A Dogged Taliban Chief Rebounds, Vexing U.S. - NYTimes.com

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By SCOTT SHANE

WASHINGTON — In late 2001, Mullah Muhammad Omar’s prospects seemed utterly bleak. The ill-educated, one-eyed leader of the Taliban had fled on a motorbike after his fighters were swiftly routed by the Americans invading Afghanistan.

Much of the world celebrated his ouster, and Afghans cheered the return of girls’ education, music and ordinary pleasures outlawed by the grim fundamentalist government.

Eight years later, Mullah Omar leads an insurgency that has gained steady ground in much of Afghanistan against much better equipped American and NATO forces. Far from a historical footnote, he represents a vexing security challenge for the Obama administration, one that has consumed the president’s advisers, divided Democrats and left many Americans frustrated.

“This is an amazing story,” said Bruce Riedel, a former Central Intelligence Agency officer who coordinated the Obama administration’s initial review of Afghanistan policy in the spring. “He’s a semiliterate individual who has met with no more than a handful of non-Muslims in his entire life. And he’s staged one of the most remarkable military comebacks in modern history.”

American officials are weighing the significance of this comeback: Is Mullah Omar the brains behind shrewd shifts of Taliban tactics and propaganda in recent years, or does he have help from Pakistani intelligence? Might the Taliban be amenable to negotiations, as Mullah Omar hinted in a Sept. 19 statement, or can his network be divided and weakened in some other way? Or is the Taliban’s total defeat required to ensure that Afghanistan will never again become a haven for Al Qaeda?

The man at the center of the American policy conundrum remains a mystery, the subject of adoring mythmaking by his followers and guesswork by the world’s intelligence agencies. He was born, by various accounts, in 1950 or 1959 or 1960 or 1962. He may be hiding near Quetta, Pakistan, or hunkered down in an Afghan village. No one is sure.

“He can’t operate openly; there are too many people looking for him,” and the eye he lost to Soviet shrapnel in the 1980s makes him recognizable, said Alex Strick van Linschoten, a Dutch-born writer who lives in Kandahar, where Mullah Omar’s movement was born, and who has helped a former Taliban official write a memoir.

“There are four or five people who can pass messages to Omar,” Mr. Strick van Linschoten said. “And then there’s a circle of people who can get access to those four or five people.”

Rahimullah Yusufzai, of The News International, a Pakistani newspaper, who interviewed Mullah Omar a dozen times before 2001, called him “a man of few words and not very knowledgeable about international affairs.” But his reputed humility, his legend as a ferocious fighter against Soviet invaders in the 1980s, and his success in ending the lawlessness and bloody warlords’ feuds of the early 1990s cemented his power.

“His followers adore him, believe in him and are willing to die for him,” Mr. Yusufzai said. While even Taliban officials rarely see him, Mullah Omar “remains an inspiration, sending out letters and audiotapes to his commanders and fighters,” the journalist said.

A recent assessment by Gen. Stanley A. McChrystal, the top American commander in Afghanistan, identified the Taliban as the most important part of the insurgency, coordinating “loosely” with groups led by two prominent warlords. He concluded that “the insurgents currently have the initiative” and “the overall situation is deteriorating.”

The statement from Mullah Omar, one of a series issued in his name on each of the two annual Id holidays, offered a remarkably similar analysis. He, or his ghostwriter, praised the success of “the gallant mujahedeen” in countering the “sophisticated and cutting-edge technology” of the enemy, saying the Taliban movement “is approaching the edge of victory.”

For a recluse, he showed a keen awareness of Western public opinion, touching on the history that haunts foreign armies in Afghanistan (“We fought against the British invaders for 80 years”), denouncing fraud in the recent presidential election and asking of the American-led forces, “Have they achieved anything in the past eight years?”

American military and intelligence analysts say the Taliban have definitely achieved some things. They describe today’s Afghan Taliban as a franchise operation, a decentralized network of fighters with varying motivations, united by hostility to the Afghan government and foreign forces and by loyalty to Mullah Omar.

The Taliban have deployed fighters in small guerrilla units and stepped up the use of suicide bombings and improvised explosive devices. The movement has expanded military operations from the Taliban’s southern stronghold into the north and west of the country, forcing NATO to spread its troops more thinly.

Day-to-day decisions are made by Mullah Omar’s deputies, in particular Mullah Abdul Ghani Baradar, a skilled, pragmatic commander, who runs many meetings with Taliban commanders and “shadow governors” appointed in much of the country, analysts say.

Mullah Omar heads the Taliban’s Rahbari Shura, or leadership council, often called the Quetta Shura since it relocated to the Pakistani city in 2002. The shura, consisting of the Taliban commanders, “operates like the politburo of a communist party,” setting broad strategy, said Mr. Yusufzai, the Pakistani journalist. General McChrystal wrote in his assessment that the shura “conducts a formal campaign review each winter, after which Mullah Omar announces his guidance and intent for the coming year.”

Thomas E. Gouttierre, director of the Center for Afghanistan Studies at the University of Nebraska, Omaha, said that “as a symbolic figure, Omar is a centrifugal force for the Taliban,” playing a similar role to that of Osama bin Laden in Al Qaeda. But Dr. Gouttierre credits the Taliban’s success not to any military genius on the part of Mullah Omar but to more worldly advisers from Pakistan’s intelligence service and Al Qaeda.

