judiciary, one of the power bases of hardliners who, though small in number, used their stronghold to block any meaningful political and cultural reforms.[53]

Similar observations can be made with regard to women’s rights and to the problem of female unemployment. Rouhani’s initiatives have so far included the appointment of some women as provincial governors, the nomination of the first female ambassador since the 1979 revolution (Marzieh Afkham, Iran’s new representative in Malaysia), the increase of activities in women-related NGOs, and the removal of restrictions on certain subjects in higher education. Nevertheless, also on this matter, criticism from within remains, and the widely publicised achievements hide a situation of persistent disparities and violation of basic rights. Women in Iran still hold only 3% of seats in Parliament;[54] female unemployment in the age group between 18 and 24 is at 42.7%. According to Mohsen Ranani, professor at the University of Esfahan, some 75% of female university graduates remain without an appropriate job, and that is a heavy price for a country that is aiming to economic grow and where an average of 60% of university students are women.[55]

The same goes for cultural freedom: reformists’ initial hopes for a cultural flowering and an easing of internet censorship were not met in the first two years of Rouhani’s mandate. Flourished during the two mandates of Khatami, NGOs made a comeback between 2014 and 2015. During Rouhani’s first year in office the number of registered NGOs in Iran rose by 30% to 7,000. Most of the newly established NGOs focus on health, the environment, and entrepreneurship, avoiding to address more controversial topics such as human rights.[56] In the atmosphere of rising expectations, fuelled by the progress achieved by the administration in the negotiations with the P5+1, hope spread that civil society and interest groups could have helped the new president to achieve the reforms the country needed. «While the democratic opposition within Iran still suffers from organisational weakness and the lack of a unifying long-term strategy, – two analysts of Iranian politics wrote in the Washington Post in April 2015 – the nuclear breakthrough seems to have recharged the emotional battery of reformist activists and supporters and contributed to an optimistic perception about short-term electoral progress.»[57]

Yet, the picture remains gloomy when it comes to political rights. In 2014-2015, the Judiciary persisted in stopping reformist journalists from publishing new newspapers. Social networks, such as Facebook and Twitter and VChat, continued to be blocked. Furthermore, while some moderate politicians were appointed to regional governorships, there are few prominent reformists in Rouhani’s administration.

The struggle for cultural freedom, which represents one facet of the wider battle between the president and its opponents, was particularly fierce in the capital Tehran, where the president and conservative Mayor Mohammad Bagher Qalibaf (who lost the presidential election both to Ahmadinejad in 2005 and to Rouhani in 2013) clashed over the limits of the new climate of relaxation of the city’s cultural life. In December 2015, the reopening of the Tehran Museum of Contemporary Art and the debates over possible collaborations with some foreign partners spread hopes for the beginning of a new phase in Iran’s social and artistic scene, similar to what happened in 1997, following the election of Khatami.[58] Earlier in the year, during his visit to Tehran’s prestigious book fair, president Rouhani raised the thorny issue of censorship.[59] Though not directly challenging the tight control imposed on authors, Rouhani called for simplifying the guidelines that regulate the publishing process in Iran, guidelines that became much stricter after the approval of a some related rules in April 2010.[60] Yet, the road remains long and full of obstacles, not only because of the complex maze of Iranian politics, but also as a result of all the steps forward that were made in the past few years. «For every liberalising move like this, – an Iranian journalist commented in December 2015 – the conservatives will get mad and want to take something back. So, this being Iran, you can only count on the fact that nothing will go as planned.»[61]

The chances of meaningful progress in the social sphere have been further reduced by the priority attached from the very beginning by Rouhani and by his entourage to the achievement and implementation of the nuclear deal with the P5+1. The political capital they invested in the diplomatic marathon that culminated with the Vienna agreement  paradoxically translated into less negotiating leverage vis-à-vis other internal key powers and actors in the social field. As mentioned in the previous section, Khamenei had indeed to re-balance the gains obtained by the administration on the nuclear front, providing more power to the opposite factions on other issues, such as de-securitisation within Iran. «Other than foreign policy and nuclear negotiations and to some extent the economy, it is difficult to find out what the government’s policies in cultural and political fields are» noticed a reform-minded analyst in January 2014.[62] The pressure on the reformist and moderate forces did not only result in growing frustration among those who supported Rouhani in the hope he would introduce meaningful change in the political and social life of the country. It also risks weakening their position in the coming elections. At the end of February 2016, Iranian citizens will be called to elect both the members of the next Majles (Parliament), currently dominated by the conservatives, and the Assembly of Experts, which might have to choose the successor of Supreme Leader Ayatollah Ali Khamenei. The vote will be a test of confidence for the government and for its conduct, after two years and a half in power. At the same time the elections will be decisive in setting the tone of the political struggle in Iran, delimiting the playground where a series of key battles will be fought. These include the hardliners’ possible comeback, the reformists’ attempts to push the government towards a more assertive stance on social and political issues, Khamenei’s efforts to keep change under control, and Rouhani’s attempt to carry on with his delicate diplomacy, at home and abroad.

 

5. The economic sphere: Rouhani’s battle for growth

Whereas some critics could accuse the president of not having paid enough attention or spent enough energy on social matters, few would question the importance he attached from the beginning of his mandate to the economic sphere. Economic rehabilitation ranked at the top of Rouhani’s agenda, along with the nuclear issue. He installed an experienced group of technocrats and economic planners to manage Iran’s recovery, most of whom had been forced out of government by Ahmadinejad. The president also openly condemned the choices and conduct in the economic management of the country throughout the two Ahmadinejad’s mandates.

Rouhani’s commitment to the improvement of the economic outlook resulted in some accomplishments. According to the World Bank’s annual report, following two years of recession, the Iranian economy recovered during the 2014 Iranian calendar year (i.e., March 2014-March 2015). The economy expanded by 3% in 2014, after annual contractions of 6.6% and 1.9% in 2012 and 2013, respectively. The inflation rate declined from a peak of 45.1% in 2012 to 15.6% in June 2015 as a consequence of the tightening of the monetary policy by the Central Bank of Iran (CBI).[63]

Yet, in the words of the deputy director of the Foreign Policy program at the Brookings Institution, the president «[had] promised the Iranian people more than just a halt to the crisis; Rouhani [had] pledged to generate growth, development, and jobs»,[64] and in this regard the picture was far from rosy. The unemployment rate remained high and rose slightly in 2014. It reached 11.4% in 2014, up from 10.4% in 2013. The unemployment rate remains much more elevated among women (20.3% for women against 8.7% for men), among the population between the ages of 15 and 29 (17.9% for men and 39% for women in this age cohort) and in urban areas (11.7% in urban areas and 7.4% in rural areas). This weak labour market performance took place within a context of a subdued and declining labour force participation rate with only 37.2% of the country’s population being economically active in 2014, down from 37.6% in 2013 (62.9% for men and 11.8% for women). The government estimated that 8.5 million jobs should be created to reduce the unemployment rate to 7% by 2016.[65]

According to estimates upon the EU and US sanction relief which, based on the phases of the JCPOA implementation described earlier, should take place in the first quarter of 2016, real GDP should rise to 5.8 % and 6.7 % in 2016 and 2017, respectively, as oil production reaches 3.6 and 4.2 million barrels per day.[66] The progressive removal of sanctions is expected to be accompanied by reforms of the business environment and the financial and banking sectors. According to many observers, the positive fulfilment of all these conditions could pave the way for a significant improvement of Iran’s economic outlook, mostly as a consequence of the surge in oil exports, the release of about US$100 billion in frozen assets, and the prospect of re-engagement with the international markets. Iran has the word’s second-largest gas reserves, third-largest oil reserves, and significant rare earth deposits; it has a diversified economy, a trade surplus, and a well-educated urban population The country’s 77 million consumers have been locked out of global markets since 2010, when EU and US unilateral sanctions were clamped on Iran, but the situation is expected to change because of the agreement signed in July 2015.[67]

However, while the implementations of the deal is taking place, it becomes increasingly clear that Iran’s recovery from years of mismanagement and isolation will not be as easy as initially envisioned. In 2015 the cost of crude fell to levels not seen for 11 years and the decline may have further to go, a phenomenon which Tehran blames on the Saudis and that strongly links the future of oil prices – and of the Organisation of the Petroleum Exporting Countries (OPEC) – with the rising tensions between Tehran and Riyadh.[68] Iranian authorities have been waiting for months to increase the country’s oil exports after the drastic drop in sales produced by the embargo imposed in 2012 by the European Union. Iran’s oil exports had fallen to 700,000 barrels per day (bpd) by May 2013, compared with an average 2.2 million bpd in 2011. Throughout 2015, Tehran exported 1.1m barrels of oil per day, but in December 2015 the Iranian oil minister, Bijan Zanganeh, announced that the country was aiming to double that amount within six months after sanctions being lifted.[69] In an effort to attract foreign investment in the post-sanctions era, Iran also offered new oil and gas contracts designed to benefit both international contractors and the National Iranian Oil Company, particularly affected by the falling prices of oil.

Despite these efforts, the Iranian government was not able to attract foreign investors. Already after the implementation of the interim agreement, despite the interest shown by European companies, Iran was experiencing severe difficulties in benefitting from the limited sanction relief granted under the JPOA. The difficulties were mostly linked to the practical challenges of delivering money to a country largely isolated from the global banking system and to the hesitation of financial institution in authorising even legitimate trade and humanitarian transactions with Tehran because of the nature of US sanctions.[70] Iran also had difficulties in improving its economy, exploiting the limited sanction relief, because of the resistance raised by some sectors of its establishment, particularly the IRGC, which remain hostile to a change in the image and structure of power of the country,. They were determined to make sure that Rouhani could not take the credit of the lifting of sanctions and the resulting economic recovery. Additionally, these groups have been among those benefitting the most from bribes and lucrative sanction-dodging schemes and were understandably keen to maintain their privileges intact. To avoid the increased presence of Western companies in Iran as a consequence of the JCPOA reached in July 2015, hardliners thus conducted a witch-hunt against «spies» to counter what IRGC commander, General Mohammad Ali Jafari, defined a «prolonged sedition of infiltration».[71] In this scenario, based on the World Bank’s 2015 Ease of Doing Business Index, Iran ranked 130th out of 189 countries – not prohibitively low, but far from optimal. Moreover Iran was 111th out of 131 countries in a 2013 worldwide ranking of property rights regimes, 136th out of 174 countries on Transparency International’s 2014 Corruption Perceptions Index, and 83rd out of 144 countries in the World Economic Forum’s 2014-15 Global Competitiveness Index.[72] Therefore, although lifting the international sanctions against Iran might remove a substantial impediment to the improvement of the country’s economic recovery, it will not automatically create the legal and regulatory framework necessary for sustained investment. The inability of the new leadership to attract investors, to effectively tackle issues such as corruption, and to resist the attempts by the more conservative elements within the élite to sabotage the new course, was crucial in hampering Rouhani’s image domestically. The outcome of this struggle, fought on the terrain of economy but with clear political implications, is bound to have a crucial impact not only on the success of Rouhani’s project of economic rehabilitation, but also on his own political standing. «People are not economic experts. – dissident journalist and writer Akbar Ganji commented in March 2015 – They expected the Rouhani administration to improve the economy rapidly. But, since that has not happened, Rouhani’s popularity has plummeted.»[73] The situation partially improved after the signing of the JCPOA in July: a poll conducted by iPOS [Iranian Elections Tracking Polls] in August 2015 suggested that a majority of Iranians favoured the nuclear deal with the West. 77% approved the plan while 3% percent disapproved. The positive stance on the nuclear deal boosted Rouhani’s overall popularity: in occasion of the same interviews 39% of Iranians said they approved the way he was handling his job as president, while 15% said they somewhat approved.

Yet such rise in popularity is unlike to last throughout the second half of the president’s mandate unless the promise of a widespread relief from economic hardship is fulfilled. As noted by Suzanne Maloney in September 2015 «to date, the nuclear diplomacy has provided no meaningful ‘trickledown’ effect for Iran’s economy or its population at large […] expectations for Implementation Day are sky-high at home among Iranians, and Rouhani will be risking his mandate and his presidency if he does not deliver on real results.»[74] Finally, the question of how to allocate the funds that will be made available by the lifting of sanctions continues to loom at the horizon. Whereas the official priorities remain job creation, a stimulus to the private sector and sustainable growth, domestic dynamics and power struggles will continue to affect the actual implementation of the initiatives designed by the president and by his economic advisors.

Since the 1979 revolution, Iran has made several attempts to transit to a market-based economy, most notably during the Rafsanjani administrations between 1989 and 1997, and following the revision of Article 44 of the Iranian Constitution in 2004.[75] Iran’s efforts have largely failed due to the political rationales of most of the economic measures adopted, and difficulties encountered when introducing measures aimed at increasing transparency and productivity and tackling corruption and inflation. As it has been argued by Najmeh Bozorgmehr in the Financial Times, the initial call for the establishment of an economy based on an amalgamation of Islamist and socialist ideologies was soon abandoned to leave room for the creation of «a class of oligarchs, nominally operating in the private sector, linked to and dependent on the survival of the regime» in a society where «wealth that is associated, as great fortunes usually are, with political patronage rather than individual entrepreneurship.»[76] There is no doubt that this time the international as much as the domestic situation suggests a more favourable outcome; yet the road towards an effective policy of economic reforms remains long and rocky.

The first months of 2016 will prove crucial for the future of Iranian political and economic outlook. Should Iran meet its end of obligations under the JCPOA, the beginning of the year might bring the lifting of nuclear-related sanctions. The implementation of the agreement might dissipate some of the doubts on the actual impact of the long-awaited removal of the measures that have crippled Iran’s economy for decades. Sanctions relief will be followed by the elections for the Majles and the Assembly of Experts scheduled for February. The candidates include Ali Akbar Rafsanjani, who has been recently defeated in the elections for chairman of the Assembly of Experts by ultraconservative Ayatollah Mohammad Yazdi, Ayatollah Mohammad Taqi Mesbah-Yazdi, and Khomeini’s nephew, moderate senior cleric Hassan. The climate of accusations and tensions that has so far dominated the electoral campaign is a clear indicator of the importance of the elections in shaping the domestic and foreign policy of the country for the year to come.[77]

 

6. Conclusions

There are few doubts that the election of Hassan Rouhani as president in June 2013 heralded a new phase in the history of the Islamic Republic of Iran. Rouhani was elected on a platform of moderation, pragmatism, and reintegration of Iran into the international community. He openly criticised the conduct of the previous administration in a number of key fields, most notably the nuclear policy and the economic management of the country, and promised to improve Iran’s international standing and to bring relief to the population after years of economic hardship.

Two-and-a-half years later his record shows mixed results. On the one hand, Rouhani and his negotiating team headed by Foreign Minister Mohammad Javad Zarif managed to achieve a deal with the P5+1, the JCPOA, that pledges to bring an end to the twelve-year old dispute over the country’s nuclear programme. The agreement, when and if fully implemented, will lift the economic sanctions imposed on Iran since 2006 by the UN, the US, and the EU in exchange for the Tehran’s commitment to limit its sensitive nuclear activities. The deal represents a crucial step in the normalisation of Iran’s relations with the West and its reintegration into the international community, as testified by Tehran’s inclusion in the Syrian peace talks in October 2015. However, Iran’s rapprochement with the West and regional cooperation over key issues, such as Yemen and Syria in particular, continue to be limited, given the domestic infight between Tehran’s centres of powers for the control of the different dossiers.

Furthermore, the success achieved on the diplomatic front of the nuclear issue was not matched by meaningful developments on the domestic front. The beneficial impact of the agreement was not felt by the population, which continued to struggle against unemployment and low growth rates. The long-awaited and badly needed increase in foreign investments, which was supposed to take place already after the interim agreement entered into force in January 2014, was undermined, among other things, by the persistence of corruption and the lack of transparency in the Iranian economy. The limited economic growth compared to what anticipated by the Rouhani administration was also the result of the collapse of oil prices, but, once again, the conflicting interests of Iran’s factions played a major role in hampering the country’s economic recovery in the past two years.

Limited progress also characterised the administration’s record on the political and social sphere. At the end of the period under review, Mir Hossein Mousavi and Mehdi Karroubi were still under house arrest, the situation of political prisoners remained unvaried, while executions have been increasing since the advent to power of Rouhani. Despite a few symbolic achievements, also the situation with regard to women’s rights and cultural freedom remained critical. Whereas the number of registered NGOs in Iran significantly increased, along with hopes of more freedom and influence for civil society and interest groups, these hopes were mostly unfulfilled. Censorship continued to be in place, the judiciary persisted in stopping reformist journalists from publishing new newspapers, and the pace of change remained slow. «Having got the nuclear deal he desperately wanted, Hassan Rouhani is now suffering the backlash» – wrote The Economist in November 2015. While the president was busy fending off the risks of a comeback from the hardliners and trying to restart the economy, Khamenei, which backed the president throughout the nuclear talks, seemed content to divide and rule.[78] «Mr Rouhani is stronger than before the deal,» – the article continues – but «a stalled economy may hurt him as much as his conservative foes».[79]

The past two years were thus characterised by a mix of successes, hopes and failed expectations for the Rouhani administration. All in all, the presidency largely constituted the decision-making power within Iran compared to the previous administration, particularly on a major international and security issue, such as the nuclear dossier. Because of the structure and the principles at the basis of the Islamic Republic, however, the Supreme Leadership has been careful in rebalancing the power of the Rouhani administration, enabling different figures, close to the hardliners and to the IRGC, to retain control over domestic issues and over other foreign policy dossiers. 2016 will likely constitute the year in which factional politics will reach its peak. With the looming parliamentary elections and the starting campaign for the presidential elections which will take place in June 2017, foreign policy, domestic reforms and economic prospects will likely all be a mere representation of who will ultimately win the domestic infight. Whether regional tensions, notably with Saudi Arabia, or more importantly the implementation of the nuclear agreement will play a crucial role in this, remains to be seen.

 

Turkmenistan 2015: existing challenges to the permanent neutrality and the strategic development of the multivector energy policy

As the country with the fourth largest natural gas reserves in the world, Turkmenistan is aiming to diversify its energy export routes in order to enhance its strategic role as an energy supplier. In 2015, this central Asian republic paved the way for the implementation of the eastward and westward export corridors, starting the completion of the TAPI pipeline and completing the national East-West gas pipeline.

Even while Turkmenistan confirmed its twenty-year adherence to permanent neutrality in its foreign policy, in the year under review President Gurbanguly Berdimuhamedow faced growing and dangerous threats along the Turkmen-Afghan border, represented by potential incursions of the Afghan Taliban or other armed groups, which could affect both Turkmenistan’s national stability and its domestic security. In this situation, and considering that Turkmenistan’s armed forces may not be ready to face this challenge along the eastern border, President Berdimuhamedow, in the year under review, reiterated Turkmenistan’s refusal to cooperate with Russia in the Collective Security Treaty Organization (CSTO) framework. However, unconfirmed reports have suggested that Uzbek and Russian military units have already been engaged along the Turkmen-Afghan border, reinforcing Turkmenistan’s border defence capacity. Likewise, according to some sources, military cooperation between Turkmenistan and the US appear to be in the offing.

  1. Introduction

During 2015 Turkmenistan has been profoundly worried about the growing activism of armed militants along its eastern border, which it shares with Afghanistan. The potential convergence between Central Asian terrorists – mainly the Afghan Taliban and the Islamic Movement of Uzbekistan – and foreign fighters linked to the so-called Islamic State represent a dangerous threat to national stability and domestic security, not only with respect to the preservation of the current political leadership but also with respect to the future implementation of the eastward corridor for energy exports. As a matter of fact, the completion of the Turkmenistan-Afghanistan-Pakistan-India (TAPI) gas pipeline (from Turkmenistan to India and Pakistan, crossing Afghanistan) has progressively become a strategic goal in the Turkmen strategy of diversifying energy exports in order to lessen the dependence on gas exports delivered to China.

On 12 December 2015, Turkmenistan celebrated the 20th anniversary of permanent neutrality, based on a peaceful and non-alignment position in foreign policy. However, if the Taliban threat along the border becomes more relevant, Turkmen President Gurbanguly Berdimuhamedow will be pushed to revise the traditional neutrality concept in foreign policy in order to receive the military support needed to contain the destabilizing armed incursions of terrorists.

With respect to the diversification of its energy exports, Turkmenistan took concrete steps, starting the completion of the TAPI pipeline and mainly reaffirming its commitment to supplying the Southern Gas Corridor. As a matter of fact, in addition to the Ashgabat Declaration signed in May 2015, Turkmenistan completed the East-West gas pipeline, which is meant to fuel the future westward export route to the EU markets.

  1. The domestic political scenario

Since 2012 Turkmenistan has progressively undertaken a gradual process of democratization and reforms, in order to change the national political system from a one-party system – based on the presidential Democratic Party – to a multi-party political system: currently the Party of Industrialists and Entrepreneurs and the Agrarian Party of Turkmenistan – which were founded in 2012 and 2014 respectively – are the other official political parties in the country.

Nevertheless, Turkmenistan remains an authoritarian state: President Berdimuhamedow is also the head of government and the commander in chief of the armed forces. According to the Turkmen leadership, an immediate adherence to the democratic experiences of other states would be inappropriate for Turkmenistan, while a gradual approach to the democratisation could better ensure that political and socio-economic reforms are consistent with “the centuries-old democratic traditions”.[1]

The role of the Council of Elders – a consultative assembly of elders from all provinces of Turkmenistan assisting the president in addressing issues of state importance – and of the Gengesh – the local self-government bodies – reflect the Turkmen’s willingness to respect the national traditions and to undertake an endogenous approach towards democracy.

During the last session of the Council of Elders, one of the debated issues was the worsening of the economic outlook, due to falling global energy prices, which has severely affected the Turkmen economy, which is heavily reliant on natural gas exports. The Council of Elders proposed abolishing the free supply of electricity, cooking gas, and water to the country’s households, so as to reduce welfare benefits – introduced by the former President Niyazov in 1993 –, which contribute to ensuring domestic stability.[2]

Moreover, in January 2015 Turkmenistan devalued its national currency, the Manat, in order to bolster its effort to diversify its trade’s.[3]

Following the negative shortcomings in the energy, economic and security spheres, Turkmenistan’s President made reshuffled his government, changing the staff in the government’s senior posts.

In August 2015, the Deputy Prime Minister Durdylyyev was dismissed, as was the Minister of Energy, Geldi Saryev, because of shortcomings in their work, while Dovranmammed Rejepow was appointed as the new Minister of Energy.[4] As we observe in the next sections, Turkmenistan’s success in the energy sector arrived only in December 2015, following the completion of the East-West gas pipeline and the beginning of the realization of the TAPI gas pipeline (Turkmenistan-Afghanistan-Pakistan-India).

Furthermore, the growing threats to national security, due to Taliban activities along the Turkmen-Afghan border pushed the Turkmen President to dismiss Begench Gundogdiyev from the post of Defence minister: Yaylim Berdiev – the former minister of national security – became the new Defence minister, while Guychgeldi Hojaberdiev was appointed Turkmenistan’s minister of national security.[5]

  1. Threats to national security at the eastern border

During 2015, the Turkmen authorities have dealt with a worsening security outlook along the eastern border, which is shared with Afghanistan, following the consolidation of tbe Taliban’s position in the Afghan districts close to the Turkmen border. After the Taliban took control of Khamyab province in December 2014, they extended their control over Faryab province in Afghanistan. Frequent clashes and military incursions have been reported, even if they diminished compared to 2014.

Considering that, according to two of the main experts on Central Asian security, the Afghan government does not have the military force to restore security in its western provinces, the rise of Taliban activism represents a serious challenge for Ashgabat.[6]

In terms of trans-border stability, the situation is further complicated by the presence of an estimated 1.5 million ethnic Turkmens in the northern Afghan provinces of Faryab and Jowzjan, just beside the border with Turkmenistan. In these Afghan border provinces, where the Taliban are firmly entrenched, the local Turkmen community have organized a kind of popular militia – led by Gurbandurdy and Emir Karyad, two former ethnic Turkmen warlords – which, in 2014 and 2015, fought against the Taliban to protect the local Turkmen.[7]

This being the situation, Turkmen border guards – worried about the Taliban threat – in order to prevent incursions by the Taliban have closed the border, installing obstructive barb wire along the border. This move has adversely affected the ethnic Turkmens on the Afghan side, depriving them of vital grazing pastures that are located on the Turkmen side of the border and which Afghan Turkmens traditionally had access to in the past.[8]

In addition to the Taliban threat, the rising presence of Central Asian foreign fighters linked to the Islamic State (IS) is another looming challenge facing Turkmenistan. According to the International Crisis Group the number of Central Asian jihadists – which are active in Iraq and Syria under the banner of the IS – is between 2,000 and 4,000. However, estimates vary, mainly because Central Asian governments often overestimate the number of terrorists for internal political reasons, in order to tighten domestic social control.[9]

Russia also appears to overestimate the presence of IS fighters in Central Asia, putting the number of IS fighters along the Turkmen-Afghan border at 2,500, in an ill-disguised attempt to pressure Ashgabat to establish military cooperation with Russia within the CSTO framework (the Collective Security Treaty Organization, the main regional security organization leaded by Russia, which also includes Kazakhstan, Tajikistan, Kyrgyzstan, Armenia and Belarus).[10]

The future possible return to their homelands of the Central Asian fighters now active in Syria and Iraq represents a big potential challenge for the Turkmen and other Central Asian authorities. This threat appears to be a serious one, particularly after the IS’s announcement that it intended to create a Khorasan vilayat (province) of the Caliphate, including Turkmenistan, Central Asia and Iran. It is a fact that the number of Turkmen IS fighters seems not to be so high – less than 400, much less than their Uzbek or Tajik counterparts. However, a potential merger between the IS and regional Islamic extremist movements is clearly perceived as a destabilizing and dangerous threat. Indeed, in August 2015 the leader of the Islamic Movement of Uzbekistan – IMU, which represents the most powerful and rooted Islamic movement in Central Asia – pledged its allegiance to the IS.[11]

This being the situation, President Berdimuhamedow has discussed with the President of Uzbekistan, Islam Karimov, in Tashkent, the worsening regional security outlook and how to address the threats coming from Afghanistan.[12]

Turkmenistan has always adopted a pragmatic approach toward Afghanistan, offering economic solutions to Afghanistan’s problems and attempting to integrate the country within a regional economy through the development of trade and energy infrastructures (natural gas and electricity networks).[13]

Part of the Ashgabat-sponsored economic solution to the Afghan woes is the completion of the TAPI gas pipeline (on which, more below). Indeed, the completion of TAPI will make available to Afghanistan both the supply of Turkmen natural gas, lucrative transit fees and revenues (estimated at 500.000-$1 billion per year) and, last but not least, the building of infrastructure and the creation of new jobs.[14]

Turkmenistan concretely supports Afghanistan’s development, by supplying electric power and liquefied petroleum gas at preferential prices, building industrial facilities and sending humanitarian aid. In 2015 the Turkmen President announced the objective of increasing fivefold the electricity supply to Afghanistan, following the expected completion of the new gas turbine power plants in the regions of Lebap and Mary.[15]

In November 2015, Turkmenistan concluded the national section of the Turkmenistan-Afghanistan-Tajikistan railway, from Atamyrat to Akina along the border with Afghanistan. In the future this trans-regional railroad corridor will play a significant role in integrating Afghanistan in the regional markets, increasing trade turnover and becoming an important link in the transport network, integrating the countries of Central Asia and easing access to the seaports on the coast of the Indian Ocean.[16]

  1. 4. Revising the Turkmen neutrality policy?

Turkmenistan’s ambitious aim is to promote peace and stability in Afghanistan through preventive diplomacy, and the Ashgabat government has proposed hosting an inter-Afghan peaceful dialogue under UN auspices, as a new political and diplomatic mechanism for resolving this issue.[17] Nevertheless, in security terms, Turkmenistan has boosted its border defences, in order to monitor and patrol the 257 km largely deserted border with Afghanistan. In October 2015, nearly 70% of Turkmenistan’s land military forces were deployed in the southern parts of the provinces of Mary and Lebap, both of which border Afghanistan, which highlights the extent to which the national government is worried about the security on its eastern border.[18]

However, Turkmenistan’s armed forces may not be ready to face the challenge of frequent terrorist incursions from the eastern border, which could destabilize the country and represents a serious threat to its national security.

According to the Stockholm International Peace Research Institute (SIPRI) Turkmenistan’s armed forces are considered among the weakest in the region, due to several factors such as the lack of personnel training and as a result of the neutrality policy. As a matter of fact, the Turkmen army did not undertake any military operations and were not involved in any multilateral training exercises as a consequence of Turkmenistan’s refusal to participate in some regional military-political blocs. Normally, 12,000 border guards are deployed along the Afghan-Turkmen border but these guards are considered ineffective due to the lack of qualified personnel.[19]

During a meeting of the State Security Council, President Berdimuhamedow – who is also Supreme Commander-in-Chief of the Armed Forces General of the Army – reaffirmed his engagement in the implementation of a large-scale military reform, based on upgrading the hardware used by the armed forces and training qualified personnel.[20]

If the Taliban threat along the border becomes more urgent, President Berdimuhamedow could be pushed to revise the neutrality concept in foreign policy in order to receive the military support needed to contain armed incursions by the Taliban.[21]

On 12 December 2015 Turkmenistan celebrated the 20th anniversary of permanent neutrality, which is internationally recognized given the fact that in 1995 the United Nations General Assembly unanimously adopted the Resolution on the Permanent Neutrality of Turkmenistan.

During his speech at the International Conference on the Policy of Neutrality held in Ashgabat, President Berdimuhamedow stressed the strategic relevance of positive neutrality, as a model based on peacefulness, non-interference in the affairs of other states, respect for their sovereignty and territorial integrity, and non-participation in international military organisations and treaties.[22]

Moreover, considering that Berdimuhamedow stated that «this status is a pillar to peace, security and development», and that «the promotion of fraternal and friendly relations with our neighbours will remain a crucial aspect of the foreign policy of neutral Turkmenistan», Turkmenistan appears officially determined to preserve its neutrality policy.[23]

As a matter of fact, in spite of several talks between Turkmenistan’s and Russia’s presidents about the security concerns and the threats coming from Afghanistan, Turkmenistan has to this day refused to cooperate with Russia in the CSTO framework, disappointing CSTO Secretary General Nikolay Bordyuzha.[24]

Nevertheless, unconfirmed reports have suggested that Uzbek and Russian military units are already engaged along the Turkmen-Afghan border in order to reinforce the border defence capacity of Turkmenistan. Likewise, according to some sources, potential future cooperation between Ashgabat and Washington to achieve the same security aim seems to be in the offing, even if the Turkmen government has not officially confirmed this.[25]

  1. 5. The strategic energy partnership with China and the diversification of export routes

Turkmenistan ranks fourth in the world in terms of the volume of its natural gas reserves, after Iran, Russia and Qatar. According to the BP Statistical Review 2015, Turkmenistan holds 17.2 trillion cubic meters (tcm) of natural gas reserves, even if the estimates of the Turkmen authorities are higher.[26] As a matter of fact, according to an independent audit, the reserves of the Galkynysh field – the world’s second largest in terms of reserves – together with the Yashlar deposits, are estimated at 26.2 tcm. In November 2015, during the international exhibition and conference «Oil and Gas of Turkmenistan», the country’s minister for oil and mineral resources, Muhametnur Halylov, stated that the reserves of this giant gas deposit will rise to 27.4 tcm when we add the reserves of the newly discovered Garakel field, which is included in the Galkynysh area.[27]

The national production of natural gas increased by 11% in 2014 (from 62.3 bcm[28] to 69.3 bcm); Turkmenistan exported 41.6 bcm of gas to the countries of China (25.5 bcm), Iran (6.5 bcm) and Russia (9 bcm).[29] Under the program for the development of the country’s oil and gas industry, the plan is to increase the gas production volume to 230 bcm by 2030.

In spite of these positive prospects in the gas sector, the need to diversify the export energy routes has suddenly become urgent, and not only to balance the rising Chinese influence in the national energy sector. As a matter of fact, in 2015, the Turkmen authorities clearly realized that Russia cannot be considered a reliable energy partner. In February 2015, Alexander Medvedev – the Gazprom Vice Chairman – revealed that Gazprom would be cutting more than 50% of its natural gas imports from Turkmenistan, from 10 bcm (2014) to 4 bcm in 2015.[30] This planned reduction of exports to Russia will affect the national energy budget. This is despite the fact that Russia signed an agreement with respect to gas supplies with Turkmenistan for 25 years in 2003 and that in 2008 Russia purchased 42 bcm of Turkmen gas. Moreover, the Turkmen authorities claim that Gazprom has not yet paid gas volumes bought in 2015.

At present Ashgabat has lost an energy partner that should be promptly replaced in order to implement the strategy of diversifying the export routes as well as selling the increased production that is expected over the next few years.

When the Turkmen government launched its strategy of export diversification, the main aim was to lessen the dependence on exports to Russia, finding new partners and opening new export routes: now Turkmenistan is in a similar situation with China, which has taken over Russia’s role.

China currently is the main energy partner for Turkmenistan in terms of exports (25.5 bcm in 2014, 60% of total gas exports) and the main investor in the development of the Turkmenistan gas fields. In addition to the development of the first and second phases of the giant Galkynish gas field, China National Petroleum Corporation (CNPC) is also developing Turkmenistan’s Bagtyyarlyk gas field on the bank of the Amu Darya, and investing billions of dollars in the Turkmen energy sector. After the completion of Line C at the end of 2015, the China-Central Asia Gas Pipeline will have a capacity of 55 bcm, while the construction of a new gas pipeline from Turkmenistan to China (Line D) with the capacity to carry 30 bcm/a of gas will start in 2016. Under the agreement signed between the CNPC and Turkmengaz, Turkmenistan will supply China annually with 65 bcm of gas by 2020-2021.[31]

In the next decade this unbalanced dependence on Chinese markets could severely affect Turkmenistan’s energy security. As a matter of fact, following the implementation of the Sino-Russian energy deal – based on the completion of the Power of Siberia gas pipeline (and potentially Altai gas pipeline) – China could decide to buy more Russian gas, reducing Turkmenistan’s gas supply and consequently exposing the Central Asian country to a condition of vulnerability, even if at present China buys Turkmen gas at a lower price than Russian gas.

This scenario is pushing President Berdimuhamedow to immediately find new and alternative energy partners, accelerating the implementation of the western and eastern vectors of export.[32]

5.1.   Turkmenistan and the Trans Caspian Pipeline: a concrete engagement

In 2015, Ashgabat took significant steps towards the completion of the Trans Caspian Pipeline (TCP), the energy corridor along the Caspian Sea between Turkmenistan and Azerbaijan, with the concrete involvement of Turkmenistan as gas the supplier, in order to enhance the capacity of this energy route.

Trilateral negotiations among the EU, Turkmenistan and Azerbaijan have paved the way for improved reciprocal relations, which have tried to address unsolved issues between Baku and Ashgabat (i.e. the ownership of disputed offshore oil and gas fields in the Caspian basin), and the recent trilateral dialogue involving Turkmenistan and Azerbaijan and Turkey have revitalized the Trans Caspian project, producing interesting results. As a matter of fact, in November 2014 Turkmenistan signed a framework agreement with Turkey to supply the Trans Anatolian Natural Gas Pipeline project (TANAP), a section of the Southern Gas Corridor (SGC) project, which aims to deliver 16 bcm of gas a year from Azerbaijan’s Shah Deniz II field in the Caspian Sea to Europe via Turkey.[33]

In January 2015, during a trilateral meeting held in Ashgabat these three countries decided to further enhance their energy cooperation and the ministers of Turkey and Azerbaijan invited Turkmenistan to join the TANAP project.[34] Turkmenistan’s participation will enhance the capacity of this energy route – which is expected to reach 31 bcm in 2026 and 60 bcm in 2030 – allowing Turkmenistan to successfully exploit an alternative energy corridor with a large capacity, bound to conspicuously enhance the growth of Turkmenistan gas production and exports.[35] On 4 March 2015, the Turkmen Presidents visited Ankara, where Turkish President Recep Tayyip Erdogan announced the project to develop a trilateral mechanism on energy issues involving the two Caspian countries and Turkey.[36]

Furthermore, the trilateral meeting involving Turkmenistan and the EU and Azerbaijan (the so-called Troika) has produced a relevant agreement in the energy issues, in light of the shared convergence of strategic interests and concerns of the actors involved.

For the European Union, the worsening relations with Russia have further highlighted the vulnerability of its energy security and the need to coherently undertake a diversification strategy with respect to import routes, aiming to lessen the «unbalanced» reliance on Russian gas imports crossing Ukraine. For Azerbaijan, the Turkish Stream pipeline project – a new gas pipeline backed by Moscow crossing Turkey and carrying Russian gas – could undermine Baku’s exclusive role as EU’s alternative supplier along a southern route bypassing Ukraine.[37] Furthermore, the SGC expected capacity will reach approximately 30 bcm of gas per year – without the contribution of Turkmen gas – representing less than half of the Turkish Stream’s potential capacity (63 bcm per year). Consequently, Azerbaijan could strategically support Turkmenistan’s participation in the SGC. For Turkmenistan, a western corridor of gas exports would allow Turkmenistan to diversify its energy routes, lessening the strong dependence on a single customer – China, which currently purchases over 60% of Turkmen gas exports – and offsetting the Russian decision to cut its gas imports from Turkmenistan by nearly two-thirds.

The EU’s diplomatic engagement has produced significant concrete steps. In February 2015, Maros Sefcovic, the European Commission’s Vice President in charge of Energy Union, declared that the EU intends to find a technical and legal basis for the Turkmen gas supply via Azerbaijan, mainly because the EU Commission considers the TCP as a project of common interest.[38]

On 1th May, during a meeting of the energy ministers of Azerbaijan, Turkey, Turkmenistan, and EU representatives in Ashgabat, the parties signed the «Ashgabat Declaration», focused on the development of cooperation in the energy field.[39] The document said that the sides support the creation of the favourable conditions necessary for ensuring reliable, stable and long-term international energy cooperation, taking into account the interests of producers, transit countries, and consumers of energy resources. The sides also recognized the importance of equal and mutually beneficial cooperation in ensuring the supply of natural gas from Turkmenistan to Europe.[40]

In July, the first high level meeting of the Working Group on the TCP project was held in Brussels, involving the deputy ministers in charge of the energy section in the four countries involved in order to consider all aspects (organizational, legal, commercial, technical) related to implementing a natural gas corridor from Turkmenistan to Europe.[41]

Furthermore, in December 2015 Turkmenistan concluded the East-West pipeline, a 773-kilometer gas pipeline with a capacity of 30 bcm of natural gas per year that connects Galkynysh’s largest gas field with the Shatlyk gas compressor station in the province of Mary and the Belek gas compressor station in the Balkan province. In order to enhance its capacity to 40 bcm the Turkmen authorities plan to add 10 bcm provided by Malaysian Petronas, operating at Turkmenistan’s offshore block. The fact that the whole pipeline has been built by national energy companies – Turkmengaz and Turkmennebitgazgurlushyk – and that the $2 billion estimated cost has been covered by the Turkmen governments shows the strategic relevance of this corridor to the national strategy of energy export diversification.[42]

5.2.   Geopolitical hindrances and alternative projects

Turkmenistan has clearly reaffirmed its commitment to developing the SGC, concretely opening a new and alternative westward route of energy export and potentially playing the role of a gas supplier to the EU. However, this ambition could be hampered by some domestic and international hindrances, such as the dilemma concerning the Iranian corridor and the persistent Russian opposition to the realization of TCP.

According to Sefcovic there are two potential routes for exporting Turkmen gas to the EU market: transiting through Iran, and building an underwater Trans Caspian pipeline.[43] Following the improvement of EU-Iranian relations, the possibility of an an overland pipeline delivering Turkmen gas through Iranian territory to Turkey could be an interesting alternative option to pursue, in order to reach the EU market.

However, it will be necessary to build infrastructure in order to realize this Turkmen-Iranian energy corridor: the current capacity of the Turkmen-Iranian gas pipeline is 18 bcm, so it would need to be expanded to carry additional volumes of Turkmen gas to boost TANAP’s capacity. Moreover, Iran should improve its domestic energy infrastructure in order to connect it to the Turkish border.[44]

Russian opposition to the realization of a Trans-Caspian pipeline is officially motivated by ecological and environmental issues, even if we can also observe geopolitical reasons in Moscow’s approach, aimed at preventing the implementation of an alternative export energy route to the EU markets, which could lessen the EU’s dependence on Russian gas imports. Moreover, the unsolved legal status of the Caspian Sea contributes to delay a potential solution with respect to the TCP.

The official position of Ashgabat regarding the project is that the consent of the countries whose territories are involved in the project is enough to build a pipeline. In spite of the recent enhanced rapprochement with Azerbaijan on energy issues – which also shared with Turkmenistan the same approach about the TCP – the next Caspian summit scheduled in 2016 could be decisive in reaching a definition of the Caspian sea’s legal status and both countries will postpone any decision concerning the Russian position during the summit.

At the same time, the agreement between Turkmenistan and Kazakhstan for the delimitation of the shared Caspian Sea bed signed in 2015 showed Ashgabat’s willingness to develop a cooperative approach with respect to regional energy issues, enhancing bilateral relations with post soviet energy producers with the aim of improving the legal framework before the Caspian summit.[45]

Considering that the bulk of national reserves are located onshore in the eastern region, Turkmenistan needs to exploit the potential Caspian reserves – which are largely unexplored – in order to enhance the western vector of its energy exports. Ashgabat invited foreign companies to sign production sharing agreements (PSA) to develop hydrocarbon resources in the Turkmen part of the Caspian Sea, which are estimated at 12 billion metric tons of oil and 6.5 trillion cubic meters of gas. Currently several foreign companies – such as Malaysia’s Petronas, Dragon Oil, Italy’s Eni, Russia’s Itera and Zarubezhneft Cyprus-based Buried Hill – are seeking to develop the Turkmen offshore energy potential.[46]

In spite of positive diplomatic steps, given the current outlook, Sefcovic’s statement that Turkmen natural gas could start being exported to Europe through a pipeline under the Caspian Sea by 2019 appears optimistic. In spite of several hindrances, which have been delaying the TCP’s realization, the potential participation of Turkmenistan in the AGRI project could allow the implementation of the Southern Gas Corridor – as well as of a westward export route – without building an underwater pipeline, also overcoming Russian claims.

