Around the World (April 6, 2013)

The Cyprus Crisis

The crisis in Cyprus seems to have started in 2009, when state expenditures started rising, under communist president Demetris Christofias.  Due to these policies, in 2011 Cyprus lost access to capital from the international markets, and instead of turning to the international institutions for a loan (which would have involved social costs), it negotiated a €2.5 billion loan from the Russian Federation.  At the end of 2011 the Cypriot banking system suffered a serious hit, when the value of the Greek state bonds, in which it was (patriotically) invested quite heavily, was cut in half, as a result of the crisis in Greece; in consequence, the banks lost about €4.5 billion (while Cyprus’s national GDP is of about €17 billion). But Cyprus is a member of the euro zone, and as such the state and its banking sector need to respond to certain financial strictures, required in order to manage the  common currency. The key demand at that time was the re-capitalization of the banks, but as the international investors had little interest in buying from Cyprus, in 2012 the government had to enter into a slow and much delayed process of negotiations with the Troika (the European Commission, the International Monetary Fund, and the European Central Bank). The fact that it was an electoral year (the lead-up to the presidential elections of 2013) further muddled the situation, slowing down the decision-making process and not allowing for a clear picture to emerge. Finally, after prolonged negotiations, on March 16, 2013, the Troika and Cyprus agreed on a €10 billion bailout deal (the fifth country to enter such a deal, after Greece, Ireland, Portugal and Spain).

This crisis seems to have started in 2009, but Cyprus’s systemic problems are much older in fact, and have to do with it becoming an offshore financial center (explanation). This started a few decades ago, when Cyprus signed double taxation treaties  with a number of countries, including the USSR. The way it works, is that economic entities from other countries transfer their earnings through Cyprus, where they are taxed at a very low level, en route to some offshore accounts (like the Cayman Islands etc.). The advantage brought by the double taxation treaties is that these economic entities are not taxed again in their home country, and thus retain a larger part of the earnings. In addition, due to the aforementioned economic relations, after 1991 Cyprus has also became one of the favorite banking locations for the nouveaux riches of Russia (with all the shady implications). Providing financial  services was such a productive activity, that offshore tax planning became a key branch of the Cypriot economy; in fact, even the current president used to earn his living in that sector. But this also meant an immense disparity between the size of the banking sector and the actual economic power of the country; by 2011, the assets of the banking sector represented an astonishing 835% of the national GDP.

This is why, when the bailout deal was agreed with the Troika, these irregular  aspects had to be taken into consideration. As part of any bailout deal, the receiving government has to contribute by raising a part of that capital and by making structural reforms; accordingly, the Cypriot government was asked to raise €5.8 billion. Initially, the agreed plan was to introduce a one-off bank deposit levy of 6.7%, on all accounts under €100,000, and of a 9.9% one on larger deposits.  Due to public pressure and to a lack of political support in the parliament, the law needed to implement this measure failed to pass the legislature. The requirement for national capitalization did not go away, however, therefore the measure was changed:  two major banks, Laiki and Bank of Cyprus, will undergo restructuring; the first one will be split into a “bad bank”, with the rest of the accounts  being transferred to Bank of Cyprus;  all the resulting accounts under €100,000 will be fully protected, but all deposits over that sum will have 40% to 60% transformed into shares in the bank (recapitalization). In addition, in order to prevent a run on the banks, strict limits were placed on the amounts customers can move from the banks; in fact, for a while, the entire banking sector was in a prolonged vacation, until the details of these policies were being worked out.

What does the future hold for Cyprus? Let us look at Iceland: in 2008 it went through a similar crisis, caused by an over-inflated and over-exposed banking sector; after a period of social and political turmoil, its government passed  a series of determined measures, which included similar capital controls (some of which are still in place), but which also focused on protecting the individual citizens, instead of a wholesale bailout of the banking sector; today, it is enjoying a remarkable 2.7% annual growth and a 1,5% budget deficit. Capital control measures were also passed in Malaysia during the Asian economic crisis; while widely criticized at the time, they have proven very effective.  In Cyprus, however, the problem is compounded by a socio-political status quo riddled by inefficiency and lack of transparency; investigations published in opposition newspapers in recent days claimed that many politicians had their loans quietly written off by Cypriot banks, while more than 130 companies had the opportunity to move out more than €500 million from Laiki, in the run-up to the March negotiations with the Troika. A positive thing is that Cyprus still has a lot of state -owned enterprises, which could be privatized; and there has been talk of off-shore gas reserves around Cyprus, which could also constitute a solid source of cash (at least theoretically). The economic situation is also compounded by the peculiar and cumbersome context of an island still-divided between the Turkish-controlled north, and the Greek-governed South (which constitutes the actual state of Cyprus we are discussing); as well as by the geopolitical implications of its immediate neighborhood  – Turkey, Greece, Syria, Israel, Lebanon.

