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Items: Afghan Travails / Widening War? / Argentine Meltdown / Marching for Capitalism / Enron Aftershocks / UN Finances Brighten / Cayman Chicanery / GPF Needs Your Help
The war in Afghanistan continues along a bloody course, in spite of the surrender or withdrawal of Taliban forces from all major cities. Reports have now confirmed the killing of some 500 prisoners held by the Northern Alliance in the Qala-e Jangi fortress in Mazar-e Sharif, an operation coordinated by US forces. Amnesty International and the UN High Commissioner for Human Rights Mary Robinson have called for an urgent investigation. On November 29, European Parliamentarian Glenys Kinnock, wife of the former Labour Party leader Neil Kinnock, also called for an inquiry. UK Foreign Secretary Jack Straw told BBC radio on November 30 that the events at Qala-e Jangi were "absolutely terrible" but affirmed that such an investigation was "frankly not on." Prisoners were massacred by artillery, tanks, and strikes by US military aircraft, guided to their target by US spotters. Reporters who visited the scene later wrote of a terrible carnage and dead prisoners who had been shot with their hands tied behind their back. Though the prisoners rebelled against their captors, those responsible may be guilty of war crimes.
Bombing by the United States continued in many parts of the country with serious consequences for civilians. Medecins sans Frontieres reported on December 5 that it had been transporting dozens of civilian casualties to hospitals in Jalalabad from the village of Tora Bora and the nearby villages of Pachir, Wazir and Agam - all hit by US air strikes. MsF announced that at least 80 people were dead and 50 wounded, including a number of women and children, while an untold number of other civilians were unaccounted for amid the rubble of their destroyed homes. MsF, in its press release, spoke of "an unacceptably high toll on civilians," noting that "these events are all the more disturbing as the leaders of the war against terrorism affirm that the conflict is being waged in the name of civilization and respect for humanitarian values."
As the fighting shifts to the rural areas, including mountains, eaves and remote villages, attacks on civilian targets may well increase in the days to come, since all Afghans in certain areas may be deemed to be al-Qaeda or Taliban supporters.
Factional fighting amongst rival warlords in the US-led coalition have led to death and chaos in a number of the "liberated" Afghan cities. Security conditions were so bad in Jalalabad that Medecins sans Frontieres withdrew their international aid workers. Reports of "fire fights" in other cities have been accompanied by tales of looting, rape, reprisals against civilians, summary justice and other atrocities. US government and military sources have denied these events, or expressed "surprise" and "regret," and called for greater "restraint" from their Afghan allies.
The humanitarian situation, which some hoped would improve quickly after the Taliban collapse, has worsened in recent days, as aid agencies have been forced to withdraw or scale back their programs. Looting of relief warehouses, attacks against aid workers, threats to truck drivers and other factors have led to cutbacks, as winter snows begin to fall. The situation is complicated by large numbers of displaced persons and drought conditions in much of the countryside, as well as warlord rule and atrocities against civilians. The countryside is sown with millions of landmines, to which now have been added thousands of unexploded bombs. UNICEF Director Carol Bellamy announced on December 7 that 1.5 million children were seriously at risk. Aid agencies worry that existing food stocks and other humanitarian supplies will not reach the seven millioin Afghans most seriously in need, putting large numbers at risk of perishing through hunger and cold.
On the United States "home front," Attorney General John Ashcroft issued a blunt warning to those who raise doubts about Operation Enduring Freedom and question the Bush administration's wider war on terrorism. In testimony to the Senate Judiciary Committee he rejected complaints that the administration had acted without proper authorization by Congress. "To those who scare peace-loving people with phantoms of lost liberty, my message is this: Your tactics only aid terrorists, for they erode our national unity and diminish our resolve," Ashcroft testified. "They give ammunition to America's enemies, and pause to America's friends. They encourage people of goodwill to remain silent in the face of evil."
A wider phase of the US war may soon begin. According to diplomats at the United Nations, the US government has been "consulting with capitals" about the possibility of a strike against Iraq in the near future. Though most countries oppose such a move, the Bush administration is actively considering it and building up large military forces in the Arabian Sea area.