Western and Afghan sources agree on the bare outline of Mullah Omar’s biography: He was born in a village, had limited religious schooling, fought with the mujahedeen against the Soviet Army and helped form the Taliban in 1994. Some accounts say he is married and has two sons.

His emergence as the leader of the puritanical students who later fought their way to the capital, Kabul, may have resulted from his very obscurity, some experts say. He was not a flamboyant warlord with allies and enemies, a likely plus for the Taliban’s sponsors in Pakistan’s Inter-Services Intelligence Directorate. “He had an unaligned quality that made him useful,” Mr. Strick van Linschoten said.

In jihadist accounts, his story has the feeling of legend: “At the height of his youth, he stepped forward against the disbelievers and terrorized their ranks,” says an undated 10-page biography from an Islamist information agency, which also describes how he once refused cream and other delicacies, preferring “a bowl of plain soup with some hard, stale bread.”

Taliban folklore tells of his bravery in the 1980s in removing his own injured eye and fighting on; of his dream in the mid-1990s in which the Prophet Muhammad told him he would bring peace to Afghanistan; and of how in 1996, he donned a cloak reputed to have belonged to the prophet and took the title “commander of the faithful.”

That was the year that Mr. bin Laden moved his base to Afghanistan. Ever since, the central question about Mullah Omar for American officials has been his relationship with Al Qaeda.

In 1998, two days after American cruise missiles hit a Qaeda training camp in an unsuccessful attempt to kill Mr. bin Laden, Mullah Omar telephoned an astonished State Department official, Michael E. Malinowski, who took the call on his porch at 2:30 a.m. Mullah Omar demanded proof that the Qaeda leader was involved in terrorism, according to declassified records. (Mullah Omar also suggested that to improve American relations with Muslim countries, President Bill Clinton should step down.)

Mr. bin Laden courted the Taliban leader, vowing allegiance and calling the far less educated man a historic leader of Islam. A letter of advice from Mr. bin Laden to Mullah Omar on Oct. 3, 2001, found on a Qaeda computer obtained by The Wall Street Journal, heaped on the praise (“I would like to emphasize how much we appreciate the fact that you are our emir”).

Despite intense pressure from the United States and its allies to turn over Mr. bin Laden, Mullah Omar declined, and paid a steep price when the Taliban fell.

Richard Barrett, a former British intelligence officer now monitoring Al Qaeda and the Taliban for the United Nations, argues that Mullah Omar has learned the lesson of 2001. If the Taliban regain power, he said, “they don’t want Al Qaeda hanging around.”

He added, “They want to be able to say, ‘We are a responsible government.’ ”

Indeed, in his Sept. 19 statement, Mullah Omar made such an assertion: “We assure all countries that the Islamic Emirate of Afghanistan, as a responsible force, will not extend its hand to cause jeopardy to others.”

Mr. Riedel, who helped devise the Afghanistan strategy now being rethought, scoffs at such pronouncements as “clever propaganda.”

“We’ve been trying for 13 years to get the Taliban to break with Al Qaeda and turn over bin Laden, and they haven’t done it,” Mr. Riedel said. “Whatever the bond is between them, it’s stood the test of time.”

Eric Schmitt contributed reporting from Washington, and Pir Zubair Shah from Islamabad, Pakistan.

Small Banks Fail at Growing Rate, Straining F.D.I.C. - NYTimes.com

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By ERIC DASH

A year after Washington rescued the banks considered too big to fail, the ones deemed too small to save are approaching a grim milestone: the 100th bank failure of 2009.

In what has become a ritual, the Federal Deposit Insurance Corporation has swooped down on a handful of troubled lenders almost every Friday, seizing 98 since January alone and putting their assets into the hands of another bank.

While the parade of failures still represents a mere fraction of America’s small banks, it underscores a growing divide between them and large institutions like Goldman Sachs, JPMorgan Chase and U.S. Bancorp, which are slowly growing stronger as the economy improves.

Burdened by worsening commercial real estate loans, many small banks’ troubles are just beginning. Many analysts say that the now-toxic loans could sink hundreds of small lenders over the next few years and place a significant drag on the economy.

Already, the bank failures are placing enormous strain on the F.D.I.C. and its fund, which keeps depositors whole. Flush with more than $50 billion only two years ago, the fund recently fell into the red.

The prospect of more failures has led the F.D.I.C. to seek new ways to replenish the fund with higher and earlier payments by healthy banks, even after setting aside reserves for future losses.

The initial wave of failures has also unsettled some communities, even though most of the troubled institutions have been bought by other banks rather than shuttered. While deposits are safe thanks to federal insurance, the new buyers often do not have the same ties to local businesses as the former owners.

In some cases, they tighten lending and make it harder for longtime customers to obtain loans or favorable terms. In other cases, managers of the new bank make other changes, like ending offers for high-interest certificates of deposit and calling in certain lines of credit. In the longer term, some new owners are likely to close branches of the bank they have acquired in order to cut costs.

“In the near term, bank failures can be painful,” said Sheila C. Bair, the chairwoman of the Federal Deposit Insurance Corporation. But a bank that is teetering on collapse is not going to lend, she said, and “that’s not good for the economy.”

Regulators expect closures to ripple through hundreds of small banks over the next couple of years, especially in the Midwest and Southeast, where lenders have been hard hit by the recession.