Finally, there is the lingering feeling that, once again, tough economic measures have been imposed by international institutions, under German leadership or influence (a Germany which is understandably reluctant to impose on its own citizens the risks and sacrifices involved in such bailouts). In any case, this is the general feeling among the population of Cyprus – that they are being punished by the EU for no fault of their own. If this will lead to a greater accountability of the Cypriot government, from the same general population (as it happened in Iceland),  that would certainly be a good outcome.

Sarkozy’s Return in Peril?

Less than a year after a relatively close electoral win over Nicholas Sarkozy, Socialist president François Hollande is “enjoying” some of the lowest approval rates of any sitting French president. Appropriately,  there has already been talk of a possible Sarkozy comeback into politics and participation in the 2017 elections, as he is still the most prominent representative of the center-right, and an exponentially more charismatic personality than Hollande.  These perspectives are threatened, however, by the very visible recent actions of the French judiciary system versus Sarkozy . These recent developments have to do with long-standing accusations that in 2007 Sarkozy had profited from the mental and physical weakness of one of the richest persons in France, Liliane Bettencourt, to obtain financial support for his presidential campaign. Even without knowing the outcome of the investigations, the image of the former chef d’État being summoned to interrogatory are due to leave a mark on his public image, adding to the divisive legacy of his previous public persona.The current events also give us an interesting insight into the relatively enclosed and rigid world of the  French elite; which is even more interesting, given the official mythology of egalitarianism. It also signals the increasing power and courage of the French judiciary,  whose institutional independence developed gradually, in the last few decades; and perhaps on the decreasing staying power of the president’s (formal and informal) immunity. It has been a slow process, from several of Mitterrand’s collaborators ending up in jail twenty years after the fact, to Chirac receiving a two-months suspended sentence a few years after leaving office, to Sarkozy being asked to come in for questioning only a few months after the end of his presidency.

Oligarch & Opponent of Putin Found Dead

On March 24, Boris Berezovsky, another Russian oligarch who had been a loud critic of Putin and had found refuge in London, was found dead in his apartment. The cause of death is not clear, but, unlike in the case of Alexander Litvinenko, the police have not found any traces of radioactive materials – or of foul play – at the home. This seems to be supported by reports that in the last year or so Berezovsky had been under a great deal of financial and personal pressure, undergoing a major financial loss, of about £3 billion, as a result of a lawsuit between him and Roman Abramovich, and being involved in another costly lawsuit with his former girlfriend (and mother of two of his children).  According to some, he was increasingly dissatisfied with his life in London, he had been suffering from depression, and wanted to reconcile with the Kremlin and return to the homeland – having changed his mind about Russia, the West, and his positions; others, however, adamantly dismiss this scenario and insist on the possibility of foul play. Whatever the facts, Berezovsky was one on a long list of oligarchs who had obtained their immense wealth in dubious circumstances during the early 1990s, and who, after Vladimir Putin’s rise to power, had to choose between working with the new regime, and organizing against it. Some chose to adapt to the system (see Mr. Evtushenko), and some chose to oppose it – the most famous case being that of Mr. Khodorkovsky, who is still in prison.

Coup D’État in the Central African Republic

On March 24, Séléka rebels took control of Bangui, the capital of the Central African Republic (map). This is a country rich in many coveted resources (such as diamonds), but also a country that has suffered from chronic political instability and under-development ever since its independence. President and strongman François Bozizé, who himself came to power in 2003 through a coup, and was until recently supported by neighboring Chad, and periodically by the French forces in the country, fled to Cameroon, and blamed the attack on Chad. Meanwhile, South Africa withdrew its soldiers from CAR, supporting reports that they had become the new patrons of Bozizé, to the discontent of Chad’s strongman Idriss Déby. One of the Séléka rebel leaders, Michel Djotodia, has declared himself CAR president, suspending the existing institutions of the state – and stated his intention of preparing the country for democratic elections in three years’ time. Most observes received these statements with skepticism; it seems that this is just another case of taking control of the main source of wealth, the state; indeed, although there would be plenty of natural resources, the main source of income for the Central African Republic is foreign aid. The African Union and the major countries invested in CAR (like the US) have until now refused to recognize the new Djotodia regime. The disorder and turbulence characteristic to such power-grabs continue, meanwhile, in Bangui.