AGRI will be designed to transport Azerbaijani gas by pipeline – with a planned capacity of 7 bcm that should thereafter be upgraded to 20 bcm – to a Black Sea port in Georgia for liquefaction and then this LNG will be delivered via tanker to the Romanian Black Sea port of Constanta before reaching Eastern European markets.[47]

If the AGRI system’s capacity is increased, it could potentially accommodate LNG exports from Turkmenistan, through the ad hoc facilities in Turkmenbashi International Seaport. The AGRI project clearly represents an interesting diversification option for Ashgabat, even if the fate of this interconnector is strictly interlinked to several economic and geopolitical hindrances which could delay its completion.[48]

Turkmenistan’s contribution to the development of an East-West corridor is growingly significantly with respect to the oil sector, considering that Turkmen oil transportation through the Baku-Tbilisi-Ceyhan pipeline increased by nearly 40% in 2015. The BTC pipeline mainly delivers Azerbaijani oil to the Western markets but also Kazakhstan and Turkmenistan oil exports by tankers to the Baku port. In 2014, BTC transported 5.6 million metric tons of Turkmen oil, compared to 3.3 million metric tons in 2013.[49] At present, the country produces around 10 million metric tons of oil per year, but in 2015 Turkmenistan increased oil production (+6.5%) partly thanks to the activities of foreign energy companies – mainly Dragon oil and Malaysian Petronas – involved in the development of the Turkmen sector of the Caspian Sea under the production sharing agreements.[50]

5.3.   The launch of the Turkmenistan-Afghanistan-Pakistan-India pipeline

Concerning the eastern energy export corridor, in 2015 Turkmenistan started to build the TAPI natural gas pipeline, overcoming the traditional hindrances. On 7 November 2015, Turkmenistan’s President signed a decree ordering the state companies Turkmengaz and Turkmengazneftstroi to design and to construct the national segment of the TAPI, to be completed in two years.[51]

On 13 December 2015, the President of Turkmenistan Gurbanguly Berdimuhamedow, the President of the Islamic Republic of Afghanistan Mohammad Ashraf Ghani, the Prime Minister of the Islamic Republic of Pakistan Muhammad Nawaz Sharif, and the Vice President of India Mohammad Hamid Ansari gathered in the city of Mary to attend the ground-breaking ceremony of the TAPI gas pipeline.[52]

Through TAPI, Ashgabat will be able to sell 33 bcm of natural gas per year, through a pipeline with a length of 1,800 kilometres, which will cross Afghanistan and Pakistan before reaching India, with an expected cost of $10 billion.

This relevant success has been made possible by the previous realization of some necessary preconditions. Firstly, the TAPI Ltd. International consortium – established in November 2014 and composed pf Turkmengaz State Concern, Afghan Gas Corporation, Pakistan’s «Inter State Gas Systems (Private) Limited» and Indian «GAIL (India)» – selected the Turkmen national energy company Turkmengaz as the leader of this consortium and also the main investor. As a leader, the Turkmengaz State Concern will supervise the interaction concerning the construction, financing, ownership and operation of the pipeline.[53]

Secondly, in September 2015, the feasibility study for a project to construct the TAPI gas pipeline was completed. The British company Penspen was involved in the feasibility study for the TAPI. According to the Asian Development Bank (ADB), which is a transaction advisor on the TAPI project, this pipeline will be realized by 2018. Moreover ADB is one of the main investors and it will try to attract other international actors interested investing and financing the project.[54]

Thirdly, Turkmenistan has signed a framework agreement with a consortium of several Japanese companies for the development of the third phase of the Galkynysh gas field, which will be the main source fueling the TAPI project.[55]

So Japan has entered the geopolitical energy game in Central Asia, because the agreement on Galkynish is a real challenge to the current position of China, which holds contracts to develop the first and the second phase of the project. Japanese Prime Minister Shinzo Abe visited Turkmenistan in October 2015, where he concluded bilateral agreements on the construction of a gas and chemical plant, power plant and other projects for worth a total of $18 billion.[56] Tokyo’s government has offered investments to construct industrial plants based on advanced technologies for gas processing meant for the production of gasoline, polypropylene, polyethylene, caustic soda and other gas-chemical products. Construction also continues to progress on a gas chemical complex in Turkmenbashi that will to produce ethylene, high-density polyethylene, and polypropylene.[57]

In spite of Turkmen claims that it will complete the infrastructure by December 2018, the rising threats to regional security and stability appear likely to delay the implementation of this export corridor which is currently vital for the national strategy of diversification. Firstly, the TAPI route will cross areas affected by a great instability such as South-Western Afghanistan (Herat, Helmand, Kandahar) and Pakistani Baluchistan. Secondly, the growing confrontation along the Turkmen-Afghan border between Islamic extremists (Taliban, foreign fighters linked to the IS or IMU) and Turkmen border guards could contribute spreading instability (even if this area is currently a long way from the northern areas involved in the unrest), representing a threat to regularly supply energy delivered through TAPI.[58]

In addition to increasing exports of oil and gas, Turkmenistan also aims to diversify its national energy strategy and exports, developing projects to expand natural gas processing and petrochemical production. Turkmenistan plans to complete a plant for polyethylene and polypropylene production in Balkan province, as well as a plant for producing synthetic gasoline from natural gas in Ahal province in the next few years.

The recent energy cooperation with Japan could help Turkmenistan to develop its national industrial sector. Another interesting opportunity to diversify the national energy strategy is based on the industrial development and commercial exploitation of more than 200 deposits of various solid minerals and hydro-mineral raw materials. According to the Turkmen government, recent geological explorations have showed the presence in the national subsoil of relevant reserves of various mineral salts – such as sodium, potassium, sulfate and magnesium salts – as well as potential reserves of metals[59] such as manganese, copper, iron, lead, zinc, gold.[60]

 

Kyrgyzstan 2015: a country adrift?

In August 2015 Kyrgyzstan completed the accession process to the Eurasian Economic Union (EEU). Bishkek now firmly gravitates in Russia’s orbit. In October parliamentary elections returned a six-party national assembly, where the president, Almazbek Atambayev, could count on a strong pro-presidential power base, consisting of the «president’s party», the Social-Democratic Party of Kyrgyzstan (SDPK), and the new «Kyrgyzstan» party. Suggesting that Kyrgyzstan is a country adrift might appear counter-intuitive. However, the impression resulting by an in-depth analysis is that the Central Asian country’s political system and society are presently floating, without trajectory or leadership. In fact, the government has been unable to resolve the never-ending controversy over the Kumtor gold mine. The authorities are also showing signs of preoccupation due to the threat posed by the Islamic State (IS). This being the situation, the chapter reviews two economic issues that largely shaped political and social developments in 2015: the first is the accession to the Eurasian Union and the effects that the economic crisis in Russia had on the Kyrgyz economy. The second is the turbulence surrounding Kumtor. Next, the chapter analyzes the results and effects of the October parliamentary elections. The remainder of the chapter focuses on some controversial legislative initiatives and concludes by discussing the threat posed by the IS to Kyrgyzstan.

1. Introduction

Suggesting that Kyrgyzstan is a country adrift might appear counter-intuitive. After all, in August 2015 the small Central Asian republic completed the accession process to the Eurasian Economic Union (EEU). Consequently, Bishkek now firmly gravitates in Russia’s orbit. In October parliamentary elections returned a six-party national assembly, where the president, Almazbek Atambayev, could count on a strong pro-presidential power base, consisting of the «president’s party», the Social-Democratic Party of Kyrgyzstan (SDPK), and the new Kyrgyzstan party. Yet, the impression is that of a political system and society that float, without trajectory or leadership. The government has been unable to resolve the never-ending controversy over the Kumtor gold mine. The authorities are also showing signs of preoccupation with the threat posed by the Islamic State (IS). Although precise numbers are hard to come by, a few hundreds Kyrgyzstani citizens are among the ranks of either the IS or Al Qai‘da’s affiliate Jabhat al-Nusra. Without a proper attempt at addressing the root causes of discontent or the individual pathways to radicalization and recruitment, the government is resorting to the strategy it knows best: a crackdown on civil and political liberties. The chapter begins with reviewing two economic issues that largely shaped political and social developments in the country in 2015: the first is the accession to the Eurasian Union and the effects that the economic crisis in Russia had on the Kyrgyz economy. The second is the turbulence surrounding Kumtor. Next, the chapter analysis the results and effects of the October parliamentary elections. The remainder of the chapter focuses on some controversial legislative initiatives and concludes by discussing the threat posed by the IS to Kyrgyzstan.

2. International and domestic causes of a critical economic situation

The Kyrgyz economy and, more broadly, society suffer from two main sources of vulnerability. The first stems from the fact that Kyrgyzstan is a resource-poor country, whose main strategic asset is the gold mine at Kumtor (and other mining sites, which are confronted with similar challenges). A drop in production (of gold) is bound to cause a decline in export revenues which constitute the main source of hard currency. This has implications on GDP growth, tax revenues and social welfare. The second is the growing dependence on the Russian economy. Over a million Kyrgyzstani citizens work in Russia and migrants’ remittances constitute an important source of livelihood for local households. Last but not least, Kyrgyzstan’s membership in the Eurasian Economic Union (EEU) meant that the country’s position as main entry in the Central Asian economic space and re-export point for Chinese goods was lost because of the higher tariffs imposed on non-EEU imported goods. In August 2015, after years of delays and wrangling during the accession negotiations, Kyrgyzstan finally formally joined the EEU, a regional economic organization which also includes Russia, Belarus, Kazakhstan and Armenia. The strongest argument in favor of Kyrgyzstan’s membership in the EEU has long been the promise of long-term economic stability and development. EEU membership will bring a welcome easing of regulations for Kyrgyz labour migrants in member countries, a critical issue for Kyrgyzstan’s economy and society, as these critically depend on remittances. Remittances from Kyrgyz migrants are crucial to the local economy staying afloat. Official statistics put the number of migrants at some 700,000 (mostly working in Russia and Kazakhstan), whereas international organizations put the estimate at well over one million, or about 20% of the overall Kyrgyzstani population. In recent years the Customs Union (the EEU’s predecessor) and the Single Economic Space have set in place a wide range of rules and institutions. This includes two of the agreements on the legal status of migrant workers and their family members, and the agreement on cooperation among member states on counteracting illegal labour migration from third countries. The most important benefit of EEU accession in this regard stems from the fact that national status is granted to labour migrants as far as job placement and access to social services are concerned. This includes the abolishment of licences and permissions to work; the granting of social and other rights to migrants and their families (medical care, education); the payment of the income tax in the country of residence; and recognition of work experience and of pensions rights. These benefits notwithstanding, some challenges remain. Kyrgyzstan will have to make arrangements to secure its external borders to restrict the move of the citizens of third countries and ensure the security of EEU countries. This will heighten pressure on the Osh and Batken regions in the south, through which illegal migration via Tajikistan and trade from China mostly enter the country. What is worse, the Russian financial crisis, caused by the plummeting of oil prices and Western sanctions because of Russia’s annexation of Crimea, has had a direct fallout on the Kyrgyz economy, bringing about a shortfall in migrant remittances, pushing inflation up and foreign investment down, all of which is bound to adversely impact on the GDP. The most direct fallout of the Russian crisis (recession, plummeting oil prices, and sanctions) is precisely on the remittances that Kyrgyz migrants send home: 20% migrants have been forced home because of shrinking labour market in Russia; as a result, remittances in 2015 are expected to decrease by some US$425m, or about 23% compared those of the previous year. Apart form the migrants issue, Kyrgyzstan’s economy remains vulnerable to external shocks such as the global trend of commodity prices. Macro-economic data reveal a worrisome picture of the Kyrgyz economy. GDP growth slowed in 2014 and 2015 (3.5% and 3.2% respectively, compared to 10.5% in 2013) . During the same period foreign direct investment declined as well. Russian investment and subsidies were announced in the closing months of the period under review as a way to promote and speed up the accession process to the EEU. They included US$600m to upgrade gas infrastructure, US$300m to enhance border security, and US$1.2bn for the establishment of a Development Fund aimed at offsetting the costs of EEU integration . Much of this has now been put on hold. In turn, the uncertainty surrounding the implications of EEU integration has led to a sharp decline of both Western and Chinese investment.

3. The Kumtor gold mine

The gold mine at Kumtor, located some 350 kilometres south-east of the capital Bishkek, is the country’s main source of hard currency, a vital contributor to the country’s GDP, and the single largest private employer. Since 1997, when production started, Kumtor has emerged as one of the most contentious issues in the small Central Asian republic’s socio-economic and political life. In 2014 the mining sector accounted for 15% of the budget revenues, 15% of the country’s GDP and over half of its industrial output and export revenues, constituting Kyrgyzstan’s main source of wealth.

3.1. The deal that never was In February 2014, after months of protests, rallies, and violence, the parliament voted in favour of a new agreement framework, replacing the one signed in 2009. At the time, the Canadian company Centerra Gold Inc. was the owner of the mine; Kumtor Gold Company, fully owned by Centerra, operated the mine. In turn, the Kyrgyzstani government owned 33% of the shares in Centerra (not Kumtor) via the state-owned mining company Kyrgyzaltyn JSC . Centerra also owned other mining sites in Mongolia, Russia, Turkey, and China, and the Kyrgyz government, being a shareholder in Centerra, received dividends from Centerra’s profits, including those accruing from activities outside Kyrgyzstan. This being the situation, a new agreement, whose signature was expected first in late 2014 and then any time in the first half of 2015, seemed in the offing, bound to radically revise the contentious 2009 framework agreement. The terms of the new agreement would have been the following: The government would release its shares in Centerra; in turn Kumtor would be co-owned as a joint venture (50-50) by Centerra and the Kyrgyzstani government, via Kyrgyzaltyn. The new agreement would have lead to Bishkek giving up its share in Centerra’s profit outside Kyrgyzstan, receiving in exchange greater responsibilities and profits exclusively in Kumtor. This was a development which would have tyed the performance of the Kyrgyzstani economy to the volatility of gold prices, making the local economy even more dependent on a single sector (gold) at the expense of other (non-gold) sectors. This, in turn, would have raised key questions about the long term development of the country. However, on 9 April 2015 the national parliament adopted a non-binding resolution which called the government’s handling of the Kumtor negotiations «unsatisfactory». On 13 April, then Prime Minister Otorbayev, in a surprising turn of events, announced that the government would no longer pursue a new agreement, as this «was no longer in the interests of the country». Ten days later, on 23 April the prime minister resigned. The new government led by Temir Sariyev promptly confirmed that neither nationalization nor the renegotiation of the deal were on the agenda. «Nationalization will only create certain risks and threats for us. We must seek other ways», Sariyev stated in April. Spats between the parties resurfaced in late July when the State Agency for Geology and Mineral Resources noted that Centerra’s report detailing data on stocks of gold at Kumtor (including the projected lower production in 2015) was overdue. Calm around the Kumtor issue was, as predicted, merely a lull. A bitter row re-ignited as the new parliament convened after the elections (see the next section) and the government, led by Temir Sariyev, was confronted with this seemingly irresolvable question. The most immediate cause of the new development lies in the failure of the parliament to adopt an amendment of the «Water Code». This would essentially prevent mining sites from operating at high altitudes, where their functioning would jeopardise glaciers, already in retreat. Failure to amend this would lead to making Centerra’s license to operate the mine inapplicable. An even more disconcerting development occurred right before the closing of the year under review as the government notified Centerra Gold of its intention of withdrawing from the renegotiations of the agreement, something which the Kyrgyz government itself had proposed to Centerra. In the words of an official statement, the Kyrgyz government «considers that the existing agreement on Kumtor in the current environment does not meet the interests of the Kyrgyz Republic». This last «act of brinkmanship» , which Bishkek blamed on Kumtor’s lower than expected output in 2015, shows the intention to pursue yet another restructuring of the ownership configuration of Kumtor, its governance, and the distribution of dividends. A new wave of «resource nationalism» has seemingly engulfed the country and the international companies operating there, in what has become a volatile political and business environment.

4. The 2015 parliamentary election in Kyrgyzstan

On 4 October 2015 Kyrgyzstan held its sixth parliamentary election since achieving independence form the Soviet Union in 1991. Of the fourteen parties allowed to register and contest the elections, six managed to pass the required threshold and gain seats in the Jogorku Kenesh (National Assembly). On the eve of the 2015 national elections, The Social-Democratic Party of Kyrgyzstan (SDPK) was the country’s dominant political party. After spending two decades at margins of Kyrgyzstan’s political life, the SDPK had been catapulted to the centre of the political system by the democratic breakthrough which followed the ouster of former president Bakiyev and the election of Almazbek Atambayev to the presidency in October 2011. Another important political party, established by former Respublika MP Kanatbek Isaev in 2015, was the Kyrgyzstan party. With an unclear ideological platform but well-endowed financially (backed by the owner of the largest vodka company in the country), in 2015 the Kyrgyzstan party staged a lavish electoral campaign. The 7% nation-wide threshold for political parties made the formation of electoral coalitions compelling. By 2015, however, SDPK’s strong competitors in 2010 had gradually withered away: nationalist Ata Jurt, with a stronghold in the south had suffered several defections, as had been the case with Respublika. Even more so, the Ar-Namys party, led by long-time politician Feliks Kulov, had literally been deserted by its members. Apart from Respublika and Ata Jurt, the main challenge to the strong organizational presidential machine was expected to come from the Butun Kyrgyzstan-Emgek coalition. Butun Kyrgyzstan was led by Adakhan Madumarov, a nationalist politician based in the south, whose party narrowly failed to pass the threshold to gain seats in 2010. Emgek was led by Askar Salimbekov, a wealthy businessman from the northern regions and owner of the country’s largest market, Dordoi, in the capital Bishkek.

4.1. Results Elections returned a six-party parliament (table 1). At 27% SDPK won comfortably. The opposition split into two competing coalitions (Respublika-Ata Jurt and Butun Kyrgyzstan-Emgek) and fared poorly, with the former coming second (20% of the popular vote) and the latter failing to secure the required threshold, receiving just over 6% of the popular vote. The other parties that managed to pass the threshold were Kyrgyzstan (12.8%), Onuguu-Progress (9.3%), Bir Bol (8.5%), and Ata-Meken (7.75%). The SDPK won predictably and comfortably, albeit not by the expected landslide. The SDPK came first in seven out of nine electoral districts. Respublika-Ata Jurt won in the other two districts (Talas in the north-west and Jalalabat in the south), with an especially strong performance in Talas where it gained 37% of the popular vote. Kyrgyzstan did exceptionally well in the Chuy district (over 17%), as well as in Osh city and Jalalabat in the south. Onuguu-Progress gained more than 14% in Jalalabat, with Bir Bol obtaining its best results in Jalalabat and Batken (around 11%). A comparison with 2010 highlights interesting trends (table 2). First, the SDPK significantly increased its presence in the new parliament (38 seats, up from 26 in 2010). Kyrgyzstan, Onuguu-Progress and Bir Bol were not represented in the fifth legislature, whereas in the sixth the three parties received 18, 13, and 12 seats respectively. Respublika-Ata Jurt incurred significant losses (28 seats in 2015). In 2010 the two parties, having run separately, conquered 23 and 28 seats, whereas they only won 28 seats in 2015. Ata Meken also performed poorly, losing 7 seats (11 in 2015, down from 18 in 2010).

Table 1. The 2015 Parliamentary Election Results (voters and percentages)

Votes (overall) % (overall) Bishkek Chuy Talas Issyk-kul Naryn Osh city Osh Jalalabat Batken SDPK 431,771 27.5 30.4 29.1 12.3 25.7 30.4 40.1 35.5 14.4 29.8 Respublika-Ata Jurt 316,372 20.2 20.6 19.6 37.3 21.7 12.8 16.9 16.3 22.6 18.4 Kyrgyzstan 203,383 13.0 8.6 17.1 13.0 11.3 16.1 14.5 12.4 14.4 7.1 Onuguu-Progress 143,475 9.3 6.5 8.6 9.3 7.7 6.4 7.5 9.5 14.1 7.6 Bir Bol 133,800 8.5 6.5 7.2 3.8 6.5 2.4 8.1 10.2 11.4 11.9 Ata Meken 122,152 7.0 7.8 6.5 13.8 7.2 10.5 5.9 6.6 8.5 6.8 Butun Kyrgyzstan-Emgek 96,751 6.1 7.9 4.4 2.6 4.9 8.2 2.6 4.4 7.3 12.4 Ar-Namys 12,496 0.7 1.1 0.5 1.6 0.3 0.3 0.6 0.3 1.5 0.6 Others 199,256 7.7 10.6 7 6.3 14.7 12.9 3.8 4.8 5.8 5.4 TOTAL 1,659,456 100 100 100 100 100 100 100 100 100 100

Source: Kyrgyz Respublikasynyn Zhogorku Keneshinin Deputattaryn Shayloo – Central Election Commission – (http://ess.shailoo.gov.kg/ServiceJSP.do)

Table 2. Jogorku Kenesh seats

2015 2010 Diff. SDPK 38 26 +12 Respublika-Ata Jurt 28 51* -23 Kyrgyzstan 18 0 n.a. Onuguu-Progress 13 0 n.a. Bir Bol 12 0 n.a. Ata-Meken 11 18 -7 Ar Namys 0 25 -25 TOTAL 120 120

* Respublika and Ata Jurt ran separately in 2010, receiving 23 and 28 seats respectively. Source: Central Election Commission, Kyrgyz Republic.

Consequently, SDPK’s grip on power has consolidated; the party increased its number of seats by 50%. Together with Kyrgyzstan, pro-presidential parties enjoy a strong base in the parliament. Similarly to 2010, Butun Kyrgyzstan again failed to pass the necessary threshold to gain seats in the parliament. Ar-Namys, one of the country’s oldest parties, was virtually eliminated from political life as it received 0.79% of the votes.

4.2. Coalition-building and government formation

In light of the changes introduced by the 2010 Constitution, the results of the parliamentary election are consequential for government formation since the cabinet must rely on a parliamentary majority. Although the parliament is home to six parties, the assembly is less fragmented than the previous one and, at least on paper, should be conducive to more stable majorities. Relatively swift post-election negotiations ended in the formation of a coalition comprising, as expected, the SDPK and Kyrgyzstan, alongside Ata Meken and Onuguu-Progress. On 5 November the parliament approved the formation of the new coalition government by Temir Sariyev (who was also Prime Minister in the previous government), with the support of 80 MPs.

5. Towards institutional isomorphism: Russia’s influence casts a shadow on Kyrgyzstan’s civil society

It is not only Bishkek’s foreign and domestic policies which orbit around Russia. Social developments are largely shaped by occurrences and even legislative initiative that take place in Moscow, such as the curbing of civil liberties. Kyrgyzstan’s once vibrant civil society has increasingly become the target of harassment, intimidation, attacks and more recently legislative activity aimed at curbing its activities and stifling its impact. Such trends bear strong resemblance to analogous dynamics in Russia. Rising nationalist tones, anti-western themes, far-right and homophobic groups already regularly feature in the republic’s daily life. The first reading of the «foreign agents» and «gay propaganda» bills in the year under review was a clear pointer to the tendency to effectively condone such attitudes and expose already vulnerable groups to increased state and public pressure and interference.

5.1. The «foreign agents» bill

On 4 June the Jogorku Kenesh voted in favor – 83 to 23 – of the «foreign agents» bill. It was the first reading of a bill which had been in the works since 2013 and which, before being enacted, is to pass two more readings and get the president’s signature. The bill requires domestic non-governmental organizations that receive funding from abroad and engage in vaguely defined «political activities» to register as «foreign agents». In its current wording, the bill is problematic in a number of respects. First, the notion of political activities is defined in very broad terms, encompassing «activities aimed at influencing public opinion and government policies». Second, as most local NGOs depend on external funding for their work, the bill would expose a large number of them to the rigours of the law. Third, the bill expands the scope of action of the authorities, which are granted increased powers to inspect the activities of NGOs. NGOs falling in this category would have to register as «foreign agents». Failing to do so would expose them to the risk of being closed down by the authorities. In its scope and language the bill mirrors Russia’s legislation on the same subject, with a focus on the origins of funding and that of political activities. The final approval of controversial legislation was halted after the first reading of the bill, as the electoral campaign went on the way, out of concerns that international support (also financial) for the elections would be curbed. What remains to be seen is whether in 2016 the legislative process will be carried to its conclusion, with the final enactment of the controversial bill.

5.2. The «gay propaganda» bill

A second pending piece of legislation was that on ‘non-traditional sexual relations’, which also passed the first reading, but did not yet complete the legislastive iter. According to the proposed draft law, propaganda – defined as depicting in positive light or promoting interest in same-sex relations – is to be prohibited at public assemblies, in the media, via the internet. Penalties include administrative and criminal sanctions, such as fines and jail sentences up to one year. If approved, the law would infringe on the advocacy of groups for rights of the LGBTI community (lesbian, gay, bisexual, trans, and/or intersex.), and would also hinder discussion of LGBTI issues, de facto condoning discrimination and intolerance. Again, the law bears close resemblance to the one adopted in Russia.

5.3. Harassment of political and civil rights groups

During the year under review, episodes of attacks against political and civil rights groups were on the rise: on 3 April 2015 Bishkek-based NGO Labrys, which defends LGBTI rights in the country, came under attack when a small group threw several explosive bottles into the NGO’s office yard. The attempt to set it on fire ultimately failed, but Labrys’s subsequent attempts to launch a police investigation were thwarted, a clear indication of the law enforcement authorities’ stance against the LGBTI groups. On 27 March the Osh offices of the Bir-Duino-Kyrgyzstan Human Rights Movement and the homes of its lawyers were searched by officers of the State Committee for National Security. Various materials, including computers, flash drives and files, were confiscated. Although the action was sanctioned by a court, the State Committee’s actions exceeded the scope allowed by the law (which applies to cases where lawyers are involved in criminal offenses). The lawyers first won the appeal, only to see the decision annulled by the Osh Regional Court. Any attempt to initiate a new investigation into the case of Askarov, an ethnic Uzbek allegedly involved in the 2010 violence in the south of the country and detained ever since, has also failed. In September 2014 the Supreme Court confirmed the decision – by another court – to discontinue such investigation. Requests to reconsider by the European Parliament and attempts to secure the involvement of the UN Human Rights Committee have similarly failed. Washington’s decision to bestow the Human Rights Defender Award to Askarov plunged Kyrgyz-US relations to a new low, with Bishkek repealing the 1993 bilateral treaty, which ensures tax-free status to Kyrgyz employees of US government or aid agencies.

6. Radicalization, the rise of the Islamic State and government crackdown

As already noted in the previous Asia Maior volume, the major global issue that found echoes in Kyrgyzstan is the rise of the Islamic State (IS). The existence of IS looms large over Kyrgyzstan in at least two respects. The first concerns radicalization and recruitment of foreign fighters. This trend has constantly been reported by international and local news agency as well as organizations such as the International Crisis Group, although evidence of radical groups actually taking root remains scant. Estimates of Central Asians living in IS-controlled territory in Syria and Iraq are set at about 3,000 for 2015 (out of about 20,000 foreign fighters), of whom about 200-300 allegedly originate from Kyrgyzstan. Once in Syria, fighters are affiliated to one of two groups, «mirroring the larger fault lines of the Syrian conflict». First the so-called «Aleppo Uzbeks», allied with al-Qa‘ida-affiliated Jabhat al-Nusra. The second and larger group is found on IS-controlled territory, especially the cities of Raqqa and Mosul, and includes both fighters and those that have relocated there, to the live under the Islamic State. Regardless of the reliability of the estimates, what is true is the far greater appeal of the events in Syria compared to the old «theatre» for Central Asian militants, namely Afghanistan and Pakistan, now seemingly remote and irrelevant. Syria is seen as an issue of global relevance, whereas the remote valleys of northern Pakistan seem to be caught up in ferocious but distant, localized and largely irrelevant fight. The second issue pertains to the possible returning fighters and the measures taken by local governments to counter the threat, real or perceived, posed by the Islamic State to domestic stability. Again, evidence in support of this claim is elusive, and yet fears along these lines are used by the authorities in support of the introduction of legislation which restricts civil liberties such as the freedom of non-traditional religious practices and religious organisations not officially sanctioned by the state. Whereas government rhetoric suggests that the authorities take the threat seriously, policies have so far focused on repression (e.g. apprehending real or imagined radicals allegedly preparing attacks on local territory) rather than tackling the root causes of those societal grievances which find expression in the IS popularity.

Conclusion

On a superficial level, most political developments that have taken place in 2015 point to stability, something which the country has been in short supply of since acquiring independence from the Soviet Union in 1991. However, at a closer look, this veneer of stability masks a situation characterized by the fact that the country is without a steering direction, adrift in the face of forces that are beyond its control. In a way, Kyrgyzstan is muddling through amidst multiple challenges and stress points. If this is a lull, how long will it be before another major crisis occurs?

 

Afghanistan 2015: the national unity government at work: reforms, war, and the search for stability

he end of the Karzai era and the establishment of a coalition government were the most important events of 2015 in Afghanistan. After the disputed 2014 presidential election, Ashraf Ghani and Abdullah Abdullah signed an agreement for the formation of a government of national unity. On this basis, Ghani took office as President, while Abdullah was appointed Chief Executive Officer, a position that corresponds roughly to that of a prime minister. Despite high expectations, the government faced enormous difficulties because of the disagreement between the two leaders. This division also characterized the reform agenda, which was an integral part of the 2014 deal. Ghani and Abdullah pledged to change the electoral system and to reform the Constitution. However, the two leaders have found themselves in disagreement on the contents of the reforms, particularly in relation to the electoral system. The dispute has therefore caused a climate of political uncertainty. Meanwhile, the military situation has deteriorated because of the intensification of the offensive of the Taliban. The military mission «Resolute Support» has seen the international forces reducing their activity to a consulting and training role. This has highlighted the weakness of the Afghan National Army. However, in mid-2015 the Taliban faced an unexpected internal crisis, with the death of their leader, Mullah Muhammad Omar. With regard to foreign relations, Ghani successfully sought to re-establish positive relations with the United States, and vigorously pursued the peace process. The two main changes in this regard were the search for a direct approach with Pakistan and the formal inclusion of China—along with the United States—in what has become the «Quadrilateral Approach» to the peace process. Finally, this essay summarizes the evolution of the Afghan economy, which appears once again to be conditioned by the uncertain political framework and by the negative effects of reduced foreign military presence, despite an improvement in tax revenue.

 1. Introduction

The end of the Karzai era and the establishment of a coalition government in Afghanistan dominated 2015. After the highly disputed 2014 presidential election, Ashraf Ghani and Abdullah Abdullah signed a deal which provided for the formation of a National Unity Government (NUG). According to the agreement, Ghani was appointed President, while Abdullah was sworn in as the Chief Executive Officer (CEO), a newly-created position corresponding to that of a prime minister. However, the deal did not bring to an end the political confrontation. Despite the solemn pledges of political unity made by the two leaders, the government has faced great difficulties in agreeing on basically all political choices. The formation of the cabinet had to wait until the end of 2014, but the key position of Minister of Defence has been left in the hands of an acting minister due to the lack of consensus on the appointment. Such disagreement also characterized the agenda of reforms, which was included in the 2014 deal. The two leaders made a commitment to change the electoral system in time for the new parliamentary elections, which were due to take place in the summer of 2015. Moreover, they committed themselves to reforming the Constitution, in order to replace the presidential system with a parliamentary one. However, since the beginning of the government, the two leaders have shown very different approaches towards the agenda: while President Ghani appeared reluctant to take concrete steps, Abdullah was much more active, showing signs of impatience at Ghani’s apathy. The confrontation between the two leaders caused a serious political impasse, which led many observers to express doubts about the capacity of the NUG to deliver political stability. In the meantime, the military situation deteriorated due to the intensification of the Taliban’s offensive. The start of the «Resolute Support Mission» in January 2015 resulted in the international forces downgrading their activity to an advisory and training role. As widely expected, these circumstances highlighted the weakness of the Afghan National Army (ANA) and its inadequacy in taking on the task of leading the war against the Taliban. However, in mid-2015 the insurgents faced an unexpected internal crisis, with the announcement of the death of their leader Mullah Muhammad Omar. The loss of the charismatic mujahidin commander led to a struggle for succession within the Taliban which has affected their unity and strength.

On the foreign policy front, President Ghani successfully tried to re-establish positive relations with the US, and eagerly pushed forward the peace process, as promised during the electoral campaign. The two main developments in this regard were the President’s initiative to directly approach Pakistan in bilateral talks, and the formal inclusion of China, together with the US, in what has become the «Quadrilateral approach» to the peace process.

Finally, in the year under review, the political uncertainties and the withdrawal of the international military forces adversely affected the economy, which nevertheless recorded, overall, a slight improvement.

  1. The NUG and the reform agenda

The results of the presidential elections largely determined the political developments in 2015.[1] The September 2014 deal signed by the two main contenders, Ashraf Ghani and Abdullah Abdullah, was not merely a power-sharing plan. Besides the distribution of the governmental posts, the deal included a plan for the reform of both the Constitution and the electoral system. The statement issued by the two leaders at the time declared a change in the Afghan political system with the introduction of the post of «executive prime minister»—therefore modifying the current presidential system—as one of the main purposes of the agreement.[2] The deal also established a two-year deadline for the convocation of a constitutional Loya Jirga (traditional grand assembly). Such a decision had delicate political consequences, because it implied that the CEO—the role held by the opposition leader Abdullah—was an interim figure, and he would have to give up his position within two years. The fact that the two leaders had agreed on a form of government was in itself an important achievement, given the country’s political history. In fact, the non-Pashtun communities—, which were for the most part Abdullah’s supporters—never quite accepted the presidential form of government, which was decided on at the 2001 Bonn conference at the insistence of both the Pashtun majority and of the US.[3]

However, the more complex point of the government’s agenda turned out to be the electoral reform. Although described in the post-election joint statement as a necessary step «to ensure that future elections are fully credible», it became soon the real point of contention between Ghani and Abdullah.[4] The dispute concerned the result of the last elections. According to Abdullah, the elections were largely marred by fraud, and the responsibility for this lay with the electoral bodies: the Independent Electoral Commission (IEC) and the Independent Electoral Complaints Commission (IECC). Therefore, the changes Abdullah and his supporters had in mind involved a radical reform of the two institutions. In February 2015, Asef Ashna, the deputy spokesman of the CEO, stated that «the (electoral) reforms include the dismissal of the commissioners of the election commissions, who have upset the elections and who are responsible for damaging the people’s trust in a democratic process».[5] As expected, this statement caused a strong reaction on the part of the electoral commissioners. Not only did they refuse to be held responsible for the problems of the last elections, but also insisted that the reform of the system was their own business, claiming that the government had no authority to interfere.[6] Unsurprisingly, the election commissioners found an ally in the President and his supporters. In fact, Ghani rejected Abdullah’s demand of a reshuffle of the IEC and the IECC, and insisted that the reform had to be limited to the electoral rules. Significantly, while Abdullah ignored the IEC and IECC in preparing his own proposals, Ghani had a meeting with the IEC commissioners and listened to their proposals.

  1. Why were the reforms so important?

There was more than one reason that caused the President and his circle of supporters to be so cautious about revising the electoral commissions and the electoral matter at large. First, a replacement of the IEC and of the IECC might be interpreted by the public as an admission that the vote had been marred by fraud. This would have undoubtedly damaged the President’s image and strengthened his opponent’s. Secondly, the choices made about the electoral system would have relevant consequences for the future Constitution. As we noted above, the reform of the Constitution required the convening of a Loya Jirga. However, the formation of the Loya Jirga was to be preceded by the election of the new parliament and district councils; according to article 110 of the Constitution, more than 85% of the Jirga’s members should be elected from a pool of delegates chosen by those assemblies.[7] In short, prevailing in the future Parliament would be a necessary step in order to acquire a majority in the future Loya Jirga, and therefore to influence the reform of the Constitution. The consequence of this was that all political actors were determined to play a role in the electoral reform. With these premises, it is easy to understand why the reform agenda became an arena of contention between the two main factions, and between the two main factions and all of the other minor groups that wanted to play a role in Afghan politics.[8]

To make things even more complex, the Afghan electoral schedule required that the parliamentary and district council elections be held not later than 23 June 2015; that is, before the end of the Wolesi Jirga’s (the lower chamber’s) term. Although the February 2015 joint declaration by the President and the CEO stated that no further elections would be made without the reform, it soon became evident that only a miracle would allow the process to be completed in time. According to the September 2014 agreement, «immediately after the establishment of the NUG», the President would appoint a special commission for the reform of the electoral system. In reality, it took as long as five months for Ashraf Ghani to sign the necessary decree. Unsurprisingly, the President’s inaction aroused anxiety in Abdullah and his supporters, who began casting doubts on the President’s real intentions. In January, the CEO began moving on his own path. His representative announced the drafting of two proposals; one to amend the electoral laws and to establish an anti-fraud mechanism, and a second one to modify the electoral system with the introduction of a quota of proportional representation.[9] The Parliament also decided to take the initiative: although article 109 of the Constitution forbids the Wolesi Jirga from amending the electoral laws during its last year of office, the assembly started discussing amendments to various articles of the law on electoral bodies. The prevalence of CEO’s supporters in the parliamentary commissions—not surprisingly—led to amendments that were very close to Abdullah’s views, which added new fuel to the confrontation.[10] These developments emphasised once more the extreme fragmentation of the Afghan institutions and the lack of consensus among the political forces.[11]

In February, the President reacted by trying to take control of the process. First, he launched a consultation with the IEC and the civil society on the electoral laws; two months later, he appointed—without consulting the CEO—a chairperson to the special commission for the reform of the electoral system.[12] The news caused a new conflict, given that the person nominated by the President—Shukria Barakzai—had been a member of Ghani’s electoral team, which obviously led the CEO’s circle to cast doubt on her impartiality. The deputy spokesperson of the CEO went so far as to accuse Barakzai of being involved in «large-scale fraud» during the past election.[13] As was largely expected, the confrontation made it impossible to complete the reform according to the constitutional schedule. Unsurprisingly, the international actors followed these events with growing concern. In May, they decided to put some pressure on Kabul, and announced the «end (of) their financial cooperation» with the Afghan electoral institutions due to the lack of reforms.[14] Given that the international donors financially supported about 80% of the IEC budget, including the salaries of the electoral commissioners, their decision to withdraw from the process meant bringing to a halt the electoral machine. The donors’ initiative was decisive in ending the stalemate; after more than three months of negotiations, in July 2015, Ghani announced the appointment of Sultan Shah Akefi as the new chairperson of the commission. An academic belonging to the Hazara community, and with extensive experience in parliamentary work, Akefi was acceptable to the opposition. In addition, the President appointed the other 14 members of the body—seven names from each party—including the UN Deputy-Special Representative for Afghanistan as the 15th component without voting rights.[15] The international partners reacted with relief to the news, and invited the government to announce an electoral calendar as soon as possible.[16]

However, great obstacles remained along the way. Apart from the technical complexity of the reform itself, the organization of the district council elections was not an easy task. The main reason was that these elections had never been held in the past; therefore, a complex work of boundary definition and the gathering of population statistics were required. Not surprisingly, the previous governments had decided to cancel the plans to hold district council elections together with other polls.[17] In any case, the special commission seemed to act efficiently. Starting work in late July, after one month it submitted a list of proposals to the President and to the CEO.[18] The draft proposals included a correction of the electoral system with the introduction of a quota of parliamentary seats (85 out of 250) allocated through proportional representation; the creation of a voter’s identification system; and the division of the provinces into smaller electoral constituencies. Having been discussed for years, the proposals were not new; however, their publication caused a new dispute between Ghani and Abdullah, because some of the former’s supporters viewed the draft as too close to the CEO’s views. For example, the head of the IECC, Abdul Sattar Saadat, already at the centre of the 2014 electoral dispute and considered close to the President, described some of the proposals as «illegal», and stated that their acceptance would amount to admitting the illegitimacy of the previous presidential election.[19] On the other side, Abdullah was quick in lauding the work of the Commission, while Ghani himself remained silent.