These banks loaded their balance sheets with loans to home builders and other property developers to make up for lost business in credit card and mortgage lending that bigger competitors wrested away. They eased their lending standards during the boom years and made big bets on new housing developments, strip malls and office projects. Now, many of those deals are falling apart, and the lenders are scrambling to raise capital to cushion the losses.

“These banks were big enough that they could do loans that were fairly sizable,” said John R. Chrin, a former investment banker who is now an executive in residence at Lehigh University. “If they go bad, they are toast.”

The pace of bank failures is expected to accelerate in the coming months. There were just 25 bank failures in 2008 and just 10 in the five previous years. But in September alone, regulators took over 11 banks in nine states that were saddled with soured commercial real estate loans, from Corus Bank, a $7 billion construction lender based in Chicago that financed projects across the country, to Brickwell Community Bank in Woodbury, Minn., which had just a single branch and $72.6 million in assets.

Three others were taken over this month, including Warren Bank, a small lender just outside Detroit. Regulators swept into the offices on a recent Friday night after brokering a sale to Huntington Bancshares of Ohio, a regional bank with a big presence in Michigan.

By Saturday morning, Huntington had taken control of the bank’s computer systems, started reassuring depositors and placed vinyl signs with its name outside some of the Warren Bank branches.

Even though the process went smoothly, customers still found it unnerving.

“People expect companies to go out of business, not banks,” said James R. Fouts, the mayor of Warren, Mich., whose working class city of 140,000 has had a front row seat to the collapses of General Motors and Chrysler. “That is something that you expect to hear about in the Great Depression, and it further exacerbates the feeling that financially, the country is not yet in stable shape.”

The banking system may also be facing a long recovery. About $870 billion, or roughly half of the industry’s $1.8 trillion of commercial real estate loans, now sit on the balance sheets of small and medium-size banks like these, according to an analysis by Foresight Analytics, a research firm. For most of the banks, this represents the biggest and riskiest part of their loan portfolio, since they lack the trading streams and fee businesses of their larger rivals. And as a group, small banks have written off only a tiny percentage of the losses that analysts expect them to incur.

In fact, applying only the commercial real estate loss assumptions that federal regulators used during the stress tests for the big banks last spring, Foresight analysts estimated that as many as 581 small banks were at risk of collapse by 2011.

By contrast, commercial real estate losses put none of the nation’s 19 biggest banks, and only about 5 of the next 100 largest lenders, in jeopardy.

Even Citigroup, the biggest and most troubled of the banks, has a relatively small portion of its loans tied to commercial real estate and may begin to recover faster than other rivals.

Gerard Cassidy, a veteran banking analyst, said the problems call to mind the wave of small bank failures in Texas and New England two decades ago during the savings and loan crisis — only on a national scale.

Back then, regulators closed more than 700 lenders in those regions. Today, Mr. Cassidy projects that as many as 1,000 small banks will close over the next few years and that their losses will be more severe. “It’s a repeat on steroids,” he said.

But Ms. Bair said the savings-and-loan crisis far surpassed the current situation. “We aren’t anywhere close to that today, and based on current projections, I don’t think we will get near that pace,” she said.

Even if hundreds of banks collapsed, they would not threaten to bring the financial system to its knees.

Together, the 8,176 smallest banks control just 15 percent of the industry’s $13.3 trillion in assets. And thanks to the expansion of the government’s deposit insurance program, regulators also appear to have squelched the threat of bank runs that brought down IndyMac Bank and Washington Mutual last year.

Consumer deposits are now insured up to $250,000 per account, and the F.D.I.C. offers unlimited coverage on noninterest payroll accounts used by businesses.

“We’ve passed the panic stage,” said Frederick Cannon, the chief equity analyst at Keefe, Bruyette & Woods in New York.

What is more, community bank supporters say the bulk of their institutions will emerge from the crisis stronger. “The community banks are picking up market share,” said Camden R. Fine, the head of the Independent Community Bankers of America.

“People are angry with all the shenanigans on Wall Street,” he said. “They believe their money stays local when they put it in a community bank, rather than sent off to Never-Never land.”

Lobbyists Fight Last Big Plans to Cut Health Care Costs - NYTimes.com

By DAVID D. KIRKPATRICK

WASHINGTON — As the health care debate moves to the floor of Congress, most of the serious proposals to fulfill President Obama’s original vow to curb costs have fallen victim to organized interests and parochial politics.

And now the last two initiatives with real bite that are still in contention — a scaled-back “Cadillac tax” on high-cost health plans and a nonpartisan Medicare budget-cutting commission — are under furious assault.

Most economists’ favorite idea for slowing the growth of health care spending was ending the income tax exemption for employer-paid health insurance to make lower-cost plans more attractive. But that would hurt workers with big benefit plans, and a labor-union lobbying blitz helped kill that idea by the Fourth of July.

Lobbying by doctors, hospitals and other health care providers, meanwhile, dimmed the prospects of various proposals to cut into their incomes, including allowing government negotiation of Medicare drug prices and creating a government insurer with the muscle to lower fee payments.

“The lobbyists are winning,” said Representative Jim Cooper, a conservative Tennessee Democrat who teaches health policy.

Total health care costs in the last 20 years have doubled to about 16 percent of the economy, with no signs of tapering. Along with universal coverage, Mr. Obama has made controlling those costs a central pillar of his health care overhaul, calling the current course “unsustainable.” The effort is a pivotal test of his campaign promise to break the stranglehold of special interests.