Military strikes may also target Sudan, Somalia and Yemen, according to dispatches in many US newspapers. Stories in the UK-based Guardian and Independent newspapers, reported that US naval warships are patrolling off the Somali coast. A Guardian story also reported that Somali Prime Minister Abdiqassim has pleaded that hostile US action would collapse his fragile government and create an environment still more favorable to terror. Some sources also reported that the US is considering other targets such as Hizbollah and Hamas camps in Iran, Syria, Lebanon and the Occupied Territories. Secretary of Defense Donald Rumsfeld and his deputy Paul Wolfowitz are reported to be the principal advocates of such wider theaters of operation, regardless of pleas from European allies. This Pentagon faction favors what the New York Times on December 2 called a "muscular, unilateralist" approach. Rumsfeld and his Pentagon colleagues speak in terms of an all-out war on "evil." "There is talk of a new American empire," commented the Times , "But what kind of empire?"
The economy of Argentina is "on the brink of the abyss" (as Reuters put it in a dispatch on December 6). Each day brings news of fresh woes: bank runs, currency speculation, plunging industrial production, slumping consumer buying and evaporating tax revenues. The country's polo-playing upper classes, among the world's most opulent, own vast rural estate and industrial fortunes, swollen by spectacular government corruption and financial skullduggery. Their country is now saddled with $132 billion in foreign debt. Creditors are knocking and the national treasury is virtually empty.
In the 1990s, Argentina pursued neo-liberal policies - what Foreign Affairs Magazine called "ambitious policies of liberalization, privatization and deregulation," including downsized social services and pension cutbacks. The polo-playing classes were happy, making huge windfalls on the privatization of public companies and related corruption, while enthusiastic foreign investors flocked the country. But Argentina's reforms left it dangerously exposed to regional and global financial turmoil including the Mexico crisis of 1995, the Asian crisis of 1997, the Russian shocks of 1998 and the Brazilian crisis of 1999. To cope with these shocks and keep the party going, the government sold off public assets to raise funds and borrowed massively from foreign lenders -- a $40 billion IMF bailout in December 2000, an $8 billion IMF package in August 2001, and another $22 billion IMF rescue loan more recently.
Not long ago, Argentines learned that Carlos Menem, twice president of the republic (1992-1999) and now under house of arrest, had engaged in arms-smuggling and financial chicanery while in high office. Today's news from Buenos Aires adds to the gloom. Ordinary people, fearing devaluation and bank failures, lined up for hours on October 29 and 30 to withdraw cash from their bank accounts, pulling $ 1.1 billion out of the banking system until Economy Minister Domingo Carvallo decreed a $250 limit on withdrawals. Cavallo, an advocate of neo-liberal orthodoxy, has adopted emergency interventionist measures including currency controls, but to no avail. On December 6, the IMF refused an urgent request for release of a $1.3 billion tranche in its latest package, pressing for devaluation or full "dollarization" that would make the US dollar the official currency of the country. The World Bank and the Inter-American Development Bank froze an additional $1.1 billion of loans.
With nearly $1 billion in foreign debt payments due in December, Carvallo seized $3.5 billion of private pension funds on deposit in Argentine banks, so that the government could pay off creditors and pay for current operations. The government will convert the pensions into government treasury bonds, a theft from the nest egg of many elderly Argentines. The move is classic Carvallo. In a previous stint as Economy Minister, he drastically cut Argentina's public pensions, once one of the world's best social protection systems.
Huge strikes and public protests have greeted the government's austerity measures. As one source commented to the New York Times recently, "Argentina is a volcano." Impatient creditors, backed by the US Treasury Department, may force a showdown, plunging the country into deeper political turmoil and economic distress. Argentina's crisis could spread to other Latin American countries and further destabilize the shaky international financial system.
On Sunday, December 2, a worldwide "Walk for Capitalism" took place in a number of cities, including New York, Stockholm, and Porto Alegre. Organizers announced in advance that "we need to defend the values of economic systems that have produced untold wealth for the Western world and are now under attack." According to the New York Times, the parade up the sidewalk along New York's Fifth Avenue attracted 60 participants, somewhat less than the 400 who marched in Stockholm, but more than the 6 who rallied in Bath, England. One of the New York participants held a sign that read: "Life, Liberty and the Pursuit of MY OWN happiness."
The marchers in New York reportedly taped blue ribbons and certificates of appreciation on the walls of the Chase Manhattan Bank, Tiffany's jewelry store, and Trump Tower, site of an upscale shopping mall. "Whatever the power of capitalists," wrote a bemused Times columnist, "they can't compete with moralists and politicians when it comes to public protest."
Also on December 2, the Enron Corporation finally declared bankruptcy. While the pro-capitalist marchers marched proudly up Fifth Avenue, bankers and corporate chieftains scrambled for their phones to size up the problem and limit the damage. Enron's shares, worth $60 billion just twelve months ago, had already vanished to nearly zero. Now the nation's seventh largest non-financial company filed for protection from its creditors, owing tens of billions in debt, including bonds, bank loans, forward contracts as yet undelivered and more.