Apart from the parties’ strategies, the introduction of a proportional quota would undoubtedly be a revolution for the Afghan political system. Not only would it reinforce the political parties’ influence at the expense of the independent parliamentarians, but it would also force the Kabul politicians to look for candidates able to mobilize the vote banks in the provinces, therefore changing the balance of power between the capital and the provinces. In any case, the complexity of the task, and the failure of the attempt to build a political consensus, made delaying the parliamentary election an unavoidable choice. By June, the President had already issued a decree extending the term of the parliament until the holding of fresh elections.[20] In late December, Ghani announced that the elections would be postponed until 15 October 2016.[21]

  1. The deteriorating military situation

Since the formation of the NUG, the insurgency has intensified its offensive against the government. The pressure by the Taliban began in February and reached its apex in September/October. Significantly, in 2015 the Taliban did not interrupt—except in Kabul—the military operations at the beginning of the winter season, as they had done in the past. The higher intensity of the fighting was also due to the reduction of the international allies’ activity to a training and advisory role, which allowed the insurgents to engage the Afghan armed forces in open battles. As a result, the geography of the war changed during 2015, with the Taliban extending their offensive to provinces that had been relatively peaceful in the past, principally in the Northern areas. Of particular importance has been the capture by the Taliban of the city of Kunduz, which was recovered by the ANA two weeks later, only thanks to the deployment of US Special Forces and air support.[22] The fall of Kunduz to the insurgents was a shock for the Afghan public, since it was the first time since 2001 that the Taliban occupied an urban area. Moreover, Kunduz was far from the territory under Taliban influence, being disconnected from their support networks in Pakistan. The strategic position of the city, near to the Tajikistan border, contributed to spreading insecurity through the Northern provinces.[23] Moreover, with their attack on Kunduz, the insurgents showed the capacity to penetrate regions that had been considered centres of anti-Taliban activity. The insurgents also conducted large-scale military operations in the South, particularly in the Helmand and Uruzgan Provinces, and launched attacks against civil targets, like the airports of Kabul and Kandahar and even the national Parliament.[24]

Although the Taliban rarely established stable control of these territories, these events augmented their confidence, while increasing the feeling of insecurity among the population. During the year under review, the Afghan National Security Forces (ANSF) continued to register a very high number of casualties, which increased by 70% in the first 15 weeks of the year, compared to the same period in 2014; a rate that former US commander, Gen. Joseph Anderson, described as «not sustainable».[25] Despite the unavailability of exact data, many observers have considered the year as the bloodiest since 2001.[26] Moreover, the confidence shown by the Taliban increased the perception that they can still prevail in military terms, which has made political reconciliation more arduous.[27]

These developments obviously emphasised the difficulties for the ANA in leading the military operations against the insurgents, following the reduction of the ISAF (International Security Assistance Force) role under the «Resolute Support Mission». There was certainly an expectation that the change in military responsibilities would lead to a weakening of ANA control in the rural areas, and therefore a growing threat to the cities. However, the speed of the process and the inability of the ANA to maintain a hold on the territory surprised many analysts.[28] According to well-informed sources, for the first time since 2001 the ANA has begun having problems with recruitment. The army is also suffering both from the withdrawal of foreign advisers at unit level, and from a weakness of equipment and logistics.[29] The high casualties suffered and the lack of major victories have also created a low morale in the troops, which was reflected in desertion and «ghost soldiering» (troops that are included on the soldiers’ list, but who are not serving).[30] The decision by the President to augment the salaries of the army was also a demonstration that the NUG was aware of the problem.[31] Another serious issue was the inability of the government to improve the mechanism of appointments based on merit. Contrary to the announcements of the NUG, politicization and patronage still condition the careers of the military, causing a serious adverse impact on ANA morale.[32]

In this context, it is not surprising that Ashraf Ghani, during his first official visit to Washington in March, formally asked the US administration to freeze the plan of withdrawal of troops from Afghanistan, a request that the US President accepted.[33] The decision of the Obama administration was also based on other elements, besides Kabul’s request. The most important was the resilience of al Qa‘ida in the border region between Afghanistan and Pakistan. Although considered moribund, according to reliable sources the Islamist network was still active in 2015 in the mountainous tribal areas, despite repeated operations by the US Special Forces.[34] The second reason was the emerging evidence on the infiltration of the so-called Islamic State’s Wilayat Khorasan (namely the «Khorasan province», Khorasan being a region in Eastern Iran) into the eastern region of Afghanistan.[35] Finally, the decision by the Obama administration to maintain «flexibility» on troops’ deployment was linked to the needs of the CIA and of the Special Forces to operate in two large military bases at Kandahar and Jalalabad. Washington has therefore redefined its initial plan of withdrawal in order to maintain about 10,000 troops in Afghanistan, which the US officials consider the minimum useful force.[36] Still, disagreement exists between the Afghan and American actors—as well as between US officials—about the future prospects of American military presence in the field. While President Obama has promised to withdraw all US troops by the end of 2016, Ashraf Ghani—aware of the ANA’s weakness—has insisted on a protracted US military presence. Apparently some of the US staff also shared that fear; according to them, the Afghan scenario after a complete US pull-out would resemble too closely the post-1989 period, when the Islamist insurgency was quick to occupy the political vacuum.[37]

  1. The power struggle within the Taliban

The apparent position of strength of the insurgents came under scrutiny in mid-2015 when, after many unconfirmed reports, Kabul’s National Directorate of Security (NDS)—the Afghan intelligence agency—revealed that Mullah Muhammad Omar, the charismatic leader of the Taliban, had died, apparently, in 2013. After two days of silence, the Taliban official sources confirmed the news, and, at the same time announced the appointment of Mullah Omar’s deputy, Mullah Akhtar Muhammad Mansour, as the new Taliban leader.[38] The loss of the acknowledged leader inflicted a tremendous blow to the movement, given that Mullah Omar was perhaps the only unifying force in a traditionally fragmented movement. In fact, not all the factions accepted the appointment of Mullah Mansour; some founded a parallel organization under the leadership of another veteran mujahidin commander, Mullah Muhammad Rasul. The actual balance of forces between the two leaders was difficult to ascertain, given that the estimates were often politically motivated. According to US diplomatic sources, about 80-90% of the movement supported Mansour, while the rest of the insurgents were loyal to Rasul. However, Taliban sources suggested that Mansour had a much more limited strength of about 55-60% of the Taliban.[39] While the struggle of power inside the movement did not generally affected their ability to fight, it nonetheless emphasised their internal rivalries and divergent opinions on a variety of topics, which may be the sign of a possible fracture in the movement. Moreover, the attempt by the Islamic State to penetrate the Af-Pak region created a further alternative to Mansour, with some of the disappointed field commanders and rank-and-file declaring their allegiance to the «Islamic State», in open disagreement with the current Taliban leadership.[40]

More importantly, the two sides showed different attitudes towards the issue of reconciliation with the NUG. Akhtar Mansour has been known for years as one of the most pragmatic and pro-dialogue Taliban commanders.[41] This was confirmed by his role in the opening of the Taliban «political office» in Qatar in 2013, as well as by his support—though with scarce enthusiasm—of the peace initiative launched under Pakistani guidance in Murree (in the Pakistan province of Punjab) in July 2015.[42] On the other side, Mullah Rasul rejected the attempts to negotiate with the NUG made by Mansour, accusing him of pursuing «personal interests».[43] However, differences within the Taliban are much more fluid than they may appear on the surface, and well-informed sources emphasise that differences of opinions regarding whether to negotiate—and under which conditions—exist on both sides, as well as in the other Taliban splinter groups. Mullah Rasul himself, while condemning the Murree Process, has emphasised that he is not against «reconciliation in principle»; rather that he is opposed to Mansour’s control over the negotiation. Mullah Rasul has publicly insisted that reconciliation must not sacrifice basic Taliban «principles», such as the insertion of more shari‘a norms into the Afghan Constitution, and the preliminary withdrawal of all Western soldiers from Afghanistan. Interestingly, Rasul has also criticized the current state of the reconciliation process, based on the «Quadrilateral approach»; that is, on the participation of the US, China and Pakistan, with the exclusion of Iran.[44] While the appointment of Mullah Mansour has undoubtedly kept the door open for negotiation, it has also had a divisive effect on the Taliban groups, which, in turn, has paradoxically made negotiating more difficult. Moreover, Mansour’s need to reassure the movement of his unwillingness to negotiate at all costs explains the dramatic increase in violence during the autumn.

  1. Ghani’s foreign policy

The most obvious change with the passage of the presidency from Karzai to Ghani was probably recorded in foreign policy. First, Ghani worked hard at reversing the Afghan-US relations, which had reached their lowest point during the last months of the Karzai era, with the latter’s refusal to sign both the Bilateral Security Agreement (BSA) with the US, and the Status of Forces Agreement (SOFA) with NATO. Significantly, one of President Ghani’s first acts was to sign both treaties.[45] Moreover, whereas Karzai based its political action in recent years on a stronger nationalist sentiment, exploiting the existing discontent among the population caused by the US bombings’ civilian victims, the nationalistic anti-US rhetoric all but disappeared with Ghani’s election. When the President visited Washington in March, he thanked the US soldiers who fought in Afghanistan, and the US government for its military and financial support.[46] This «different relationship» was acknowledged by the US officials, who described Ghani as «more cooperative» than his predecessor.[47] On the other hand, Ghani’s cordial tone towards the US is easily understood in the light of his extreme need for continued military support, as noted above. The second new aspect was Ghani’s initiative—supported also by Abdullah—to directly address Pakistan about reviving the peace process with the Taliban. This in fact was not a true innovation, in that it reflected a widespread belief among Afghan politicians—often repeated by Karzai in the past—that the Taliban are controlled by Islamabad, or at least that Pakistan may persuade the Taliban to sit at the negotiating table.[48] This vision—which probably overestimates the strength of Pakistan vis-à-vis the Taliban—stems, among other factors, from a vision of the war as a conflict between states (that is, Afghanistan and Pakistan), rather than between different components of Afghan society.[49] That there has been a tendency on the part of Kabul and the US to overestimate the role of Pakistan in controlling the Taliban—or most of them—has been shown by the complex events of the Murree Process, that is, the negotiation conducted in summer 2015 under the auspices of Pakistan.[50] Well-informed sources suggest that the negotiation has actually been imposed on the Taliban by Islamabad, with the consequence of creating a rift between some of the Taliban commanders and the Pakistani civilian and military authorities. The result has been that, so far, the process has had limited results.[51] That said, it has to be recognized that the NUG have energetically carried on the attempt to build a new confidence in relations with Islamabad, also taking advantage of Nawaz Sharif’s new government in Pakistan, an attempt which has been acknowledged by Islamabad.[52] Regardless of whether Pakistan does or does not have the power to control the Taliban, there is no doubt that peace in the region must come from a change in relations between the two neighbouring states.[53]

  1. The economic situation

The political uncertainties and the withdrawal of international military forces affected the economic results of 2015. The political impasse caused by the reform difficulties and the military situation have counterbalanced the positive effect of the formation of the NUG. Accordingly, the economic improvement during the year under review has been modest when compared to the 2014 estimates.[54] However, the overall macroeconomic situation has remained stable and there are hopes of a gradual recovery in the next few years. The GDP growth rate marginally increased from 1.3% in 2014 to 1.5% in 2015. There was a slight growth in services, from 2.2% (2014) to 2.8% (2015), while the industry expansion rate was 1.4% lower than the previous year’s 2.4%. The data on new firm registrations showed a small rise in investment activities; however, these remained low in comparison with the 2012 level. The agricultural output was negative at -2.0% in 2015, mainly due to unfavourable weather conditions.[55] The inflation rate decreased to 1.5% from 4.5% in 2014, which may be explained by the fall of private consumption. The exchange rate saw the afghani depreciated by 7% against the US dollar, due to the decrease in foreign aid and the tendency of Afghan consumers to save their wealth in foreign currencies because of the political and military uncertainty.[56] The area where the Afghan economy improved most was in the fiscal sphere. Domestic revenues improved from 8.7% of the GDP in 2014 to 10.4% in 2015, which was, in part, the result of the Kabul government’s reforms in tax policy and arrears collection, and, in part, an effect of cautious expenditure management. Total expenditure slightly increased from 26.2% in 2014 to 27% in 2015.[57]

The issue of opium poppy cultivation also slightly improved during 2015, with the total area under cultivation estimated to be 19% less than 2014. This was even more significant in the context that this was the first decrease since 2009. A similar improvement was recorded with regard to the areas where poppy eradication was carried out, with an increase of 40% from 2014; this was due to enhanced coordination between the government’s agencies and increased protection on the part of the military. However, the data for 2015 confirmed the connection between opium production and insecurity, with 97% of the total production of opium taking place in the Southern, Eastern and Western provinces, where the political and military situation is most unstable.[58]

 

Pakistan 2015: domestic and foreign policy challenges

In Pakistan, the period under review (January–December 2015) was characterised by the overall stable rule of the Nawaz Sharif-headed government of the PML-N (Pakistan Muslim League-Nawaz) of the Prime Minister. The main challenge to the Nawaz Sharif government was the internal militancy. The cruelty of the 2013 attack on an army-run school in Peshawar that killed 149 people, including 132 children, had started what appeared to be a watershed moment in the savagery of domestic terrorism. In the period under review, a clear message was sent by the Pakistani institutions to the perpetrators of the deadly assault and to the militancy in the country at large: zero tolerance and no more safe havens allowed in Pakistan or Afghanistan. The special measures taken to fight the militants represented a change of direction after the initial tendency of the Nawaz Sharif government to engage in dialogue with the fighters operating in the North West areas of the country.

A similar iron-fist approach was taken by the military-led paramilitary forces in its effort to fight the violent crime affecting Karachi, the country’s most populous city. This policy, however, triggered political instability, as the strongest political party in town was the main target of the crackdown.

Developments in Pakistan-China bilateral relations led to the formalisation of an important economic agreement for the creation of a trade corridor linking China to the port of Gwadar in Balochistan. The strategic implications of the accord can be better understood in the context of the announced disengagement of the United States from Afghanistan. Moreover, the agreement contributes to explaining Islamabad’s decision not to support militarily its traditional ally Saudi Arabia in its campaign against Houthi rebel fighters in Yemen.

Overall stable bilateral relations between Pakistan and India at the highest diplomatic level did not prevent tensions from escalating on the international border in Jammu and Kashmir, where exchanges of fire and civilian casualties were reported, beginning in the summer of 2015.

  1. The domestic challenge: the militancy

The long years of military rule in the country (34, more than half of its history), which can be divided into four periods, were characterised by the national governments’ opposition to ethno-national provincial administrations and by the attempt to ensure political stability and economic modernisation in Pakistan. Ethnic and provincial identities were considered as threats to the achievement of these aims, while Islam was promoted as a means of national integration, which was done in parallel with a centralization of powers in Islamabad. As a consequence, both the empowerment of Islamic parties and militant groups (which were allowed unprecedented power) and the weaponisation of the country became the overall legacy of the long years of military rule and the distinguishing features of contemporary Pakistan. The war on terrorism which followed 9/11 strengthened these features further. Since then, Pakistani forces have encountered difficulties in maintaining control over the restive tribal regions, from where Islamic anti-government militants are mostly operating.

On 15 June 2014, the Pakistani army launched a comprehensive operation called Zarb-e-Azb against local and foreign militants in North Waziristan. According to the army, the military operation succeeded in ridding that geographical area from anti-government militant forces. A few months later, the military also launched Khyber-1, a follow up intervention aimed at clearing out militant strongholds in the tribal region of Khyber.[1]

The Islamic fighters’ retaliation was particularly cruel. On 16 December 2014, the Pakistani Taliban attacked an army-run school in Peshawar, the capital of Khyber Pakhtunkhwa province, killing nearly 150 people, among whom many were children. The attack triggered widespread outrage both in the country and abroad and the political leadership was put under pressure to take effective measures against terrorism.[2] Military action against militant groups was strongly demanded by the civil society. The widespread indignation caused by the event gave rise to a unity of purpose on the part of the political class, the army, and civil society at large. This resulted in a more resolute and united national effort to address the country’s security problems and, ultimately, in a more determined approach to counter-terrorism.

In March 2015, Pakistan launched a fresh operation (Khyber-2) against terrorists in the Khyber tribal region near the Afghanistan border.[3] In the period under review, the army continued fighting militants belonging to TTP (Tehrik-i-Taliban Pakistan, an alliance of a dozen groups of insurgents). A 20-point action plan was launched by the government to counter the escalating terrorism in Pakistan. A specific measure waiving the existing moratorium on the death penalty was taken to allow the execution of convicted terrorists. Also, special military courts were established for two years in order to be able to rapidly prosecute and try suspected terrorists. This was criticised for its implications regarding civil-military relations and, later in the year, the Supreme Court suspended some of the executions of terrorists convicted by the military courts.

Other measures were taken to freeze the financial and communication networks of the terrorist groups. A regulation of the madrasas was also put on the anvil, as the government pledged to exercise strong control over the religious seminaries suspected of fostering extremism. References to the financial support provided by Saudi Arabia to the religious seminaries, seen as breeding grounds for religious extremism, had frequently appeared in the media after the 2013 mass murder in Peshawar. Saudi authorities answered these implicit and explicit accusations by clarifying that all their donations had been cleared by the government of Pakistan. Iron-fisted counter-measures aimed at implementing a zero tolerance policy for militancy were also announced in Punjab, where violence had rapidly escalated.

Attacks by the TTP, their splinter groups, and other militant organisations continued in the period under review and were expanded in January and February 2015 to target minority groups, in particular Shia Muslims and Christians, in other areas of Pakistan.[4] A first attack on a Shia mosque involved Rawalpindi’s imambargah (a Shia congregation hall for commemoration ceremonies) Aun Mohammad Rizvi in the city’s Chatian Hatian area. Later, about 40 people were killed and over 50 injured as a blast hit a Shia mosque during the Friday prayers in Pakistan’s southern province of Sindh at the end of January 2015. According to the local English newspaper Express Tribune, a militant group named Jundallah – a Balochistan-based TTP splinter group which has pledged support to the Islamic State, claimed responsibility for the attack.

Christian churches were targeted too by the militants. On 15 March 2015, at least 15 people were killed and 70 wounded by bombs which were detonated near the gates of St. John’s Catholic Church and Christ Church in Lahore.[5] Similarly, on 13 May 2015, about 50 people were killed in Karachi when an armed commando opened fire inside a bus carrying members of the Shia minority Ismaili community. Again, Jundallah was reported to have claimed responsibility for the attack.

Another high-profile attack occurred in Attock in August 2015, when a suicide bomber killed the Home Minister of the Punjab province, Shuja Khanzada.

  1. The paramilitary operations in Karachi

Karachi, the country’s most populous city, which is afflicted by a violent criminal racket, has been repeatedly targeted by the paramilitary forces’ interventions since the 1990s.[6]

The current Rangers operation which started in 2013[7] has led to a significant fall in criminal activity, yet it has increased the political instability. In the period under review, the paramilitary forces predominantly targeted the members of the MQM (Muttahida Qaumi Movement), the strongest political party in town. Bearing responsibility for violent and intimidating acts, the MQM saw the Karachi party’s premises raided and many of the party members arrested. Disappearances and killings of MQM-affiliated individuals were reported throughout 2015. Altaf Hussain, who rules the MQM from his self-imposed exile in London, was investigated by the British police over allegations of money-laundering. Hussain, claiming that his party had been unfairly targeted in the crackdown organised by the Rangers, launched a campaign against the Chief of Army Staff Raheel Sharif and Prime Minister Nawaz Sharif. In August 2015, the MQM announced the resignations of all the party’s members from the National Assembly, the Senate, and the Provincial Assembly.

The security forces paid similar attention to the PPP (Pakistan People’s Party), triggering the reaction of Asif Ali Zardari, PPP president and former President of the Islamic Republic of Pakistan. As a reaction, Zardari threatened to abrogate the PPP’s informal non-aggression pact with the PML-N, which had been in place since the two parties decided to jointly oppose the former military ruler General Pervez Musharraf a decade ago.

  1. Pakistan and Saudi Arabia

Saudi Arabia’s campaign against Houthi rebel fighters in Yemen, which began in late March 2015, was coordinated with other Sunni countries. At the end of March 2015, the Saudi-led coalition fighting Yemen’s Shia Houthi rebels asked Pakistan to contribute soldiers.

Islamabad and Riyadh’s ties are rooted in a partnership which has been forged over the years and has led to a strong bilateral relationship. This partnership started to become important when the two countries jointly supported the Afghan mujahedeen fighting against the Red Army’s occupation in the 1980s. Later, both countries – and the United Arab Emirates – recognised the legitimacy of the Taliban regime in Kabul (1996–2001). Also, the Saudis gave oil to Pakistan in 1998, when the government of Islamabad was hit by international sanctions for conducting a nuclear test.[8] The following year, in 1999, the Saudis offered shelter to Nawaz Sharif after the then Prime Minister was overthrown by the military coup led by Pervez Musharraf.[9]

For its part, Pakistan has provided military aid to Saudi Arabia since the 1960s – including deploying Pakistani combat forces in Saudi Arabia in the 1970s and 1980s, and providing continual military technical aid.[10]

After his official visit to Saudi Arabia in March 2015, followed by Nawaz Sharif’s visit a few weeks later, Pakistani Defence Minister Khawaja Asif confirmed Islamabad’s commitment to defending Saudi Arabia’s national territorial integrity.[11]

In April 2015, Pakistan, which had backed the Saudi mission against the Houthis without offering military assistance, debated formally in parliament whether or not to contribute militarily to the campaign against the rebels. Opposition politicians expressed their concerns and called for the country to be neutral. They stressed that internal terrorism and other pressing domestic and regional issues would make Islamabad’s involvement in a proxy war between Iran and Saudi Arabia and in a Shia-Sunni conflict in the Middle East extremely risky.[12]

The joint session of parliament called by Prime Minister Nawaz Sharif at the beginning of April 2015, to discuss Saudi Arabia’s request for Pakistani military aid, went on for five days and ended with a unanimous decision to make use of diplomatic instruments – and diplomatic instruments only – to bring about an end to the crisis in Yemen. An ensuing parliamentary resolution on the Yemen crisis urged Pakistan to stay neutral and play a mediatory role to resolve the issue. The reference to «neutrality» in the parliamentary resolution generated tensions in the Pakistan-Saudi relationship, as Riyadh reacted badly to it.[13] Yet, as admitted by the Minister for Climate Change and PML-N’s Information Secretary Senator Mushahid Ullah Khan, Pakistani troops were already deployed in Saudi Arabia to protect the holy places.[14]

  1. Pakistan-China

In the past few years, the Islamabad-Beijing axis has been progressively growing in strategic importance in view of the announced disengagement of the USA from Afghanistan.[15] According to some sources, the strategic links developed by Pakistan with China were also one of the reasons why the former could afford to decline Saudi Arabia’s requests for support, as described in the previous section.[16]

On April 21, the President of the Republic of China, Xi Jinping, visited Pakistan and pledged 46 billion dollars of support for energy and infrastructure projects. While the current trade value between Pakistan and China is relatively low – US$ 9 billion per year – the future economic relations between the two countries are bound to grow by leaps and bounds. The plans agreed upon during Xi Jinping’s visit to Islamabad represented a remarkable boost in bilateral relations, particularly in light of the rights won by a state-run Chinese company to operate the expansion of Gwadar Port as an economic hub, which was obtained for a period of 40 years.

Gwadar is strategically located in Balochistan, on the shores of the Arabian Sea, opposite the Gulf of Oman, and in close proximity to the oil and gas resources of the Gulf countries. For China, Gwadar Port is of both economic and military strategic interest. It will grant China access to the Gulf countries, by providing it with the possibility of having a naval base on the Arabian Sea. According to a plan, formalised during Xi Jinping’s visit to Pakistan, the port – originally financed and constructed by the Chinese – will become the head of a km 3,000 long economic corridor – the China-Pakistan Economic Corridor – connecting Gwadar to Kashgar, in the Muslim majority Xinjiang region of China, via land routes and pipelines.[17] The idea of the economic corridor began being shaped in 2013, when Pakistan passed the task to expand Gwadar Port from Singapore Port Authority to China Overseas Port Holding. It has actually embraced other existing projects and, due to the economic potential of the port’s development, Chinese banks were interested in funding it and pledged more than US$ 46 billion.[18]

The port will play a critical economic role for Pakistan too, allowing the outflow of goods from Western China and Central Asia, and enriching the Pakistani exchequer thanks to the port, cargo handling, and freight charges related to the economic traffic between China and Pakistan.

The development of Gwadar Port has been controversial over the years. Balochistan is the poorest province of Pakistan, where basic necessities are not taken care of; yet it is rich in natural resources and Balochi nationalists have been accusing the federal government of the exploitation and violation of the province’s rights.[19] The port’s development has occurred in parallel with an upsurge in religious extremism in Gwadar and in the province at large, while Baloch political parties were opposing the deal with China and Baloch militant organisations were trying to sabotage the construction work.[20] This has worried China, which has alerted the government of Pakistan; in turn, the government of Pakistan has tried to implement extra security military measures to protect the increasing number of Chinese personnel involved in the project.[21] According to current plans, the corridor would also cross the Khyber Pakhtunkhwa province and, in case it is decided that the route should be changed to avoid turbulent areas, the Baloch and Pashtun areas would be avoided by making the corridor run through Sindh and Punjab.

  1. Pakistan-India

In December 2014 and January 2015, tensions between Pakistan and India rose over the disputed region of Kashmir. Clashes between security forces occurred on the border, followed by a meeting of the two countries’ foreign secretaries in March.[22] Harsh statements from senior officials on both sides referring to the alleged involvement of the other country in sponsoring terrorism escalated the tensions, yet without permanently undermining the high level bilateral relations.

In July 2015, the two premiers, Nawaz Sharif and Narendra Modi, met at the Shanghai Cooperation Organisation summit held in Ufa, Russia.[23] The discussions focused on agreeing to expedite the Mumbai terror attack trial, and statements aimed at promoting peace and development in the region and condemning terrorism were issued. An agreement to organise a meeting of top security advisers to discuss terrorism was achieved, while no specific reference to the disputed Kashmir region was made, over which India and Pakistan have conflicting territorial claims. Sharif invited Modi to attend the annual[24] SAARC (South Asian Association for Regional Cooperation) summit in Pakistan in 2016 and the Indian Prime Minister accepted the invitation.[25]

As a follow up to the Ufa agreement, a meeting of the National Security Advisers (NSA) of India and Pakistan, Sartaj Aziz and Ajit Doval, respectively, was scheduled for 23 and 24 August 2015.

However, a few days after the Ufa meeting tensions escalated again when Pakistan accused India of unprovoked ceasefire violations in Kashmir. According to the Pakistani Foreign Ministry, on July 18, Indian troops opened fire in the Poonch area. This was not an isolated event, as skirmishes had occurred in the previous days and the exchanged gunfire had killed Pakistani civilians. The civilian casualties on both sides led the United Nations Secretary General Ban Ki-Moon to urge India and Pakistan to resolve their issues through diplomatic dialogue.

A rise in tensions between the two countries as a result of frequent violations of the Line of Control (LoC), which continued for the following months, increased further when the NSA peace talks were cancelled one day before they were set to begin in August 2015.[26] While Pakistan had reiterated its intention to discuss the disputed Kashmir territory, India had insisted that the talks focus on terrorism issues only. Eventually, on the eve of the scheduled NSA meeting, India advised Pakistan against his high commissioner in New Delhi meeting with Kashmiri separatist leaders belonging to the Hurriyat Conference.[27] Indian authorities pointed out that India had never sought dialogue with groups and regions demanding separation from Pakistan. For their part, the Pakistani authorities answered by highlighting that the habit of the Pakistan high commissioner in New Delhi to consult with Hurriyat leaders on the eve of official visits by Pakistani political leaders to India was by then a well-established practice, which had never caused problems with previous Indian governments. Islamabad also reiterated that India’s intention to restrict the discussion agenda was evidence of a lack of any serious intent on the part of New Delhi to engage in meaningful talks with Islamabad.[28]

As had happened in 2014[29] – this time due to the lack of agreement with respect to the agenda – the meeting of the top security advisers was cancelled with the two countries blaming each other. This event seemed to illustrate the gulf between the civil government and the Pakistani military establishment. Specifically, Sharif seemed to have overestimated his capacity to influence Pakistan’s India policy in line with the desiderata of the Pakistani business community. The latter would welcome increased engagement with India, which would be beneficial to the Pakistani economy. Pakistan’s India policy, however, remains strictly controlled by the army, which appears suspicious of any thaw in the relations with India.

In September 2015, following talks between the Director Generals of the Pakistani Punjab Rangers and India’s Border Security Force held in New Delhi, the two parties agreed to observe the ceasefire along the LoC and to de-escalate tensions through a set of confidence building measures.[30] Yet, just a few days later, skirmishes erupted again across the de facto border and casualties were again reported.[31]

  1. Economy

Pakistani average growth rate for the last five years has been 2.9%. During the same period, inflation has remained steady at 7.9%.[32] Pakistan’s economic growth for the financial year 2015, which ended on 30 June 2015, was mainly driven by services. Manufacturing and industrial growth slowed down due to reduced external demand. Power shortages also contributed to the setback, debilitating the industrial sector.[33]

The federal budget for the fiscal year 2015–16 was presented on 31 June 2015. Its total outlay was 4,451.3 billion rupees (about US$ 42 million), 3.5% higher than the 2014-15 budget.[34] The main internal source of income was the provinces’ revenues and taxes. The budget introduced measures focused mostly on fighting tax evasion, increasing tax revenues and, nominally, trying to save the poorest segments of society from new taxes. The long awaited increase in the government employees’ salaries was not significant, being 7.5%.[35] External sources of income, mainly loans, increased by 12.1% compared to the 2014–15 budget.

The government announced incentives for the agricultural sector to boost agricultural production in the country. A health insurance scheme (9 billion rupees, about US$ 85 million) was launched to provide insurance for patients suffering from serious diseases. The targeted growth rate was fixed at 5.5%, more than a 1 percentage point increase over the previous financial year.[36]

Last but not least, 781 billion rupees (about US$ 7.5 billion) were allocated for expenditures on defence, representing an increase of 11.16% over the previous fiscal year.[37]

 

Sri Lanka 2015: The downing of a new era?

At the beginning of the year under review, the Opposition common candidate, Maithripala Sirisena, emerged as the winner of the January presidential election. The new Presidency brought with it the promise of a new political phase, characterised by the restoration of both democratic institutions and the rule of law, seriously eroded during the previous ten year long Rajapaksa’s presidencies. However, the shift of power at the presidential level was not immediately accompanied by an analogous shift in the Parliament, which at first precluded the possibility of a wide-ranging change of policies. Nevertheless, the Sirisena administration was able to tackle at least some of the most compelling issues affecting the country, in particular by limiting the extensive powers attributed to the Presidency by Rajapaksa in 2010. Despite this and other unquestionably positive political developments, other critical matters – among which the heavy militarization of the Northern region, the maintenance of the draconian Prevention of Terrorism Act and some restrictions on media freedom – were left unsolved.

In foreign policy, the shift was substantial, resulting in the cooling down of relations with Beijing and in a new closeness between Colombo and both New Delhi and, particularly, Washington. This realignment involved on the one hand the interruption of numerous Chinese funded infrastructural projects in Sri Lanka, and, on the other hand, a dramatic shift in the United Nations Human Right Council (UNHRC) attitude towards Sri Lanka. The UNHRC had previously issued three resolutions, sponsored by Washington, harshly criticizing the war crimes occurred in Sri Lanka during the long and gory 1986-2009 civil war. However, in October 2015, a new UNHRC issued resolution on the same topic saw the involvement of Sri Lanka in its drafting, which, not surprisingly, took into account the Sirisena administration demands and needs.

From an economic standpoint, the year under review opened on a rather bleak situation, to which the government reacted by promoting an expansive policy. Although not devoid of positive results, this policy brought about a surge in the debt and a worsening of the balance of payments. After the parliamentary election held in August, which saw the victory of the pro-Sirisena political forces, the resulting new government launched a novel economic policy, presented by Prime Minister Ranil Wickremesinghe in his 5 November  speech. Wickremesinghe outlined a «Third Generation Reforms Plan» made up by a complex set of socio-economic reforms which, while being  mainly congruent with neo-liberal orthodoxy, nevertheless included numerous provisions aimed at promoting the economic welfare of the lower social strata. The budget, presented on 20 November, reflected this dual aspect. At the end of the year, in spite of the many continuing difficulties, the Sri Lankan economy still managed «a respectable growth», exemplified by a full year GDP increase equal to 4.8%.

  1. Introduction

During 2015, Sri Lanka witnessed one of the major political developments of the last decade. The authoritarian rule of the President Percy Mahendra Rajapaksa – alias Mahinda Rajapaksa – indeed came to a conclusion in the wake of the unexpected result of the presidential election, held on 8 January 2015, two years ahead of schedule. Though the new President of Sri Lanka, Maithripala Sirisena, used to be the Health Minister of the Rajapaksa administration, his election promised a deep change in the political path followed by his predecessor.

Rajapaksa, head of state from 2005 to 2015, was indeed a controversial figure that came under the scrutiny of international community, mainly as a result of his unwillingness to pursue those responsible for the war crimes committed during the long civil war.[1] With the election of Sirisena as President, a new political phase began, characterized by the progressive restoration of those democratic rules which had been greatly limited during Rajapaksa’s increasingly authoritarian and corrupt rule. This process, however was slowed down and limited by the lack of a parliamentary majority supporting the new President.

If the political shift in domestic policies was limited, although real, that in foreign policy was decidedly more pronounced. The close bond between Sri Lanka and China, which marked the Rajapaksa decade, in fact loosened, while the relationship with Western countries, especially the United States, and India became closer. During the year under review, as a result of the improved relationship with Washington, international pressure on Sri Lanka, above all within the UNHRC (United Nations Human Rights Council), dramatically relaxed. This is not surprising, considering the U.S.’s strong support for Sirisena’s Presidential candidacy. The pro-U.S. attitude of the new President was indeed welcomed by Washington, which was eager to remove the South Asian island from the Chinese orbit.

Once in power, Sirisena proved to be able to politically distance himself from his predecessor. This does not meant that Sirisena’s mandate started a democratic revolution: since the 1950s, Sri Lanka has indeed been a dysfunctional democracy and the road to turn it into full-bodied and mature democracies is bound to be full of obstacles.[2] The first of them is the realization of the reconciliation between the Tamil and Sinhala communities, as well as between the North and the South of the island. Six years after the end of a 26-year gory civil war (1983-2009), the wounds caused by it have not yet completely healed, leaving open geographical and ethnic deep rifts, which are preventing Sri Lanka from consolidating its democratic institutions.

  1. The Presidential Election: The unexpected defeat of Rajapaksa

The erosion of Rajapaksa’s popular support had already become evident during the provincial elections held in March and September 2014, when the ruling Sri Lanka Freedom Party (SLPF) recorded an unprecedented decline in its share of votes. It was owing to this electoral decline that Rajapaksa called for an earlier presidential election, aiming to be re-elected for a third mandate before losing further popular support. The decision to move up the presidential election was followed by the emergence of rifts within the United People’s Freedom Alliance (UPFA), namely the SLFP-headed ruling coalition, which, in turn, led to the resignation of three ministers among whom the Health Minister, Maithripala Sirisena. Sirisena’s resignation represented a crucial turn, since he was soon chosen as the joint opposition candidate. His candidature – supported by Sri Lanka’s former President Chandrika Bandaranaike Kumaratunga – united a weak and scattered opposition in the newly created New Democratic Front (NDF). The NDF included several parties, the strongest one being the United National Party (UNP), and was backed by the Tamil National Alliance (TNA), the leftist Janatha Vimukthi Peramuna (JVP), and about 40 civic action movements. Supported by these forces, Sirisena went on to win the presidential election (8 January 2015), obtaining 51.2% of the vote against 47.5% received by Rajapaksa.[3]

The NDF electoral campaign pledged a democratic and corruption-free governance, the end of family rule and cronyism, and the re-establishment of the autonomy of key institutions of governance, in particular the legislature and the judiciary.[4] Above all, the electoral manifesto of the former Health Minister consisted of a 100 days agenda, focused on reforming the presidency, abolishing the Eighteenth Amendment, which made the office of the President extremely powerful, and changing the electoral system.[5]

Sirisena’s unexpected victory took place in a relatively peaceful way and was function of the fact that, together with a part of the Sinhala electorate, the minority communities and their parties massively backed the former Health Minister’s candidacy.[6] Indeed, the main vote support received by Sirisena came from those electoral divisions where the Tamil and Muslim components were overwhelming, in particular the Northern and Eastern Provinces. The peak of votes for Sirisena was reached in the districts of Batticaloa and Trincomalee, in the Eastern Province, where he received 81% and 71% of the popular vote, respectively. Also the Northern Province constituency, especially the Jaffna and Vanni districts, massively endorsed Sirisena’s candidacy, which was supported by more than 70% of the popular vote.[7]

Actually, this voting pattern was due less to Sirisena’s popularity among the ethnic minorities than to their hostility towards Rajapaksa. Ten years after the end of the civil war, Rajapaksa’s appeal as the national hero who ended the three decades old ethnic conflict was no longer sufficient to compensate for the lack of answers to concrete political, economic, and social issued faced by the country – not least inflation and the high costs of living affecting the lower classes of society. This being the situation, as hinted above, even a part – although not the majority – of the conservative sinhala electorate, which had been the core of Rajapaksa’s support, switched behind Sirisena. At the same time – as above stated – the Tamil and Muslim minorities (12% and 10% of total population, respectively), which had been increasingly marginalized during Rajapaksa’s presidency, voted for the candidate in the strongest position to defeat Rajapaksa. They cast their vote for Sirisena, in spite of the fact that he had not made any concrete commitment favouring their political rights. In the close competition between the two presidential candidates, the minority groups’ decision to strategically vote against Rajapaksa proved decisive in determining his defeat. [8]

After the poll, the new President swore in the UNP leader Ranil Wickremesinghe as the Prime Minister, at the head of a minority «national government» which incorporated the Sri Lanka Freedom Party (SLFP), namely Rajapaksa’s party, into the UNP-led coalition.[9] This rather paradoxical development was due to the fact that, although Maithripala Sirisena had won the election as the common candidate of the opposition, he had maintained his role as General Secretary of the SLFP. Soon after the election, on 16 January, the SLFP Central Committee decided to hand over the leadership of the party to Sirisena, justifying its decision with reference to the fact that: «Article 12-2(a) of the SLFP Constitution stipulates in clear terms that when a person contests as a SLFP candidate at the Presidential Election and if he were to win, he automatically becomes the President/Leader of the Party».[10] As a consequence, in a highly ironic development, Sirisena not only took over the SLFP formal leadership from Rajapaksa, but was also made chairman of UPFA,[11] namely – as above remembered – the political coalition which had opposed his candidature to the presidency in the just contested presidential polls. Of course, as was only to be expected, Sirisena was not able to gain effective control over the UPFA parties, while the same SLPF split into a pro-Sirisena and a pro-Rajapaksa’s faction.[12]

  1. The first signals of the restoring of rule of law

Despite the weakness of the UNP «national government» and the lack of a parliamentary majority, the new administration proved to be able to deal with some of the most urgent issues of the country, curtailing the presidency’s executive powers, reviving the parliamentary system, strengthening the rule of law, re-establishing an independent judiciary, removing some media restrictions, vigorously pursuing corruption cases, and showing attention to at least some of the needs of the minorities.

In a highly symbolic action, one of the first moves of Sirisena as President was to declare illegal (29 January) the controversial impeachment of the Chief Justice Shirani Bandaranayake, decided by the previous government.[13] The destitution of Bandaranayake in 2013 had indeed caused harsh criticism from the UNHRC and feelings of deep indignation among segments of Sri Lanka’s civil society. The latter perceived the sacking of the Chief Justice as an assault on judicial independence in order to annihilate it.[14] Sirisena formally restored Shirani Bandaranayake to the office of Chief Justice, thereby implementing one of his electoral commitments. Shirani Bandaranayake formally resigned after two days, but Sirisena following choice of a new Chief Justice was also very significant, since the President appointed Kanagasabapathy Sripavan, namely the first Tamil to occupy this top judicial position in 24 years.[15] It was a highly revealing decision, as it underlined the new President’s willingness to pursue a policy of national reconciliation after 26 years of ethnic conflict and a further ten years of majoritarian rule based on a vision of ethnic exclusiveness. After all, Sirisena had received a strong electoral support from the Tamil community; accordingly his pursuit of national reconciliation – apart from being an ethically high profile policy – from a realpolitik viewpoint represented a way to keep the support of the Tamil electoral block.

Once the above has been pointed out, it is worth stressing that Sirisena’ s decision to appoint a Tamil as Chief Justice was not an isolated decision but part of a general strategy. A Presidential Task Force on Reconciliation, headed by the former President Kumaratunga, was established in March 2015, with the aim of identifying the most urgent needs of the minority Tamil community.[16] Also Ranil Wickremesinghe, following his appointment as Prime Minister, expressed the intent to «implement the Thirteenth Amendment within a unitary state».[17] The implementation of Thirteenth Amendment, born out of the Indo-Lanka Accord of 1987,[18] represented the main legal instrument with the potentiality to ensure a national reconciliation process. In fact, it provided for the devolution of conspicuous legislative and executive powers to the Provincial Councils, which would automatically guarantee the autonomy of the minorities, which are numerically dominant in the north of the island.

Up to Sirisena’s election, the Thirteenth Amendment had never been fully implemented, and the central government had withhold the powers entitled to the Provinces, especially the powers related to police and land authority.[19] A week after assuming the Presidency, as an additional gesture aimed at opening up the dialogue with the Tamil community, Sirisena appointed a new civilian governor for the Northern Province. That area – despite the conclusion ten years before of the civil war – had been under the protracted military rule of General G. A. Chandrasiri. Chandrasiri’s replacement with a civilian governor – the long time diplomat H. M. G. S. Palihakkara – met «one of the major requests» expressed by the Tamil electorate.[20]

The Sirisena administration’s conciliatory policies towards the minorities were also directed towards the Muslim community. In the past few years, the Sri Lankan Muslim community had become the main target of a hate campaign carried out by Sinhala Buddhist extremist groups. Significantly, Sinhala Buddhist extremism developed during the Rajapaksa regime, taking root both in society and politics and benefitting from state patronage. As a result, in the past decade Sri Lanka witnessed a series of increasingly frequent communitarian attacks against its Muslim minority which culminated in the eruption of the 2014 Aluthgama wave of violence.[21] Sirisena, since assuming power, has been engaged in contrasting this chauvinistic trend. On the occasion of the SLFP convention on 17 March, he stated that the SLFP was «not a Sinhala Buddhist party».[22] Moreover, on 26 May, the leader of the extremist group Bodu Bala Sena (Buddhist Power Force, BBS), the Buddhist monk Galagoda Aththe Gnanasara Thera, was arrested by the police for the first time. Though the monk was released on bail, the episode marked the end of the immunity that the group had hitherto enjoyed. Through the restoration of the rule of law, the authorities were also able either to prevent communal violence or to minimise it, as happened during the Buddhist Sinhala demonstration at the Kuragala holy site.[23] Communal incidents, which have continued in 2015, with 37 cases recorded in the first four months of the year, have nevertheless experienced a slight decline in comparison with the last four months of 2014, which saw 48 cases.[24]

When Sirisena, in November 2014, resigned as Health Minister to run as a Presidential candidate, he explained: «Parliament is under this [Rajapaksa’s] family, the ministries are under this family, the judiciary is under this family, the military and the entire state sector and business and investment come under the direct control of this family. This country is as unstable as it could be because of family bandyism and nepotism».[25]

Indeed, during the Rajapaksa rule, the concentration of power and wealth in the hands of the presidential family made it similar to a sort of close-knit oligarchy, beyond the reach of the law. That was a situation which, during his electoral campaign, Sirisena pledged to end once for all.[26] Once Sirisena became President, the fight against corruption and the abuse of power was carried out through the establishment of a series of institutional mechanisms. These included the formation of a cabinet subcommittee on corruption, a Police Financial Crimes Investigation Division (FCID), and a Presidential Commission of Inquiry to Probe Corruption and Abuse of Power. The last was designated to investigate matters such as the illegal acquisition of lands, irregularities in the Colombo Stock Exchange, and the handling of money in the Employees’ Provident Fund.[27]

Basil Rajapaksa, the brother of Mahinda Rajapaksa and the former Economic Development Minister, was detained in April 2015 on charges of misappropriating public funds earmarked for the construction of public housing.[28] Another brother of Mahinda Rajapaksa, the former Defence Secretary, Gotabaya Rajapaksa, was summoned in front of the commission appointed to investigate allegations of bribery and corruption on 23 April.