In his weekly radio address on Saturday, Mr. Obama applauded the bill set for a vote next week in the Senate Finance Committee. “By attacking waste and fraud within the system,” he said, “it will slow the growth in health care costs, without adding a dime to our deficits.”

In an interview, Peter R. Orszag, the White House budget director and the official most associated with the drive to cut costs, singled out the proposed Medicare commission and the “Cadillac tax” as evidence of progress. “A key priority now,” Mr. Orszag said, “is to make sure cost containment holds up as we move through the legislative process."

Neither element appears in any of the other four health care bills on Capitol Hill, and both face dug-in resistance in the House.

Although the bills contain other measures aimed at medical costs, most of the surviving ones do not antagonize any organized interest. Among them are voluntary efficiency measures like encouraging the coordination of medical records, disseminating information comparing the effectiveness of treatments and various pilot projects.

White House officials argue that in any case it is prudent to start with such tests, and that many could be expanded to more comprehensive programs. But their real impact is hard to gauge, and the nonpartisan Congressional Budget Office assigns them little weight. (The budget office credited the Finance Committee bill with reducing the federal deficit, but how much it will slow the growth of total public and private health spending is another question.)

The tax on gold-plated insurance plans is the last vestige of most economists’ favorite idea, eliminating the tax exemption for employer plans. The finance bill would impose a 40 percent excise tax on insurance plans that cost more than $8,000 a year for an individual or $21,000 for a family.

The bill has aroused the frantic opposition of labor and business lobbyists who appear to have found friends in the Capitol. On Wednesday, 157 House Democrats — a majority of the party — signed a letter to Speaker Nancy Pelosi opposing the tax.

“It has no legs in the House,” said Representative Pete Stark, the California Democrat who is chairman of the health subcommittee of the tax-writing panel.

The proposed Medicare commission, aimed at providers instead of consumers, is becoming a case study in the political difficulty of reducing medical payments.

The commission was intended to side-step the interest-group pressure that often stymies Congress. Modeled after the nonpartisan commission for military base closings, it would present a roster of Medicare cuts that Congress could block only with legislation.

But along the way, the White House and the Senate Finance Committee have cut deals for political support with lobbyists that may circumscribe the cost cuts, potentially including the recommendations of the commission.

For example, the White House and the panel’s chairman, Senator Max Baucus, Democrat of Montana, reached an agreement with the drug industry for its companies to contribute a total of $80 billion — but no more — over 10 years in reductions to their government payments.

Many Democrats would like to see the government negotiate far lower prices for the Medicare drugs it buys. But drug industry lobbyists say — and the debate on the finance bill appears to confirm — that Mr. Baucus’s agreement to limit the industry’s costs excludes such price negotiations. Now the drug lobbyists are pushing to be sure the Medicare commission could not force negotiations either. The relevant text of the bill is still being written.

Some analysts contend that in other ways the drug industry deal could even encourage unnecessary spending on brand-name drugs. As part of its $80 billion, the industry would provide discounted drugs for certain Medicare patients who had previously been forced to pay for them until their bills reached a certain level. The deal will thus eliminate what had been an incentive to switch to cheaper generics. “It is market protection,” one drug company lobbyist said of the deal, speaking anonymously for fear of alienating the White House.

Senate finance staff members counter that their bill encourages the use of generic drugs in other ways by waiving the first co-payment for patients who try them.

A parallel White House deal with hospital lobbyists is posing a more serious political problem for the Medicare commission. The White House and the Senate finance chairman agreed to limit the hospitals’ payment reductions to $155 billion over 10 years, and in this case they added a guarantee to the hospitals that for that 10-year period the proposed Medicare commission would not extract any more. (The hospitals are also gaining new income from the expansion of insurance.)

A Senate Democratic aide said the hospitals had already agreed to significant cuts and noted that 10 years was not very long. (White House officials previously disputed the hospital lobbyists’ account of the deal, but the Senate finance bill confirms it.)

Now other heath care interests, led by the powerful American Medical Association, are complaining that it is unfair to protect hospitals from the commission, especially since they are the biggest recipient of Medicare money.

“This presents a serious inequity,” the group said in a letter to Mr. Baucus. The association and others also complain that the commission could cut only provider payments, without authority over benefits or premiums.

Some Democratic lawmakers are upset, too. “To work, it has to look at the full picture,” Senator John D. Rockefeller IV of West Virginia, one of the commission’s principal sponsors, said in an e-mailed statement. “There can be no carve-outs for specific provider groups.”

Mr. Cooper, the Tennessee Democrat and another supporter, predicted the end of the commission. “This will start a race for the exits,” he said. “Every other provider group will say, why are you letting these guys out? Why should we have to participate?”

The House committee chairmen were already hostile to the commission as an unconstitutional intrusion on their budgetary powers. At a dinner with Democratic lawmakers at the Capitol Hill home of Representative Rosa DeLauro of Connecticut a few months ago, Representative Henry A. Waxman, the chairman of the Energy and Commerce Committee, practically “tackled Orszag” in a dispute over the commission, one lawmaker present said.

Mr. Waxman confirmed a “spirited” disagreement. When he learned last week about the hospital exemption, “it amazed me,” he said. “If they think Congress is too political to be involved in Medicare cuts, it seems rather political to have exempted the hospitals.”

A spokesman for Ms. Pelosi said she also opposed the commission.