The company had liberally used "off balance sheet transactions," an accounting gimmick that hid liabilities and enhanced the apparent health of the firm. Enron management kept hundreds of satellite companies, which harbored much of the total debt, off the parent's balance sheet, leading investors to see a move robust firm than really existed. Accountants have told GPF that this is now a common structure in many large firms, including banks and financial institutions and Enron-type collapses may spread to other blue-chip companies, including major banks and financial service conglomerates. The United States Department of Justice has started a criminal investigation and the Securities and Exchange Commission has an inquiry also under way. On December 7, New York's Amalgamated Bank brought suit against 29 current and former Enron executives, accusing them of fraud and deception and charging them with selling $1.1 billion in Enron stock at high prices while hiding the real conditions of the firm. Several other suits will target the company's outside auditor, Arthur Anderson, already besmirched in the collapse of the Sunbeam Corporation. Anderson, one of the country's leading audit firms, gave a clean bill of health to Enron's finances just a short time ago. Accountants are supposed to provide an independent audit judgment, but they are fearful that if they scrutinize too closely they will lose business to other accounting rivals.
Enron management told more than 3,000 employees at the company's 50-story Houston headquarters that they no longer had jobs. With police on every floor, employees were to immediately pack their personal belongings and leave the building. As the tearful workers streamed outside, they paused to console colleagues and hug each other. Mounted police shouted at them and ordered them to disperse.
The company has told them to apply to bankruptcy court in New York for monies owed, such as pay due for unspent vacations. Employees had already seen their pension plans evaporate, as Enron stock (which they could not sell) plummeted from over $80 a share to nearly zero.
According to the New York Times, more than 100 lawyers crowded into the bankruptcy court on December 3 and "whole armies of white-shoe lawyers, bankers and accountants are preparing for legal proceedings that may well last for years." Reports also circulated in the business press that upper managers and traders of the firm had given themselves $105 million in bonuses in the last days before the filing, supposedly as a reward to stay on the job and see the company through the bankruptcy proceedings.
Not all financial news has been bad. At United Nations headquarters, major debt payments by the United States substantially improved the organization's financial picture. In October and November, the US government paid a total of $1.342 towards the UN's regular budget, peacekeeping and international tribunals, greatly reducing the mountainous US arrears. The US forwarded the payments in several tranches, beginning with $725 million on October 15 and ending with $475 million on November 12, finally making good on promises by former US ambassador Richard Holbrooke during UN budget negotiations in the fall of 2000.
The US payments reduce the overall arrears of the UN by about one-third, to about $2.8 billion, bringing the organization back from the brink of financial ruin. The UN's financial crisis has lasted for nearly seven years and seriously weakened the organization at a time when its work was more in demand than ever. The crisis has abated, but is not resolved. UN debts remain large in proportion to its annual budget, including more than $1 billion still owed by the United States. US pressure has forced the UN to reduce its overall budget in real terms since 1995, leaving the organization terribly short of needed resources. Further, several UN agencies still face financial emergencies that undermine world efforts for health, food relief, refugee aid, population efforts and much more.
Robert Morganthau, the Manhattan District Attorney, has often spoken out against tax evasion, money laundering and other financial scams associated with offshore financial centers. In an op-ed in the New York Times last summer, he disclosed that the Cayman Islands alone shelter accounts of US depositors totaling $800 billion, a sum equal to one-third of all domestic US bank accounts. Cayman accounts have only one purpose: to escape the regulatory scrutiny and legal oversight imposed on money-center banks in New York, Boston, Chicago or San Francisco. Morganthau, who prosecutes financial wrongdoing in the biggest US money market, has often seen investigations bog down when the money trail leads to the Caymans and other offshore locations, where local governments vigorously protect bank and corporate secrecy.
According to a December 8 story in the New York Times, Morganthau has criticized an agreement signed in late November by US Treasury Secretary Paul O'Neill with the Cayman Islands government. The agreement promotes the sharing of information between the two governments, beginning in 2004. The deal covers only income tax issues and does not deal with estate, gift and state-level taxes, or other areas of abuse. According to the Times, Morganthau has called the deal a "sham" and said "people are going to think that the government is doing something when this is just a fig leaf." The D.A. points out that the deal gives current malefactors 25 months to move their assets to another tax haven and it seals their past deeds from any investigations. On December 4, Morganthau called on the Bush administration to cut off immediately Cayman links to the US banking system.
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