The anti-corruption campaign, focused on frauds in the different government departments and in state owned companies, investigated 220 cases by August, bringing to light grafts and irregularities concerning major development projects and leading institutes in the country. Among the latter there were the arms and security firm Rakna Lanka Company and the Sri Lankan Airlines.[29] The investigations revealed not only the magnitude and intensity of corrupt practices among officials during the Rajapaksa regime, but also the need for an efficient and independent system to either prevent or contain such a phenomenon. However, the mechanisms established to investigate large-scale corruption allegations did not adequately meet these standards, given the politicization of the anti-corruption institutions and the magnitude of caseload. On the other hand, the expectations raised by the government’s rhetoric made it necessary «to act fast to satisfy voter expectations and capitalize on the old regime’s political weakness».[30]

It is worth to consider that the chase against corruption crimes took place in the course of a power struggle during which the former President Rajapaksa, who was able to keep his influence over a section of the SLPF. The antagonism between Rajapaksa and Sirisena reached a peak when the former President’s activities threatened to derail the UNP reform program. In this respect, the anti-corruption enquiries involving Rajapaksa and his inner circle certainly contributed to politically weaken the former President. Since January 2015, the improvement of press freedom within the country has indeed made Sri Lankan citizens more aware of the alarming features that marked the Rajapaksa administration.

  1. The arduous path of political reforms

The major and more ambitious goal achieved by the UNP-led government was the passage of the Nineteenth Amendment, on 28 April. Such a constitutional change represented a significant step forward in restoring democracy and the rule of law. Since the end of the civil war, Mahinda Rajapaksa had actually embarked on a process of accretion and centralization of presidential powers, epitomised by the promulgation, on 8 September 2010, of the Eighteenth Amendment. The latter abrogated the presidential limit of two mandates and gave the President direct power to appoint judges and a variety of enquiry commissions.[31] On its part, the Nineteenth Amendment, approved on 28 April 2015, limited the length of the presidential mandate from six to five years, renewable for a second term only. It also limited the presidential power to dissolve the Parliament: under Rajapaksa this power could be made use of after one year, now it could be applied only after four and a half years. Furthermore, the Nineteenth Amendment reduced the legal immunity of the President and envisaged a marginal shift of power and authority to the Prime Minister, though the Supreme Court rejected the provisions that made the Prime Minister the head of the Cabinet.[32] Even if the abolition of the executive presidency was the major electoral promise of Sirisena, the road that led to the passing of the amendment was scattered with obstacles which conditioned the final form of the law. Indeed, the law turned out to be weaker than most of its proponents had wanted. The difficulties that Sirisena encountered in implementing the reforming agenda resulted both from the need to deal with an heterogeneous ruling coalition and the lack of a two-thirds majority in Parliament, which is required in order to pass any constitutional amendment.

The lack of a clear majority proved to be a challenge for the UNP-lead government. Not surprisingly, one of the main controversial issues faced by the new government was that of the electoral reform, which had been promised as part of Sirisena’s 100 day’s agenda and which implied the revision the Twentieth Amendment. The electoral reform aimed at replacing the proportional system with a hybrid system, containing proportional and first-past-the-post elements. Such a system was supposed to ensure both a stable government and a strong opposition. Nevertheless, since the proportional system could enable, to a certain extent, the ethnic, social, political, and ideological diversities of Sri Lanka’s society to find representation in all legislative assemblies, the proposed electoral reform threatened to marginalize both minorities and small parties, consolidating the trend towards ethnic and social majoritarian in politics.[33] Also, there were different viewpoints among the parties about the abolition of the executive presidency: whereas the UNP called for a return to the Westminster-style parliamentary model, the JHU wanted the President to keep key powers to avoid «jeopardising national security and territorial integrity».[34]

The debate on electoral reform witnessed the attempt by some sections of the SLPF to use the issue for short-term political gains. First of all, the majority faction of the SLPF sought to delay the adoption of the Nineteenth Amendment and the reform of the electoral system. Secondly, the SLFP attempted to postpone the parliamentary poll to the end of 2015, using a delaying tactic to exploit the growing anti-incumbency factor. On the other side, Prime Minister Wickremesinghe fought for an early dissolution of parliament, in order to ride the wave of popular discontent against Rajapaksa and the UPFA to secure a majority of seats in next parliamentary election.[35] Despite the Parliament being dissolved on 26 June, without any agreement on the electoral reform, Sirisena was able to negotiate with the SLPF, gaining its support for the Nineteenth Amendment. In order to obtain the SLPF’s support, the President persuaded Ranil Wickremesinghe to accept the substantial changes to the bill required by the SLFP. The most important of such changes was the reduction of the number of civil society members on the Constitutional Council from seven to three.[36] Popular demand and support from civil society played also an important propulsive role in the process that led to the passage of the Amendment. In fact, several organizations joined the Satyagraha campaign arranged by the monk Maduluwawe Sobitha Thera, whose most important moment was the popular march towards the parliament building on 27 April.[37] Overall, the approval of the Nineteenth Amendment to the Constitution was a crucial personal success for Sirisena, who succeeded in passing the bill with a majority of 214 votes in favour.

  1. The UNP minority government: a silent revolution?

Maithripala Sirisena’s advent to power and the UNP government’s policies were surely remarkable, in spite of their limitations. Indeed these policies were portrayed by the media as a «silent revolution». However, as highlighted by some observers, what happened in Sri Lanka was mainly a factional struggle within the Sri Lankan ruling classes, particularly inside the SLPF.[38] The progressive centralization of powers in his own and his family’s hands, undertaken by Rajapaksa, had progressively excluded from power an increasing number of political players, including high level members of the very same SLPF. The latter, while not unduly worried for the erosion of the democratic checks and balances, became increasingly uncomfortable as the diminution of their own power.

It is worth noting that Sirisena had held the office of SLFP’s general secretary for 13 years, and had served the Rajapaksa government both as the Minister of Agriculture and as the Minister of Health from 2005 onward. Sirisena had also been the Minister in charge of Defence during the last, and most bloody, two weeks of the war.[39] Consequently, he was in every respect an active and important member of Rajapaksa’s regime. In this respect, Sirisena’s political turn-around could be attributed not so much to a sudden democratic fervour as to political opportunism. The Rajapaksa family increasingly tight and monopolistic hold on Sri Lankan political power had translated into a crony capitalism benefitting the Rajapaksa’s clan and their mignons. This situation had caused the growing anxiety of both the international investors and the local business, which, in turn, undoubtedly was a relevant factor in favouring Sirisena’s decision to challenge Rajapaksa. Once Rajapaksa was defeated, Maithripala Sirisena and the UNP government, which received the backing of the Sri Lankan capital, appeared not to be unresponsive to the call by international financial actors to further push Sri Lanka towards free market and global investments.[40] Actually, both the SLPF and the UNP have favoured a similar economic development pattern, namely that of a «Singaporean hyper-urbanised and consumption-driven» country.[41] The new Sri Lankan regime seemed eager to achieve this goal by rethinking its position on the international stage and, particularly, by reducing Sri Lanka’s dependency on China in favour of a greater integration in the global economy.

Arguably, the steps made by Sirisena’s administration towards democratic restoration were accompanied by a certain degree of continuity with the former regime and the persistence of political anomalies. For instance, the new government appeared reluctant to abrogate the draconian Prevention of Terrorism Act and to proceed with the demilitarization of the Northern area of the island, despite both having so negatively affected the democratic recovery after the end of the civil war.[42] Such caution was presumably caused by the influence of the Sri Lankan army, an influence which had greatly increased following its victory in the civil war. Furthermore, during the Rajapaksa’s regime, the army played a key role in allowing the President to increase and centralize his powers. In turn, Rajapaksa supported and promoted the army’s increasing role in civil affairs.[43] Thus, the Sri Lankan army gained a deep ascendency over both society and politics, which will be hard to remove. Nonetheless, the government adopted some modest measures to marginally reduce the army presence in Northern Jaffna District, by returning about 1,000 acres of military occupied land to the long-time displaced owners. Such an action represented an isolated gesture, extraneous to any coherent programs for resettlement; therefore its concrete effect was pretty insignificant. In fact, the above-mentioned land was undeveloped, with neither original houses nor new military camps or other government buildings.

In addition, as far as media freedom is concerned, the Sirisena administration proved to be ambiguous. The restoration of press freedom was a major electoral promise of Sirisena’s electoral campaign. In fact, after the January election, the blocking of independent news websites, implemented by the old regime, was immediately lifted. Along with this provision, the President also announced, in May, that the government was determined to reopen investigations into all past murders and disappearances of journalists.[44] Yet, two months later, Sirisena decided to restore the Press Council, which had virtually ceased to exist after the January Presidential election. The Press Council was a controversial body, through which the Rajapaksa’s regime had coerced the media.

After Rajapaksa’s electoral defeat, Sri Lanka certainly «took a number of positive steps to address human rights and democracy concerns».[45] In fact, according to a United Kingdom governmental report on human rights in Sri Lanka, the overall situation improved during the first half of 2015.[46] Nonetheless, as shown above, political inconsistencies have marked Sri Lankan democracy even after Sirisena’s election. The positive democratic shift by Maithripala Sirisena and the UNP-led government, although real, has been limited and fragile. On the other hand, the restoration of democratic institutions after a 26 year long ethnic war and a decade of authoritarian and majoritarian government could be neither an easy nor a speedy process.

  1. The Parliamentary Elections and the Formation of National Government

In the electoral Manifesto, Sirisena had promised to held new general elections hundred days after the presidential election.[47] This pledge was redeemed in a substantial way, although with some delay, with the dissolution of the Parliament on the midnight of Friday 26 June, namely ten months before the completion of the legislature,[48] and the convening of the general election. In doing this, Sirisena, beside keeping a key promise contained in his 100 days agenda, was trying to consolidate his political basis of support. The electoral competition saw the UNP-led coalition – the United National Front for Good Governance (UNFGG), which included, among others, the All Ceylon Muslim Party, the Sri Lanka Muslim Congress, and the JHU – challenging the UPFA. Yet, the political struggle was not limited to the counterpoising of the two main party coalitions, but was, above all, an intestine fight inside the SLFP, eventually tearing the party asunder. After the poll was announced, the power struggle between Sirisena and Rajapaksa to take control over the party intensified, reflecting deep divisions within the Sri Lankan ruling class. The rivalry became dramatic when the former President sought to orchestrate his return to the scene as the SLFP prime ministerial candidate. On the occasion of the party leaders’ meeting, held on 2 July, Rajapaksa indeed managed to be nominated to compete in the forthcoming polls.[49] His appointment represented a political debacle for Sirisena, because, had Rajapaksa won at the poll and become Prime Minister, he would have wielded those increased political powers, just conferred by the recently promulgated Eighteenth Amendment. In addition, Sirisena faced heavy criticism for having been unable to nip in the bud Rajapaksa’s possible political comeback. However, under the party rules, Sirisena, as SLPF’s President, had not the power to block the nomination.

All this drove the Sri Lankan President to change radically his attitude towards the party. In fact, months of negotiations with SLFP cadres had only resulted in the President’s failure to impose his leadership on the party. Accordingly, on 14 July, Sirisena declared that he would not appoint his predecessor as Prime Minister, even if the SLFP won the majority of parliamentary seats. Sirisena was legally entitled to do that, as, according to the Constitution, the Sri Lankan President had the authority to appoint as Prime Minister «the Member of Parliament who in his opinion is most likely to command the confidence of Parliament».[50] Nevertheless, it is clear that Sirisena intended to exercise this presidential right only as a last resort; in the short ran, his announcement aimed at undermining Rajapaksa’s ascendancy and his electoral prospects, in favour of the UNP candidate, Ranil Wickremesinghe. On the same day of the election (17 August), the Sri Lankan President, in his capacity as the SLFP Chairman, further displayed his strength by removing thirteen General Secretaries from the party Central Committee. The Central Committee is the head decision-making body of the SLFP and most of its members were appointed by Rajapaksa. Sirisena’s move was indeed aimed at consolidating his power over the party.[51]

Sharp antagonism clearly marked the two Prime Ministerial candidates electoral campaigns as well. The rivalry between Mahinda Rajapaksa and Ranil Wickremesinghe was such as to make the parliamentary election a competition fashioned along the lines of the presidential election, namely as a political duel between the Sirisena-sponsored candidate, Ranil Wickremesinghe, and Sirisena’s main political adversary, Mahinda Rajapaksa. Accordingly, the SLPF’s defeat appeared, above all, as Rajapaksa personal defeat. Indeed, the poll – which saw a huge popular participation (70% of the electorate)[52] – confirmed the electoral trend initiated by the January poll. The UNFGG, namely the UNP-led coalition, emerged as the winner, gaining 45.6% of the votes and 106 seats in the 225 members legislature, whereas the rival UPFA obtained 95 seats only. Nonetheless, the UNFGG’s victory was less than total, as the winning coalition was not able to secure the 113 seats required for a having the absolute majority in the new legislature.[53]

The outcome of the parliamentary election essentially reflected the decline of Rajapaksa’s political appeal, rather than the success of the UNFGG coalition. The former President’s defeat as the prime ministerial candidate was due to two main factors. First of all, Rajapaksa appeared to have not learned any lessons from his previous electoral debacle, persisting in underestimating the need to gain the confidence of the minority communities. In fact, he based his electoral strategy almost exclusively on the nationalist appeal to Sinhala Buddhist voters, making extensive use of the language of national security and patriotism. His aggressive electoral campaign centred around three issues: national sovereignty, development, and the security of the country. The first topic was related to Rajapaksa’s struggle against the threat of the supposed foreign «conspiracy». The conspiracy was allegedly organised by Americans, Norwegians, Europeans, and Indians, along with the UNHRC, and aimed at interfering in Sri Lanka’s national affairs. The second issue was based on championing development policies followed during Rajapaksa’s presidency, which emphasized major infrastructural projects. The third, which was also the dominant theme of Rajapaksa’s campaign, was essentially marked by an incendiary communal attitude focused on highlighting the threat of a possible resurgence of the Liberation Tiger Tamil Eelam (LTTE). The former President indeed accused the government of concerting with the LTTE and jeopardising national security by removing the Army from the North and «nurturing terrorists».[54] This divisive approach ended up being rejected by most of the electorate, in particular in the electoral districts with a considerable presence of ethnic and religious minority populations. In those areas, the UPFA performed even worse than it had in January. It is no coincidence that the Tamil National People’s Front (TNPF), which embraced a sharply nationalistic position with a separatist manifesto, also did not gain any seats, in contrast to the moderate TNA. The latter obtained 16 parliamentary seats, thanks to the remarkable support it gained among Tamil voters, who appreciated the role played by the party in calling for the building of democracy by opposing the constantly authoritarian style of the Rajapaksa regime.[55]

Unlike the SLPF, the UNP based its campaign on topics related to development, as indicated by its five-points manifesto – focused on the growth of the economy, the fight against corruption, the enshrining of freedoms for all, investments in infrastructures, and improvement of the education system. This agenda sounded attractive to a wide range of voters, irrespective of their religion or ethnicity. In addition, while Wickremesinghe campaigned all over the island, Rajapaksa carried an electoral campaign that focused on the UPFA strongholds, virtually ignoring the Northern and Eastern Provinces.

Furthermore, since his defeat in the January election, Rajapaksa’s political opportunities undoubtedly shrank because of the loss of the political power he had enjoyed while being in control of the government, with its machinery and patronage network.[56] At the same time, Rajapaksa’s image suffered a gradual deterioration that affected even his formerly immense popularity among the Sinhala electorate, especially in urban areas. The inquiries launched under the Sirisena administration into allegations of corruption, abuse of power, and even murder contributed to dispelling the myth of the national hero that had arisen around the former President.[57] Besides, the news circulated that, when defeated at the Presidential poll, Rajapaksa had sought to orchestrate a coup, eventually conceding defeat only because unable to gain the support of the Army Chief and the Police Inspector General.[58] Despite the fact that this accusation had not been proven, it undoubtedly played a part in further discrediting Rajapaksa. As a result, the UPFA and its Prime ministerial candidate were not able to achieve the same kind of electoral mobilisation that Rajapaksa’s charisma alone had achieved during past elections.[59]

Despite the UPFA electoral defeat, the lack of an absolute majority compelled the UNP to engage in intensive negotiations with other parties, mainly the SLPF, in order to achieve the formation of a National Government able to last two years. This task was accomplished on 4 September, at the cost of conspicuously expanding the cabinet beyond the originally pledged number of 30, following in this way the pattern previously implemented by Rajapaksa’s administration.[60] In fact, the cabinet composition required a great effort by Wickremesinghe and Sirisena to balance different needs and demands. In order to do that, the UNP renounced several important Ministries, such as those of Power and Energy, Petroleum and Gas, and Labour and Trade Unions, in order to accommodate its allies. This was a sacrifice well worth doing, because, according to Sirisena, the unity government represented a prime strategy for achieving «reconciliation among all communities» and «socio-economic development to face the new world».[61]

After the swearing in of the new government, the reconciliation goal was certainly supported by the new Prime Minister’s decision to recognise the TNA leader R. Sampanthan as the Leader of the Opposition in Parliament.[62] That was the first time, after over three decades, in which a Tamil Member of Parliament was appointed to this office.[63] This happened in spite of the opposition of Rajapaksa and his SLFP loyalists, which had joined the opposition. In fact, the former President and his supporters requested the appointment of one of them, Kumara Welgama, as Leader of Opposition. Against this backdrop, Sampanthan’s appointment acquired a double meaning: on the one hand, it was designed as a reassurance to the Tamil community with regards to their place in national politics;[64] on the other hand, it was a measure to further marginalise the former President.[65]

Even with the difficulties faced by Sirisena in the first months of his office, the President displayed his ability by widening his support and establishing his leadership over the SLPF, while the party faction still devoted to Rajapaksa was gradually isolated and weakened. The aim of the National Government was to «work harmoniously at least for another two years to come to a consensus on the basic issues affecting the country».[66]

  1. The role of Sri Lanka in the Indian Ocean dispute

The field that has been most affected by the establishment of Sirisena’s administration is that of foreign policy. The ensuing political shift has been highly welcomed by India and Western countries, in particular the United States. In fact, Sri Lanka is a key nodal point for sea-routes, whose worldwide importance has increased as a result of the pivotal role the Indian Ocean plays in the global economy and the geopolitical strategy of a number of countries. In fact, the most significant Sea Lines of Communication (SLOC) and a number of major choke points in the world are hosted by the Indian Ocean. More than 80% of the global seaborne trade in oil transits through Indian Ocean choke points, with 40% passing through the Strait of Hormuz, 35% through the Strait of Malacca, and 8% through the Bab-el-Mandeb strait.[67]

Since the end of the 1960s, in the background of the Cold War, foreign superpowers and local countries have increasingly paid attention to this region, engaging in a competition aimed at enlarging their own areas of influence, securing their vital interests, and imposing their hegemony on the Indian Ocean. Therefore, the United States, China, and India have formed a «strategic triangle», within which their rival ambitions over the Indian Ocean has emerged more and more acutely.[68] After the end of the Cold War, Washington tried to secure a major role for itself in the Indian Ocean, with the purpose of containing Beijing’s influence over the area. In fact, the interests of the United States appeared to be threatened when China started to increasingly assert its presence on the Indian Ocean chessboard, especially from the 1990s onwards, when Beijing launched the so called «String of Pearls» strategy. This strategy has consisted in the establishment of strategic relations with Indian Ocean littoral countries through the installation of maritime infrastructure and Chinese detachments in coastal ports, like Coco Islands, Sittwe (formerly Akyab) and Bassein in Myanmar, Chittagong in Bangladesh, Hambantota in Sri Lanka and Gwadar in Pakistan. The strategic partnership that China has strengthened with those littoral Asian countries has been enhanced by infrastructural and commercial cooperation. This has allowed Beijing to secure a vital maritime line, connecting the South China Sea to the Gulf of Bengal, and then on to the Persian Gulf and the Red Sea. However, the Chinese effort in engineering a «new maritime silk road» predictably collided with both the US and Indian interests in the area. As a consequence, Sri Lanka, because of its commercially and a strategically geographical location, could not avoid being involved in this dispute.[69]

During Rajapaksa’s rule, Colombo approached Beijing and joined enthusiastically its «String of Pearl» plan, which resulted in the launching of a series of Chinese funded projects – such as the Hambantota port, in the South of the island. Throughout his presidency, Rajapaksa massively promoted economic and military ties with China, with India and the United States showing growing concern. As a consequence, during Rajapaksa’s years relations between China and Sri Lanka have grown closer at a rapid pace, along with the increase in Chinese investments in the economy of the island. Foreign direct investment from China, which was US$ 101,2 million in 2008, grew to 149,3 million in 2011.[70] Beginning in 2007, Beijing has turned into the biggest provider of loans to Colombo, albeit at a high rate of interest, overtaking countries such as India and Japan, which had previously been the largest source of financing for Sri Lanka’s infrastructure projects. In addition, the total trade between Sri Lanka and China has been steadily increasing over the years, more than doubling from 2009 to 2012.[71] The friendship between Beijing and Colombo was further strengthened in 2013 thanks to the signing of a Strategic Cooperative Partnership and, in 2014, by the first visit of a Chinese President to Sri Lanka in 28 years, along with the signing of 27 agreements.[72]

The Obama administration was undoubtedly irritated by Rajapaksa’s strong ties with Beijing and eager to bring Sri Lanka closer to its «pivot to Asia» policy. As a consequence, the role played by Delhi and Washington in favouring the change of regime that occurred in January 2015 in Sri Lanka was neither unexpected nor negligible. At first, India and the United States exerted significant pressure on Colombo through the UNHRC and the potential threat of economic sanctions.[73] Given Rajapaksa’s unwillingness to fulfil the UNHRC recommendations, the international body voted in 2014 for a stricter resolution calling on the U.N.’s human rights office to investigate allegations of war crimes, through the establishment of an independent commission of inquiry.

Sirisena’s election to the presidency was strongly backed by two leading Lankan politicians with friendly relations with the U.S.: UNP’s leader, Ranil Wickremesinghe, and Sri Lanka’s former President Chandrika Kumaratunga, the latter being the main architect in bringing Sirisena forward as the common opposition candidate. Also New Delhi seemed to be involved in manoeuvring behind the scenes, with the aim of bringing about Rajapaksa’s departure. Indeed, the Sri Lankan station chief for India’s foreign intelligence service allegedly cooperated with the local opposition parties to get them to agree on a joint contender for the election, facilitating meetings and encouraging defections from the UPFA.[74]

  1. Rebalancing Foreign Policy

The confidence of United States and India in Sirisena’s presidential candidacy was actually well placed. In fact, the foreign policy vision outlined in the NDF electoral manifesto was grounded on the consolidation of Sri Lanka’s relationship with its Asian neighbours and a willingness to establish equal relations with China, Pakistan, Japan, and India. In particular, in relation to India, the manifesto, by alluding to the different positions vis-à-vis Sri Lanka taken by India’s central government and by the government of the nearby Indian state of Tamil Nadu (which, being inhabited by Tamils, had a special interest for the Lankan Tamil minority), asserted: «Our Indian policy will take into due consideration the diversity of India». The Manifesto went on stating: «I [Sirisena][75] would act to have closer relations with an attitude that would be neither anti-Indian nor dependent».[76] Such an agenda aimed at allaying New Delhi’s anxiety about its relations with Sri Lanka, which had witnessed a dramatic deterioration, when, in November 2014, a Chinese submarine and a warship had docked in Sri Lankan ports, on the very day the Japanese Prime Minister was visiting the island.[77]

After assuming office, Sirisena’s first foreign visit, significantly, was to India. On 15 February 2015, the Sri Lankan President indeed met Narendra Modi in order to strengthen bilateral relations between the two countries. During the visit, India and Sri Lanka signed four agreements; among them, the most strategically important was the pact pertaining to civilian nuclear cooperation. Such an agreement could not but be perceived as a «major setback for China».[78]

The rapprochement between New Delhi and Colombo was fostered by Indian domestic factors as well. In fact, the landslide victory of the Narendra Modi-headed Bharatiya Janata Party (BJP), in May 2014, allowed the new Indian government to carry out a foreign policy less affected by the requests of the Indian Tamil parties.[79] In addition, the BJP-led administration displayed a renewed eagerness to engage with India’s neighbours and reclaim New Delhi’s status as a major power in the Indian Ocean, as shown by Narendra Modi’s five days visit to the Seychelles, Mauritius, and Sri Lanka (10-14 March 2015). The visit was designed to strengthen India’s key role among the Indian Ocean island states, improve security cooperation in the area, and counter China’s growing presence in the region. Modi’s trip to Sri Lanka was politically very significant, since it was the first Indian Prime ministerial visit in 28 years to the island. [80] The visit mainly aimed to ensure that India gained a stronger presence in the eastern port of Trincomalee, thanks to the joint development of an Oil tank Farm.[81] Nonetheless, Modi also took the opportunity to raise the Tamil issue, urging Colombo to implement the provisions enclosed in the 1987 Indo-Sri Lankan agreement.[82]

New Delhi’s effort at strengthening its position in the Indian Ocean was a product of the need to reverse what had been a protracted phase of policy neglect, which had favoured China’s strategy to become a major player in the area. In fact, as regards to Sri Lanka, India had failed to provide significant investments in the country’s maritime infrastructure, which the island-state perceives as essential to achieving its national development goals.[83] That was a situation that the new Indian Prime Minister appeared keen to reverse.

Not surprisingly, China’s relations with Sri Lanka seemed to be heading for trouble, when, soon after the January Presidential election in Sri Lanka, anti-corruption probes were started, putting under scrutiny the allegedly tainted ties between the Rajapaksa administration and the Chinese investments in Sri Lanka. Following this probe, the construction of the Colombo Port City, a US$ 1,4 billion Chinese project, funded by a company considered a security risk by New Delhi, was suspended until the completion of an inquiry into allegedly unlawful awarding of the contract. To this followed a meeting between the Sri Lankan Foreign Minister Mangala Samaraweera and the Chinese Premier Li Keqiang in Beijing (27 February 2015), during which the Sri Lankan Minister sought to renegotiate some huge loans given by Beijing at rates as high as 8%. Samaraweera also announced the decision not to allow further Chinese submarines docking in Colombo.[84]

Once all this has been pointed out, it is worth stressing that Sirisena’s foreign policy did not aim at breaking ties with China, but at rebalancing them. In fact only one month after his visit to India, the Sri Lankan President went to Beijing to meet Xi Jinping (25-27 March 2015). On that occasion, the two countries reaffirmed their longstanding ties and the Chinese President expressed China’s eagerness to «again promote and elevate the Sino-Sri Lankan relationship to fulfil an important purpose».[85]

Beijing did not appear to be resigned to a weakened friendship with Colombo. China considered its friendship with Colombo as being fundamental to its strategy in the Indian Ocean, in order to keep its favourable position in the region and secure its growing energy needs. Accordingly, the Chinese answer to Sirisena’s rebalancing in foreign policy was to pledge over US$ 1 billion new grant to Sri Lanka after a Chinese luxury real estate project in the capital Colombo was suspended. Furthermore, Chinese companies agreed to cut the cost of the US$ 520 million project to build a road in a Colombo suburb by $ 225,73 million.[86]

The apparent slowdown experienced by Sino-Sri Lankan relations is likely to result in a «normal» relationship with Beijing, which could enable Colombo to avoid irritating India and the United States. According to government spokesman Rajitha Senaratne, the Sirisena’s administration has not been «against China, but we have been analysing and re-evaluating all the projects so that Sri Lanka gets the best deal».[87] Chinese investments in Sri Lanka have been significantly greater than Indian ones and, despite the political change that has occurred in the island, Beijing’s presence in the area will likely «continue to rise in the coming years».[88]

  1. The reconciliation between Sri Lanka and United States: implications on the UNHRC attitude

The remarkable shift that occurred in Sri Lankan international relations following Sirisena’s rise to the presidency was reflected notably in the attitude of Washington towards the island-state. The United States, indeed, praised the result of the January 2015 Presidential poll and welcomed the regime change that took place on the island.[89] Apart from the rhetoric about the Sri Lankan democratic twist, Washington was pleased by the pro-Western bias in Sirisena’s foreign policy agenda, which could not but favour the U.S. strategic interests. The ensuing change in the Sri Lanka-U.S. relations was signalled by the visit of U.S. Secretary of State John F. Kerry to Sri Lanka, in May 2015. The visit had a highly symbolic value, since Kerry was the first top-level U.S. diplomat to visit Sri Lanka in ten years. The reconciliation between the two countries brought with it other important consequences, especially as far as the UNHRC was concerned, as the Obama administration adopted a more compliant approach on the issue of war crimes accountability. In fact, the prospect of setting up a United Nations investigation into the war crimes committed during the Sri Lankan civil war, previously strongly supported by the United States, appeared to have become less compelling with Sirisena’s election. The point of view of Washington on the issue was well formulated by New York Times’ journalist Ryan Goodman: «Pushing for full, sweeping accountability in this fragile moment of transition could destabilize the new government and jeopardize the warming of relations between the United States and Sri Lanka».[90] Since the beginning, Sirisena’s administration struggled both to avoid an independent international investigation and to gain a postponement in the release of a UNHRC «landmark enquiry»  into possible war crimes, originally scheduled for March 2015.[91] Essentially, Sirisena sought successfully to convey the impression that his government was, on one side, definitely more open to pursuing the responsible of war crimes than that of his predecessor, but, on the other side, maintained Rajapaksa’s same stand with respect to averting direct international involvement in war crimes prosecutions.

After fruitful negotiations within UNHRC and with Washington, Colombo was able to obtain a six-month delay of the presentation of the U.N.’s report on war atrocities.[92] This concession to the Sirisena administration was granted in anticipation of the conclusion of the scheduled general elections.[93]

In addition to postponing the resolution, the Sri Lankan government reached a further and greater success. This was the achievement, within UNHRC, of a mutually agreeable mechanism for addressing the issue of war crimes and human rights violations in the country. Such a mechanism was envisaged in the resolution passed without any opposition, on the occasion of the 30th session in Geneva on 1 October 2015.[94] The motion had the strong endorsement of India and, importantly, the crucial support of the United Stated.[95] Indeed, the latter took an active part in searching for a joint solution through consensus, and the final UNHCR document represented the outcome of this effort. The final content of the resolution probably exceed even the more ambitious hopes of the Sirisena administration, meeting fully Sri Lankan demands. Firstly, the UNHRC document acknowledged «the steps taken by the Government of Sri Lanka since January 2015 to advance respect for human rights and to strengthen good governance and democratic institutions».[96] Secondly, the resolution largely backed the Sri Lankan aspiration to implement a domestic accountability mechanism, rather than establish an international court. As a result, the accountability mechanism by the UNHRC was pretty far from the hybrid special courts suggested by both the U.N.’s report and the High Commissioner, Prince Zeid Ra’ad Zeid Al-Hussein.[97]

The UNHRC resolution represented a dramatic shift in the United States’ position on the issue of Sri Lankan war crimes. No doubt, this softening of Washington’s stand can be explained by the more collaborative attitude showed by the Sirisena administration and its asserted willingness to make those responsible for war crimes accountable. On the other hand, it clearly aimed at further encouraging Colombo to more closely enter into the US network of strategic alliances in the Asia-Pacific region, leaving the Chinese orbit for good.

Although a clear-cut success, as pointed above, the UNHRC resolution was doomed to disappoint sections of Sri Lankan society, namely both the Sinhala nationalist groups and the Tamil community. The former, indeed, blamed the government for allowing the international community to violate Sri Lankan sovereignty, while the latter perceived the provisions included in the resolution as too mild. A joint statement on the draft UNHRC resolution, issued on 29 September by a wide range of Tamil civil society groups and political parties, reflected their frustration. They regretted the lack of adequate provisions for the setting up of a credible investigation. According to the joint statement, the UNHRC resolution merely sought «to provide the appearance of credibility to a domestic process through the appointment of ‘commonwealth and other foreign judges, defence lawyers, and authorized prosecutors and investigators’».[98] Consequently, the judicial mechanism, managed to a great extent by the Sri Lankan state, was, in fact, branded by the Tamil groups as not credible for the (mainly Tamil) victims. As a matter of fact, the UNHRC resolution called merely for an oral report in June 2016 and a written report in March 2017. This arrangement appeared like a noteworthy attenuation of international pressure on Sri Lankan state, if not even a sort of disengagement.

  1. Political Economy

10.1. The Interim Budget and after

At the beginning of the year under review, the economic situation appeared bleak. During the first quarter of 2015, Sri Lanka witnessed a significant slowdown in its GDP growth, which, in comparison with the previous year, went down from 7.4% to 4.4%.[99] Its causes were several. One was that, the country’s total debt had reached US$ 58.7 billion, which implied heavy annual costs in debt servicing.[100] This was a situation which had come into being in the previous decade, mainly as a consequence of expenditures on large infrastructure development projects, the financing of imports, and loan repayments.[101] As half of the total debt was foreign debt, this, by itself powerfully contributed to the worsening the country’s balance of payments. A conspicuous role in it was played by the infrastructure projects funded by Beijing, which caused Sri Lanka to triple its foreign debt over the past five years, due to the high interest rates of Chinese loans.[102]

This situation was further aggravated by the adverse effects of the world-wide international economic crisis.

To the above long term factors, two others added themselves at the beginning of the year under review. The first was the new government’s decision to suspend a series of construction projects funded by Chinese investments.[103] Of course, as has been pointed out above, repaying the debts related to the infrastructure projects funded by the Chinese was a major factor in the Sri Lankan balance-of-payments crisis. However, to suddenly suspend them could not but adversely impact on the economy as a whole, because, since the end of the civil war in 2009, the Sri Lankan economy had mostly been driven by them, allowing the Rajapaksa’s regime to sustain an impressive average annual growth of 7.4%.[104]

The second contingent cause of the economic slowdown was the uncertainty brought into being by the change of regime that occurred in January, along with the prospect of a new parliamentary election during the course of the year.[105]

This being the situation, the interim budget, approved on 29 January 2015, was nevertheless aimed less at remedying the causes of the economic slowdown than at pursuing the goal of social justice (or, should one prefer the language normally employed by the mainstream media and neo-liberal economists, at implementing populist policies). Of course, in whichever way one views the measures characterising the 2015 Interim budget, they had the advantage of likely gaining electoral support for the parties in government during the incoming general election.

Among the most notable provisions, aiming at pursuing social justice by raising the living conditions of workers and the poor, there were the enhancement of the salaries of state sector public servants, the raise of pensions, the cutting of farmers’ loans by 50%, the cutting of taxes on 13 essential food items, the continuation of the agricultural fertilizer subsidy, and the raise of the education allocation to 6% of GDP. Also congruent with social justice goals can be considered those interim budget provisions introducing additional taxes on the most profitable private companies and the wealthy – such as an annual mansion tax, a 25% «Super Gain Tax» on companies whose profits exceed 2,000 million rupees, a tax on casino business-owners, and a onetime tax on telecommunication providers and mobile phone operators.[106]

In spite of its expansive character, the Interim Budged aimed at bringing down the fiscal deficit from the 4.6%, estimated in the previous budget, to 4.4%. This target was aimed at by the dubious method of cutting public investment from 6.2% to 4.5%.[107]

Not surprisingly, criticism to this policy came from the International Monetary Fund (IMF), which disapproved of the financial measures adopted by the Sri Lankan government for lacking credible steps to boost revenues; the IMF warned that such measures could threaten the island nation’s fiscal consolidation.[108] The IMF had indeed demanded that Sri Lanka enhanced its revenues and implemented a policy of economic austerity as a precondition for any new loan.[109] However, as shown above, the interim budget went in the opposite direction, and, in spite of its rosy forecast, the fiscal deficit target was exceeded in the first semester of 2015. According to Government’s data it reached 4.7%, whereas, according to IMF estimated, the full year budget deficit was likely to be close to 6.0% of the GDP.[110]

In spite of the IMF criticism, the expansion of expenditures promoted by the interim budget seemed, at first, to be able to revive the economic growth, which, in the second quarter of the year, increased to 6.7%. The growth appeared to be broad based – with tourism earnings that grew notably by 14% – despite agriculture continuing to underperform because of drought early in the year, which were followed by heavy rains and flooding.[111] Also the inflation trend improved, as it experienced a remarkable drop, especially related to fuel and food prices. Indeed, food inflation went down from 12% in December 2014 to 2.5% in August 2015.[112]

These positive developments were however more than overshadowed by the rising debt and the accelerated worsening of the balance of payments.[113] According to an analysis published in the influential Wall Street Journal in mid-September, «Sri Lanka’s rising debt [was] unsustainable and the country [was] heading for another balance-of-payments crisis». The same analysis went on pointing out that debt financing was «dangerously reliant on commercial borrowing at a time of increasingly volatile capital flows to emerging markets».[114]

10.2. Wickremesinghe’s «third generation» reform plan

On 5 November, Prime Minister Ranil Wickremesinghe, delivered a statement in front of the Parliament, outlining the plan for a complex set of socio-economic reforms. Some of these reforms appeared well thought out, others were barely outlined; all of them, however, aimed at making the economy of the island flourish, while keeping in mind both social justice and the need to heal the wounds of the civil war.[115]

Wickremesinghe’s action plan appeared to be influenced on one side by the history of the island, which, in pre-colonial times had been a major hub in the flourishing Indian Ocean trade routes, and, on the other, by Singapore’s contemporary example. As remembered by Wickremesinghe, Singapore, which in the 1950s looked up to the Sri Lankan example, envisioning to follow it, had conquered a much more advanced position, becoming a major regional power, in spite of its complete lack of natural resources, «not even water».

In order to reach his goal, Wickremesinghe intended to introduce a «third generation» economic reforms. As remembered by the Prime Minister, after the post-WW2 period, when Sri Lanka had «lived with the false notion that the Government must somehow intervene in the economic process» and when «heavy taxes were imposed on the private sector that negatively affected imports and exports», a first set of reforms, were introduced by President J.R. Jayawardena in 1977, starting to change the existing system. These were followed by a «second generation economic reforms», which «took place under the aegis of President Premadasa» (in office from 1989 to 1993). At the time, according to Wickremesinghe: «The investment climate and the stock market were dynamic and free to grow in leaps and bounds.  State enterprises that were considered not relevant to be managed by the Government were given to the public. The initial growth and expansion of the garment sector, which forms a key economic area today, took place at the time.»

According to Wickremesinghe, all that had changed for the worse during the Rajapaksa’s administration, whose procedures, based on «erratic economic process and irregular practices» had pushed the country into an «economic abyss». Now, in Wickremesinghe’s own words, it was the time «to steer the country in the right direction with the third generation economic reforms that would herald in a new era».

What said so far can lead one to think that Wickremesinghe’s «third generation» reforms merely amounted to a more or less extensive implementation of the usual neo-liberal economic policies, giving a free hand to international and domestic capital, without much attention for the needs of the subordinate classes. This is an impression which could not but be strengthened by Wickremesinghe’s reputation as a friend of free-market policies and a critic of state intervention in the economy. But already Wickremesinghe’s reference to former President Ranasinghe Premadasa was a give-away that the Prime Minister’s strategy was something more complex than the simple implementation of the neo-liberal orthodoxy. Indeed Premadasa had started his public life as an activist working for the uplifting of the poor and ended it as a President who had played a key role not only as the author of the «second generation» reforms, but in the field of poverty alleviation. In fact, Wickremesinghe’s action plan, while pushing for a series of policies congruent with neo-liberal orthodoxy, included numerous provisions aimed at promoting the economic welfare of the lower social strata. As claimed by Wickremesinghe himself, towards the closing of his speech: «The economy we plan to build must yield results for all. An economy that will promote the benefits of development among all. An economy that will be friendly to all, beneficial to all.»

In order to achieve this objective, Wickremesinghe outlined a complex set of strategies. The most impressive was the plan to establish a State Holding Corporation Limited, «built along the lines of the famous Temasek Company of Singapore», with the task to manage «on sound economic principles and market economies» all state enterprises. At the same time, the shares of state enterprises would be sold to the public through a newly created Public Wealth Trust, whose managing board would be selected from the ranks of civil society, unions and chambers of commerce, and whose activities would be supervised by the Secretary of the Treasury and the Governor of the Central Bank.