How the measures fare in the final weeks of debate could determine how well the bill lives up to its original promise of curbing health care costs, said Dr. Mark B. McClellan, an administrator of Medicare and Medicaid in the Bush administration who is now tracking the legislation at the Brookings Institution.

“It is still up in the air,” Dr. McClellan said, adding, “I’d give them an A for effort, but there is a lot more they could do.”

Kabul Embassy Attack May Intensify India-Pakistan Proxy War - washingtonpost.com

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By Emily Wax
Washington Post Foreign Service
Sunday, October 11, 2009

NEW DELHI, Oct. 10 -- Across Afghanistan, hundreds of Indian workers and engineers are repairing disintegrated roads and constructing highways. India is building the country's new parliament building. It is running medical missions and training Afghan police officers, diplomats and civil servants, part of a hearts-and-minds offensive to strengthen old ties in a rough neighborhood.

Like archrival Pakistan, India sees Afghanistan as a strategic prize, but its efforts to establish a big footprint there have been set back twice in 15 months by suicide bombings aimed at its widening presence.

In some ways, India and Pakistan have been waging a quiet battle inside Afghanistan, and experts say the latest attack, on Thursday outside the Indian Embassy in Kabul, is bound to intensify that rivalry.

Pakistan's spy agency, the Inter-Services Intelligence, has long had deep ties with elements inside Afghanistan, but large numbers of Indian intelligence operatives are also in Afghanistan to counter Pakistan's influence and to act as a check on Taliban militants, Indian and Pakistani security experts say.

"This is where the real proxy war between the two countries is being fought," said Ahmed Rashid, the Pakistani author of "Descent Into Chaos: The United States and the Failure of Nation Building in Pakistan, Afghanistan, and Central Asia."

Intelligence agencies blame the Inter-Services Intelligence, better known as the ISI, for a 2008 blast at the Indian Embassy that killed 58 people, including the defense attache. Pakistan denied the assertions.

India's active opposition to the Taliban in Afghanistan dates to the 1990s, when the New Delhi government joined Iran and Russia in supporting the Northern Alliance against the Islamist movement. Now, India is spending $1.2 billion in health-care, food and infrastructure aid to Afghanistan, its largest foreign assistance program.

The bombing comes as hostilities between India and Pakistan have intensified after a November terrorist attack in Mumbai, which killed more than 170 people and brought India's financial capital to a three-day standstill. Indian authorities said all 10 attackers were from Pakistan. The Mumbai siege rolled back at least five years of diplomatic progress between the two countries.

The Kabul embassy blast, which left 17 dead, came a day after Pakistani Foreign Minister Shah Mahmood Qureshi announced that relations between India and Pakistan were thawing and that they could be getting ready to resume peace talks. A Taliban spokesman asserted responsibility for the attack, saying the embassy was the intended target. India has not yet assigned blame.

Experts say there is a growing rift between Pakistan's civilian government and its military, and between the military and the ISI. Those apparent rifts are not lost on Indian diplomats, who realize the limits of Pakistan's government to see through diplomatic promises.

Many in India note that Pakistan's government has been seeking some cooperation with New Delhi, leaving Pakistan's military services and the ISI outside of that diplomacy.

"The latest embassy bombing is going to cast a very dark shadow over talks between India and Pakistan," said Uday Bhaskar, director of the New Delhi-based National Maritime Foundation. "The general perception is that this bombing could not have happened without the ISI's cooperation. It was not the work of some bandit or independent actors."

India and Afghanistan appear to be deepening their ties. More than 4,000 Indians work in Afghanistan. There are six Indian consulates there. The main immigration office in New Delhi has a special section for Afghans seeking residency or asylum in India. By helping rebuild Afghanistan, India sees itself as promoting regional stability as well as balancing Pakistan's influence in Kabul, experts said.

In recent years, Pakistan's government has been increasingly wary of India's influence in Afghanistan, including New Delhi's close ties to the government of President Hamid Karzai, who studied in India, as did most of Afghanistan's leadership.

An Indian air base in Tajikistan, the first one outside the country, also has increased Pakistan's worries about India's growing strategic reach in the region. The air base is a transit point for security forces and material to Afghanistan.

In the past few years, India has sent mountain-trained paramilitary forces to protect its workers in Afghanistan from kidnappings and attacks. About 500 Indian police officers are deployed there.

India has opened consulates in Herat and Mazar-e Sharif; it also reopened two in Jalalabad and Kandahar that had been shut since 1979. In January, India completed the Zaranj-Delaram highway near the Iranian border. In May, an Indian-made power transmission line brought 24-hour electricity to Kabul, the capital.

"I always say that Kabul is the new Kashmir," said Rashid, the Pakistani author, referring to the disputed Himalayan region that is claimed by both India and Pakistan.

He added: "The bombings against the Indian Embassy in Kabul will be logged in the Indian mind beside the Mumbai attacks. All this is accumulating in the Indian mind and could lead to some kind of eventual retaliation."

Armenia, Turkey Reach Accord - washingtonpost.com

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Swiss Broker New Diplomatic Ties

By Mary Beth Sheridan
Washington Post Staff Writer
Sunday, October 11, 2009

ZURICH, Switzerland, Oct. 10 -- Armenia and Turkey signed a landmark agreement Saturday to establish diplomatic ties, after a dramatic last-minute intervention by Secretary of State Hillary Rodham Clinton to keep the event from falling apart.