Escalation of Belligerent Rhetoric From North Korea

Given the very little verifiable information, and the poor channels of  communication with the regime, it is still not clear what the actual intentions are, behind the escalation in the rhetoric and actions of Kim Jong-Un‘s regime. For some, this seems like a continuation of his father’s policies of periodically provoking the West and South Korea, and receiving aid in return; this might also have to do with an attempt from the young ruler to assert and concentrate his control over the military and the party structures (which would be a reasonable assumption, given Kim Jong-Un’s relative inexperience and newness to the position).  However, some of the communication coming out of Pyongyang, including the publicizing  of contingency plans to strike at mainland USA (although they do not possess this capacity), as well as the closing of a key industrial complex ran in partnership with  South Korea (which is one of the main sources of income for the country), and the little influence that China seems to have at the moment over the regime, have put many on the edge.  One of the greatest dangers in such conditions is for a conflict to be started accidentally, as military assets are within range of each other, and bellicose rhetoric has put everyone on high alert.

Here is some footage of the drumming up of “support” from the poor people of North Korea; note the ill-fitting uniforms and the obviously coerced choreography.

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Norodom Sihanouk

Norodom Sihanouk

Norodom Sihanouk

One of the prominent political figures of the twentieth century, especially for Asia’s twentieth century, Norodom Sihanouk, has died. On and off, he was the actual ruler, or one of the leaders, of Cambodia, and a key player in Southeast Asian politics. Shrewd politician as well as prolific filmmaker, “father of the country” and singer who made several LPs, he was a larger than life figure, present both in the political decision rooms and in the salons of the world for over half a century. Like his ancestors, over the course of his life he had dozens of concubines and fathered a total of 14 children. Finally, for most of the lifetime of the people living today in Cambodia, he was the determining national figure, whether they liked him, or not.

But where and what is Cambodia?

Cambodia

Cambodia is a country in Southeast Asia, situated between Laos (to the north), Vietnam (east) and Thailand (west), and enjoying a long oceanic coastline to the southwest.

Today its population is of about 14 million people, mostly of Khmer ethnicity, but there are also Vietnamese and Chinese minority groups. The main religion of the population is Theravada Buddhism. Its current capital is Pnomh Penh.

The first organized political units in the area, that are mentioned in historical sources (mainly Chinese), date between the first and fifth centuries. They were already influenced by Indian culture, both in terms of social structures and of religion (Hinduism & Buddhism).

However, the golden age of Cambodian history takes place between the 9th and the 13th century. This is the period of political (territorial) expansion, and of building some of its most remarkable monuments – like Angkor Vatt. After the fourteenth century there follows a period of decline and of ongoing conflicts with the neighboring Thai, Siamese and Vietnamese powers.

By the 19th century, tired of this continued struggle with its neighbors, Cambodia appeals to the colonial power of France for help, and becomes a protectorate in 1864. For nearly a century thereafter, France will control the area (including parts of today’s Vietnam, Laos etc. – what was known as Indochina) politically and economically.  However, since the French were mostly interested in extracting resources, and less in running the country, they left the monarchy and the social arrangements largely undisturbed, which actually dampened the possible anti-colonial feelings.

(There are several good resources on Cambodia’s older and more recent history, and they are well-worth exploring and using.)

Norodom Sihanouk: Beginnings & Golden Age

Norodom Sihanouk enters the stage in 1941, as part of a long blood line of Cambodian monarchs, by being installed in power by the French, while he was only 18 years old. Although the goal was to have a more easily controllable local ruler, through deft maneuvering Norodom will play a central part after the war in the (relatively peaceful and untroubled) decolonization of his country. The French leave in 1953, but two years later Norodom Sihanouk abdicates (as monarch) in favor of his father (whom he initially replaced), in order to be able to get involved in the actual political life of the country. Correspondingly, soon after he becomes prime minister – until 1960, when his father dies, and he will have to go back to occupy the position of head of state.

During the 1950s and 1960s Norodom Sihanouk tried to walk a fine line, both with regards to the conflicts raging in the region, as well as in relation to the two ideological-military blocks during the Cold War, even  joining as a founder the non-aligned movement. This period represents Norodom Sihanouk’s golden age – he rules autocratically, according to his own original blend  of Buddhism and socialism, and also devotes time and money to his extracurricular passions.  He edits magazines, directs films, conducts jazz bands, and croons songs of his own composition (see links to his works on the right side of his personal website).