Another key strategy aimed at confronting «the catastrophe facing the rural economy». This strategy implied the establishment of 2500 state rural development centres, the building or strengthening of rural infrastructures, the creation of «large scale enterprises in which farmers can be members». Moreover, «a fully fledged agro marketing authority that will purchase all agricultural produce» was to be established. Its task was handling «all matters relating to marketing, storage, sourcing markets, improving transport, purchasing of produce at a village and provincial level, preserving of produce and freezer facilities». Finally, the Prime Minister planned both «to put into place a mechanism that will encourage and empower landowners investing in new technology and farming methods», and to gear Sri Lanka’s agricultural production to meet the food requirements of the middle class in the SAARC (South Asian Association for Regional Cooperation) region.

An additional key strategy aimed at empowering «3 millions citizens to become land and house owners», through a set of policies, including a low interest loan scheme.

Wickremesinghe also envisioned the carrying out of a series of institutional reforms aimed at making the state machinery more efficient and more responsive to the needs of the Sri Lankan population. Among them there was the creation of a new pension fund; the establishment of a new Employment Council in charge to ensure minimum wages for the working population; structural changes in the Central Bank, making it more independent; the creation of a Tea Industry Committee to enhance the efficiency in tea production; the creation of an International Trade Agency «that will handle all aspects of international trade»; the restructuring of the Board of Investment, of the Export Development Board and of the Tourism Authority. Finally, an Agency for Development, bearing responsibility for «managing all economic activity» and «manned by professionals from the state and the private sector» was to be created within three years. The same deadline was set for restructuring the Board of Investment, the Export Development Board and the Tourism Authority. No clear cut deadline was set for the creation of restructuring of the others above quoted institutions.

Expenditures on education were to be augmented, taxes on knowledge and talent removed, and women were to be supported. In fact, another main government effort was to be geared at «reviewing the possibility of providing economic empowerment for women». «We will implement a policy of ensuring that 25% of all political representation at provincial government level will be allocated to women», said Wickremesinghe. He went on promising that: «In future, from 2017 onwards, when making budget allocations, it will be based on identifying financial needs on a gender basis, enabling women to have better access to opportunities at all levels».

The Prime Minister also pointed out the intention to rebuild the war affected areas in the North and East of the island. To this effect, Wickremesinghe stated that «we have discussed with Japan the possibility of conveying an aid summit in this regard in 2016».

On a more strictly economic plan, the Prime Minister, while taking pride in the economic policies introduced with the interim budget, and pointing out that, as a result, «people have more money in their hands», announced a series of changes, on the whole favouring the business community, but not only it. Among these changes there was the reduction of the budget deficit to 3.5%[116] and the abolition of the «Super Gain Tax». The latter had «served the purpose of propping up demand and providing relevant revenue», but was not needed any more. Also the Prime Minister stressed the fact that, in order to achieve the results broached out in his speech, it was vital «to encourage foreign investment and investment by individuals». Consequently he promised protection for local and global investors and announced the government intention not to make use of Under Utilized Asset Act, which had been misused in the past, in order to harass business, in some cases taking it over. «We will not engage in such activities.» announced Wickremesinghe, who went on saying: «The Government will not take over private enterprises. We will also review the business taken over in this manner».

Business activities were to be further promoted by the establishment of 11 business and development areas throughout the island – some of them in the geographical parts more affected by the civil war – and by the creation of financial and business areas, fitted out both for economic activities and social development («…they will have schools, hospitals and highways»).

At the same time, the Prime Minister pointed out the necessity «to review the tax concessions given to the investors» and announced a policy aimed at the minimization of regressive taxes. The latter policy was to pursue the medium term aim to bring down to 60%:40% the existing 80%:20% indirect/direct tax ratio. Both were steps going against the interest of the business community, although congruent with the general interest.

Concluding the present examination of Wickremesinghe’s speech, it is necessary to dwell on the fact that, as already noted, in it two different – some would say contradictory – themes were present: a neoliberal strategy of economic reforms and the pursuit of social justice. Only the future will tell if one of the two strands will prevail on the other, or if they will coexist side by side. Also, only the future will tell if Wickremesinghe’s promises were just only that – heady promises without any concrete follow-up – or a turning point in Sri Lanka’s history, the beginning of a new phase, not only in the economic field, but in the political and social ones as well. The fact that, at the time of writing the present essay, the latter possibility did exist explains why the present author has dwelt at some length on Wickremesinghe’s «third generation reform» speech.

10.3. Towards the «Third Generation» reforms? The 2015 budget

In closing his 5 November speech, Wickremesinghe claimed that: «The first budget of our Government presented on the 20th [of November] will reflect the third generation economic reforms we have planned».[117] To a certain extent this promise was fulfilled, even if the decisions part of the budget do not – actually could not – be taken as proof that Wickremesinghe’s promises were in the process of being actually translated into concrete policies. After all, as pointed out time and again by Wickremesinghe in his speech, most of the promises there made were part of a medium-term program, needing some years in order to be implemented.

Budget 2016[118] was presented on 20 November by Finance Minister Ravi Karunanayake in a marathon speech lasting more than four hours.[119]

The speech was differently assessed as «a road map for economic reforms»,[120] as providing «relief to people by reducing the prices of essential commodities»,[121] and as an austerity budget, «in line with the pro-business demands of the International Monetary Fund».[122] At the end of the day, however, Budget 2016 can be evaluated as characterized by the same ambiguities already present in Wickremesinghe’s 5 November speech: strategies in line with the neo-liberal orthodoxy coexisted with an array of measures which neo-liberal ideologues would decry as «populist».

On the social front, prices of 11 essential commodities were reduced; a programme to build 100,000 houses in five years for slum dwellers and low income groups were announced; new laws to grant ownership of lands and houses to those who had occupied them for over 10 years were announced; a series of training and financial measures favouring teachers were made known. They were to be accompanied by increased investments in education and health. Moreover, the Finance Minister urged «the private sector employers to increase the monthly salary by at least Rs.2,500 per month of which Rs.1,500 per month could be given in 2015 and the balance Rs.1,000 per month in 2016» [§ 303]. In making his request, Karunanayake pointed out that the «necessary legislations will be brought in to implement this»[§ 303].

Confirming what had already been said by Wickremesinghe on 5 November, Karunanayake also officially announced that: «While the government has committed to a significant amount of funds for the development of the war affected areas, we also plan to convene a Donor Conference in 2016, to generate support from bilateral and multilateral agencies to enhance the rehabilitation of the North and the East» [§ 507]. In fact, many of the budget provisions aimed at improving the situation in the war affected areas, in the North and East of the island, were 70% of the Tamil population lived. Also, Karunanayake announced the Government’s decision «to ensuring that the issues of the internally displaced people are addressed immediately.» «In this regard, – stated the Finance Minister –  we will initiate a rapid large scale resettlement programme for the internally displaced people and provide basic needs and livelihood opportunities to the already resettled families. In this respect, we will be building 20,000 houses especially in the Districts of Mannar and Mulativu,[123] with proper sanitation facilities, access to clean water and electricity» [§ 508].

In consonance with fiscal prudency, Karunanayake announced that the time had come «to critically analyze and evaluate the expenditure needs of the line ministries and departments to rationalize unnecessary expenditure and eliminate excessive administrative overheads» [§ 65]. He also noted that the «social protection and safety network mechanism» aimed «to protect the most vulnerable in the society» was «riddled with issues of inefficiency and sub optimal effectiveness in reaching those who actually require assistance» [§ 410]. Hence the Finance Minister decision to review this scheme.[124]

A main aim of the budget was that of attracting foreign investment. Accordingly Karunanayake announced «an investor friendly Foreign Exchange Management Bill (FEMB), which would help attract foreign flows from the SAARC and the world at large» [§ 199], the removal of tax on leasing of land to foreigners and the lifting of restrictions on land ownership by foreigners in the case of selected investments. The Minister of Finance also assured that any application for foreign investment would be cleared in 50 days and investors allowed to bring money to Sri Lanka «through any bank account existing in the formal banking system» [§ 208].

At the end of the day, and differently from what claimed by some analyst, it is difficult to allege that Budget 2016 imposed «a series of austerity measures on working people while granting significant concessions for local and foreign capital».[125] Rather, the budget, reflecting the guidelines set out in the Prime Minister 5 November programmatic speech, was a complex effort aimed at bringing together measures which could encourage both domestic and international capital to invest in the Sri Lankan economy, while introducing a conspicuous set of measures in support of the poorer and intermediate strata of the population. In this perspective it does not come as a surprise that the budget deficit, which in 2015 was equal to 6%, was brought down of a modest 0.1% to 5.9% in 2016.[126]

10.4. Taking stock of the economy

During the year under review, weak global demand and domestic political change adversely affected the economic situation in the island-state. Investment faltered as investors decided to assume a «wait and see» attitude. Moreover, the Sirisena-Wickremesinghe administration cut capital spending and, as noted above, temporarily suspended some large investment projects approved by the Rajapaksa’s administration. In that situation, growth was sustained by an increase in private and government consumption spending and was led by a 5.3% expansion in the service sector, the largest one in the Lankan economy.[127]

In spite of the above listed difficulties, at the closing of the period under review, the Sri Lankan economy still managed «a respectable growth». In fact the economy expanded 2.5% on a yearly basis in Q4, namely the fourth quarter of the year, bringing full year growth to 4.8%.[128]

Of course, all economic difficulties were still there, in particular an adverse balance of payment and a ballooning debt. Accordingly, only the future will tell if the new Sri Lanka administration will be able to progress on a path of social justice and economic growth, pointed out in Prime Minister Ranil Wickremesinghe’s 5 November speech.

 

India 2015: The uncertain record of the Modi government

Narendra Modi’s 2014 election generated enormous expectations in the economic sphere. However, in 2015, on the one hand, Modi was unwilling or unable to push through any «big bang» reforms; on the other hand, jobs generation – one of Modi’s key electoral promises – proceeded at an excruciatingly slow pace. At the macroeconomic level, the Indian GDP grew by 7.3% during 2014/15, making India the fastest growing among the major economies. However, these data were the result of a new methodology, and most economists, including some politically close to the Modi government, were uncertain about its reliability. Moreover, when applied to the previous years, the new methodology unequivocally showed that the positive turn-around in the economy had happened before Modi’s government came to power. The Indian economy was also severely affected by a deepening rural crisis. Some of its causes were beyond the reach of Modi’s government, but it is a fact that its response was disappointingly inadequate.

Domestic politics was a constant source of difficulty for Modi. First, state elections in Delhi and Bihar dispelled the myth of the invincibility of the Modi – and Amit Shah – led BJP, which was soundly defeated by local outfits. Second, the government struggled to pass key legislation in Parliament, also thanks to the unexpectedly successful opposition of the Congress party. Finally, the most worrying development on the domestic front was the rise of intolerance against non Hindus, who were victims of Fascist-like, sometimes deadly, aggressions by Hindu outfits. This happened while the Prime Minister appeared basically unconcerned about the climate of growing violence and some members of his government went so far to openly justify this state of affairs.

The aim of Modi’s foreign policy was projecting India as a major power on the world stage and getting all the possible foreign help in promoting India’s economic development. To this end, India’s foreign policy was articulated along two main axis: the India-US connection and the India-China connection. In turn, the latter had two faces: engaging China and containing China. At the end of the day, the India-US connection was high on hype but low on content, among other reasons because the US business community, after its initial enthusiasm for Modi, had come to perceive him as well intentioned but unable to further liberalise the Indian economy. India’s economic engagement with China brought about the signing of several MoUs and China’s promise to invest in India. However the concrete fall-out of all this was limited. More concrete appeared the containment aspect of Modi’s China policy, which, at a more general level was expression of India’s strategic surge, aimed at reclaiming the position of great power.

  1. Introduction

In 2015, India’s political, economic and even social landscape was dominated by the presence of her prime minister, Narendra Modi. In the making of political and economic strategies, Modi’s role was a proactive one, the prime minister playing the role of the undisputed star on stage. In contrast, in the case of social problems, Modi appeared conspicuous for his virtually total absence from stage. Nevertheless his absence was – for all intents and purposes – as politically significant as his urge to play the dominant role when dealing with politics and the economy. At first sight, the contrast between Modi’s unbound activism in the political and economic fields and his sloth and timidity when dealing with social problems may appear paradoxical. In reality, this apparent strangeness is the natural manifestation of Narendra Modi’s Janus-faced political personality: on the one hand, there is Narendra Modi the statesman, the Indian super-CEO, the man who purportedly intends to modernize India and make her a world power; on the other hand there is Narendra Modi the former Rashtriya Swayamsevak Sangh (RSS) pracharak, the political leader who turned a blind eye to the 2002 pogrom against the Gujarat Muslims, the Gujarat Chief Minister who presided over the marginalization and ghettoization of the local Muslim community.

During the extraordinarily successful 2014 general election campaign, the latter aspect of Modi’s personality was successfully disguised under the elegantly tailored suit of India’s super-CEO to be. Nevertheless, if the super-CEO aspect of Modi’s personality is undoubtedly a real one, the same is true, in the opinion of the authors of this chapter, with respect to the other aspect of Modi’s personality – that of the Hindu communal leader. Accordingly, in 2015, Modi’s activism, or lack of it, can be explained by his dual political and ideological personality, as a pro-business and a Hindu leader.

During 2015, both the Indian and the international press, while advancing some infrequent and timid criticism of Modi’s role as a Hindu leader, by and large continued to give a very positive assessment of his role as India’s super-CEO. However, as will be shown in the remainder of this article, even as India’s super-CEO, Modi’s performance has been much less successful than may appear at first sight.

The remainder of this article will proceed as follows: first, the economic policy implemented by the Modi’s government and its (mixed) results will be analysed; then the analysis will dwell on the domestic political developments; finally Modi’s over-dynamic and over-personalized foreign policy will be assessed.

  1. Modi’s economic policy

Modi’s election generated enormous expectations in the economic sphere.[2] On the one hand, the Prime Minister was expected to put India’s economy back on a path of high growth; on the other hand, he promised to create million of new jobs for what is one of the fastest growing labour force in the world.[3] Modi’s main strategy for achieving these objectives was based on a series of economic reforms that would stimulate investments (both domestic and foreign), and on initiatives aimed at bettering the quality of India’s labour force. In this section, we will first look at Modi’s government’s key economic reforms and the first budget it presented in February 2015; we will then analyse how and to what extent some of the key economic electoral promises – the implementation of the Goods and Services Tax, the creation of jobs, and the support of farmers’ incomes – were fulfilled; finally we shall examine the data related to the growth of the economy in the year under review.

2.1. A government signalling its intention to push ahead with its reformist economic agenda…

The year 2015 started with the appointment of Arvind Panagariya, a renowned free-market economist and a professor of economics at Columbia University (New York), as the first vice-chairman, namely de facto head, of the newly established Niti Aayog, the body which replaced the Planning Commission in 2014.[4] Panagariya’s appointment was seen by many as a concrete sign that Modi intended to push for a programme of rapid economic reforms.

Indeed, between the end of December 2014 and the first week of January 2015, the government promulgated several ordinances on economic matters. This was a message to both investors and the opposition that the government was ready to bypass the Parliament in order to push ahead with its reform programme. In fact, during the second part of 2014, the government’s attempt to pass its economic reform legislation in the Rajya Sabha had been stalled by its lack of a majority in the Upper House.

The most significant ordinances were – listed in chronological order – the Coal Mines (Special provisions) second ordinance; the Insurance Laws (Amendment) ordinance; the Land Acquisition ordinance; [5] and the Mines and Minerals ordinance.

The Coal Mines (Special provisions) second ordinance,[6] promulgated on 26 December 2014, aimed at clearing the logjam created by an order of the Supreme Court, in September 2014, which had cancelled hundreds of coal-mining licences that had been allocated illegally.[7] The ordinance introduced a more transparent procedure for the allocation of coal blocks, which aimed at more strictly regulating what had become a major source of corruption.[8] The ordinance was also a first step towards liberalising the coal sector.[9] By allocating mines to the state governments for commercial mining, the ordinance put an end to the monopoly of the centre in the sector.

The Insurance Laws (Amendment) ordinance, promulgated on 26 December 2014, hiked the Foreign Direct Investment (FDI) limit in the insurance sector from 26 to 49%.[10]

The Land Ordinance emended the Land Acquisition Act of 2013 – the last important piece of legislation enacted by the UPA2 government – by listing five new categories of projects for which land expropriation would be facilitated. In fact, for these projects – related to infrastructure, defence, and industrial corridors – prior consent from affected families and social impact assessment (SIA) would not be required.[11]

The Mines and Minerals ordinance, promulgated on 12 January 2015, emended the 1957 Mines and Minerals Act. It aimed at removing discretion when granting mineral concessions, by making it compulsory to allot them through public auctions.[12]

All the above ordinances were turned into legislation by the Parliament during the Budget session, with one conspicuous exception. In fact, the Land Acquisition ordinance became the object of a major political clash between the majority and the opposition. Finally – as detailed in the section on domestic policies – the government gave up the attempt to turn it into an act in August 2015, when it decided to let the ordinance lapse and accepted the requests of numerous state governments that were seeking to pass their own land laws.[13]

2.2. … but failing to convincingly do so in the budget

In spite of the promise of a rapid implementation of key economic reforms, the 2015-16 budget – as usual presented on the last day of February – did not contain any «big bang» reforms. [14] Rather, the government chose to follow in the footsteps of its predecessor, continuing with a «gradualist» approach.[15]

One of Modi’s top priorities in the economic sphere was to increase capital expenditure for infrastructures. In order to do this, however, he had to find the resources without giving the impression to foreign and domestic investors that he was reversing the traditionally rather conservative fiscal policy of the Indian government.

Arun Jaitley, the Finance Minister, found the resources mainly from three sources. First, the government chose to relax its short-term fiscal deficit reduction targets, without changing the medium-term ones. This provided some (short-term) fiscal space. Second, expenditure on subsidies was cut significantly, but this reduction was entirely due to the huge fall in global crude and commodity prices. Third, the government planned to raise Rs. 69,500 crore [Rs. 695 billion] through disinvestment (i.e. the privatisation of state-owned enterprises). The latter source of resources, however, remained largely on paper, since, as of October 2015, the government had been able to raise just Rs. 12,600 crore [Rs. 126 billion].[16] Moreover, out of this sum, Rs. 9,000 crore [Rs. 90 billion] came from the selling of 90% of India Oil Corporation to another state-owned enterprise, Life Insurance Corporation of India.[17] In addition, in mid November 2015, the government gave its nod to the sale of 10% of Coal India Ltd, which was supposed to fetch the government about Rs. 21,000 crore [Rs. 210 billion].[18] In any case, the inability of Modi’s government, despite its huge majority in Parliament, to significantly disinvest its shares of public enterprises shows how politically sensitive this issue remains.

Overall, Jaitley was not able to mobilise relevant resources for infrastructure investments. The budget for capital expenditure was raised to 1.7% of the GDP (up from 1.5% in 2014/15), which was about the same as in 2012-13 and 2013-14 when «nobody made a song and a dance about it».[19]

Jaitley’s fiscal space was also constrained by the fact that the government, in order to fulfil its promise of fostering a more business-friendly environment, decided to cut the corporate tax rate by as much as 5 percentage points and not to implement the much hated General Anti-Avoidance Rule (GAAR)[20] for another two years.

Another indication of how constrained Jaitley’s fiscal space was can be seen in the very limited increase in military expenses. These were brought to Rs. 2,46,727 crore, a rise of 6.9% compared to the sum allocated in Jaitley’s first budget.[21]

Furthermore, the government, wishing to please the urban middle classes, which had so much supported Modi in the 2014 general elections,[22] introduced a number of incentives for retirement investments, health care insurance, and financial savings and abolished the wealth tax. On the other hand, the government increased by 2% the surcharge on the super rich and marginally raised indirect taxation. Finally, what is usually called ‘revenue foregone’ (made up of tax concessions and the relaxation of custom duties and excise) grew slightly to Rs. 5.89 lakh crore, the largest share being constituted by exemptions for the diamond and gold industries. Overall, the tax-to-GDP ratio (one of the lowest in the world)[23] remained unchanged at 10.3%.

The big story of the 2015/16 Budget, however, was the rather radical restructuring of fiscal centre-state relations. Shortly before the presentation of the budget, the government accepted the recommendations of the 14th Finance Commission, which had proposed raising the states’ share of central government revenues from 32 to 42%, which increased the receipts of the states by Rs. 1.41 lakh crore [Rs. 1410 billion]. However, this was matched by a reduction of Rs. 1.34 lakh crore [Rs. 1340 billion] of central government funding to state plans.[24]

This restructuring of fiscal centre-state relations has several implications. Firstly, what is significant is not so much the (limited) increase in the resources transferred to the state governments, but the fact that the states were left free to spend these additional resources as they preferred. However, it should be noted that in some states (Telangana, Uttarakhand, Karnataka and Maharashtra) the availability of resources actually decreased between 3 and 20% when compared with the previous year’s revised estimates.[25]

The bulk of the reduction of the centre’s assistance to the states’ plans came from the reduction in the funding of Centrally Sponsored Schemes (CSS).[26] This decision was bound to have huge implications, in particular for the social sector, since most CSSs are welfare programmes.

The 2015-16 Budget divided the existing CSSs in three categories. First, some schemes were discontinued, among which were the Backward Regions Grant Funds, a scheme for strengthening the panchayats, a scheme for the modernisation of police forces, and the National e-Governance Plan. Second, 31 schemes, including the Mahatma Gandhi National Rural Employment Guarantee Act (MGNREGA), the Sarva Shiksha Abhiyaan, and the Mid Day Meal Scheme continued to be fully funded by the central government. Third, for 24 schemes – among which the Swachh Bharat Abhiyaan, the National Health Mission, the Rashtriya Madhyamik Shiksha Abhiyaan, the Integrated Child Development Scheme (ICDS), the National AIDS and STD Control Programme, and the Rural Housing scheme – the government severely reduced its budgetary commitments, leaving to the states the decisions regarding whether to keep the original budgetary allocations by using the newly allocated additional resources.[27]

The cut in funding for these social sector programmes was particularly alarming for the schemes belonging to the third category. For example, the budget for the ICDS – India’s only programme to tackle child malnutrition[28] – was cut by as much as 44%. The Minister for Women and Child Development, Maneka Gandhi, in a rare expression of dissent from her own government’s policy, said that with the reduced budgetary allocation there was barely enough money to pay for the wages of the millions of health workers in charge of running the programme.[29] Another example was the health sector, which saw its budget reduced not only as a proportion of GDP and in real terms, but even in monetary terms.[30] This is likely to have disastrous consequences in the future, as recently argued by a group of scholars in the prestigious medical journal The Lancet.[31] In fact, India already had one of the lowest health budgets (as a proportion of GDP) in the entire world.[32]

Obviously, the question is to what extent the states will match the central government’s cuts with their own resources. This will depend not only on state-specific political considerations, but also on the technical capacity of the states to manage an unexpected «29 billion dollar bonanza».[33] It is rather ironic that the central government, in an attempt to devolve more powers to the states, caught them completely unprepared to deal with the changed fiscal situation. Not only does it appear that the states were caught unprepared to cope with the impending changes in the funding for the social sector programmes, but the timing of the announcement of these changes (in the budget presentation speech of the Finance Minister on 28 February 2014) was particularly ill-timed. In fact, many state governments had already passed their 2015-16 budgets, whereas the central ministries were expected to approve the CSSs annual plan and budget for states within a few weeks. It was a situation bound to increase the states’ difficulties in managing and correctly spending the central funds allocated for the CSSs. It is also worth stressing that, even in normal times, the states had tackled with difficulty the task of managing CSSs central funding, often leaving a conspicuous part of it unspent.[34]

One final implication of the changed fiscal relations between the centre and the states could be a growing gap between the richest (and administratively more capable) and the poorest state. However, it is certainly a good idea, on principle, to leave the state governments with more leeway in spending centre-allocated resources, as each state has a better understanding of its own local conditions and needs. In fact, a state with notoriously low administrative capacity, Bihar, has been able, in recent years, to dramatically improve its implementation capacity of state-designed schemes.[35]

2.3. The unsuccessful attempt to push through the Goods and Service Tax bill

Another important piece of legislation that encountered substantial difficulties was the Goods and Service Tax (GST) bill. The reform of indirect taxation is a long-time demand of India’s business groups. In fact, each state has its own regulations, which makes it difficult to move goods and services across state borders, inflates costs and causes severe delays. The 2015 GST bill aimed at replacing this chaotic structure with a national goods and services tax, getting rid, in the process, of at least 14 federal and state levies, which often resulted in double taxation, pushed up the average burden for all goods at about 30% of the cost, going, in a few cases, as high as 50%. Moreover, the necessity to collect these taxes caused considerable delays in the movement of goods, as the trucks transporting them had to spend nearly a quarter of their road time going through border checks and being subjected to other inspections.[36]

In spite of the evident drawbacks of the prevailing situation, the bill faced strong opposition both by the states and the Congress party. Indeed, the latter went out of its way to oppose the bill, in spite of the fact that it had supported the imposition of GST legislation in the past. But the most significant source of opposition came from the state governments, which feared loosing part of their revenues. This was a main stumbling block, as the support of the states was crucial not only for passing the bill in the Upper House, but also because, in order to become operational, the GST law had to be ratified by at least half of them.

It was precisely to assuage the opposition from the states that the government agreed to a 1% additional new toll by states for goods crossing the internal borders, even in cases when the same company was shipping its own products from one of its plants to another. Moreover, the GTS bill did not extend to real estate, leaving companies still subjected to state taxes on plants and properties, possibly including machinery. Again this was not an oversight, but the result of the fact that these kinds of taxes were one of the major financial sources for the states.[37] This being the situation, it does not come as a surprise that, once the GST bill was introduced in Parliament, India’s business community reacted with considerable disappointment. In fact, it pointed out that the bill could result in an increase in taxation rather than in its diminution, creating a situation in which, according to an anonymous senior executive at a major steelmaker, «it would be easier for businessmen to import rather than manufacture goods in the country».[38]

The business community opposition, however, was not a compact one. In fact, a report by the Confederation of Indian Industry (CII) argued that, if implemented well, the proposed legislation would significantly lower logistic costs.[39] In any case, the government failed to implement the bill on 1 April 2016, as promised.[40]

Overall, at the end of the period under review it appeared that the impression (and hope) that Modi would push through a set of epochal economic reforms was inaccurate. Both institutional constraints (in particular the BJP’s lack of control of the Upper House) and political considerations (in particular the BJP’s fear of being depicted as anti-farmer and anti-poor) resulted in the continuation of India’s long-established gradualist approach to economic reform. Modi himself has indeed acknowledged the path of reforms is a «marathon» rather than a «sprint».[41]

2.4. Attracting additional foreign direct investments (FDI)

A main preoccupation moulding the economic policies of the Modi government has been attracting FDI, particularly through its «Make in India» campaign. Although what the Make in India campaign entails in terms of concrete policy has never been totally clear,[42] it appears that, on the one hand, the government instructed its officials to expedite business activity-related processes and procedures, while, on the other hand, a few small but important administrative changes made it easier to start and conduct business. This strategy was not totally devoid of results; in fact in the latest World Bank’s Doing Business Report, India moved up twelve positions in the «ease of doing business» ranking.[43] This was mainly due to easier and faster procedures for obtaining an electricity connection and starting a new business.[44] Although there was still a long way to go – India was ranked 130th out of 189 countries – the direction of change was certainly positive and showed that Modi’s battle against red tape was starting to pay off. It is also significant that the conclusions of the World Bank’s report, based on data collected in Delhi and Mumbai, were strengthened by the government’s own data. These suggested that states such as Gujarat, Rajasthan, Chhattisgarh, Madhya Pradesh, and Odisha had recently made important steps forward in reducing unnecessary business regulations.[45] It is thus possible that the all-India picture might be better than the World Bank report suggested. It is also worth stressing that the 2015 Doing Business report is based on data collected up to June 2015; accordingly, it does not take into account a number of changes introduced after that date. The post-June 2015 data, which will be shown in the 2016 report, are likely to positively impact on India’s ranking.

Once all this is said, it is necessary to stress that data on investment flows do not offer a clear picture of the impact of these measurers. On the one hand, FDI have indeed been increasing. In September, The Financial Times reported that India was then ahead of both China and the United States as the most favoured destination for FDI.[46] On the other hand, Gross Fixed Capital Formation (GFCF) data do not indicate any dramatic surge of investment levels. Similarly, data from the Department of Industrial Policy and Promotion do not show any significant revival in investment trends.[47] On a more positive note, data show that the lion’s share of new investments are in the manufacturing sector, whose growth was one of the key objectives of the «Make in India» campaign.[48] When all the above is taken into account, it is necessary to point out that, after a few quarters of significant progress in the unclogging of stalled projects, there has been an inversion of the trend. At the end of the quarter ending in September 2015, the stock of stalled projects amounted to Rs. 9.9 trillion, up from Rs. 8.8 trillion of the previous quarter.[49]

2.5. Creating jobs at an excruciatingly slow pace

Apart from the pledge to reboot the economy through a sustained programme of economic reforms, the other key promise of Modi’s 2014 electoral campaign was that of creating jobs. During his prime ministership, Modi has attempted to fulfil this electoral pledge by pursuing two strategies: the already quoted «Make in India» Campaign and an ambitious programme for skills development.

As noted above, Modi’s second strategy to boost job creation was the introduction of an ambitious new skill-development programme, aiming to render no less than 402 million people skilled between 2015 and 2022.[54] This is potentially an extremely important policy initiative, as, paradoxically enough in a context of prolonged jobless growth,[55] India’s entrepreneurs struggle to find qualified workers.[56] This comes as no surprise if one bears in mind that only 4% of India’s workforce has received any formal training.[57]

The previous UPA government had launched its own National Skill Policy in 2009, but very little was achieved. At the time of writing it is not possible to say in what respects the new policy differs from the old one. What seems clear is that officials in the newly established Ministry of Skill Development and Entrepreneurship hardly appear confident about the success of the new initiative.[58]

2.6. The continuing rural crisis

2.6.1. The long term and contingent causes of the rural crisis

The poverty of India’s primary sector has been a major economic problem since the colonial period. After independence the situation has improved, but only up to a point. Anyway, the economic reforms launched in 1991 ended a period of relatively high public investments in the rural sector, which had started with the launch of the Green Revolution in the mid-1960s. Not very surprisingly, but against the expectations of India’s policy makers, private investments, also because of a series of legal norms that make agriculture a very risky business,[59] did not compensate for the decreasing intervention of the state in the primary sector. During the UPA 1 and 2 governments, a number of anti-poverty policies were introduced, the most significant among them being the MGNREGA. This, together with robust economic growth throughout the period, had a significantly positive effect on the rural areas in general, and on poverty reduction in particular.[60] However, the most recent data indicate that the rate of growth of farm income declined in 2015 and that non-farm income in rural areas «remained flat at best».[61]

As a result of the above listed long-term problems, Indian agriculture in the period under review presented a dismal enough picture. Data released by the National Sample Survey Organisation (NSSO) at the end of 2015 indicated that nearly 70% of farmers subsisted on farm holdings which were economically unviable, being less than a hectare in size. Not surprisingly, over one-fifth of farm households did not report farming as the primary source of their income, but rather salaried employment. An additional 44% had to supplement their limited income by seeking work under the MGNREGA.[62] Finally, according to government data for the year 2014, 52% of India’s agricultural households were indebted.[63]

In the period under review, the long-term problems afflicting Indian agriculture were compounded by a series of contingent but momentous events. These events were of two main kinds: natural and related to the global economic situation.

In 2014, El Niño – the climatic phenomenon caused by the exceptional warming of the Pacific Ocean, which causes droughts in large swathes of the globe and excessive rains and floods in others – started to manifest itself once again.[66] As a consequence, in India, rains were 12% below normal, which caused a 4.7% diminution in grain production in the twelve months ending in June 2015. This was followed by a worsening of the climatic situation, characterised by «unseasonal rains that damaged India’s winter harvest in March and April»,[67] followed by monsoon rains 14% below par in June-September 2015.[68] As a consequence, according to the Indian Meteorological Department, already in October 2015 nearly half of the Indian districts – a total of 320 – had been afflicted by a deficiency in rainfall of at least 20%.[69] Considering that roughly half of India’s cultivated land lack irrigation, this could have disastrous consequences.[70] In fact, an in-depth drought impact assessment conducted during the Summer months of 2015 by the Swaraj Abhiyan in seven districts in southern Uttar Pradesh – one of the drought worst hit states – suggested that «the drought may well be a famine».[71]

An additional natural event that adversely affected the rural production of perhaps the best irrigated state in India, namely Punjab, was the whitefly infestation of cotton. This happened in spite of the fact that the local cotton, the Bt type, is supposedly pest-resistant. In November 2015, according to a Press Trust of India report, Punjab’s cotton output was likely to shrink by 40%.[72]

The climatic difficulties were coupled with difficulties related to the global economy, which resulted in an 11% fall in India’s farm exports in the October 2014–March 2015 crop season.[73] Moreover, international factors adversely affected the production of a number of Indian crops. In particular, cotton and non-basmati rice exports were affected by China’s decision to put an end to cotton stockpiling and by Thailand’s decision to diminish its rice stocks, respectively.

Indian sugar was made uncompetitive in the international market by the decline in world sugar prices, caused by the devaluation of the real, the currency of Brazil, the world’s main sugar producer; Indian sugar, soy, barley and basmati, formerly bought at a premium by an Iran hemmed in by world sanctions, after the easing of such sanctions started to be substituted by less expensive goods produced by other countries; the fall in global crude oil prices, on the one side, had an adverse effect on the competitiveness of Indian grains and oilseeds used for biofuels and, on the other side, by cutting down freight costs, made South America-produced soy and corn competitive in the Indian market. Last but not least, the strength of the rupee during the year under review put Indian exports at a disadvantage and favoured imports.[74]

2.6.2. The Modi government’s slow response to the rural crisis

In May 2014, the BJP manifesto had promised that farmers would earn a 50% profit over their total input costs.[75] Although often repeated by Modi during the electoral campaign, once the new government was in place, this particular electoral promise seems to have rapidly been forgotten. This, it seems, happened as a consequence of the advice of two influential neoliberal economists: Dr. Arvind Subramanian (Chief Economic Advisor (CEA) to the Government of India since October 2014) and Dr. Arvind Panagariya (as already mentioned, the vice-chairman of the Niti Aayog).[76] In November 2014, both Subramanian and Panagariya warned the Indian Government that higher agricultural procurement prices could trigger a surge in inflation.[77] As a consequence, the minimum government support price for staples – in particular wheat and rice – was cut, badly affecting the level of rural incomes.[78]

In the analysis of The Economist, although the above decision «was the right move, and has since helped bring down inflation», it, nevertheless, «should have come with more transitional support for farmers hurt by the adjustment».[79] On top of that, after the decision was taken, soft commodities prices[80] crashed, making the situation desperate for Indian farmers.[81] The most glaring indication of the increasing desperation of the Indian farmers was the sudden raise in farmers committing suicide, which has been reported with increasing frequency by the domestic press.[82]

In this situation, even some economists close to the government started to express their concern. In the words of agricultural economist and advisor to the Niti Aayog on agriculture, Dr. Ashok Gulati, the situation was «so grim» that, without «a sustained incentive structure for the farmers, India could slip back to the era of food shortages experienced in the 1960s».[83] For his part, D.H. Pai Panandiker, president of the Mumbai-based RPG Foundation, which houses a macroeconomic policy think-tank, expressed the fear that, considering the challenging agricultural situation, farm output in the 2015-16 fiscal year could shrink «by as much as 4 per cent, which would be the first [agricultural output] contraction since 2002/03».[84]

Strangely enough, the response of the Modi government to this situation was slow and not commensurate with the increasing gravity of the situation. The consequences of this lack of attention was that, during the year under review, no well thought-out and comprehensive strategy aimed at remedying the many ills affecting Indian agriculture was ever conceived, and much less implemented. What was to be implemented were a set of piecemeal ad hoc decisions, which could not but be judged, particularly by those affected by the deepening agrarian crisis, except as examples of «too little, too late» stopgap remedies.

The most important of these ad hoc remedies was the decision to moderately increase the minimum support prices (MSP) for grains and pulses. In addition, the central government raised the compensation for crop damage and set more generous rules for claiming it.[85] Moreover it asked state governments to draw from the more than US$ 1 billion allotted to the State Disaster Response Fund, for which the centre provides 75% of the funds, and raised compensation by 50% for farmers suffering crop losses. At the same time, quality requirements for wheat purchases by state agencies were lowered, import taxes on rubber and sugar were lowered, and raw sugar exports promoted through an incentive.[86]

However, in practical terms, these apparently generous provisos were gravely insufficient. Even when compensation reached the farmers – which depended on a set of circumstances, including the decision of the particular states to declare a situation of drought and the farmers being the owners of the damaged land and being indebted with a bank – they covered less – sometime considerably less – than a fifth of the damage.[87]

As far as the suicides of farmers were concerned, compensations were provided to the families. But the rules for allowing these compensations varied from state to state, were more or less restrictive[88] and, once again, insufficient to provide for the bereft families.[89]

More generally, what was striking in the government’s response was not only – as noted above – the complete lack of a general well-thought out plan to cope with the mounting rural distress, but the lack of willingness to fully make use of the instruments already available. In the words of Harsh Mander, a former district collector and present human rights activist, who reported his impression after visiting the rural district of Banda (U.P.): «The response of state administration to looming drought is disgracefully dismal and listless, lacking entirely in both urgency and compassion. People showed us empty job cards; public works under the MGNREGA, the most effective instrument to prevent distress migration, were nowhere to be found. Wages from earlier work had not been paid for over a year. Even more gravely, neither the Central nor the state government is serious about rolling out the National Food Security Act that should lawfully have commenced a year and a quarter ago. It would have ensured the availability of half of each household’s monthly cereal requirements almost for free for more than 80 per cent of households».[90]

When all this has been noted, it is worth stressing that, as noted by Harsh Mander himself, the callousness of the central and most state governments as far as the plight of the rural population was concerned was accompanied by – and possibly was a function of – the indifference of the educated public with respect to this problem. In fact, the abundance of quotations concerning the rural population’s plight present in this chapter should not conceal the fact that, as a rule, the attention given by the Indian media to this issue has been minimal and erratic.[91] As noted once again by Harsh Mander: «Farmers and landless workers in 11 states are crashed by drought, often for three years in a row, but if you scan newspapers and television screens, debate in Parliament and meetings in state secretariats, it would appear that this is a figment of some imagination». «This, indeed, – concluded Mander – is what some senior journalists and officials said to me, or implied – that we are inventing a story of drought hunger».[92]

2.7. Macroeconomic Performance

2.7.1. A positive U-turn in the GDP rate of growth?

In spite of the mixed success of the economic policies listed above, during the year under review the macroeconomic indexes appeared to experience an impressive improvement. Consumer price inflation, which had been a major problem in the UPA-2 years, was put under control, as shown in chart 1 and table 1. This was mainly due to the already mentioned steep decline of the oil price at the global level.[93] As a consequence, the Reserve Bank of India (RBI) significantly cut interest rates, a move that was welcomed by the business community.[94]

Chart 1 – Monthly Inflation in India 2015, CPI (Consumer Price Index) The average inflation of India in 2015 = 5.88%[95]

Table 1 – 2015 inflation India (CPI)

 Inflation

(monthly basis)

Inflation % Inflation

(yearly basis)

Inflation

 Jan 2015 – Dec 2014 0.40 Jan 2015 – Jan 2014   7.17
 Feb 2015 – Jan 2015 -0.39 Feb 2015 – Feb 2014   6.30
 Mar 2015 – Feb 2015 0.40 Mar 2015 – Mar 2014   6.28
 Apr 2015 – Mar 2015 0.79 Apr 2015 – Apr 2014   5.79
 May 2015 – Apr 2015 0.78 May 2015 – May 2014   5.74
 Jun 2015 – May 2015 1.16 Jun 2015 – Jun 2014   6.10
 Jul 2015 – Jun 2015 0.77 Jul 2015 – Jul 2014   4.37
 Aug 2015 – Jul 2015 0.38 Aug 2015 – Aug 2014   4.35
 Sep 2015 – Aug 2015 0.76 Sep 2015 – Sep 2014   5.14
 Oct 2015 – Sep 2015 1.13 Oct 2015 – Oct 2014   6.32
 Nov 2015 – Oct 2015 0.37 Nov 2015 – Nov 2014   6.72
 Dec 2015 – Nov 2015 -0.37 Dec 2015 – Dec 2014   6.32

Inflation rates in the table are presented both on a monthly basis (compared to the month before) as well as on a yearly basis (compared to the same month the year before).[96]

As far as the real GDP (Gross Domestic Product) is concerned, official government data unveiled on 9 February 2015 showed that India had become the fastest growing country among the major economies, overcoming China, [97] a success that was much celebrated by the Indian media. However, the Indian media rarely pointed out that, a the end of the day, China’s economy was still four times the size of India’s and that, as noted by Ashish Kumar, director general of the Indian Central Statistics Office, if India continued to grow at the same speed as in 2014-15 and China continued to perform at the lower level of the last few years, «then still it will take 20 to 30 years [for India] to catch up [with China]».[98]

Once this has been pointed out, it remains the fact that, according to the official data, the rate of growth of India’s real GDP (Gross Domestic Product) was equal to 7.3% in the fiscal year 2014-15 and to 7.25% for the calendar year 2015.[99] The quarterly growth from October 2014 to December 2015 is given in Table 2.

Table 2 – Growth of the real gross domestic product (GDP) from 3rd quarter 2014 to 3rd quarter 2015 (compared to the same quarter of the previous year)[100]

Q3 2014

October-December

Q4 2014

January-March

Q1 2015

April-June

Q2 2015

July-September

Q3 2015

October-December

8,4% 6,6 % 7.5% 7% 7.4%
Source: Statista – The Statistics Portal

(http://www.statista.com/statistics/276947/gross-domestic-product-gdp-growth-in-india-by-quarter)

At first sight the growth in the six quarters ending with October-December 2015 represents a radical U-turn when compared to the sluggish rate of growth of the UPA-2 period (given in Table 3).