The accord, aimed at ending a century of hostility stemming from Ottoman Era massacres, was brokered by the Swiss over the past two years, with the help of French, Russian and U.S. officials. Clinton had been in frequent contact with the two sides in recent months to help seal the deal.

But just as she arrived at the University of Zurich for the signing at about 5 p.m. Saturday, Clinton heard that the Armenian side was objecting to a Turkish statement prepared for the ceremony, officials said. Clinton's motorcade made a U-turn and raced back to the hotel, where a U.S. diplomat was talking to the Armenians.

In the hotel parking lot, Clinton sat in her black BMW sedan in a soft rain for about an hour, talking on one phone to the Armenian foreign minister and on another to the Turkish foreign minister, Ahmet Davutoglu. Finally, she went into the hotel to invite the Armenian foreign minister, Edward Nalbandian, to drive with her to the university, where his Turkish counterpart was waiting.

Once there, further hours of negotiating ensued with a broader group of international diplomats, including Russian Foreign Minister Sergey Lavrov, before the documents were signed. In an apparent compromise, neither the Turks nor the Armenians made a statement at the ceremony.

The drama was a sign of the enduring suspicion between the two countries and of the difficulties that could lie ahead as their parliaments decide whether to ratify them.

Muslim Turkey and Christian Armenia have had bitter relations since a wave of bloodshed starting in 1915 left hundreds of thousands of ethnic Armenians dead.

Many historians call the killings genocide, but Turkey strongly rejects that label, saying people died in forced relocations and fighting.

If ratified, the accord could have implications well beyond Turkey and Armenia. It may ease tensions in other parts of southeastern Europe and provide new opportunities for oil pipelines to the West, U.S. officials said.

Clinton said that as the hours of negotiations ticked on, she repeatedly urged the participants to look at the bigger picture.

"There were several times when I said to all of the parties involved, that 'This is too important. This has to be seen through. You've gone too far. All of the work that has gone into the protocols should not be walked away from,' " she told reporters traveling with her.

The Armenian-Turkish dispute has echoed far beyond the region, prompting battles in Washington between the White House and lawmakers pushing to recognize the killings as genocide.

Both Republican and Democratic presidents have resisted such resolutions, worried that they would damage U.S. relations with Turkey, a NATO member that has provided critical support for the wars in Iraq and Afghanistan.

The two protocols signed Saturday would establish diplomatic relations, open the border between Turkey and Armenia that was closed in 1993 and establish committees to work on economic affairs, the environment and other bilateral issues.

The protocols do not explicitly mention the genocide controversy, which would go to a committee of historical experts for study.

Clinton declined to characterize the last-minute objections to the statements planned for the signing ceremony.

The rapprochement between the countries is so sensitive that officials were unsure until almost the last minute whether the Armenians would even show up in Zurich for the ceremony.

Clinton did not add the stop to her official itinerary until Thursday. A day earlier, Obama called Armenian President Serge Sarkisian to "commend him for his courageous leadership" on the issue, according to a White House statement -- yet another gentle push.

Clinton has made 29 calls to the parties involved this year in her efforts to promote a settlement.

The Armenian president has faced angry protests in his own country and from Armenian communities in France and Lebanon over the plan to normalize relations.

The politically powerful Armenian-American community, which Obama courted during his campaign, appeared split over Saturday's accord.

"If Turkey normalizes relations with Armenia and ends its blockade of that landlocked country, it would be a very positive step for the region," said Rep. Adam Schiff (D-Calif.), a leading supporter of Armenian genocide resolutions in Congress, in a statement.

He added, however, "Turkey must not be allowed to rewrite the history of the Armenian Genocide as a price of diplomatic relations."

The Armenian National Committee of America blasted the accord, saying, "The Obama administration's attempts to force Armenia into one-sided concessions is short-sighted and will, in the long term, create more problems than it serves."

In pursuing the accord, Turkey won a commitment from Washington to step up its efforts to settle the dispute over the breakaway territory of Nagorno-Karabakh, an Armenian enclave in the Azerbaijan, officials said. Azerbaijan is an ally of Turkey's.

About 30,000 people have been killed in fighting in Nagorno-Karabakh.

Suit Puts Focus on Immigrant Workers' Rights - washingtonpost.com

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By Kari Lydersen
Washington Post Staff Writer
Sunday, October 11, 2009

DECATUR, Ill. -- Gloria Garcia Barragan, 52, boarded a plane for the first time this summer to travel from her home in southern Mexico to Decatur. She came to this industrial central Illinois town to testify in the wrongful death lawsuit concerning her son, who died in 2007 at age 26 of burns from an accident at the BioProducts plant of Archer Daniels Midland.

Every week, Garcia's son, Francisco Garcia Moreno, sent money to his family. He came to the United States as a teenager and was earning about $16.50 an hour working for a contractor at the ADM plant, which makes lysine and other additives. Besides helping Garcia and his father, Antonio Garcia Valencia, an unemployed field worker with health problems, the funds helped support Francisco's five adult siblings in a town near Guadalajara.

ADM, whose global headquarters are in Decatur, offered the family $500,000 to settle. Attorney Donald Shapiro thought the family deserved more.