However, in 1965 he drifts from the middle line from which he and the country had benefited, and breaks off relations with the US, as a result of their bombing guerrilla groups within his country, and throws his support behind the North Vietnamese guerrillas. Meanwhile, the country itself is caught between rival political forces of the right and of the far left, and these tensions that will come to a head in 1970 when, after years of declining economic conditions, Sihanouk is removed from power through a US-supported coup led by army leaders (the right wing faction). The ideological motivation of these forces contained, among others, a strong nationalistic streak, being motivated by an anti-Vietnamese feeling that has a long tradition in Cambodian history. Sihanouk seeks refuge in China, where he will start to build ever closer relations with the leaders of a communist group called the Khmer Rouge (“red Khmers”).

The Khmer Rouge

Between 1970-1975, the Khmer Rouge troops increase their  power and the aggressiveness of their operations within Cambodia, fighting the military-led regime with Vietnamese and Chinese support. Through a gradual grinding down of the power of the regime, they manage to enter and occupy the capital Phnom Penh on April 17, 1975. During these years the Khmer Rouge had earned themselves a fierce and terrible reputation,  becoming known for their extreme ideology, for their strident and aggressive rhetoric (they had a public kill list), and for the mass atrocities they committed programatically in the areas they conquered. This reputation did not fail to confirm itself immediately after they took power. All city dwellers (for example, all 2,5 million inhabitants of Phnom Penh, including the sick and dying) were forced to move to the countryside, in an ideological effort (not unlike the Great Leap Forward) to create a societal and cultural blank slate on which to build a new, pure, utterly rural society. The Khmer Rouge called this moment, the “Year Zero.”

In the following years there followed one of the most gruesome experiments in mass reeducation and societal re-formation, which resulted in of the greatest genocides of the twentieth century. The main targets of these policies were the middle-class and the educated people – but there was no excuse or escape for any sort of person or group. Religion was banned, normal education ceased, all basic freedoms were abolished. During this period, 1975-1978, thus during only three-four years, it is estimated that about 1,7 million people (in other words, one-fifths of the population) died as a result of executions, torture, forced labor or starvation.

The de facto leader of this newly established  “Democratic Kampuchea” and of the Khmer Rouge forces was Pol Pot. Although Norodom Sihanouk initially entered the country with the Khmer Rouge, and during the first year was the nominal head of state, he spent the next years of Khmer Rouge rule under house arrest, in the royal palace, afterwards stating that he was not aware of the details of what was going on. Five of Sihanouk’s children and a large number of other members of his family lost their lives during this period.

The Khmer Rouge regime‘s bellicose policy was not however restricted to the “internal front”. As a result of a previous disenchantment with the Vietnamese Communist forces, and of reignited – historical – territorial ambitions, and certainly of a pervasive ethno-nationalism, the Khmer Rouge initiated attacks along the borders with Thailand and Laos, and especially against Vietnam. The conflict intensified, leading to the 1979 Vietnamese invasion of Cambodia, with the help of internal Cambodian political forces and with the backing of émigré Cambodian leaders (including, by this time, prince Sihanouk, who had left the country).

The 1980s: Isolation and Strife

The Khmer Rouge were removed from power in 1979, and were replaced by a sort of coalition government, that was dependent militarily and economically on Vietnam. The Khmer Rouge forces did not disappear, however; therefore the next decade was defined in Cambodia by economic and physical insecurity, with continued (occasionally brutal) internal conflict,; externally, the position of the country was uncertain as well, given that the Western powers (and especially the US) could not back a Vietnam-propped regime, nor (of course) could they support their enemies, the Khmer Rouge.

During the ’80s Norodom Sihanouk lives mostly abroad, with bases in China and North Korea, while being also very much in the favor of the Western powers, as one of the leading figures of the anti-Vietnamese opposition in exile. This broad support sponsored a lavish lifestyle, Norodom continuing to be present in Western capitals at lavish parties, and to indulge in his pleasures.

With the Cold War coming to an end, and with the dissolution of the Soviet Block in Europe, and with the Vietnamese withdrawing in 1989, the regime crumbled, leading in 1991 to multi-party talks. These negotiations – at which Norodom proved against what a skille dpolitrician he was – ended with the Paris Peace Agreements in which the signatories (including the four major political  groups  of Cambodia, 18 other countries such as USA, China, Australia, Russia, countries of Southeast Asia, as well as representatives of the UN) established a pathway to a return to stable government and to free elections in Cambodia.