Table 3  – The GDP rate of growth during the UPA-2 government according to the old methodology

Financial year 2009-10 2010-11 2011-12 2012-13 2013-14
GDP rate of growth 8,6 9,3% 6,2% 5% 4.9%

However, the rosy picture given by the above data needs some qualifications. The first is that the new figures were the result of a new methodology plus a change in the base year from 2004-05 to 2011-12.[101]

Here, the first problem is that most economists – including RBI governor Raghuram Rajan and the Narendra Modi government’s new CEA Arvind Subramanian – were clearly uncertain about the reliability of the «incredible (in both senses of the word) new numbers».[102] Accordingly, Raghuram Rajan appeared unwilling «to take a strong view» based on the updated data. [103] For his part, Arvind Subramanian pointed out that the new figures were «mystifying because these numbers, especially the acceleration in 2013-14 [when, according to the new methodology, the GDP rate of growth was 6.9%, instead of 5%, as shown by the old methodology], are at odds with other features of the macroeconomy».[104] As explained by Subramanian: «The year 2013-14 was a crisis year – capital flowed out, interest rates were tightened and there was consolidation – and it is difficult to understand how an economy’s growth could be so high and accelerate so much under such circumstances».[105]

A second (political) problem with the new methodology, implicitly highlighted in the above quoted CEA’s remarks, was that, when applied to the rate of growth during the UPA-2 government years, it unequivocally showed that the positive turn-around in the economy had happened before the Modi’s government came to power, as shown in Table 4.

Table 4 – Growth of the real gross domestic product (GDP) in India from 2010 to 2015[106]

2010 2011 2012 2013 2014 2015
10.26% 6.64% 5.08% 6.9% 7.29% 7.26%

At the end of the day, the credit for the positive U-turn of the Indian economy must either go to the Central Statistical Organization, which revised the national statistics in January 2015,[107] or to the policies implemented during the last phase of the UPA 2 government. Most probably – as noted, among others, by the authors of this chapter – the economic recovery had indeed started during 2014, [108] but the extent of this recovery has been amplified by the new GDP methodology.

2.7.2. The economy beyond the GDP

Should the official GDP data be taken at face value, the conclusion would be that the economic situation could not but be considered a quite positive one. This being the situation, one would expect a quite optimistic outlook on the part of the general public and, particularly, the business community. This, however, was not the case. As noted by Harvard educated Indian economist c: «Whenever and wherever business people meet, the conversation invariably veers to flattening sales and falling profits despite the government crowing that the real GDP is growing at 7.4%».[109] This negative perception was shared by credit rating agency Standard & Poor’s, which refused to change India’s credit rating from just above «junk».[110]

According to Guruswamy, the discrepancy between, on the one side, the image of the economy conveyed by the official data and, on the other, the perception on the part of business people and credit rating agencies such as Standard & Poor’s can be explained by the nature of the macroeconomic data employed by the Indian government. According to Guruswamy, even if the official data were recognized as correct, a major problem in accepting them as an accurate image of India’s economic reality was related to the discrepancy between the real GDP rate of growth (taken into account in the official data) and the nominal GDP rate of growth.[111] It is on the basis of the latter that most economic decisions are taken both by businessmen and individuals and families.[112]

Here the problem was that, in the 2015 calendar year, the Wholesale Price Index (WPI) declined below zero for the whole period (see charts 2 & 3), a trend which had begun in November of 2014. More precisely, the WPI declined by 0.90% year-on-year in January of 2016, as compared to a 0.73% drop in December.[113] In other words, beginning in November 2014, the Indian economy entered a period of deflation.[114]

Chart 2 –India’s Wholesale Price Index 2011-15[115]

Chart 3 – India’s Wholesale Price Index January 2015- January 2016[116]

All the above means that beginning in November 2014 the nominal rate of growth was well below the real rate of growth. Indeed, according to the government’s mid-year review, made public in December 2015, the nominal GDP growth had sharply declined from 13.5% in 2014-15 to only 7.4% in the first two quarters 2015-16. As noted by well-known senior journalist and economy expert M. K. Venu: «This is almost like suggesting that the income growth rate across the board is nearly halved!»[117] The government itself acknowledged that: «The sharp and continuing decline in nominal GDP growth, as well as the fact that the economy is powered only by private consumption and public investment – is a cause for concern».[118]

This «dramatic slowdown in nominal GDP growth» witnessed, as a consequence, «the extremely low growth in corporate earnings».[119] Hence the business community’s despondency, noted above. The nominal GDP slowdown could not but adversely affect future investment decisions on the part of Indian companies. This, in turn, did affect employment and salary growth in the organized sector, which, in the year under review, «experienced the worst retrenchment, the scale of which has not been seen in the past two decades».[120] All this catastrophically dovetailed with the deepening agricultural crisis. The all too real crises in both the secondary and primary sectors could not but impinge on the unorganised sector, further depressing the internal demand. On top of all this, exports experienced «an unprecedented decline» in 2015.[121]

Summing up, once one goes beyond the over-optimistic official macroeconomic data, the situation of the Indian economy in 2015 looked far from satisfactory and, certainly, very distant from the rosy hopes engendered by Narendra Modi’s electoral promises.

  1. Domestic Politics

Even as far as domestic politics are concerned, during 2015 not all went well for Narendra Modi. The Prime Minister’s problems originated from three interrelated factors. First, the BJP’s defeat in two important polls (Delhi and Bihar) put into question the Prime Minister’s ability to win elections. Second, the Congress Party, which practically all analysts considered to be in ​its ​death ​throes, quite unexpectedly put up a spirited and sometimes successful fight against the Modi government; finally the Prime Minister struggled uneasily to reconcile his institutional role as Prime Minister with the demands and actions of a number of Hindu extremist groups.

3.1. The Delhi and Bihar Elections

The state elections held in 2015 (and the local bodies election in Gujarat and Uttar Pradesh) reveal a common pattern. This is that, compared to 2014, the Modi’s wave had lost at least some of its steam and the Prime Minister was not able to win elections on his own any longer.

On 10th February 2015, the results of the elections in Delhi were announced. It was a political earthquake.[122] The Aam Aadmi Party (AAP – «Party of the common man») led by Arvind Kejriwal obtained the largest majority a party has ever captured since 1993, when the Delhi legislative Assembly was reintroduced.[123] Table 5 shows the number of seats and the share of the vote obtained by the AAP, the BJP, and the Congress.

Table 5

Delhi Election results and comparison with the 2013 election[124]

Party No. of Seats Change in

No. of Seats

Vote Share Change in

Vote Share

AAP 67 +39 54.3 +24.81
BJP   3 -28 32.2 -0.8
INC   0   -8   9.7 -14.85
Total 70 96.2

Apart from the smashing victory conquered by the AAP, the other most noteworthy development to be noted is the disastrous performance of the Congress. The party (which had ruled Delhi for three consecutive terms from 1998 to 2013) failed to conquer a single seat and saw its vote share plummet from 40.31% in 2008 to 9.7% in 2015.[125]

Another point worth stressing is that the poor performance of the BJP was not so much due to any significant decline in the popular vote; rather, it was the consequence of India’s first-past-the-post electoral system. It had worked well for the BJP in the 2014 Lok Sabha elections, when the party obtained 51.93% of the seats with 31.3% of the votes.[126] However, the extraordinary electoral performance of the AAP in 2015 translated into an even more extraordinary vote-to-seat conversion rate.[127]

The failure of the BJP to replicate its impressive performance in Delhi during the 2014 Lok Sabha election was mainly due to the poor choice of its chief ministerial candidate.[128] In January 2015 – less than a month before the polls – the BJP started presenting Kiran Bedi (a well-known former Indian Police Service officer, who had been an active militant in the Anna Hazare anti-corruption movement) [129] as its chief minister candidate.[130] The choice surprised many, especially the local BJP leaders. Many of them resented the fact that an outsider had been «parachuted» in by the national leadership onto the Delhi political battlefield, and were upset because Bedi, when associated with Anna Hazare’s anti-corruption movement in 2011, had been a sharp critic of the BJP. [131] The very disappointing results obviously upset greatly the local BJP leaders, who saw the defeat as the direct consequence of the «politics of arrogance»[132] of Modi and his principal lieutenant, Amit Shah, who had managed the elections from the top, without involving the local party branch.

Bedi’s choice as the BJP’s chief ministerial candidate was also a demonstration of weakness. The party chose a candidate that had a lot in common with her main rival, Arvind Kejriwal: both were known for their honesty and integrity, both had been associated with the Anna Hazare anti-corruption movement, and both had entered politics comparatively late in life. In this way, the BJP had endorsed the AAP’s argument that what Delhi needed was a new type of politician, and, in so doing, had strengthened Kejriwal’s position, as the latter appeared much more credible than Bedi in the role of a «new politician».

The extraordinary performance of the AAP was in many ways unexpected. The AAP had formed an Arvind Kejriwal-headed minority government in Delhi, with the support of the Congress party, in 2013. However, after only 49 days, Kejriwal had stepped down. Many thought this was a fatal error for the newly born party. The very disappointing performance of the AAP at the Lok Sabha elections in 2014 (when it failed to conquer a single seat in the capital)[133] seemed to confirm this view.[134]

Kejriwal, however, did something completely unexpected at that point: he apologised to the citizens of Delhi and to its own party for his mistakes[135] and started a vigorous and carefully planned electoral campaign based on a number of innovative initiatives such as the «Delhi Dialogues», flash mobs, and clever and intensive usage of social media.[136]

Data collected by the Centre for the Study of Developing Society (CSDS) show that, on the one hand, the AAP’s message resonated with a very broad section of the electorate, cutting to a large extent across caste, class and religious lines.[137] However, CSDS data also show that the AAP was the preferred party of the more marginalised communities and religious minorities:[138] 77% of the Muslims, who had overwhelmingly voted for the Congress in the past, 57% of the Sikhs, and 66% of the poor voted for Kejriwal.[139] It is significant though that as many as 47% of the upper classes chose the AAP (as against 43% who preferred the BJP).[140] Overall, the CDSD post-poll survey shows that corruption was the second most important issue for Delhi’s voters (just after «price rise») and that Kejriwal was considered by far the most credible chief minister candidate up to tackle the problem.[141]

On the other hand, one should be cautious to interpret the results in Delhi as a sign of the declining popularity of the Prime Minister. The CDSD survey shows that 65.5% of the electorate was «fully satisfied» or «somewhat satisfied» with Modi’s government.[142] But it is nevertheless clear that the BJP cannot win state elections just hoping that the «Modi wave» will last forever. The message of the Delhi electorate was precisely this: the BJP cannot «parachute» candidates from above, especially if other parties have strong and locally popular candidates. The result of the Delhi elections was also a shot in the arm for Modi’s internal opposition,[143] which had been resentful at the high degree of centralisation in the management of party affairs.

A similar lesson can be drawn from the results in Bihar. The state went to the polls in October-November 2015. Table 6 offers a synthetic view of the results.

 Table 6

Bihar elections results and comparison with the 2010 elections[144]

Alliance Party Seats Change No. of Seats Vote Share Change Vote

Share

Grand

Alliance

Janata Dal (U) 71 -44 16.8 -5.81
Rashtriya Janata Dal 80 +68 18.4 -0.44
Congress 27 +23   6.7 -1.68
Total Grand Alliance    178
NDA BJP 53 -38 24.4 +7.94
Lok Janshakti Party   2   -1   4.8 -1.95
Other NDA   3 NA   4.9 NA
Total NDA 58

It is difficult to compare the 2015 results in Bihar with the previous state election in 2010 because of the complete change in the political landscape in the intervening years. Two major developments were significant. First, when Narendra Modi was chosen in 2013 as the NDA’s Prime Ministerial candidate, the chief minister of Bihar and leader of the Janata Dal (United) or JD(U), Nitish Kumar, decided to break the 17-year old alliance with the BJP.[145] Second, at the 2014 Lok Sabha elections in Bihar the spectacular performance of the BJP – which gained 22 out of 40 seats – and the catastrophic results for the JD(U) – which crashed down from 12 to 2 seats – produced two main consequences among the political forces which were on the losing side. The first was Nitish Kumar’s resignation as Chief Minister in May 2014.[146] The second was that the electoral results alarmed not only the JD(U), but also the other main regional party of Bihar, the Rashtriya Janata Dal (RJD), led by Lalu Prasad Yadav. Although the two parties have been at daggers drawn since the JD(U)’s creation on 30 October 2003, the 2014 electoral results were worrying enough for both parties to convince them to bury the hatchet and form (together with the locally almost irrelevant Congress party) a «Grand Alliance».[147]

These two important political developments make it very difficult to assess the changes in the parties’ electoral performance. For example, the declining vote share of the JD(U) was almost entirely due to the fact that the party contested a significantly lower number of seats because of the seat-sharing agreement with the RJD.[148] Similarly, the BJP’s vote share increased, but, again, this was mostly due to the increased number of seats it contested.

The BJP’s original plan was to confront the Bihar’s voters with a choice between development (Modi) and caste politics (Nitish and Lalu). Accordingly, the Prime Minister was to be the focal point of the BJP’s campaign, so much so that the party did not even name a potential chief minister candidate.

However, after the first phase of polling, BJP’s leaders started feeling that the party’s prospects were not as good as hoped. This had a significant impact on the BJP’s campaign in two ways. First, the duo Narendra Modi-Amit Shah – who in the first phase of the campaign had dominated the party’s billboards and advertisements throughout the state – disappeared, to be replaced by local party leaders.[149] This was an attempt to shelter the Prime Minister in case of defeat. Second, the BJP decided to shift the emphasis of its campaign from development to caste and religious polarisation.[150]

A few examples are sufficient to highlight this shift. At a public rally on 25th October, Modi alleged the existence of a secret plan of the Grand Alliance to take away 5% of the existing reservation quota – allotted to Dalits, Extremely Backward Castes (EBCs) and Other Backward Classes (OBCs) – giving it to Muslims.[151] A few days later, Amit Shah said that a victory for the Grand Alliance would be celebrated with firecrackers in Pakistan.[152] At the beginning of November – just a few weeks after a Hindu mob assassinated in Dadri, in neighbouring Uttar Pradesh, a Muslim suspected of keeping cow meat in his house[153] – the BJP displayed billboards portraying a woman hugging a cow with a headline saying «Nitish Kumar Ji, your allies kept insulting the holy cow of every Indian and you kept quiet!»[154] Television ads, on the other hand, reminded the voters of Narendra Modi’s OBC background and the fact that the Grand Alliance leaders could not stomach his ascendancy to the country’s highest office, because of his caste background.[155] The list could be much longer.

The strategy did not work.[156] On the one hand, those for whom cows are a crucial political issue would most probably vote for the BJP anyway. On the other hand, religious polarisation mainly had the effect of consolidating the Muslims vote behind the Grand Alliance. There is also some evidence that shows that the BJP performed only marginally better in districts more affected by religious riots.[157] The attempt to woo OBCs, EBCs and Dalits did not work either, as the BJP offered a disproportionate number of seats to the upper castes.[158] On the other hand, the Grand Alliance was able to expand its social base among Muslims, OBCs, and EBCs, especially in rural areas.[159] Throughout the campaign, the BJP-led alliance managed to mobilise the upper castes only, the only exception being the Paswan Dalits, whose leader Jitan Ram Manjhi (briefly Chief Minister of Bihar when Nitish resigned in 2014) had chosen to ally with the BJP.[160]

The Grand Alliance, more importantly, won the rhetorical battle on development.[161] In fact, Modi’s repeated attacks on Lalu and the «jungle raj» that characterised Lalu’s chief ministerships in the 1990s did not undermine Nitish Kumar’s image as an able administrator.[162] Moreover, CSDS data show that Modi’s rhetoric of Bihar being a hopelessly underdeveloped state collided with the voters’ perception that Nitish Kumar had indeed been able to bring about development during his two terms (2005-10).[163]

This, in fact, was more than just a perception. Under Nitish Kumar the state’s GDP grew at an unprecedented pace (albeit from a very low base) both in absolute terms and as a share of all states’ GDP.[164] There is evidence, importantly, that this growth had been inclusive: not only did Kumar fund and implement a number of social welfare schemes reasonably well,[165] but growth in agriculture, poverty reduction, and literacy rates improvements have been among the highest in India.[166] The results would thus confirm the trend, identified by Milan Vaishnav and Reedy Swanson, according to which Indian voters are more and more inclined to reward good economic performance, at least at the state level. [167]

Finally, it is worth noting that, like in the case of Delhi, leadership was an extremely important issue for Bihar’s voters. Even though satisfaction with Modi’s government at the centre was quite high – 71.6% of the voters were fully or somewhat satisfied with the BJP-led government, according to CSDS data[168] – Nitish Kumar was by far the preferred choice for the chief ministership.[169] In Bihar too, the Modi-centric campaign – as a BJP leader put it, Modi and Shah «hijacked the entire campaign without feeling the pulse of the state»[170] – and the choice not to name a chief minister candidate did not pay off. The lesson that the BJP learnt – and that Modi’s internal enemies were quick to highlight[171] – was that an extremely centralised management of the party does not work, even if at the top of it stands a politician as popular as Narendra Modi.

Some more troubles for Modi came from the results of the elections for local bodies (panchayats and municipal corporations) in two states, Gujarat and Uttar Pradesh. In both cases the BJP suffered heavy losses.[172]

3.2. The Congress’ unexpected comeback

Another source of problems for the Prime Minister came from the opposition parties and in particular from the Congress. After its resounding defeat in 2014, the Congress was in serious trouble. Many thought that the «Grand Old Party» was about to implode,[173] as a number of senior leaders left and many more seriously questioned the leadership of the Gandhi family.[174]

However, contrary to expectations, the party put up an increasingly effective parliamentary fight against the Modi government and effectively disrupted the legislative activity in Parliament, thus replicating the BJP’s strategy during the UPA governments. Whereas this was certainly not a democratically healthy way of opposing the government, it suggested that the Congress was not yet ready to be consigned to the dustbin of India’s political history.

A turning point in Congress’s parliamentary strategy occurred following the results of the elections in Delhi, where the Congress failed to conquer a single seat. This appeared – and undoubtedly was – as clear-cut as any confirmation of the sad state of the party.[175] However, rather paradoxically, the results of the Delhi elections, by showing that Modi was not invincible, encouraged the Congress to get its act together, mounting a more determined and eventually not totally ineffective resistance effort against the Modi government. The main battleground of the Congress counterattack was the fight against the Land Acquisition Ordinance.

3.2.1. The fight against the Land Acquisition Ordinance

As recalled above, the Land Acquisition Ordinance was one of several ordinances on economic matters promulgated by the government between the end of December 2014 and the first week of January 2015.[176] Clearly, it was considered a key initiative in favour of the business community. It emended the «UPA’s growth-killing Land Acquisition Act»,[177] namely the last important piece of legislation enacted by the UPA-2 government in 2013.[178] In turn, the 2013 Land Acquisition Act had supplanted the Land Acquisition Act of 1894, a law enacted in the colonial period, which, nevertheless, had continued to be the rule of the land up until 2013.

The longevity of the 1894 Land Acquisition Act can be explained by the fact that it gave a free hand to the state to take hold of any extension of land, when it was «likely to be needed for any public purpose [or for a company]»,[179] without providing any adequate compensation to the former owners. Accordingly, land was seized and the former owners were paid a meagre amount (if any at all).

According to the Land Acquisition Act 2013, land could be expropriated only if assent was given by at least 70% (if the expropriated land was meant for public and public-private-partnership enterprises) or 80% (if the land was meant for private enterprises) of the people living off the land (namely not only landowners, but also «livelihood losers», that is people whose livelihood depended on the land which was being acquired). Moreover the Act fixed generous compensations for those who lost their land: four or two times the market value for urban and rural land respectively. [180]

The 2013 Land Act had been conceived by Rahul Gandhi and piloted through the parliamentary process by the then Minister of Rural Development, Jairam Ramesh. Interestingly enough, it had had the near general support of the Opposition, starting from the BJP. As later remarked by Rahul Gandhi, «In 2013, BJP had supported the new law. There were two all-party meetings, three amendments the BJP had proposed and which were incorporated, 15 hours of debate in Parliament, 65 MPs taking part».[181] Not only that, as again remembered by Rahul Gandhi, during the parliamentary debate two eminent BJP politicians such as Rajnath Singh and Vinay Katiyar had acted as the «opening batsmen» in favour of the law in the Lok Sabha and Rajya Sabha respectively.[182]

The above does not detract from the fact that, as soon as the new law was approved, strong objections were raised by many states, including several then ruled by Congress.[183] Also, the then Power Minister, Jyotiraditya Scindia, had called for an amendment exempting from the new law the biggest power projects.[184] Even more relevant was the fact that the business community was vehemently against the new Act; so much so that, according to a well known pro-Congress intellectual, it was this particular Act which had been a main reason behind the business community’s massive shift against the Congress party.[185]

This being the situation, the Modi government’s decision to emend the 2013 Land Acquisition Act made sense and was in line with the pro-business approach which characterised its policies – hence the decision to introduce an ordinance emending the law, which was promulgated by the President of India on 31 December 2014.

As briefly noted above, the ordinance exempted five categories of land use from the provisions of the 2013 Land Act: defence; rural infrastructure; affordable housing; industrial corridors; and infrastructure projects, including Public Private Partnership (PPP) projects where the central government owned land. For these extremely vaguely defined areas, expropriation would not require the consent of the people living off the land and the state was dispensed from performing the social impact assessment.

The government tried to convert the ordinance into law[186] by introducing in Parliament the Land Acquisition bill in February 2015. However, the bill, which was passed in the Lok Sabha in March, got stuck in the Rajya Sabha, where the government did not have a majority.[187] To this the government responded by having the land ordinance issued – with some minor variations as compared to the first version – a second and a third time, in April and May.[188]

By mid-February, however, following the BJP Delhi debacle, the Congress MPs, which had been «directionless for the first six months after the Lok Sabha election […] came into their own», as «they realised that the Modi government was not invincible».[189] Not only the Congress, under the leadership of a «newly energised» Rahul Gandhi put up a fierce parliamentary battle against the land acquisition legislation, but, led by Sonia Gandhi, took to the streets, accusing the Modi government of being «anti-farmer and pro-corporate».[190] More importantly, all the main opposition parties, which had hitherto acted each by itself, making life easy for the government, started to act together, leaving the issues which divided them at the level of the states.[191]

The opposition in the streets was organised not only by Congress, but also by other parties (particularly the AAP) and, perhaps more importantly, by several grassroots organisations. Even Anna Hazare, the leader of the 2013 anti-corruption movement, launched a march from Faridabad to Delhi, where it concluded with a two-day demonstration.[192]

Eventually, the Land Acquisition bill was referred to a joint parliamentary committee, where the Opposition parties, following the suggestion of the Congress general secretary, Digvijay Singh, insisted that a number of RSS-affiliated peasant organizations be heard.[193] This was done knowing that, since the promulgation of the first land ordinance, the opposition to the Modi government’s land legislation from «its own Sangh mischief-mongers» had been evident.[194] In fact, in spite of the behind curtains attempt by Modi and Amit Shah to convince the Sangh Parivar peasant organizations to close ranks and support the government’s land legislation, the Bharatiya Mazdoor Sangh, the Bharatiya Kisan Sangh, the Swadeshi Jagran Manch, and the Akhil Bharatiya Vanvasi Ashram made clear their continued opposition to the government’s Land Acquisition legislation.[195]

That was really the turning point in the struggle: the government – which had been mulling over the idea of convening a joint session of Parliament, in case the land bill was not passed in the Upper House[196] – decided to cut its losses and call it a day. The change in strategy was made public when, on 30 August, Narendra Modi announced during his radio programme Mann ki Baat his decision to let the third Land Acquisition ordinance lapse.[197]

All this does not mean that the government’s attempt at modifying the 2013 Land Act was over. The Land Acquisition Bill was still standing. Moreover, both Arun Jaitley and Arvind Panagariya advised states to frame their own acquisition laws, following the example of what had already done by Tamil Nadu.[198]

Once all this has been said, the undisputable fact remains that the shelving of the land ordinance was a major political defeat for the government and a clear cut victory for the opposition at large, but more specifically for Congress, which had led the attack on the government’s land legislation. It was not without justification that Sonia Gandhi, at a rally in Patna, celebrated «the victory of farmers over a government that has worked against the interests of the farmers».[199]

3.2.2. The Lalit Modi and Shivraj Singh Chouhan affairs

In leading its parliamentary battle against the BJP, the Congress became increasingly effective in highlighting and exploiting the BJP’s weaknesses. For example, in June 2015, an anonymous source leaked to the British Sunday Times[200] the content of some emails casting a shadow on External Affairs Minister, Sushma Swaraj, and Rajasthan’s Chief Minister, Vasundhara Raje. According to these emails, Swaraj and Raje had made use of their influence with the British government to favour Lalit Modi, the former Commissioner of India’s Premier (Cricket) League (IPL), who had fled to Great Britain to avoid prosecution in India over charges of «financial impropriety». Despite the fact that the Indian government had cancelled his passport due to allegations of «monumental graft» in the allocation of broadcasting rights, first Vasundhara Raje had helped Lalit Modi to find a safe haven in Great Britain by sponsoring his British immigration application in 2011 and then Sushma Swaraj had helped the former IPL chief to get British travel papers on «humanitarian» grounds.[201] The Congress disrupted the functioning of the Parliament repeatedly asking for Swaraj and Raje’s resignation (to no avail).

A similar strategy was adopted by the Congress in relation to the Vyapam scam involving Madhya Pradesh’s Chief Minister Shivraj Singh Chouhan. The scam, which involved a widespread corruption network in the state’s civil service appointment system, was made particularly disturbing by the fact that, over the last few years, as many as 50 witnesses and defendants involved in the affair have died, 23 of them for «unnatural» reasons.[202]

The effects of the Congress’s opposition against Modi’s government were mixed. On the one hand, even if the Congress did not obtain any resignations, it certainly reinvigorated itself, at least in Parliament. Moreover, it is undeniable that the continuous media exposure (also due to the Congress strategy) seriously damaged the image of the BJP as the «clean» party that in the 2014 election campaign had ridden the anti-corruption wave.[203] Furthermore, the continuous disruption of legislative activity – leading to a virtual policy paralysis[204] – affected the image of the Modi government as a «doer».

On the other hand, however, probably just by chance, all the accused in these scams – which reached the press thanks to internal leakages – were Modi’s internal rivals.[205] Therefore, although the BJP’s prestige was damaged, thus indirectly weakening the Prime Minister himself, it is a fact that the whole affair strengthened rather than undermined Modi’s position inside his own party.

3.3. Intolerance

The second source of problems for the Modi government came from the heart of Narendra Modi’s social base, namely the galaxy of Hindu groups that form the core of the BJP’s electoral support. The election of Modi in May 2014 galvanised Hindu groups throughout the country.[206] Since then, the Prime Minister has proven to be unable (or unwilling) to control the most extremist elements among them. To put it in different terms, Modi has been unable to reconcile his institutional role as Prime Minister with that of leader of a party that represents the interests and demands (also) of Hindu zealots.

Two policy decisions taken at the state level by BJP governments (in Maharashtra and Haryana) were particularly important in their consequences. Both states made it illegal to own or sell beef.[207] We shall leave aside the implications for personal freedom that these decisions entail. We will also not discuss the fact that beef is widely consumed in India – 1 in 13 Indians consume it, including 12.5 million Hindus[208] – especially by the most nutritionally deprived sections of society (Dalits and Tribals, for whom beef is an important and cheap source of proteins)[209] and by religious minorities (Muslims and Christians).

Rather, we will focus on the fact that the bans contributed to creating an «anti-beef hysteria»[210] that had major political consequences. On 28th September in Dadri (Uttar Pradesh) someone at the local temple announced that the family of Mohammad Akhlaq, a farm worker, had some cow meat in their house. Shortly afterward a mob reached Akhlaq’s house, killed him, and severely injured his son, Danish.[211] The episode – perhaps because Dadri is just 50 kilometres from New Delhi, from where journalists could travel easily – immediately caught the attention of the national media.

Akhlaq’s murder became of national relevance for several other reasons. First, some of the people involved in the lynching were associated with the BJP.[212] Second, BJP local leaders, MPs and ministers made a number of outrageous declarations on the incident. MP Tarun Vijay suggested that the victims should «maintain silence in the face of assaults».[213] Culture Minister Mahesh Sharma – who had raised a controversy a few days earlier when he said that the former President of India A. P. J. Abdul Kalam was a nationalist «despite being a Muslim»[214] – called the lynching just an «incident» that should not be given a «communal tone».[215] An MP from Uttar Pradesh, Yogi Adityanath – one of the main architects of the «Love Jihad» campaign during 2014[216]– offered guns to the Hindus of Dadri to defend themselves from retaliation.[217] The list is by no means exhaustive.

Third, the Dadri lynching occurred in a climate of increasing religious intolerance – at least at the level of perception.[218] A number of disturbing episodes happened during 2015 that reached the national media. In December 2014, Perumal Murugan, an acclaimed Tamil writer, was threatened by Hindu groups that found a novel of his (written in 2010) insulting. The police suggested him to go into exile, as they could not ensure his safety. Eventually, he withdrew his entire literary production and promised to give up writing.[219] In February 2015, Govind Pansare, a Communist Party of India member, author of a biography of Shivaji and a sharp critic of right-wing Hindu extremism, was killed.[220] Former vice-chancellor of Kannada University in Hampi, Malleshappa Madivalappa Kalburgi, a rationalist who had spoken out against idolatry in Hinduism, suffered a similar fate in August.[221] In October, two concerts of the famous Pakistani singer Ghulam Ali, scheduled in Mumbai and Pune, were cancelled because the Shiv Sena (an ally of the BJP in Maharashtra) objected to Ghulam Ali’s nationality.[222] Later in the same month, the Jammu and Kashmir MLA Engineer Rashid was attacked with black ink in New Delhi because he had organised a «beef party».[223] Sudheendra Kulkarni, a former BJP member, suffered the same fate a few days earlier, when he was attacked with ink by Shiv Sena activists who did not want him to present the new book by the former Pakistan Foreign Minister Khurshid Kasuri in Mumbai.[224]

All these (and other) episodes contributed to creating a fear that freedom of speech and religion were in danger. As many as 40 writers returned their Sahitya Akademi awards in protest. Numerous filmmakers, scientists and academics returned their awards too.[225] This obviously kept the attention of the media focused on the issue, as did the fact that the RBI governor Rajan and the rating agency Moody warned the government that rising religious tensions could hurt its economic reform agenda.[226]

Fourth, the government badly mismanaged the situation from a public relations perspective. The Prime Minister did not comment on the Dadri lynching until 14 of October (more than two weeks after the episode) when he called the incident «sad» and «not desirable», pointing out, however, that the central government could not be blamed for it.[227] Also, those BJP members responsible for outrageous declarations were not punished in any way. The Prime Minister did not comment on any of the other episodes listed above.[228]

Modi’s silence is significant if only because it sheds light on the nature of his relationship with the RSS. In short, the impression is that the Prime Minister cannot afford to take a firm stance in defence of religious pluralism, even if he wanted to.

Of course, it is far from certain that Modi’s silence is not an endorsement of the actions of Hindu extremists. His long career in the RSS, his track record in Gujarat where he oversaw the killing of hundreds of Muslims, and his more recent explicit attempts to polarise the electorate (both during the last phase of the 2014 Lok Sabha elections and the 2015 Bihar polls),[229] are clear signs that Modi’s silence is at least a partial endorsement of the Hindutva agenda.

The problem represented by Modi’s silences can be more accurately assessed by reflecting on the fact that, although the Prime Minister could have politically profited by taking a firm stand against religious extremism, he chose not to do so because of even weightier political reasons. Indeed, speaking firmly and without reservation against communal hatred would have reinforced Modi’s image as a statesman, both domestically and internationally. This would have vindicated a great number of political commentators in the international and Indian English media who, since May 2014, have repeatedly argued that Modi, the Prime Minister, is a radically different person from Modi the politician who, in Gujarat, turned a blind eye to the anti-Muslim pogrom of 2002. Modi the Prime Minister, according to this view, is a pragmatist who only cares about economic growth. Hence, according to these interpretations, Modi would actually be disturbed and irritated by the behaviour of his (extremist) followers, because they distract the party from pursuing his economic agenda. Furthermore, Modi, by taking a firm stance against religious intolerance, would have avoided offering the opposition an excuse to block yet another parliamentary session on a golden plate[230] and left him more space to push through his reform agenda.[231]

These benefits, however, appear to be too limited when compared to the potential damages caused by a firm stand against religious extremism. First of all, it is not clear to what extent the indignation over Modi’s behaviour exists beyond the English media. By looking at the CSDS data on the most important electoral issues in the eyes of Bihar’s voters, one would be inclined to conclude that the debate was largely confined to the English speaking élite.[232] Moreover, even the English speaking élite, although dissatisfied with Modi, still considered him the lesser of two evils. As pithily stated by a quintessential member of this élite: «I am certainly disappointed by Modi’s priorities, performance and style so far […] but if the elections were held today I would still vote for Modi. I myself and many others I know well, and perhaps millions of Indians, are so fed up with the greed, avarice, dishonesty and feudalism of the Congress/Gandhis that any alternative is better than them.»[233]

Summing up, there are reasons to think that the damage to Modi’s image may be much more limited than what it would seem reading the English media, even among the members of the English speaking middle class. Which explains why Modi did not appear overly concerned about the criticism. More importantly, the complexity of the relationship between the Prime Minister and the RSS made it extremely difficult for him to take an institutional stance in defence of religious pluralism.

The BJP and the RSS are in a symbiotic relationship. To oversimplify: the former needs the latter’s workers to win support, particularly during electoral campaigns; the latter needs the BJP’s presence in the state institutions to put the country on the path leading from a secular state to a Hindu Rashtra. However, as shown by what happened during Atal Bihari Vajpayee’s prime ministership, when the BJP is in power this symbiotic relationship runs the risk of being disrupted. However, since Modi’s 2014 victory, the government and the RSS had found a division of roles that ensured a certain equilibrium. On the one hand, the RSS were left a free hand to either direct or oversee government and party affairs in the cultural and educational spheres.[234] On the other hand, the RSS did not interfere in other domains, especially in the management of the economy. This being the situation, had Modi taken a firm stance against religious intolerance, he would have explicitly violated this tacit pact.[235]

During 2015, however, a number of latent tensions between the Modi and Shah duo, on the one hand, and the RSS, on the other, emerged. The duo’s overly centralised management of the BJP had been a constant source of concern for the leadership of the RSS. What had probably upset the RSS leadership the most was Shah’s attempt to recruit 1.5 million new BJP members independently from the RSS. According to Dhirendra K. Jha (an acute observer of the RSS and the BJP) this would be the reason behind the RSS cadres’ rather lukewarm support to the BJP during the 2015 electoral campaign in Bihar.[236] It may also be possible that the politically inappropriate call for a review of the reservation system – an extremely obvious taboo in a state like Bihar – made by Mohan Bhagwat, the RSS Sarsanghchalak (supreme leader), during the electoral campaign in that state, was not an accident. Rather it may have been a not-so-covert attempt to undermine the Prime Minister, or at least to send him a not-so-subtle message.[237]

To complicate things further, the RSS cannot afford to loose ground vis-à-vis the growing number of increasingly assertive Hindu extremist groups (within and outside the Sangh Parivar). The risk for the RSS is to be «outflanked from the right by Hindutva outfits they can no longer control».[238] These groups can potentially attract the most radical elements within the RSS family. Suhas Pashikar has written an informative essay on one such outfit (the Sanatan Sanstha) that explicitly endorses violence as a means of ensuring religious «justice» and which has been involved in Govind Pansare’s assassination. [239] This and other militant groups of the Hindutva galaxy are increasingly independent of the RSS, which is worried about loosing even more ground if it shows any sign of «weakness». If only for this reason, the leadership of the RSS cannot and will not tolerate any criticism of the Hindutva agenda from «their» Prime Minister.

The challenge on the right involves political parties too. The Shiv Sena in Maharashtra is a case in point. Probably with its mind on the Mumbai municipal elections (to be held in 2017),[240] the leadership of the party has posed a direct challenge (from the right) to the BJP. When Modi «dared» to call «unfortunate» the cancellation of Ghulam Ali’s concerts and the Dadri lynching, Shiv Sena MLA Sanjay Raut replied that the Shiv Sena respected Modi because of Godhra, and that what was «unfortunate» was Modi saying that the Dadri lynching was «sad».[241]

What is at stake is one of the key elements of the BJP’s (and the RSS’s) social base of support, which may be relatively small in numerical terms – the overwhelming majority of Indian voters do not endorse the Hindutva agenda – but it is extremely important in terms of political mobilisation.

  1. Foreign Policy

As in the second half of 2014, in the year under review India’s foreign policy had two main objectives: projecting India as a major power on the world stage and getting all the possible foreign help it could in promoting its own economic development. The pursuit of both objectives was often intertwined with, on the one hand, the shopping for state-of-the-art weapons and weapon systems on the part of India and, on the other hand, with the selling or gifting of (maybe not so state-of-the art) weapons and weapon-systems by India to countries which she wanted to bring inside her sphere of influence. As in the second half of the 2014, in the year under review an absolutely dominant role in the making of India’s foreign policy was played by Narendra Modi, with Foreign Affairs’ Minister, Sushma Swaraj, playing a distinctively subordinate role. Indeed, in 2015 Modi confirmed to be the most peripatetic among India’s Prime Ministers by making 27 trips abroad and officially visiting 26 nations, which means an average of more than two foreign countries visited each month.[242] These official visits brought Modi not only to the US, China, Japan and Russia – all countries which have traditionally been central to India’s foreign policy strategies – but also to a host of other important and less important nations, some of which had rarely or never been visited by an Indian premier. Westward, Modi visited France, Germany, Ireland, and Canada; southward, he visited most Indian Ocean island nations plus Singapore and Malaysia; northward, he went to Mongolia, most Central Asian republics, and Turkey; finally, among India’s closest neighbours, Modi visited Sri Lanka, Bangladesh, Afghanistan, and Pakistan. Moreover Modi was present at the Paris climate conference (30 November-11 December 2015), where India played an important role in its successful conclusion[243] and was able to have some of its main objectives included in the final accord.[244]

In pursuing his two main objectives Modi’s main effort appears to have been twofold. On one side it aimed at strengthening the political, military, and economic connection with the US (attempting at the same time, with some success, not to loosen India’s traditional ties with Russia)[245] and, on the other side, it was focussed on the strategy of engaging/containing China. Therefore, it is on the relationship with the US and that with China that this year’s treatment of India’s foreign policy is mainly focussed. However additional space will be dedicated to the analysis of India’s relations with two of its closest neighbours: Nepal and Pakistan. Finally, some attention will be given to analysing India’s role at the WTO (World Trade Organization) ministerial meeting of 15-19 December, held in Nairobi. This was practically the only really important foreign event for India where Modi was not present, the key role being played by Commerce and Industry Minister of State (independent charge) Nirmala Sitharaman.

4.1. The India-US connection: high on hype, low on content

During the year under review the India-US relationship was high on hype, but low on content. The hype was provided in particular by Modi’s invitation to US President Barack Obama to be the «Chief Guest» to the Republic Day parade on 26 January 2015. That was the first time ever that a foreign head of state was invited to the Republic Day parade. Moreover, this brought about an unprecedented second visit by a US President to India during his term in office.[246] Also, high on the first pages of the press – at least the Indian press; in the American press it went almost unnoticed – was Modi’s second visit to the US from 26-30 September 2015. [247] These two high visibility visits were accompanied by a host of other visits either by prominent members of the Obama administration to India or by eminent members of the Indian government to the US.[248]

All these visits, but particularly the ones by Barack Obama to India and Narendra Modi to the US, although «extraordinarily rich in political symbolism», at the end of the day «failed to produce a substantive outcome».[249] According to former Ambassador M. K. Bhadrakumar, this happened because «the sort of market access that the US is demanding and the high Indian expectations regarding American investments are unrealistic in a near term.»[250] However, US access to the Indian market and US investments in India were not the only issues on the table. Two additional, interrelated and crucial ones were Washington’s attempt to integrate India’s military with the US forces deployed in the Asia-Pacific region and its contemporary effort – really the other face of the same coin – to more firmly bring India inside the American arc of containment around China.

As far as the opening of the Indian market to US capital is concerned, there were two main problems to be solved. One was the definition of the terms for operationalizing the 2008 civil nuclear cooperation agreement; the second was the signing of a bilateral investment agreement between the two countries.

The 2008 civil nuclear agreement had possibly been George W. Bush’s major political success in the area of foreign relations. However, the agreement had nevertheless failed with respect to the economic goal of opening the Indian market to US nuclear firms, mainly because of the passing of the Nuclear Liability Act by the Indian Parliament in 2010, which allowed both the victims and the operators of a nuclear plant involved in a disaster to sue the suppliers «for tortuous and criminal liability»,[251] effectively deterring the US nuclear companies from entering the Indian market.[252] Already during his 2014 trip to the US, Modi had signalled his intention to modify the US-India nuclear agreement in such a way as to accommodate the needs of the American nuclear firms.[253] Although news circulated[254] that the two parties were willing to compromise, it remains the fact that, as noted by the former Ambassador M. K. Bhadrakumar, «there [was] no clarity whether the understanding [concerning India’s nuclear liability law] reached at the governmental level (details of which haven’t been divulged) would stand scrutiny in a court of law or even prompt the American companies to shed their inhibitions over the Indian law (which, they say, does not conform to the international covenants on liability in nuclear commerce)».[255]

Indeed, the lack of clarity highlighted by Bhadrakumar still persisted at the end of the period under review. During the same period, no indication has emerged of a newly found willingness on the part of US nuclear firms to enter the Indian market.