Shapiro knew declining ADM's offer and going to a jury trial would be a gamble, especially given anti-immigrant sentiment apparent in the highly charged national debate. Like many Midwestern cities and towns, Decatur has experienced an influx of immigrant workers in the past decade. Latinos make up only about 2 percent of Decatur's 75,000 population, but their growing presence is noticeable. Long-time residents welcome the new Mexican restaurants, but many resent the competition for jobs in a town with 12.4 percent unemployment, up from 8.3 percent a year ago.

He "wants to come up here and get killed, that's one more job for an American," said retired locomotive engineer Kenny Smith, noting that he has friends who get up at 3 a.m. to drive hundreds of miles to Chicago or Indianapolis in search of work.

The Garcias decided to put their faith in a local jury, declining Archer Daniel's $500,000 and a later offer of $1 million.

On Sept. 11, a jury awarded the family $6.7 million, among the largest such judgments in state history for a childless man.

Shapiro said the award shows the jurors -- 11 white, one black -- "really tried to treat this family just like any other family that had lost a son."

"I think they cut across all the lines of prejudice, both prejudice against people who are Mexican and who are poor," he said.

Thomas Saenz, president of the Mexican American Legal Defense and Educational Fund, said anti-immigrant feelings are always a concern with juries, but he said people typically sympathize with an individual even if they have negative feelings toward immigrants as a whole.

"That's human nature," he said.

Decatur is known as a proud union town that has had more than its share of hard knocks. In 1999, Jesse L. Jackson led high-profile protests over the expulsion of seven African American students for fighting at a high school football game.

Many residents are still dealing with the effects of bitter labor conflicts in the 1990s involving Bridgestone/Firestone, Caterpillar and the A.E. Staley Manufacturing's starch and corn syrup plant. More than 1,500 people were laid off when the Bridgestone-Firestone tire plant closed in 2001, blamed for the recall of millions of tires prone to dangerously unraveling.

Archer Daniels employs 4,000 people in Decatur, a stable economic presence even as it was plagued by price-fixing and workplace-accident scandals in the 1990s. Some say the acronym stands for "Another Dead Man."

In 2007, Garcia was suspended 15 feet in the air when a machine malfunctioned and blasted him with steam and hot caustic liquid. He tumbled to the ground and co-workers dragged him into a safety shower; nearly 90 percent of his body was covered in third-degree burns and his skin was sloughing off. He died at a hospital 32 hours later, on March 24, 2007.

Archer Daniels spokesman Roman Blahoski said that injury rates have been significantly reduced at the company's facilities in Decatur and globally in recent years, and that Garcia's is the only death at the BioProducts plant.

"The safety of employees and contractors who work at our facilities is always a priority at ADM," said Blahoski. "All of us at ADM were deeply saddened by Francisco Garcia's death. . . . We admitted liability. The issue at trial was compensation for the family. We are reviewing the court's decision and considering next steps."

Nationally, Latino immigrant workers are significantly more likely than members of other races to die or be seriously injured on the job. A National Council of La Raza report released in September notes that Latinos have had the highest workplace death rate of any ethnicity for the past 15 years. In 2007, 937 Latinos, "the majority of them immigrants," died of occupational injuries, a rate of 4.6 per 100,000. The rate was 3.9 per 100,000 for white workers and 3.8 for black workers.

Officials say the injury-death rates are so high because Latinos tend to work in dangerous professions such as construction, meatpacking and forestry.

Saenz said multimillion-dollar verdicts for immigrant workers killed on the job are rare. Many immigrant families avoid taking legal action because of the language barrier and unfamiliarity with the system. Garcia's estate could also sue Archer Daniels for an amount much higher than workers' compensation law would have allowed because he was employed by a contractor, not ADM -- hence ADM was not subject to workers' compensation limits.

"There's a great amount of myth about the limitations on rights of people who are not citizens; legal and undocumented immigrants often make an assumption they are not entitled to the same rights, when in this case they are," said Saenz.

At the Sundown Lounge, Archer Daniels millwright Al Kramer ticked off the circumstances of eight people killed since 1995 at the company's Decatur facilities. They include two killed in a fire at a wet corn mill in 2008 and two, like Garcia, by steam explosions in 2002 and 1995.

"What about them?" said Kramer. "[Garcia] was an illegal immigrant in the first place. I'd like to see United States citizens have jobs before immigrants."

Blahoski said contractor ECF, which hired Garcia, was required to verify his legal status. ECF did not return calls for comment.

"Six million for a dead man is fair, but sending the money to Mexico -- I don't agree with that," said a locomotive engineer in a cowboy hat and denim jacket who declined to give his name.

But Decatur Federation of Labor President Bill Francisco, 35, said the judgment sends a message to firms that workers' rights should be respected regardless of race, nationality or citizenship status.

"They come to chase the American dream, and for Francisco Garcia it was demolished all in a day's work," he said. "The exploitation of the immigrant worker is something that needs to cease. It seems the country is taking advantage of them."

As Pressure Grows, Obama Addresses Gay Rights Group

Image by Getty Images via Daylife

He Promises to End 'Don't Ask, Don't Tell'

By Michael D. Shear, Anne E. Kornblut and Ed O'Keefe
Washington Post Staff Writers
Sunday, October 11, 2009

President Obama, struggling to keep promises he made during last year's campaign, renewed his pledge to end the military's ban on openly gay service members as he appeared at a fundraising dinner for the nation's largest gay advocacy group on Saturday night.

"I will end 'don't ask, don't tell,' " Obama said at the Human Rights Campaign dinner. Recounting the ongoing effort to bring full civil rights to gays and lesbians, the president said: "I'm here with a simple message: I'm here with you in that fight."