A New Cambodia: Norodom Sihanouk, Continued

Following the peace agreements, Sihanouk is again at the center of the political negotiations aiming to form a new government, and he becomes president within the new political arrangement. In 1993 national elections take place, in which over 4 million Cambodians (or 90% of the voting population ) participates. Corresponding to the results of the election, a coalition government is formed, containing  FUNCINPEC (the party emerging from the anti-Vietnamese coalition of the 1980s, lead by Sihanouk’s son), the Cambodian People’s Party – CPP (lead by Hun Sen, who used to be prime minister in the Vietnamese-backed regime of the 1980s) and the Buddhist Liberal Democratic Party – BLDP. Soon after, a democratic constitution is proclaimed that establishes a a multiparty liberal democracy with guaranteed human rights, in the framework of a constitutional monarchy; Norodom Sihanouk is proclaimed king (again).

The 1990s consolidate Cambodia’s internal and external situation, notwithstanding a fractious, disputed, and not always clean (to make an understatement) national political arena. The peculiar political arrangements of the period include a period with two prime-ministers (representing the two main warring factions of the 1990), one of them being Norodom’s son (Ranaridh Sihanouk) and the other being Hun Sen. A frail but necessary arrangement, in order to transition from more than two decades of civil war, to a more stable society; yet not an unproblematic one, with political and even physical  conflict erupting at times, but with no return to the civil war situation.  Another key development of the 1990s is the gradual disassembling and eventual crumbling of the Khmer Rouge forces (eg. Pol Pot is assassinated by his won circle in 1998), and the beginning of the official judicial efforts to bring them to justice (see the Khmer Rouge Tribunal).

The next democratic elections take place in 1998, but these are troubled elections, being preceded by (coup d’etat-like) power fights between CPP and FUNCINPEC, and being accompanied by numerous irregularities and local instances of violence. However, following the election, and being constrained by the results, the two major rival parties reach a coalition agreement and a power-sharing arrangement. In the end, notwithstanding the many problems, the population demonstrated that they have a will, and are intent on showing and imposing it. In the following year, 1999, as a result of the same coalition agreements, and upper house (Senate) is created. In 2003, new elections take place, won by CPP and Hun Sen, who becomes prime minister (again). The 2008 elections, the most regular of all, reinforce and solidify CPP’s domination over the country.

During the 1990s and the early 2000s Norodom Sihanouk (by now, the King Father) is often out of the country, as a result of a prolonged struggle with cancer. Nevertheless, he remained a towering figure in Cambodia throughout, one very involved with the citizens’ lives. He was in fact the first leader in the area to have a personal website.

With an increasingly deteriorating health, Norodom abdicates in 2004, in favor of his son, the little-known ballet dancer Norodom Sihamoni. This does not mean, however, that he will reduce his participation in the Cambodian public sphere; in fact, he will remain a central figure in the life of the country.

Norodom Sihanouk dies on October 15, 2012, in a hospital in Beijing . With him half a century of Southeast Asian politics, including de-colonization, Cold War struggles for influence, ideology-fueled local guerrillas and a changing of the very meaning of the term, “Third World”, seems to be gone.

At the same time, his passing seems to also signal the end of an era of autocratic and eccentric rulers, with lavish resources at their disposal, governing over fascinating, exotic, yet impoverished countries, with much suffering within. (In its obituary, the Telegraph paints a colorful portrait of Sihanouk.) We see fewer and fewer of these rich, Western-supported autocratic rulers going to and fro through the salons of Europe and North America. Politics at its less picturesque – but perhaps for the better. At the same time, the ruling families of the Middle East and the oligarchs of Russia still do their best to spread their wealth, publicly and with emphasis. But perhaps it is only in the context of a Norodom Sihanouk and of other similar leaders, that the figure of a Silvio Berlusconi suddenly starts to make sense: successful, crafty politicians, able to grab or stay around power for decades, while also pursuing a wide range of extracurricular activities (such as writing and singing an entire album of love songs).

Cambodia: Current Political System

The head of state of Cambodia is the monarch, while the head of government is the Prime Minister. The upper house of the legislature is the Senate, which has 59 members (57 elected by Commune Councillors, two by the lower house National Assembly, and two appointed by the King) who enjoy 6-year terms. The 123 members of the lower house, the National Assembly (Radhsphea Ney Preah Recheanachakr Kampuchea), are directly elected through proportional representation (closed party lists) from each of the country’s 21 provinces.