As far as the bilateral investment treaty between the US and India is concerned, this had been under negotiation for years. This negotiation, stalled in February 2014, was restarted on January 2015, when visiting US secretary of state John Kerry, taking part in the «Vibrant Gujarat» conclave, made a strong case for it.[256] The American position on the bilateral investment treaty was that it, by facilitating protection of intellectual property rights, would encourage US companies to invest in India.[257] However, any speedy progress in the negotiation was impeded by uncertainties on the Indian part. Indeed, at the beginning of 2015 India was reviewing its existing bilateral investment model agreement, on which 83 Bilateral Investment Promotion and Protection Agreements (BIPPAs) with several foreign countries had been based since 1994. The problem was that, in the previous two years only, the pre-existing bilateral investment model agreement had paved the way to no less than 17 arbitration proceedings initiated by international companies against the Indian government.[258] This being the situation, the Ministry of Commerce proposed scrapping the BIPPAs altogether; the ministries of Finance and of Foreign Affairs, however, proposed modifying the existing model by modifying the investor-State dispute settlement in such a way as to prevent foreign companies from taking the Indian government to international arbitration unless all legal and administrative remedies in India had been exhausted.

Both the above solutions were bound to be opposed by the US government and investors, which, not without reason, considered the Indian judicial system slow and inefficient. US investors in particular appeared concerned regarding the question of intellectual property rights, which they saw as being routinely infringed upon by India, in spite of India’s claim that its regime was in line with the WTO’s Trade-Related Aspects of Intellectual Property Rights.[259]

In due course the Indian government finalized a new bilateral treaty model framework, deciding in favour of the Ministry of Finance-sponsored solution. This brought forward several US objections to the Indian position.[260] As a consequence, at the end of the year under review, «the long pending bilateral investment treaty between India and the US [appeared] nowhere on the horizon».[261]

As far as the high Indian expectations regarding American investments are concerned, Modi’s main attempt at increasing them was made during his second visit to the US in late September. Modi, after a stopover at the UN headquarters in New York, spent most of his time on American soil meeting 47 among the US’s main Chief Executive Officers (CEOs), some of whom – as in the cases of Google, Microsoft, and Adobe – were of Indian origin.[262] As during his previous visit to the States one year earlier, Modi declared that «India was open for business». Also «he listened to the Americans carefully, and seemed to take [their] complaints on board without defensiveness». For their parts, the American CEOs «praised the [Indian] prime minister’s efforts but highlighted a host of obstacles».[263] However, at that point in time it had already become clear that the mood was not that of the previous year and the enthusiasm for Modi had somewhat cooled down. In the period between Modi’s two American trips, the US CEOs and politicians had expected the Indian Prime Minister to translate his first announcement about India being «open for business» into «doing the business».[264] This was something that had not happened, at least not at the speed with which foreign investors had expected Modi to proceed. Indeed, the changed attitude of the American business community and politicians had already become apparent on the eve of Modi’s second arrival in the States. During the US-India CEO Forum held in Washington on 21 September 2015, US Secretary of Commerce Penny Pritzker had remarked that the World Bank ranked India 186 out of 189 countries on the ease of enforcing contracts. «In fact – Pritzker had stated – it can take years to resolve a contractual dispute with a vendor in India, and terms are too frequently reinterpreted after a deal has closed. These challenges make it incredibly costly and unpredictable to do business in India, and only serve to impede the operations and investments of Indian and foreign firms alike.»[265] For his part, during the same event, Honeywell CEO David Cote, while declaring that he was «pretty bullish» on India’s efforts to cut red tape, decried the Indian bureaucracy as «stultifying».[266]

Summing up, the impression is inescapable that the US business community had concluded that Narendra Modi, although willing to accommodate their needs, was not up at doing that, at least in the near future. Accordingly, in spite of the rise in US direct investment in India – noted in a previous section – this remained well below India’s expectations and the US business community’s potentialities.[267]

During the year under review, Washington’s doubts about India’s ability to fully integrate into the US-dominated neoliberal economic space became evident in relation to India’s «unambiguous interest in joining APEC»[268], namely the Asia-Pacific Economic Cooperation forum, which includes 21 Pacific rim nations and was founded in 1989 to promote free trade in the region. Indeed, joining the APEC forum was seen by both New Delhi and Washington as a necessary stepping-stone to India joining the Trans-Pacific Partnership treaty. The January 2015 US-India Joint Strategic Vision for the Asia Pacific and Indian Ocean Region had welcomed India’s interest in joining the Asia Pacific Economic Cooperation forum, noting that «the Indian economy is a dynamic part of the Asian economy.»[269] But in the following months the matter rested there, without any new developments.[270] Significantly, in the joint press conference following the Modi-Obama New York meeting of 28 September 2015, India’s Prime Minister’s statement that he looked «forward to work with the US for India’s membership of the Asia Pacific Economic Community» was not reciprocated by the US President.[271]

As far as the US attempt to closely integrate the Indian military with its own military forces in the Asia-Pacific sector is concerned, this depended upon the finalization of some contentious pacts, in particular the Logistic Support Agreement (LSA), the Communication Interoperability and Security Memorandum Agreement (CISMOA), and the Basic Exchange and Cooperation Agreement for Geo-Spatial Cooperation (BECA).

The LSA envisaged reciprocal logistical support on barter or an equal value exchange basis, whereas the CISMOA and BECA would enable the US to transfer high-tech avionics and electronics to India. However, in spite of their seeming advantages for India, these pacts, when they had first been discussed during the UPA’s time in office, had eventually been steadfastly opposed by the then Defence Minister, A. K. Antony, who had come to the conclusion that they limited India’s full control of its own military forces, and gave the US unfettered access to India’s military installations and to sensitive data, including India’s encrypted systems.[272] With the coming to power of the BJP government, the negotiations had been restarted and the US had pressured India to accept the pacts, which were described as «foundational» in the development of the military ties between the two countries.[273]

Although at the beginning of June 2015 a new 10-year US-India defence framework was signed in New Delhi, renewing the previous one, signed during the first UPA government in 2005,[274] the more specific military pacts still remained up in the air. A new and more intense phase in the negotiations concerning the LSA started at the end of year under review, during Defence Minister Manohar Parrikar’s visit to the USA (7-10 December 2015), whose «open mind» on signing the pact was appreciated by the US negotiators.[275] However, at the end of the period under review, the finalization of the LSA had not yet been reached.[276]

While unable to finalize the LSA, CISMOA and BECA, the US had considerably more success in more firmly inserting India into their own arc of containment around China. In fact, during Obama’s January trip to India, the two countries signed a joint document officially setting out their common vision for the Asia-Pacific and Indian Ocean region. This document, which re-stated their common position on the topic, which had already been arrived at during the September 2014 Modi’s visit to the United States, was most notable for reasserting Washington’s anti-Chinese position on «safeguarding maritime security and ensuring freedom of navigation and over flight throughout the [Asia-Pacific and Indian Ocean] region, especially in the South China Sea».[277]

The joint document was seen by some commentators as prefiguring the «eventual amalgamation of India’s Act East Policy and US’s Asia pivot»,[278] as adumbrating a closer integration of India’s foreign policy in the Asia-Pacific region within the US’s anti-China arc of containment policy. However, at first, New Delhi seemed both bent on distancing itself from what it unofficially termed a «strategic misinterpretation» of its foreign policy goals,[279] and concerned about the consequences of openly espousing the US anti-Chinese arc of containment policy.

On the other hand, the US appeared determined to push India exactly in that direction. This was mainly done by pressuring New Delhi to integrate Japan in the Malabar naval exercises.[280]

The annual «Exercise Malabar», from a very modest beginning in 1992, off the coast of Goa, had gradually progressed «to become a high point of Indo-US defence cooperation at the operational level […] with high strategic significance».[281] In 2007 «Exercise Malabar» was held twice, the first time off the coast of Japan, the second time in the Bay of Bengal, and expanded from a bilateral to a multilateral exercise, with Japan taking part in the first session and Australia and Singapore joining India, the US, and Japan in the second session. The 2007 expansion of «Exercise Malabar» was part of a strategic quadrilateral dialogue involving Washington, New Delhi, Tokyo, and Canberra and clearly aimed at containing China. Indeed Beijing responded to it by issuing formal diplomatic protests, which induced both India and Australia to pull out of the quadrilateral dialogue, «citing political and economic reasons respectively».[282] For its part, the Malabar Exercise continued as a merely bilateral India-US military drill.

However, US Defence Secretary Ashton Carter, during his visit to New Delhi on 2-4 June 2015, had both «singled out “India’s Act East policy” as a strategy that the US supported» and stressed that «the US “pivot” or “rebalance” to Asia complemented India’s Act East Policy».[283] Also, high on Carter’s agenda was the goal of convincing India to once again include Japan in the Malabar exercise. This was an attempt that, after the official disbanding of the quadrilateral dialogue, had been made during the UPA government’s tenure to no avail.

Indeed, according to an anonymous «top defence ministry official», even this time India was unlikely a change its position.[284] However, in the end, India’s Foreign Minister Sushma Swaraj met in New York with her US and Japanese counterparts in September, inaugurating a «trilateral ministerial dialogue».[285] Soon after the news became official that the annual Malabar exercise would henceforth include Japan.[286] As a consequence, in October, a Japanese destroyer joined US and Indian ships in the Malabar exercise in the Bay of Bengal.[287] Although Japanese participation could appear limited, from a strictly military standpoint it was «operationally and strategically significant», as claimed by a former Commander-in-Chief of the Indian navy’s Southern Naval Command.[288] But, of course, the real importance of Japan’s participation was political: the fact that the Malabar exercise had once again been upgraded to include both the US and Japan clearly signalled that India had jettisoning its original shyness about being seen as openly taking part in the US sponsored anti-China arc of containment.

4.2. The India-China relationship: economic engagement and political containment

4.2.1. Engaging China

All the above brings us to India’s China policy. As during the first six months of Modi’s government, during 2015 it continued to have two apparently contradictory aspects: economic engagement and political containment.

The first aspect was apparent during Modi’s visit to China (14-16 May 2015); the second was visible during the whole year in India’s proactive policy in the Indian Ocean, in East and Central Asia and in the Pacific. Indeed, the bulk of India’s initiatives in the above areas appeared to have New Delhi’s need to build its own arc of containment around China as a common subtext.

Modi’s May 2015 visit to China aimed at procuring both Chinese investment in support of India’s economy and Chinese help in realising his «make in India» pet project. The visit was not without results, as «24 agreements for cooperation in education, science, and economic development, including railways, aerospace, mining and tourism, said to be worth over $ 10 billion» were signed.[289] Moreover, 21 business-to-business deals worth US$ 22 billion were also signed. Many of the deals entailed Chinese banks’ financial support to Indian firms and, in some cases, to joint India-China ventures (for example in the field of steel production).[290] This, in a way, nicely dovetailed with the fact that India and China were already acting in partnership in a number of important international initiatives, such as the BRICS Development Bank and the Asia Infrastructure Investment Bank (AIIB).[291] However, as noted by M. K. Bhadrakumar, at a closer look many of the above agreements were «in the nature of MOUs», namely memoranda of understanding, which, although «good for the optics», might not get implemented.[292] Also, a host of problems that are making the relationship between the two Asia giants difficult were left either unaddressed or unresolved.

From a political standpoint, the main problem remained the question of the disputed borders and the uncertainty itself of the LAC (Line of Actual Control), namely the provisional India-Pakistan border, in much of its course. This was such a complicated problem that it could be highlighted – as Modi did during a speech given at the prestigious Tsinghua University, in Beijing[293] – but not solved during a tree-day visit, even though it was well prepared in advance.

More significant for judging the status of the relationship between the two countries was a series of economic questions. First of all, work on the industrial parks that China should have set up in India, as agreed during China’s President Xi Jinping September 2014 visit to India, had not yet taken off. Also, during Modi’s visit China’s distinct lack of interest in the «make in India» project was evident. On the other hand, no offer on China’s part to involve India in the «New Silk Road» project was made.[294] However, the main and more urgent problem that remained unresolved was the question of the growing imbalance vis-à-vis India of the growing China-India trade.

India-China trade, which has been growing steadily from as little as US$ 2.92 billion in 2000 to US$ 70.25 billion in 2014, making China India’s largest trading partner in goods, is highly imbalanced in favour of China. India’s trade deficit increased from US$ 18.65 billion in 2009 to US$ 36.88 billion in 2013 and then skyrocketed to US$ 46.29 billion in 2014.[295] This was not such a surprising development, given the nature of India-China trade: while China exports high value goods, such as telecommunications equipment, computer hardware, industrial machinery and other manufactured goods, India sends back mostly raw materials such as cotton yarn, copper, petroleum products, and iron ore.[296]

In his Tsinghua University speech Modi hinted at his dissatisfaction with the existing Sino-Indian trade partnership by pointing out that: «to maintain this partnership over the long run, we must also improve the access of Indian industry to the Chinese market». To this, Modi hastened to add: «I am encouraged by President Xi’s and Premier Li’s commitment to resolve this problem».[297]

Unfortunately, in spite of Modi’s exhibited optimism, no sustained policy on China’s part, aimed at solving this problem, appears to have taken shape, at least during the period under review.

4.2.2. Containing China

The second aspect of Modi’s China policy – containing China – can be seen not only as the other face of the policy of engaging China, but, more generally, as an expression of India’s strategic surge aimed at reclaiming the position of great power and a main player in an area extending from the western side of the Indian Ocean to the Pacific and including the whole of South Asia. This strategic surge was given expression in a series of official visits by the Indian Prime Minister to the states of the area, with the accompanying signing of bilateral agreements, and a series of bilateral naval exercises, involving the Indian navy and the navies of other countries. Also, this strategic surge was also expressed, on both the political and theoretical level, at an international conference, where India announced the launching of a «Cotton Route» policy, in clear competition with China’s «Silk Road» policy.

In March, that is, before his visit to China, Modi embarked on a five-day tour to three Indian Ocean island states: Seychelles, Mauritius, and Sri Lanka (10-14 March 2015). In all three cases, India offered military aid and opened lines of credit with the explicit aim to counter China’s growing influence in the Indian Ocean.[298]

This was followed by a three-day international conference (18-20 March 2015) held at Bhubaneswar (Odisha). The conference, entitled «India and the Indian Ocean: Renewing the Maritime Trade and Civilisational Linkages», was conceived as the official launching of a «Cotton Route» policy, aimed at reviving the pre-colonial connections between India and a series of Asian and African countries. The conference included a close-door session and saw the participation of no less than four Indian ministers, among whom the Foreign Affairs Minister, Sushma Swaraj, plus India’s National Security Adviser, Ajit Doval, and several foreign ambassadors («at least a dozen»). [299] According to Indian government sources, the idea on which the conference was based was «to balance China’s growing maritime ambitions, especially its security interests and projects that have adverse implications for India’s defence.»[300]

Part of the «Cotton Route» policy can be considered Modi’s visit to Dhaka (6-7 June 2015). Although the contentious issue of the sharing of the waters of the Teesta River could not be solved, a series of important agreements were concluded. These included, among others, the long-due rationalization of the common borders, Bangladesh’s engagement to create an India-reserved special economic zone in the hinterland of the port city of Mongla, and the opening to Indian cargo vessels of the Chittagong and Mongla ports. Particularly the opening of the Chittagong port to Indian traffic was bound to irk China, as the port had been developed thanks to China’s help, as part of Beijing’s «string of pearls» policy.[301] Also, while in Dhaka, Modi announced a US$ 2 billion line of credit to Bangladesh, to be used to finance infrastructure, power, health, and education projects.[302]

In July 2015, news circulated that the Indian navy was aiming at having 200 warships operational by 2027, up from 137.[303] This was followed by the first-ever joint maritime exercise held off the East coast of India on 11-19 September 2015 by the Indian Navy and the Royal Australian Navy.[304] Finally a «strategic partnership» declaration between India and Singapore was signed on 24 November 2015, during Modi’s visit and was accompanied by the inking of 10 bilateral pacts in the fields of defence, cyber security and civil aviation.[305]

Also part of the «Cotton Route» strategy (although India’s eastward pre-colonial sea routes only went as far as China but did not reached the Pacific Ocean) can be considered the second Forum for India-Pacific Islands Cooperation (FIPIC), held in Jaipur (Rajasthan) on 21 August 2015. The first FIPIC had been held in November 2014, in Suva, Fiji, when Modi had visited that small island nation. In Jaipur, Modi, speaking to the representatives of 14 Pacific nations, offered the establishment of an FIPIC trade office in Delhi and promised to fund solar power infrastructures and to help in setting up early warning and response systems for extreme weather events.[306]

Summing up, India’s policy aimed at containing China can be seen as an expression of India’s strategic surge in South Asia and in the Indian and Pacific Oceans. Among the nations which were drawn in the net weaved by Narendra Modi’s hectic foreign tours in the above mentioned geographical areas, some – Bangladesh, Sri Lanka and Fiji (where half of the population is of Indian origin) – had traditionally been a privileged object of India’s foreign policy. However, in the case of the others, the visit of an Indian Prime Minister had been a novelty, as it had been a novelty that India was supplying military and economic aid to these nations.

4.3. India’s difficulties in its own neighbourhood

In spite of Modi’s foreign policy activism and his attempt to project India as a major world power and define the Indian Ocean-South Asia-Pacific Ocean as an Indian sphere of influence, the fact remains that India either failed to develop more harmonious relations with some of its closest neighbours or contributed to making them more difficult. The former is the case of Pakistan, the latter that of Nepal. Significantly, in both cases, the shadow of China appears in the background. We shall dwell first on Nepal and then on Pakistan.[307]

4.3.1. The India-Nepal crisis

Nepal had been one of the first countries to be visited by Narendra Modi, soon after his election, in August 2014. At the time, the relations between New Delhi and Kathmandu seemed to have reached an all-time high, as Modi’s commitment to massively invest in the Himalayan country arrived after the crucial role played by India in mediating the end of the long civil war which had bloodied Nepal from 1996 to 2006. Furthermore, when Nepal was hit by two devastating earthquakes in April and May 2015, India was ready to succour its small neighbour.

However, the relations between the two countries suddenly nosedived following the promulgation of the Nepal’s new constitution on 20 September 2015, which established the country as a secular federal republic organized in seven states.[308] India publicly not only expressed its dissatisfaction with the contents of Nepal’s constitution[309] but, while officially denying doing that, immediately imposed a de facto blockade on the movement of first necessity goods to the Himalayan country.[310]

According to India, the new constitution restricted the political rights of the inhabitants of the Madhes or Terai region, namely the plains bordering with India, where some 40% of the Nepali population lived[311]. India claimed that this was bound to produce a backlash, which could become violent and even spill beyond the border, because the inhabitants of the southern Nepali plains were closely related to the inhabitants of the Indian state of Bihar. Also, and rather funnily – considering the totally different position consistently taken by the BJP in the case of Sonia Gandhi, whose Italian origin had been an unending source of polemics and personal and political attacks – India objected to the fact that, according to the new constitution, only citizens by descent, and not citizens by birth or by naturalization, were entitled to occupy the top political, judicial and security positions, such as president of the Republic, Prime Minister, head of the judiciary and head of the police. Equally funny was the request that foreign women married to a Nepali citizen should automatically acquire the Nepali citizenship.[312] More concretely, India’s real political objective seems to have been the creation of two Madhes provincial states, which would run 800 kilometres along the southern border, being only 20-30 kilometres wide. By many, this move was seen as potentially endangering Nepal’s territorial integrity.[313]

Although this is not the place to discuss the democratic features of Nepal’s constitution, in order to put the Indian government’s claims and behaviour in perspective, some points need to be highlighted.[314] The first is that some of the Nepal’s constitution key aspects favourably compare with the Indian Constitution. The Nepali constitution abolishes the death penalty;[315] explicitly abolishes any discrimination based not only on «origin, religion, race, caste, tribe», but also on « sex, physical condition, condition of health, marital status, pregnancy, economic condition, language or region, ideology or on similar other grounds»;[316] establishes «that women members constitute at least one third of the total number of members elected to the Federal Parliament» by any given party; [317] or, in case a party is unable to do that, enjoins the party to «so elect that women members constitute at least one third of the total number of members elected to the State Assembly from that party».[318] Also, the constitution establishes a National Women Commission, with extensive powers, among which is that of monitoring «as to whether laws concerning the rights and interests of the women and obligations under the international treaties to which Nepal is a party have been implemented».[319] The Nepali Constitution also grants extensive rights to the Dalits, among which «free education with scholarship, from primary to higher education».[320] Last but not least, the Nepali Constitution introduces a mixed electoral system, according to which a part of the representatives in the two houses of Parliament are elected according to the first-past-the-post method and the remaining part according to the proportional method.[321] In other words, in contrast to the Indian electoral system, the Nepali one, while assuring governability through the first-past-the-post system, allows a closer correspondence between the popular vote and the number of representatives elected in Parliament, thanks to the proportional method.[322] This, by itself, goes a long way towards preventing the danger – so evident in the first-past-the-post system – that the minorities go unrepresented.

It should also be stressed that the Nepali constitution was approved by the 601-members Constituent Assembly on 17 September 2015 by an overwhelming majority. In fact, 507 members voted for it; 25 members, representing the pro-Hindu and pro-monarchist Rastriya Prajatantra Party Nepal, voted against it; finally, most of the absent members, belonging to small parties representing the ethnic minorities residing in the southern plain, boycotted the vote.[323] This does not mean that all or even the majority of the representatives of the Terai/Madhes region boycotted the vote, as the majority of them had been elected in the national parties and, therefore, voted for the constitution.[324]

Contemporaneously to the opposition put up in the Constituent Assembly, the small Madhesi parties launched a series of violent demonstrations, which, already by 18 September, resulted in some 40 deaths, half of which were members of Nepal’s police and Armed Police Force.[325] This agitation continued to be carried out in the following months, resulting in further deaths.[326]

Two aspects of the anti-constitution agitation must be stressed. The first is that, in spite of what was claimed by much of the Indian press, it was carried out only by a part of the Terai population, which did not include the Dalits and landless people.[327] The second is that the suspicion is legitimate that Indian agents acting as provocateurs helped to organize the agitation itself, as the death of an Indian national and the arrest of several others seem to confirm.[328]

The blockade – for which, contrary to all evidence, the Indian government continued to deny any responsibility – resulted in «severe and chronic shortage of fuel, essential commodities and medicines».[329] The situation became so bad that, in a statement issued on 30 November 2015, UNICEF denounced the risk of death or disease for more of 3 million children under the age of 5 due to a severe shortage of fuel, food, medicines and vaccines. This situation was due to the fact that, as diplomatically stated in the UNICEF’s press release, «In the past 10 weeks, vital imports of essential commodities have been severely restricted at Nepal’s southern border due to unrest over the country’s new constitution.»[330]

All this translated in a rapid increase in anti-Indian sentiments in the Himalayan country.[331] For its part, the Nepal government, while trying to appease India, opened negotiations with China, from which it received some essential fuel supplies.[332] But geography stood against any possibility that, at least for the time being, this counterstrategy could be effective. While Nepal appears sandwiched between the two Asian giants, the truth is that the lines of communication with India are easier and shorter than those with China,[333] which really makes Nepal an «India-locked» country.[334] This means that supplies from China were slowed down and made overly expensive by geography.

However, by the end of the year, the fact started to become apparent that New Delhi had overplayed its hand. The Modi government had been right in assessing that the major powers, including the US, while not necessarily being enthusiastic about India’s behaviour vis-à-vis Nepal, would leave a free hand to New Delhi.[335] The problem was that, on the domestic front, the open opposition to the Nepal policy of some intellectual circles was joined by the silent, but much more redoubtable opposition of two other groups. One was the business community trading with Nepal; the other was the RSS. The latter had always been in sympathy with what had hitherto been the only Hindu state in the world and, accordingly, hostile to the new secular constitution. However, the fact that India’s intervention was justified with the need to defend both Nepal’s democracy and the rights of the Madhes people and Nepali women disturbed the RSS, as a distraction from the real objective, namely supporting the political forces opposing secularism in Nepal.[336]

By the end of the year, there were timid signs that Modi’s government was searching for some face-saving formula to break the impasse which it had so powerfully contributed to creating.[337]

At the time of writing, the India-Nepal crisis is still on-going, which makes it impossible to arrive at a final assessment of it. However, two tentative points can be made, the first related to the causes of the crisis, the second to its consequences.

When one goes beyond the rather funny and scarcely convincing claims that the Modi government’s intervention was motivated by its love for democracy and preoccupation with the political rights of the Madhesi minorities and the gender rights of the Nepali women, the suspicion is legitimate that such an intervention was triggered by the conviction that the Nepali government and constituent assembly, by not heeding New Delhi’s wishes, were taking too independent a stand. Clearly Modi and his government considered Nepal as a sort of protectorate, a conviction which was widely – even if (most of the times) unconsciously – shared by the bulk of the Indian commentators and public opinion. This motivated the Indian government’s arrogant and brutal behaviour, rightly compared to that of Lord Curzon of colonial lore vis-à-vis the Indian princely states and Tibet.

Concerning the consequences of the crisis, it is clear that not only anti-Indian sentiments in Nepal had reached an all-time high, but that the local political class was bound to try to countervail India by building closer ties with China. Of course, in the year under review, recourse to this strategy was drastically limited by the scarcity, length, and difficulty of the land routes connecting Nepal to China. However, the situation was bound to dramatically change in the near future because of the expansion of the railway and all-weather highway connections between the two countries, triggered by the India-Nepal crisis itself.[338]

4.3.2. The India-Pakistan relationship

Since the beginning of his mandate Modi had put Pakistan in front of the choice between either accepting New Delhi’s own guidelines concerning the modalities of the relationship between the two countries or being isolated and put under pressure.[339] In other words, New Delhi’s Pakistan policy was not so different from its Nepal policy; the problem was that Pakistan was not only a more powerful country than tiny Nepal, but also a country which, in contrast to Nepal, had an extremely favourable geopolitical position. Not surprisingly, by the early months of 2015 indications started to abound that Modi’s Pakistan policy was badly failing.

The attempt to isolate Pakistan from the US could proceed only up to a point. Although the relationship between Islamabad and Washington was not particularly warm, Washington’s decision to maintain an important military presence in Afghanistan until 2018 made the safeguarding of tolerably good relations with Islamabad imperative.[340]

On a different front, after having been traditionally difficult, Russo-Pakistan relations started to suddenly flourish. The turning point was the end of Russia’s embargo on arm sales to Pakistan and the inking, in November 2014, of a «milestone» military cooperation agreement between the two countries.[341] In mid-April 2015, this was followed by Moscow’s decision to invest US$ 2 billion in the building of a 1,100-kilometres pipeline for the transport of liquefied natural gas from the port city of Karachi to Lahore.[342]

The Russia-Pakistan deal, however, was soon dwarfed by the almost contemporaneous launching (20 April 2015) of a $46 billion Chinese project, the China-Pakistan Economic Corridor (CPEC). The CPEC – a set of railways, all-weather highways, and pipelines, aiming at connecting Pakistan’s southern Gwadar port on the Arabian Sea to China’s western Xinjiang region – was an integral and radically important part of the Chinese new «Silk Road».[343] The Corridor aimed at providing China with a safer new route to the Middle Eastern gas and oil fields and the European markets than the sea route going through the Malacca Straits. The CPEC also had the potential to easily be extended to Iran, making possible a China-Pakistan-Iran variation of the Iran-Pakistan-India (IPI) pipeline. After having been on the anvil for more than 20 years, the IPI had not been able to take off, because of American opposition and Indian second thoughts.[344]

This being the situation, on 10 July 2015, rather unexpectedly, Narendra Modi and his Pakistani counterpart, Nawaz Sharif, met «for nearly an hour» on the sidelines of the Shanghai Cooperation Organization summit in Ufa (Russia) and decided to restart the negotiation process between the two countries, putting together «a clear road map of events» to take the dialogue process forward.[345] However, the envisaged dialogue process got derailed even before it started. In fact, its initial step – the meeting in August of the Indian and Pakistani National Security Advisors in New Delhi – was abruptly cancelled on 21 August 2015 by the Indian Foreign Affairs Ministry, on the very eve of the meeting itself.

Although the political preparations for the meeting had been badly managed by both countries,[346] the key reason for the negotiations being derailed was India’s continuing attempt to unilaterally impose its own modalities and (newly drawn) red lines on the negotiations between the two countries.[347]

On 30 September 2015, Pakistan Prime Minister Nawaz Sharif tried to re-launch the negotiations by proposing, in front of the UN General Assembly, that Pakistan and India normalized relations by formalizing the 2003 ceasefire line and agreeing to an expansion of the UN Military Observer Group to monitor a new ceasefire. Sharif’s proposal was responded to by India’s Foreign Affair Ministry spokesperson Vikas Swarup, tweeting that: «To demilitarize Kashmir is not the answer. To de-terrorize Pakistan is».[348] This was followed by India’s decision, in October, «to take an aggressive position on Balochistan», highlighting the «atrocities» by Pakistani forces both there and in «Pakistan occupied Kashmir».[349]

In this inauspicious contest there was a new coup de theatre, namely the meeting of the Pakistani and Indian National Security Advisors in Bangkok on 6 December 2015.[350] The meeting itself – which had been prepared in the most absolute and unbroken secrecy – was the result of a «path-breaking 167-second long talks in Paris», between Modi and Sharif, held on 30 November 2015, on the sideline of the climate summit.[351]

From Bangkok onward, the stalled dialogue process appeared to proceed at full speed. On 8 December India’s External Affairs Minister Sushma Swaraj travelled to Islamabad where she held talks with her Pakistan counterpart Sartaj Aziz. At the and of them, at a joint press conference, Swaraj made public the two country’s decision to launch a «Comprehensive Bilateral Dialogue».[352] A fortnight later, this was capped by the «surprise move» by Modi, who, on his way back to New Delhi from Kabul – where he had visited the new Parliament building, gifted by India – made an «unscheduled stopover» in Lahore (25 December), to meet Nawaz Sharif on his birthday.[353] It was a typical vintage Modi move, a highly symbolic personal meeting aimed at highlighting that a new phase in the India-Pakistan relationship had begun.

Summing up, during 2015 Modi’s policy vis-à-vis Pakistan, in spite of a false start, had turned on its head: as late as June 2015, while in Bangladesh, Modi had publicly attacked Pakistan for «constantly» troubling India by promoting terrorism;[354] some six months later he had celebrated Pakistan Prime Minister’s birthday in the latter’s family home near Lahore.[355] More importantly, by accepting the re-launch of a «comprehensive dialogue», Modi had de facto abandoned his attempt, pursued from the start of his prime ministership up until August 2015 and beyond, to impose his own preconditions on the dialogue with Pakistan.

The fact remains that the history of the difficult Pakistan-India relationship, particularly in the last few decades, is such as to make anybody sceptical about the fact that any sudden positive turn can really last over time. Both in Pakistan and India there are powerful interests which militate against any real and long-lasting detente between the two countries. Accordingly, it comes as no surprise that, in the past decades, any positive diplomatic steps aimed at pushing forward meaningful negotiations between Islamabad and New Delhi have inevitably been marred by the increase in incidents along the border and, sometimes, by terrorist attacks.

4.4. India at the Nairobi World Trade Organisation meeting

On 27 November 2014, the WTO’s General Council had set 31 December 2015 as the final deadline for arriving at a permanent solution to the controversial problem of stockholding of food crops, maintained by developing countries for security reasons. Public stockholding of food crops was opposed by the developed countries, which claimed that it distorted market prices. For their part, less developed countries, led by India, had strongly defended their right to stockholding, pointing out that it was crucial to protect the poorer strata of their own population against the danger of scarcity or famine. Thanks to the spirited fight led by India, first at the WTO ministerial conference held in Bali in December 2013, and then in a series of secretive dealings with the US during the second half of 2014, the WTO had provisionally accepted the right of developing and least developed countries to hold public stockholding of food crops beyond the limits officially established by the WTO itself. This right had been sanctioned by a «peace clause», namely an agreement that, while standing, would suspend any legal challenge to the food subsidy policy of any WTO country. At Bali the expiry date of the «peace clause» had been set at 2017; later on (13 November 2014), the US and India had announced that they had agreed on the fact that the «peace clause» would have an indefinite timeframe. A few days later, on 27 November 2014, the WTO’s General Council «unequivocally» agreed to the indefinite «peace clause», fixing however – as noted above – 31 December 2015 as the deadline to solve the food stockholding problem.[356]

This being the situation, the tenth ministerial WTO meeting, scheduled to be held in Nairobi on 15-18 December 2015, was bound to be the place where the whole question of food stockholding and the «peace clause» would be solved. Moreover, some further questions were on the anvil. One was the Special Safeguarding Mechanism (SSM), which developing and least developed countries wanted in order to temporarily raise tariffs in case of surging imports and related price falls. Another problem was the cutting of «trade distorting» subsidies on agricultural and allied activities, requested by developed countries. A crucial part of this problem was the question of subsidies for cotton. Last but not least, there was the question of the continuation/discontinuation of the Doha Development Agenda (DDA). The DDA, launched in 2001 at the fourth WTO ministerial conference, aimed at making trade rules more favourable to developing countries. After 14 years without any substantial results, the developed countries (plus Brazil) wanted the DDA to be abandoned, a proposal which was strongly resisted by developing and least developed countries. The Indian delegation, led by Commerce and Industry Minister Nirmala Sitharaman , played an important role in building and leading a united front that included both most developing countries (the exception being Brazil) and the least developed countries.[357]

Reaching a consensus on all these problems proved difficult enough to force a one-day-extension of the conference to 19 December.[358] The final ministerial declaration, while not an unqualified success for India, was nevertheless far from being a failure. Concerning the food stockholding question, the decision was taken to continue the discussion of the problem in the Committee on Agriculture, to be convened in special session. This actually meant that the 31 December 2015 deadline had been cancelled, de facto leaving India free to continue with its existing food stockholding policy. Regarding the SSM, the developing countries’ right to it was recognised; at the same time the final ministerial declaration stated that this issue was to be defined and reviewed later on. The question of farm subsidies was left open, but the decision to end farm export subsidies was taken. However, while developed countries were asked to start cutting subsidies immediately, the other countries, including India, were allowed to start doing so as late as the end of 2018. A major reverse for India was related to cotton exports: the ministerial declaration established duty-free and quota-free access to the developed countries market for cotton produce, but only for the least developed countries, excluding from this benefit developing countries, such as India. Finally, on the DDA, the final declaration reaffirmed a full commitment to its fulfilment, although noting that some member-nations disagreed about this. However, as WTO’s procedures require the unanimous support of all member-countries for any new resolution, the declaration amounted to a reaffirmation of the validity of the DDA.[359]

In India – possibly favoured by a tweet by Nirmala Sitharaman, saying: «Utterly disappointed! A unanimous reaffirmation of DDA hasn’t happened» – the opposition and most civil society groups portrayed the results of the Nairobi conference as an utter disaster, a «dismal failure» and «nothing, but surrender».[360] But it is difficult to see how – given the compact opposition of all the developed countries, led by the US and supported by Brazil – India could have got more.

 

Bangladesh 2015: The emergence of radical Islam

The main issues that shaped Bangladeshi politics in 2015 were the emergence of radical Islamic terrorism, the continuation of the trial related to the war crimes committed by pro-Pakistan organizations during the 1971 war of independence, the continuation of the Rana Plaza case, and the positive evolution of the bilateral relations with India.

It is difficult to define the dividing line between the domestic and IS-related roots of the wave of political violence which engulfed the country in the year under review. But it is a fact that in 2015 Bangladesh was wracked by continuous attacks against exponents of civil society, Christians, and foreigners.

In 2015 the targets of and strategy behind political violence changed. Unlike in 2013, when political violence reached heights unprecedented since 1971 and was aimed mostly at political activists and agents of law enforcement, in 2015 violence was directed mainly against common people, including children.

The dimensions of political unrest were such as to make many analysts fearful of there being serious adverse consequences for the promising Bangladeshi economy. The massive infrastructure investments in 2015 had a setback and foreign investors withdrew from Bangladesh’s industrial sector. However, in 2015 Bangladesh maintained its approximately 6% GDP growth rate.

Ties with India were strengthened, in spite of the misgivings caused by Indian Prime Minister Narendra Modi’s anti-Bangladeshi statements during his 2014 electoral campaign.   

  1. Introduction

The main factors which characterised Bangladesh’s political evolution in 2015 were the emergence of radical Islamic terrorism, the continuation of the trials related to the war crimes committed by pro-Pakistani organisations during the 1971 civil war, the continuation of the Rana Plaza case[1] and the positive evolution of relations with India.

In a country which, since its foundation, has been dominated by a combination of autocracy, political violence, Islamic extremism and terrorism, the spread of the radical Islam threat was more than predictable. In such a climate, it is difficult to define the dividing line between the domestic and IS (Islamic State) related roots of the wave of terrorism which engulfed the country in the year under review. But it is a fact that, in 2015, Bangladesh was wracked by continual attacks against exponents of the civil society, against Christians and foreigners, and by a massive return of political violence.[2]

It is worth stressing that, in 2015, political violence changed its targets and strategy. In 2013, when it had reached unprecedented heights since 1971, violence was characterised by riots and hartals,[3] which targeted mostly political activists and law enforcing subjects.[4] In 2015, violence was directed mainly against the common people,[5] including children. Its dimensions were such as to make many analysts fearful of serious adverse consequences even for the promising Bangladeshi economy.

The description of the violence that upset Bangladesh in 2015, which will be given below, may seem exceedingly detailed. However, it is necessary to realise that, although the international media have concentrated almost entirely on the attacks taking place in the West, the same situation has held true in other parts of the world, including Bangladesh. Indeed, Africans and Asians were exposed to the same threats faced by Westerners.

  1. The first anniversary of Hasina’s second term (and its aftermath)

The year began with the government’s restrictions over the celebrations, on 5 January, of the first anniversary of the 2014 election and the opposition’s protests, which signalled the return to «uncertainty in the political landscape of Bangladesh».[6]

A few days earlier, police and sand-laden lorries had blocked Khaleda Zia—leader of the main opposition party, the Bangladesh Nationalist Party (BNP)—in her office in Dhaka, allegedly to protect her. Long-distance bus services were suspended and gatherings were banned. Fakhrul Islam Alamgir, the BNP secretary general, was arrested, while many other party leaders went into hiding. Tariq Rahman, Khaleda Zia’s son living in London to escape the consequences of corruption charges, publicly incited the Bangladeshi people to overthrow the government. The owner of the television station that broadcast his speech was arrested, although allegedly not for political reasons, but because charged with pornography. Mahfuz Anam, editor of the Daily Star, condemned the «mindless suppression of the opposition».[7] Mohammad Ershad, former dictator and leader of the JatiyaParty, Bangladesh’s third largest party and a League ally, warned that his party’s ministers could quit the government.

The Awami League celebrated the anniversary as «Constitution and Democracy Protection Day», while the opposition renamed it «Democracy killing day».[8] After the assassination of two BNP members, allegedly killed by Awami League activists in the northern district of Natore, the BNP called an indefinite national transport strike. The month-long blockade turned immediately into turmoil. Bombs were thrown into two buses and about 60 people died in clashes.[9]

In spite of this new spell of violence, a year after her electoral success, Sheikh Hasina seemed firmly in control and appeared to be strengthened by international support. The US government, which in 2014 had expressed much criticism of Hasina’s policy, «stopped putting public pressure on the Bangladeshi government».[10]

In 2015, the trial against those responsible for war crimes during the 1971 liberation war continued, with two more executions.

  1. 3. The trial goes on

The trial against the 1971 war criminals, started by the Awami League in 2010, went on among the usual controversies and violent retaliations.[11] Since the beginning of the trial, the court had prosecuted 17 people.[12] In spite of internal and international criticism, the sentences were severe. In February 2015, the tribunal ordered the execution of Abdus Subhan, age 79, former vice-president of the Jamaat-e-Islami (JI), declared guilty of six out of nine charges, including murder, genocide and torture. According to the prosecutors, during the 1971 war, Subhan was the head of the JI and of a pro-Pakistani militia in the district of Pabna, in the north-west of Bangladesh. Subhan was accused of having murdered hundreds of villagers in his area, most of them Hindus.

After the sentence was passed, some disorder occurred outside the court, where three Molotov bombs were thrown by suspected opponents of the government.[13] On 16 June 2015, the Supreme Court upheld the death penalty for 67 year old Ali Ahsan Mohammad Mojaheed, Jamaat-e-Islami’s Secretary General, charged with abduction, torture, genocide and the killing of intellectuals. Mojaheed had been a minister in the Khaleda Zia government between 2001 and 2006. The Jamaat-e-Islami immediately called a 24-hour nationwide strike.[14] At the end of July, the death sentence for the opposition leader and former BNP Member of Parliament Salauddin Quader Chowdhury, aged 68, was also upheld. Chowdhury was proved guilty of nine charges out of 23, including genocide, murder, torment, and forced and unfair extradition of people. Chowdhury committed the crimes while supporting Pakistan’s occupation forces during the 1971 liberation war and made use of his house in Chittagong as a torture detention centre. Among Chowdhury’s victims were Sheikh Mozaffar Ahmed, the founder of the Awami League in Chittagong, and his son Sheikh Alamgir.

BNP and JI activists loudly protested against what they claimed to be an unfair sentence. However these protests remained at the verbal level, as the BNP and JI did not call for agitation. By then, after the three month long nationwide blockade, the opposition was politically weakened.[15]

3.1. The executions

On 18 November, the Supreme Court rejected the petitions filed by Ali Ahsan Mohammad Mojaheed and Salauddin Quader Chowdhury and once again upheld the death sentences. The Jamaat called for protests the following day,[16] but to no avail, as the two men were hanged on 22 November. The opposition immediately called for a general strike but, in order to prevent major disorders, thousands of police and border guards were deployed in Dhaka, Faridpur and Raojan, respectively Mojaheed’s and Chowdhury’s hometowns, where the funerals were held on the morning of 22 November. The Awami League’s supporters greeted the executions and held parties in the streets, distributing sweets[17] while, thanks to the massive police deployment, protests were muted. The general strike went on without demonstrations and the day was peaceful.

The Prime Minister has, however, been sharply criticised. Since the beginning of the trial, the main charge was that Sheikh Hasina was exploiting the trial for political gain. Some analysts warned that the executions might provoke further bloodshed in Bangladesh. However, it is a fact that an overwhelming majority of people were in favour of the trial and the execution of the war criminals.[18]

The issue provoked tensions with Pakistan. On 22 November, Pakistan’s Foreign Minister Hina Rabbani Khar expressed «deep concern and anguish» over the executions.[19] This statement provoked an immediate reaction from the Bangladeshi Foreign Minister, A.H. Mahmud Ali, who publicly criticized his counterpart and recalled the Bangladeshi envoy in Dhaka. As a response, Pakistan’s Foreign Ministry recalled its deputy High Commissioner in Bangladesh.[20]

Some observers pointed to the trial as the main source of political polarisation,[21] but this view appears simplistic and biased to this author. Even if the death penalty is objectionable, justice had to be done for the 1971 war crimes.

While the sentences were issued and the political confrontation turned increasingly bitter, violence proliferated and manifested itself in a number of attacks against multiple targets, especially exponents of the secular civil society and minorities.

  1. Political violence and its multiple shapes

By the end of February 2015, strikes, blockades, protests and arson had caused 30 deaths (many, including children, burned to death) and hundreds of injuries, while more than 7,000 people had been arrested.[22] Many analysts compared the 2015 violence with the 2013 riots, but the 2015 wave of violence differed from that of two years previously. In 2013, the violence took the shape of clashes between at least two different factions: the supporters of the Awami League government and its opponents, especially the BNP and Jamaat-e-Islami followers. In contrast, as already pointed out, the violence in 2015 was indiscriminate, directed against the common man, characterised by attacks on the crowd carried out by politically oriented gangs trained in urban guerrilla actions. Buses were the preferred targets: bombs were thrown inside them or they were set on fire, causing severe casualties and panic. Moreover, private properties and vehicles were looted and damaged or destroyed. By the end of January 2015, more than 600 motorcycles had been burned. The perpetrators were clearly connected with the opposition, especially with the BNP. The violence was indeed the uncontrolled result of the BNP’s call for strikes. The outburst of violence in February 2015 has been correctly defined «as the most anti-people, unimaginative, cruel and destructive programme that the BNP is embarking on».[23] This agenda alienated the already low public support for the BNP and other opposition parties.

In the following months, the features of the violence changed and differentiated. They took three main shapes: attacks against secular writers and media people, especially bloggers; attacks on foreigners and minorities, especially Christians; and terrorism.

4.1. Secular and independent media under attack

In 2015, four bloggers were hacked to death. All the killings were executed with identical modality. All the victims were attacked by masked assailants who acted in groups of between two and four men. All the victims were butchered with cold weapons, such as machetes, knives or meat cleavers. On 26 February 2015, Avijit Roy, a US national born to a Bangladeshi Hindu family in 1972, was killed in the street in Dhaka. His wife, Rafida Ahmed Bonia, was also seriously injured in the attack. On his Facebook profile, Roy defined himself «as an engineer by profession and a writer by passion».[24] Avijit Roy had founded his own blog, Mukto Mona, and also contributed to other blogs and newspapers. He had authored about ten books on secularism and against religious fanaticism. Roy’s most famous book was Biswasher Virus («Virus of Faith»). In his writing, he frequently compared religion to a disease and denied any scientific reliability in the Koran. His views about Islam were very radical, as he did not acknowledge the existence of any tolerant stream in the Muslim religion. Roy publicly condemned the attack on the school in Peshawar and on Charlie Hebdo in Paris, and debated provocative issues like homosexuality, upsetting many conservative Bangladeshis.[25] In spite of death threats, Roy had just arrived from the US a week before being killed. On 29 March 2015, another secular blogger, Washiqur Rahman Babu, age 27, was assassinated in Dhaka. He was so maimed that the police identified him from his voter card. Washiqur Rahman had attacked the fundamentalists in his blog.[26] On 12 May 2015, Ananta Bijoy Das, 32 years old, was murdered in Sylhet. Das was a banker, a progressive writer and editor of the science fiction magazine Jukti. He was also an activist in the Gonojagoron Mancha («People’s Resurgence Platform»), an organisation connected to the Shahbag Square movement, supporting the International Crimes Tribunal and the death penalty for the criminals.[27] Das was connected with Avijit Roy, as he had written blogs for Roy’s Mukto Mona. Das had also criticised Islamic fundamentalism in his blog. Within a few hours of Das’ murder, a message was posted on Twitter by somebody concealing himself behind the nickname «Ansar Bangla 8», claiming responsibility for assassinating the blogger. Apparently, the nickname referred to the Ansar Bangla or Ansarullah Bangla Team (ABT), namely an extremist organisation implicated in various criminal activities, including murder and bank robbery. The same username later tweeted the message: «Al-Qaeda in Indian Sub-Continent (AQIS) claimed responsibility of [sic] killing  Ananta Bijoy in Sylhet.».[28] AQIS posted another message in Justpaste.it, threatening those who insulted Allah and the Prophet Mohammed.[29]

The police headquarters asked the Home Ministry to ban ABT for its involvement in several attacks on secular bloggers and writers.[30] One more attack took place on 6 August, when 28 year old Niloy Chatterjee— pen name Niloy Neel—was killed in his flat in Dhaka. Chatterjee too was a Hindu and belonged to the Gonojagoron Mancha. Responsibility for the murder was claimed by an organisation named Ansar al-Islam, apparently a local affiliation of Al-Qaeda. Niloy’s wife reported that her husband had tried to file a complaint about having been threatened, but the police had refused to receive it.[31]

On 31 October, two attacks took place in Dhaka against two publishers. Both had printed Avijit Roy’s books. During the first attack, the office of the Shudhdhoswar publishing house was assaulted by three men carrying cold weapons. The publisher, Ahmed Rahim Tutul, was in a conversation with two writers when the killers broke into his room. Both Tutul and the two writers were seriously wounded and had to be hospitalised.[32] During the second attack, which occurred a few hours later, Faisal Arefin Dipan, head of the publishing house Jagriti Prakashani, was assaulted in his office in the Shahbag area and stabbed to death.[33] Both publishers had filed a complaint with the police claiming they were being threatened.[34] However, in these cases again the police did not take any precautions.[35]

The attacks on the two publishers have been claimed by AQIS’s affiliate Ansar-al-Islam. In a message sent to the media, Ansar-al-Islam asserted: «These two publishers were worse than the writers of such books, as they helped to propagate those books and paid the blasphemers [a] handsome amount of money for writing them».[36]

After the attacks on the publishers, writers and citizens alike turned out in large numbers for a rally on the streets of Dhaka on 3 November, asserting the right to free speech.[37]

The attacks on bloggers and publishers have been strongly criticised by several eminent voices including the Committee to Protect Journalists, the Blogger and Online Activist Network, and Human Rights Watch, who urged Sheikh Hasina to take steps to ensure the safety of secular writers in Bangladesh.[38] About 150 writers, including Salman Rushdie, Margaret Atwood, Yann Martel and Colm Tóibín, signed a letter condemning the attacks and asking the government to take measures to prevent similar events.[39]

The role of the police is not clear. At least three victims had sought help from the police, who did not take any steps to protect them, even when the blogger issue had clearly become an emergency. The Inspector General of Police, after defending the free thinkers, declared that respecting religious feelings is a duty, so much so that: «Any offender of religious beliefs may get the highest punishment of 14 years».[40] Many labelled the Bangladeshi bloggers «atheists», but none of them published any blasphemous message.[41]

The attacks had several aspects in common: the targets, the methods and the weapons. As far as the methods are concerned, they were clearly inspired by the Charlie Hebdo assault. This aspect can be explained in two ways. The attackers may have been affiliated to IS and therefore shared its targets and methods; or they could just be politically motivated local gangs, who flaunted their affiliation to radical Islam and emulated its methods, but pursued different goals, most probably connected to local politics. The victims have some common features. Two were Hindus and two belonged to Gonojagoron Mancha. They were not common people, but they had the capacity to voice some of the values that the government was trying to promote, like the trial of the war criminals, secularism, freedom of speech and belief. These assassinations, therefore, could not just be directed against the offenders of Islam, as officially claimed, but targeted government policies, particularly the war crimes trials. Gonojagoron Mancha started in 2013 in connection with the above quoted Shahbag Square movement and can be considered the Shahbag online voice. Gonojagoron Mancha rapidly became a nationwide movement, demanding capital punishment for war criminals and safeguarding of the «nation’s secular ideals that were attained through the liberation war in 1971».[42]

In September 2015, the ABT published a hit list of 18 secular bloggers, writers and activists to be killed if they did not stop criticising radical Islam or writing about «blasphemous» topics. The targets were not only Bangladeshis living in the country, but also Bangladeshi nationals based abroad, individuals with dual nationality, and citizens of Western countries. The list includes nine persons living in the UK, seven in Germany, two in the US and one in Canada.[43] A prominent name in the list was Taslima Nasreen, who has lived under police protection in India for the past 21 years, after receiving death threats from Muslim fundamentalists.[44] Some individuals in the list declared their decision to continue writing and blogging. Some of them approached the police after the publication of the list. The authorities seem to have taken the matter seriously and advised the writers to take precautions to reduce the risk of attack.[45]

It is unclear if the ABT has the capacity to act abroad, but the publication of the list may be a call for action potentially capable of triggering a witch hunt outside Bangladesh. The publication of the black list, indeed, may call for «lone wolf» action around the world.[46]

4.2. Attacks on foreigners and religious minorities

On 28 September, the Italian aid worker Cesare Tavella was killed on a street in Gulshan, Dhaka’s diplomatic area, while he was jogging. A 50 year old veterinary surgeon, Tavella was working as project manager for the Dutch NGO ICCO, within the programme Cooperation’s Profitable Opportunities for Food Security (PROOFS). Witnesses reported that the assailants fled on a motorcycle and that one of them was carrying a gun. The forensic expert Qazi Md Abu Sharma, after inspecting Tavella’s body, told the media that the Italian aid worker had been «shot three times from behind at close range» with a revolver.[47] The American SITE Intelligence Group, which monitors online activities of radical Islam, reported a statement released shortly after the murder, where IS claimed that a «security detachment» had tracked Tavella through the streets of Dhaka and killed him with «silenced weapons». The statement warned that foreigners should not feel confident in Muslim lands. It announced more attacks in Bangladesh on citizens belonging to «the crusader coalition».[48]  The “crusader” Tavella had chosen to work in Bangladesh (as he did in several other developing countries) to train farmers to breed cattle.[49]

According to the Bangladeshi authorities, Tavella’s murder was planned, but he was not the objective. The attack was rather directed against the Western presence, activities and interests in Bangladesh. The Bangladeshi authorities and the Prime Minister denied the presence of IS cells in Bangladesh.[50]

According to the Italian diplomatic and intelligence authorities cooperating with the Bangladeshi investigators, the attack was deliberately directed against Tavella, yet the reasons for the murder had to be clarified.[51] However, the thesis supported by the Bangladeshi authorities, according to which the terrorists’ targets were not specific individuals but foreigners as such, seems to be more plausible, as shown by the assassination of a 65 year old Japanese farmer, Kunio Hoshi, on 3 October. Kunio was killed by three masked gunmen, who shot him while he was on the way to his farm in Rangpur.[52] The murder was claimed on the same day by the IS, but the Prime Minister, who met the journalists at her residence on 4 October, once again denied any IS involvement. She asserted that the killings of the two foreigners were «part of a conspiracy to tarnish the image of the government».[53] The paradoxical nature of these rather indiscriminate attacks is highlighted by the fact that Kunio Hoshi had recently converted to Islam.[54] The murderers kill people who are either concerned about Bangladesh’s development or who share their assailants’ faith.

The murders of two foreigners in less than a week increased the alarm of Western authorities. Before the killings, the Australian and British embassies had informed their citizens that «there is reliable information to suggest that militants may be planning to target Western interests in Bangladesh».[55] After Tavella’s murder, the Canadian Embassy issued a web site alert to its nationals, informing them that «attacks cannot be ruled out and could be indiscriminate. Terrorist attacks could occur at any time and could target areas frequented by expatriates and foreign travellers. Limit your attendance at events where Westerners may gather, for example in hotels or conference centers».[56] The message issued by the American authorities warned that «in case of increased threat, US citizens should maintain a high level of vigilance and situational awareness and should exercise caution in public places including restaurants, hotels and other places frequented by foreigners».[57] Before Tavella’s killing, Cricket Australia (CA) delayed the arrival of its cricket team in Bangladesh because of security concerns. The Australian authorities had received «reliable information» on the possibility of attacks by Islamic militants. A few hours before Tavella’s murder, the Bangladesh authorities had already provided the Australian team with the highest security.[58]

Attacks on foreigners represent a serious threat to Bangladeshi business, which depends upon foreign investments, export of Bangladeshi goods and delocalisation in Bangladesh. One of the main disruptive effects of the climate of terror spreading in the country is its negative consequences for the economy. Investors – especially in the ready-made garment sector, which is the backbone of Bangladesh economic development – have cancelled their trips to the country.[59]

Sheikh Hasina promised prompt action to capture the culprits of the attacks on foreign citizens.[60] Once more, the government blamed the opposition for the violence against foreigners.[61]

On 5 October, a 52 year old Bangladeshi pastor from Pabna survived a vicious assault by three men who came to his house, pretending to be interested in learning about Christianity. The assailants, between 25 and 30 years old, attacked the pastor with knives. The man suffered minor injuries.[62] Less than two weeks later, on 18 November, an Italian missionary and doctor, Piero Parolari, was gunned down by three men while riding his bicycle to church in Dinajpur. The assailants fled on a motorbike. The priest survived the wounds. Parolari had been living in Bangladesh since 1984.[63] IS claimed responsibility for the attempt.[64]

Alok Sen, leader of the HinduBouddhoChristian Unity Parishad in Faridpur, survived an assassination attempt. The assailants were armed with kitchen knives. The attempt on the religious leader took place on 24 November, the day after Ali Ahsan Mohammad Mojaheed’s burial in Faridpur.[65]

Besides the attempts on individuals, the terrorists carried out attacks on religious crowds and holy places. The Shia community was repeatedly targeted between October and December. The first strike took place on 24 October, the day of Ashura, when a series of bomb blasts killed a boy and wounded over a hundred people gathered for a procession in the old part of Dhaka. When claiming responsibility for the attack, IS defined the religious gathering as «polytheist rituals».[66]

An almost identical attack killed 16 people during a Shia procession in Pakistan hours earlier, but the Bangladeshi Home Minister, Asaduzzaman Khan, denied any involvement of extremists or any connection between the two attempts. The minister, as usual, blamed the opposition for «aiming only to destabilize the situation of the country».[67] The attack provoked consternation in the country, as the day of Ashura in Bangladesh has been peacefully celebrated for some four hundred years and the Shia community had rarely been under attack in the past.

National and international experts, including the Italian Ambassador and the Italian media,[68] shared the Home Minister’s doubts about IS involvement in the violence that upset the country throughout the year. An international relations expert who did not want to be identified noted that militant organisations have the tendency to attack targets where «casualties are likely be higher», ensuring that their names make headlines across the world. «By all means, this seems to be a conspiracy at maligning [sic] the global image of Bangladesh», he said.[69]

On 26 November, three young men stormed into a small mosque in the Bogra district and opened fire indiscriminately on the worshippers during the function after locking the main gate. The muezzin was killed and three people were wounded. The attack has been claimed by IS, but the authorities continued to question IS’s involvement and suspected that the banned Jamaat-ul-Mujahideen Bangladesh (JMB) might have been behind the attack.[70]

On 5 December, three crude bombs exploded outside Kantaj Temple in Dinajpur during a religious gathering. At least ten people were injured, three of them seriously.[71] The attempt took place in Faridpur, Ali Ahsan Mohammad Mojaheed’s birthplace, the same area were Parolari was assaulted a month earlier.

IS involvement in the attacks in Bangladesh is not beyond doubt. The hypothesis that the mainstream opposition parties may exploit radical Islam as an instrument to destabilise the country and topple the government cannot be discarded. Indeed, this hypothesis is shared by most analysts and by the Bangladeshi government alike. As shown above, the latter has consistently denied the affiliation of the killers to Islamic State and «blamed domestic Islamist militants and parties for orchestrating the violence in a bid to destabilise the nation».[72]

  1. 5. A wave of arrests

At the time of writing this text, the attitude of the police regarding the assassinations was unclear. As already seen, in some cases the police did not take proper action to protect the victims who reported harassment and did not take any measures to protect them. The Bangladeshi authorities have been under international pressure, including in consideration of the high exposure of foreign citizens living in Bangladesh and the size of foreign investments in the country. The police’s reaction only came in August 2015, perhaps after government pressure. Since then, the police have become very efficient and have carried out a series of notable arrests. When the violence against foreigners became an embarrassing issue, the police, about a week after Niloy’s August assassination, arrested two suspects, Saad al-Nahin and Masud Rana, both members of the banned ABT. Nahin was on bail on the charge of attempted murder of another blogger in 2013. A further three men were arrested shortly afterwards, on 17 August 2015. They too belonged to the ABT. According to a spokesman for the Rapid Action Battalion, a paramilitary police unit, Touhidur Rahman, a 58 year old British national of Bangladeshi origin, was the «mastermind and financier of the attacks» on Avijit Roy and Ananta Bijoy Das.[73] Another of the three arrested, Sadek Ali Mithu, 28, acted as the «bridge» with the alleged head of the ABT, Mufti Jasim Rahmani, in jail for the assassination of a blogger in 2013. The third man arrested, Aminul Malik, 35, apparently was not directly involved in the murders, but helped the ABT militants to escape abroad by furnishing them with forged passports. By the beginning of September, the police had arrested seven militants.[74]

Cesare Tavella’s alleged killers were arrested a month after his assassination, on 26 October 2015. Dhaka police held four people, three of whom have been identified as Tavella’s killers.[75] The suspected assailants of the Italian priest Piero Parolari were held immediately after the attack. The Secretary General of the Jamaat-e-Islami, Mahbubur Rahman Bhutto, has been arrested, while ten more people have been held in custody.[76]

At the end of November, the police detained two members of the Jamaat-e-Islami. One of them spread pro-Caliphate propaganda on Facebook under the pseudonym Jihadi John.[77]

On the evening of 4 November 2015, commandos, armed with machetes, rode on motorbikes up to a checkpoint in Baroipara, in the Dhaka suburbs, and assaulted the stationing policemen. Three were seriously injured and one was killed. Most probably the attempt was a retaliation against the police for the crackdown of the previous months.[78] Between October and November, another three attacks on policemen were carried out and another officer was killed.[79]

At the end of the year, on 24 December, the police raided a building in the capital and seized a massive quantity of weapons and explosives, including bombs, grenades, suicide belts and substances to produce at least 200 bombs. In the operation, the police detained seven men associated with the banned Jamaatul Mujahideen Bangladesh. When the raid started, the militants exploded bombs, fortunately without consequence.[80]

Apart from the arrests, the Bangladeshi government also took several measures to combat radicalism at the international level. According to security and intelligence sources in Dhaka, Bangladeshi diaspora communities in the UK finance and encourage young Bangladeshi radicals to join the international jihad. The Jamaat-e-Islami is very active in East London. Two of three British citizens recruited by IS and killed by drone strike in Syria in August 2015 were of Bangladeshi origin. Sheikh Hasina urged David Cameron «to do more to combat radicalism, as British jihadists play a prominent role in fomenting the Muslim radicalism in Bangladesh». «The British government should take more steps on the ground», the Bangladeshi Prime Minister told the press.[81]

In November, the Bangladeshi government, considering that the criminals made use of apps and social media, decided to block Viber, WhatsApp and the social media for some days. On 11 November, the Prime Minister announced to parliament the decision to suspend the internet connection in the country for some days.[82] Most probably, the internet blackout allowed the Bangladesh Telecommunication Regulatory Commission (BTRC) to put into operation Internet Safety Solutions, a system to monitor the social media and cyber activities. Several agencies have been involved in efforts to prevent cybercrimes.[83]

On 23 December, the second secretary in Pakistan’s high commission in Dhaka, Farina Arshad, was recalled to Islamabad following a request by the Bangladeshi authorities. She was suspected of having financed a member of the Jamaatul Mujahideen Bangladesh on trial for espionage.[84]

  1. 6. Bangladesh’s Muslim radicalism: identity and financial sources

In a year, the Bangladeshi authorities arrested 15 IS suspects.[85] Nevertheless, official sources continued to deny any IS involvement in the series of bloody attacks that shocked the country in 2015. Most attacks and murders have been claimed by IS and most of the arrested seem to have actually been connected with the group. However, as maintained by the government, the opposition may be involved in most, if not all, the attacks, through its militant wing, the Jamaat-e-Islami.

In a context like the intricate Bangladeshi political scene, it is difficult to identify the dividing line between domestic political radicalism and international militancy. Political identities and demands are changing in Bangladesh, where there are no less than 125 Islamist militant organisations. Seven of them are prominent: the already mentioned Ansarullah Bangla Team (ABT), AQIS and Jamaatul Mujahideen Bangladesh (JMB); plus the Harkat-ul-Jihad-al-Islami Bangladesh (HuJI-B), the Hizb-ut-Tahrir (HuT), the Jagrata Muslim Janata Bangladesh (JMJB), and Sahadat-e Al-Hikma (SAH).[86] Among them, the most active groups are the ABT and JMB. They may be connected with IS, as claimed by IS itself after the attacks and confirmed by information obtained from the arrested. As far as AQIS is concerned, in September 2014, Ayman Al-Zawahiri, in a video released by Al-Qaeda, announced the formation of a new body: «Al-Qaeda in the Indian Subcontinent».[87]

The emergence of violent radical Islam in Bangladesh may be explained by the competition between Al-Qaeda/AQIS on one side and IS on the other. Both organisations aspire to obtain the international leadership of Islamic extremism and both seek maximum visibility for their actions. AQIS may try to strengthen its presence in South Asia in order to claim a role in a post-American Afghanistan and in a post-Zawahiri Al-Qaeda, remaining active in a region – South Asia – where Al-Qaeda has its historical roots. On its part, IS may be engaged in challenging Al-Qaeda’s influence in South Asia. In fact, at the end of January 2015, IS announced its formal establishment in the Af-Pak region.[88]

According to Abul Barkat, Professor of Economics at Dhaka University and an expert in the economics of fundamentalism, the Bangladeshi Islamist extremist organisations are «the militant front of the mainstream Islamist Party», the Jamaat-e-Islami. JI has created «a state within a state» and an «economy within an economy» in Bangladesh.[89] The Jamaat has established its presence in most sectors of Bangladesh civil society and economy: NGOs and microcredit, madrasas, mass media, banks and finance, the pharmaceutical industry and healthcare, real estate, trade and transport. Professor Barkat has calculated that the Jamaat’s annual net profit amounts to about US$ 278 million. The largest part of JI’s income, 27.5%, derives from bank, insurance and finance. The second main source of income, 18.7%, is from the NGOs. About 10% of the total amount goes to the party’s political activities. The strongest business lobbies in Bangladesh are connected with the BNP and JI, and many persons accused of war crimes control this business. Mir Quasem Ali, a Jamaat-e-Islami executive committee member sentenced to death for crimes against humanity in the 1971 war, was a business tycoon and the director of the Islamic Bank of Bangladesh Ltd. (IBBL), Jamaat’s principal source of funding. The IBBL has been involved in illegal activities, some of which were carried out on Jamaat’s behalf. In 2006, Mir Quasem Ali was prosecuted under the Money Laundering Act for crimes committed through the IBBL. The Islamic Bank of Bangladesh was founded in 1975 at the initiative of the Saudi Ambassador in Dhaka, Fuad Abdullah Al Khatib, and has become one of the largest banks in South Asia, with 60% of its shares held by Saudi Arabian subjects. Recently, the IBBL extended its connections with the Islamic world, forging links with the Razee Bank of Saudi Arabia. Besides IBBL, Jamaat controls fourteen other banks, including the Islamic Bank Foundation (IBF), an affiliate of IBBL. Mir Quasem is the chief of the IBF and of the Saudi Arabian NGO Rabeta-al-alam-al-Islam. With other NGOs like the Kuwait Relief Fund and the Al-Nahiyan Trust from Saudi Arabia, Rabeta runs several projects in Bangladesh.[90] Therefore, the government’s explanation for the insurgence of Islamic radicalism in Bangladesh seems to be correct. IS is probably a label to cover a network of local political movements and organisations coordinated by JI, with the common dual objective of overthrowing the secular tradition and values represented by the Awami League since the foundation of Bangladesh and attacking the local religious minorities, namely Shia Muslims, Hindus and Christians.

  1. Will IS proliferate in Bangladesh?

The attention of international experts, analysts and governments is focused on Syria, Libya, Afghanistan and other areas in the Middle East and Africa, considered the core of IS and international jihadism. Bangladesh is somehow neglected as a potential laboratory and a manpower reserve for international terrorism. However, Bangladesh, the world’s third most populous Muslim country, should not be underestimated as a potential recruiting ground for radical Islamic organisations. The same applies to the huge Bangladeshi diaspora. Even if it is not possible, at present, to quantify the phenomenon, Bangladeshis living in Great Britain and other European countries are a fertile recruiting ground for radical Islamic organisations. For instance, in April 2015, an entire family of eleven people based in Britain disappeared. It reportedly joined the Islamic State in Syria. At the beginning of July, IS posted a message asserting that the family was «safer than ever with the Islamic State».[91]

Adherence to radical Islam is a phenomenon which involves middle class families living in metropolitan cities in Bangladesh or abroad. They are isolated, tend to lose their family networks and, therefore, recognise themselves in the religious community that symbolically replaces the extended family.[92]

The Bangladeshi diaspora, along with Islamic charities, is the main source of IS financing. The reasons – which explain the growth of Islamic radicalism among Bangladeshi youths, both in their homeland and abroad—are similar to those which apply to other Muslim youths living in Muslim countries, in Europe and in the United States: unemployment, lack of prospects, social and political exclusion, lack of government measures and discrimination have created space for radical Islam. Within the mosques, these youths feel acknowledged and involved. Those who join the armed units are well paid. Jihad becomes a job.[93] In 2014, the unemployment rate among Bangladeshis in the UK over 16 years of age was 13.4%, which, as far as unemployment is concerned, made them the third most affected community in the UK after Pakistanis (16.9%) and Africans and Caribbeans as a whole (15.3%).[94] IS is able to capitalise on the lack of social and economic integration not only in Western societies, but also in Bangladesh.

Besides political violence, the country is still affected by social insecurity and a lack of fundamental rights. Among the many other challenges Bangladesh has been facing since its foundation, from poverty to climate change and environmental problems or women rights, two are particularly alarming: the violence against minors and the labour conditions.

  1. Minors at risk

Between July and August 2015, three teenagers and a small girl were brutally killed. Muhammad Samiul Alam Rajon, 13 years old, was killed in Sylhet on 8 July. He was tied to a pole and tortured for about an hour. On 3 August, in Khulna, Rakib Hawladar, a 12 year old, was tortured to death with unthinkable cruelty. On 4 August, Sumaiya Akter, a 3 year old girl, died after being heavily beaten by her parents. The next day, Robiul Awal, 15 years old, was beaten to death for allegedly having tried to steal food. Rakib Hawladar was murdered by the owners of the garage where he had worked because he moved to another nearby garage. Witnesses reported that the boy had previously been harassed and tortured on many other occasions. Sumaiya Akter’s father, Emran Hossain, was a carpenter who had fallen into debt. In order to earn some money, he and his wife duped people into thinking they had supernatural powers and could exorcise them from evil spirits. The couple used the girl to simulate a ritual, where she was beaten to expel the evils from her body. These facts attracted people’s attention.

A friend of Rakib Hawladar witnessed part of the scene and reported the facts to the local media. The boy was rescued, although too late, by bystanders who, after his death, broke into the garage and brought the owners to the attention of the police. Rajon’s murder was filmed and the video went on Facebook. It outraged the public and stirred a public outcry across the country. One of Rajon’s murderers, Kamrul Islam, managed to flee to Saudi Arabia, but was caught by some Bangladeshi expatriates and handed over to the police. The post «#JusticeforRajon» circulated on Twitter, Facebook and the main social media. In November, four men involved in Rajon’s murder and two in Rakib’s murder were sentenced to death, to the cheering of the crowd gathered outside the court.[95]

Thanks to the public uproar, the police were compelled to act promptly. On 12 August, people were arrested for Rajon’s murder, while Rakib and Robiul’s killers and Sumaiya’s parents were arrested on the spot.[96] According to the Bangladeshi Shishu Adhikar Forum (BSAF) – a Dhaka based organisation promoting children’s rights – at least 154 children were killed in Bangladesh between January and June 2015, 292 in 2014 and 180 in 2013.[97] Children in Bangladesh are victims of rape, sexual and other kind of abuse, and are often killed for insignificant reasons.[98] These facts prove not only that children’s rights in Bangladesh are still not respected and that childhood is exposed to tremendous risks, but also that the combination of poverty and ignorance can be deadly. All the murders described above had economic motives: Rakib was a working child; Robiul was compelled to steal food; Sumaiya died because of her parents’ economic problems; Rajon came from a poor family.[99] The poor in Bangladesh are powerless and are often blackmailed by criminals. Children fall prey to sexual exploitation, child labour and kidnapping for illegal trafficking.

On 14 March, the dead body of ten year old Abu Sayeed was discovered in the house of a police officer in Sylhet. When arrested, the man confessed that the boy had been abducted. The General Secretary of the Sylhet Ulama League and an officer of the Rapid Action Battalion were involved in the murder. The kidnappers had demanded a ransom of 500,000 Taka—less than 5,000 euros—from Sayeed’s family.[100]

Child suicide is on the increase in Bangladesh. In 2014, about 95 children took their own lives. According to the experts, children are depressed because they are affected by poverty, child marriage and child labour, and are forced to take responsibilities they cannot bear at an age when they should only study and play. In metropolitan areas, there are not even playgrounds, as land is being used to erect buildings and shopping centres. Children play on the streets and are frequently victims of accidents.[101]

Children have always been exploited and abused in Bangladesh. The people’s fierce reaction and the role of social media in denouncing the crimes prove that awareness of children rights is increasing, but also that much has still to be done.

  1. The Rana Plaza issue

Other powerless subjects in Bangladesh are factory workers, especially those employed by Western garment firms. According to a Human Rights Watch (HRW) report published on the occasion of the second anniversary of the Rana Plaza disaster of 24 April 2013,[102] the workers continue to suffer from poor working conditions, «physical assault, verbal abuse, forced overtime, unsanitary conditions, denial of paid maternity leave, and failure to pay wages».[103]

After the Rana Plaza collapse, the Western retailers set up two consortia, the Accord on Fire and Building Safety – a group of 180 companies based mainly in Europe – and the Alliance for Bangladesh, representing 26 North American firms. The two institutions have helped Bangladeshi businessmen to improve the structures of their firms and to set up an inspection regime. The two organisations oversee more than 2,000 factories. On its part, the Bangladeshi government has facilitated the registration of new unions. These now number about 400, three times more than in 2012. According to the HRW report, workers who try to form unions are often intimidated, dismissed or physically assaulted.[104]

The Clean Clothes Campaign – an alliance of unions, NGOs and other organisations in sixteen European countries – has been campaigning since the April 2013 tragedy, demanding that companies and retailers compensate the families of the victims and the injured. The Clean Clothes Campaign has exposed many world famous companies whose clothes were produced by the factories housed in the Rana Plaza building and has mobilised more than a million consumers.[105]

In September 2013, representatives from the Bangladeshi government, local and international garment companies, trade unions and NGOs came together to form the Rana Plaza Coordination Committee. With the International Labour Office (ILO) acting as a neutral chair, the Committee aimed «to develop a comprehensive and independent process» to support the victims, their families and the workers, according to international standards.[106] In January 2014, the ILO set up the Rana Plaza Donors Trust Fund to collect the financial resources to refund loss of income and the medical expenses faced by the victims and their families. The ILO was the sole trustee. The fund was financed by a combination of donors, including buyers, companies and individuals who wished to make a voluntary donation.[107] In November 2014, the Rana Plaza Coordination Committee announced that about US$ 30 million was required to cover the refund costs.[108] In April 2015, a week before the anniversary of the Rana Plaza disaster, 21 million dollars had been collected and nine million were still missing. Benetton, which sourced clothes from a Rana Plaza factory, eventually promised to donate 1.1 million after denying any connection with the factories in the collapsed building. Benetton’s donation came after protests and a petition signed by one million people asking the Italian corporation to donate alongside other Western companies.[109] The companies were supposed to contribute on the basis of their share of production at Rana Plaza factories, according to ILO compensation conventions. Benetton’s share was 1.8%. The Italian company donated an extra 500,000 dollars to BRAC, the main Bangladeshi NGO.[110] Other Western companies that manufactured in Bangladesh but not in the collapsed building, donated to the fund: the US$ 30 million target was eventually reached in June 2015.[111]

On 1 June 2015, the Bangladeshi authorities filed murder charges against 41 people for the Rana Plaza collapse. Among the accused were the owner of the building, Sohel Rana, his parents, the owners of seven factories housed in the complex, and some government officials. Initially, the defendants were charged with culpable homicide, but later the court, due to the gravity of the accident and at the investigators’ request, decided on a charge of murder. In the latter case, the defendants risked the death penalty, whereas the maximum punishment for culpable homicide in Bangladesh was only seven years in jail. The investigators changed their attitude after discovering that the management of the factories, on the day of the accident, forced the workers to enter the building despite the fact that it had developed major cracks the previous day. The police defined the Rana Plaza collapse a «mass killing». Other charges were related to the violation of safety rules, as additional floors had been built up over the existing five and had illegally housed additional factories. In December, the court issued arrest warrants and ordered the seizure of the properties of 24 suspects who had absconded. The defendants were asked to report to the police, in order to be arrested, by 27 January 2016.[112]

  1. A promising economy constrained by political turmoil

Despite a slight decline in economic growth in the fiscal year (FY) 2015[113] and all the challenges it was facing (on which more below), Bangladesh, according to the World Bank and the IMF, advanced 14 steps from 58th position in the world economy in 2013 to 44th position in 2015.[114] Indeed, Bangladesh’s economic growth did well in the first half of FY15.[115] The growth rate was 6.4% – a good result, but far below the 7% rate expected by the government.[116] According to the World Bank, the GDP growth rate should rise to 7.5-8% to accelerate the poverty reduction and improve shared prosperity.[117] In the second part of 2015, the World Bank and the Asian Development bank had to revise their growth forecasts respectively to 6.8% and 6.7%, while inflation was expected to remain at about 6.2%.[118]

There is no survey-based evidence on poverty reduction in Bangladesh since 2010; however, it is assumed that the sustained GDP growth of approximately 6% has been the result of agricultural growth of 3.3% and remittance growth of 6.7%, which, taken together, made possible an annual poverty decline of 1.74% between 2000 and 2010.[119]

During the year under review, the global growth recovery – in particular in the US and Europe – had positive repercussions on Bangladesh, while the low international commodity prices favoured the investments and helped to contain inflation. The 12 month average inflation decelerated from 7.6% in February 2014 to 6.8% in February 2015.[120]

The fiscal deficit was stable. The total budget deficit in the first half of FY15 amounted to 108.96 billion against 118.70 billion in the same period of FY14.[121]

The Eighth Pay and Service Commission suggested a 100% salary increase for civil servants. It was recommended that the lowest basic salaries be raised from 4,100 Taka (US$ 52) to 8,200 Taka, and the highest basic salaries from 40,000 (US$ 510) Taka to 80,000 Taka. The government planned to implement the Commission’s recommendations gradually, beginning in FY16.[122]

Despite its promising results, Bangladesh’s economy was exposed to several challenges. In 2015, the political turmoil took a heavy toll on the economy and tested the resilience of Bangladesh’s growth. Disruptions to domestic transportation due to the blockades in the first months of 2015 broke the supply chains. The apparel sector, which improved after the Rana Plaza reforms, recorded losses due to order cancellations, shipment delays and vandalism. Retailers cancelled trips and orders, shifting them to India, China, Pakistan, Myanmar, Vietnam and Indonesia. The Bangladesh Shop Owners’ Association, which represents 2.5 million retailers, reported that sales dropped from 30 billion to 9 billion Taka a day.[123]

Disruptions also had a negative effect on revenue collection, which in the first four months of FY15 was 3.2 lower than the corresponding period of FY14.[124] The pessimistic investment climate was confirmed at the end of 2015, due to the persistent risk of political instability. [125]

Besides political unrest, other risks threatened Bangladesh’s development. The financial sector was weak due to rigid lending rates, nonperforming loans, financial scams and lack of accountability in bank management.[126] The land market was very inefficient because of long delays and high costs in property registration, lack of ownership data, weak computerisation of land records, poor zoning laws and high transaction costs. The availability of land for manufacturing enterprises was insufficient.[127]

On 18 February 2015, the government approved a proposal to establish 17 special economic zones (SEZs) to attract local and foreign investors. However, the implementation of infrastructural projects was poor as a consequence of resource constraints, unrealistic targets and procedural lapses between the initiation and the completion of the projects. Corruption was often behind the delays. Sometimes projects were approved far beyond the planned inception date. Procedural delays and post-approvals held back the projects’ start-up. Key projects started in 2014, mostly with foreign investments – such as the Dhaka-Chittagong four lane highway, the double tracking Dhaka-Chittagong railway, the Dhaka metro rail, the Moghbazar Flyover, the two Bibiyana gas power plants and others – were proceeding disappointingly slowly.[128]

Apart from domestic factors, Bangladesh is expected to face global challenges in the short and medium term. The slowdown of the European economy may compromise Bangladesh’s export competitiveness in the main European markets. Moreover, exports to the European Union risk being cancelled or reduced if Bangladesh does not succeed in improving labour and safety standards in the garment sector.[129]

Female employment is the key factor in Bangladesh’s short and medium term development. The country is facing a potential decline in GDP growth from the present 6% to 5.7% in FY17, because of both the labour force’s decline and reduced growth in productivity. The labour force has begun to decline because of ageing, wider access to education and migration. There is a chance to increase the labour force growth by improving female employment, however: women make up a little over half the national population, but their contribution to the country’s economy is far below its potential. In spite of significant progress in recent times, the labour market remains divided along gender lines and the promotion of gender equality in employment has stalled. It has been estimated that if female labour participation rates were to rise by 2.1 million a year for ten years, pushing up the total female participation to 75% of its full potential and reaching the level of Thailand in 1990, the growth rate would rise to 7.3%. The leverage to stimulate women’s participation is developing early childhood and tertiary education, technical training, and reducing legal and social impediments to pursuing a profession.[130]

  1. India-Bangladesh ties grow up

«Hum paas paas hain, hum saat saat bhi hain» (literally, «we are close close, we are also together together»). [131] The sentence sounds like a line of a ghazal, but it is part of Indian Prime Minister Narendra Modi’s talk on the occasion of his two-day visit to Bangladesh on 6 and 7 June 2015. «We are close and united» was the ultimate meaning of Narendra Modi’s words.

India is adopting a leading role in the region, with the objective also of containing China’s expansion into the Bay of Bengal. In this context, Narendra Modi’s visit to Bangladesh was the first tangible act of rapprochement between the two countries after the tensions caused by the territorial dispute dividing them and Modi’s electoral and post-electoral declarations about Bangladeshi illegal immigrants in India. In fact, during his electoral campaign in 2014, Modi declared that if the BJP came to power, the «Bangladeshis would have to pack their bags and leave India».[132] In June 2015, however, the Indian Prime Minister carefully avoided the subject. On Modi’s initiative, the land boundary agreement –which had been inked in 1974, namely 41 years before, but never ratified – became effective on 6 June 2015. The agreement swapped 160 enclaves on both sides of the border, whose residents, up to that moment, had been stateless people. The enclaves were created in the eighteenth century by princely rulers and were like islands where stateless people of either country used to live. The Land Boundary Agreement (LBA) allowed about 51,000 people to choose between Indian and Bangladeshi nationalities, also giving them the right to decide to stay where they were, or to move to the other country.[133]

In June 2015, Bangladesh and India signed 22 more agreements and Memoranda of Understanding, including «blue economy» and maritime cooperation agreements. India obtained the use of the Chittagong and Mongla ports. Chittagong was developed through Chinese investment, like several other major ports in Pakistan, Sri Lanka and Myanmar. Apparently in a rather paradoxical development, India will be able to make use of an infrastructure built by her main rival for influence in the Indian Ocean region. In fact, this development is not as paradoxical as it appears, but is the result of a tripartite agreement between Bangladesh, China and India.[134] Part of this agreement is the fact that India will build the infrastructure that will facilitate the traffic of goods not only between the Indian state of West Bengal and Bangladesh, but also between China and the Indian Ocean.[135] Also, China continues to be the main supplier of military equipment to Bangladesh and Dhaka’s «most dependable partner», according to official sources.[136] On the other hand, India is emerging as Bangladesh’s potential key partner in the energy sector. In fact, India has agreed to raise the power supply to Bangladesh from 500 to 1000 MW and has supported a sale to the Bangladesh Power Development Board of 3000 MW at a cost of US$ 3 billion. In addition, two coal-fired plants with a capacity of 1600 MW are expected to be set up by the Indian corporation Adani Power, at a cost of US$ 1.5 billion. Last but not least, Narendra Modi announced a line of credit of US$ 2 billion to Bangladesh, while Sheikh Hasina pledged zero tolerance of terrorism.[137]

 

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