Obama did not offer specifics on how he would advance the cause of allowing gays to serve openly in the military, or of same-sex marriage, two areas where his inaction as president have disappointed many gay supporters.

But on the eve of a major gay rights rally in Washington, an event aimed in part at pressuring Obama and Congress, the president was met with a standing ovation and resounding cheers. Obama acknowledged the frustration of some activists, portraying himself as a forceful ally in a lengthy fight. And while he said that gay rights are only one part of his agenda, which is loaded down with domestic and international challenges, he said that would not deter him.

"My commitment to you is unwavering, even as we wrestle with these enormous problems," Obama said. "Do not doubt the direction we are headed and the destination we will reach."

Just days after winning the presidency, Obama vowed that he would be "a fierce advocate for gay and lesbian Americans."

But nine months later, many in the community say he has done little to make good on that statement. They accuse the president of putting their agenda on the back burner -- behind Wall Street regulation, health care, climate change and a series of foreign-policy issues. And although his sweeping rhetoric is appreciated, many are concerned that he has so far offered little beyond the symbolic and the incremental.

Many gay rights activists are disappointed that Obama has not moved forward on two major issues: ending the military's "don't ask, don't tell" policy, under which gay soldiers can be discharged for their sexual orientation; and his failure to work toward ending the Defense of Marriage Act.

"As someone who supported Barack Obama early on during the primaries, and raised nearly $50,000 for him during the campaign, it gives me no pleasure to burst the pink champagne bubbles of hope," John Aravosis, a gay rights activist and popular blogger, wrote in the Huffington Post. "But President Obama's track record on keeping his gay promises has been fairly abominable."

Protesters gathered outside the Washington Convention Center before the event began, some demanding that Obama take greater action on gay rights, others carrying apocalyptic warnings about the fate of the country should he do so. "America is doomed," one sign read.

But inside the $250-a-plate black-tie event, some 3,000 guests from around the country were in a festive mood. Pop singer Lady Gaga and cast members from the Fox comedy "Glee" performed at the dinner. C-SPAN broadcast Obama's portion of the event live -- one sign of the interest surrounding his first address to a big gay rights gathering as president.

To date, Obama has delayed action on gays in the military, saying his generals are reviewing the issue. And although he has said he supports an eventual repeal of the marriage act, his Justice Department has defended the statute in court, saying it is the agency's responsibility to do so until Congress changes the law.

Taken together, those things have angered many gays and lesbians, who have been among Obama's most ardent supporters. Some, in sharp contrast to pro-Obama rallies during the campaign, have begun to stage protests to demand action by the administration.

Obama's top domestic policy aides insist that the president is committed to an equality agenda for gays and lesbians. They note that he has moved quickly on smaller issues that did not require congressional approval.

The president extended some benefits to the spouses of gay federal employees in June while voicing support for a House bill that grants them other rights. The State Department now allows married gay and lesbian couples to obtain passports with their married names. And the Census Bureau has agreed to release data on same-sex marriages.

But Obama is also clearly mindful of the politics of the combustible issue. Opposition remains strong in much of the country to extending rights to gays, especially where marriage is concerned.

House Democrats introduced a bill last month that would repeal the marriage act, but polls consistently show that opponents of legalizing same-sex marriage outnumber supporters. Twenty-nine states have banned same-sex marriage.

Aides have signaled that efforts to repeal the Defense of Marriage Act will have to take a back seat to other domestic priorities during the president's first term. That is an indication Obama wants to avoid the mistakes that Bill Clinton made when he attempted to allow gays to serve in the military during the first days of his presidency.

But Obama has also repeatedly dangled the promise of action in his own comments on the issues. At a White House gathering of gay and lesbian activists in the East Room in June, Obama confronted the disappointment directly but pleaded for more time to make good.

"I expect and hope to be judged not by words, not by promises I've made, but by the promises that my administration keeps," the president said to sustained applause. "We've been in office six months now. I suspect that by the time this administration is over, I think you guys will have pretty good feelings about the Obama administration."

The White House distributed tickets to gay families to attend the annual Easter Egg Roll this year, hosted a Gay Pride Month celebration and will hold a series of public forums to help develop a national HIV/AIDS strategy. And the administration is taking steps to end a policy that prohibits HIV-positive foreigners from entering the country.

Obama also awarded the Medal of Freedom posthumously to Harvey Milk, the San Francisco supervisor and gay activist. The president picked John Berry to serve as director of the Office of Personnel Management, making him the highest-ranking openly gay official in U.S. history.

One victory that appears near is the passage of hate-crimes legislation that would broaden the definition of federal hate crimes to include attacks based on gender, sexual orientation, gender identity or disability. The House passed the legislation last week. Final action in the Senate is expected this week.

Similar bills languished for years under the weight of veto threats from President George W. Bush and Republican opposition in the Congress. But Obama has said he will eagerly sign the bill, which has become a centerpiece of the gay civil rights agenda.

Staff writers Ben Pershing and Jason Horowitz contributed to this report.

Steep Losses Pose Crisis for Pensions

Two Bad Choices for Funds: Cut Benefits Or Take Greater Risks to Rebuild Assets

By David Cho
Washington Post Staff Writer
Sunday, October 11, 2009

The financial crisis has blown a hole in the rosy forecasts of pension funds that cover teachers, police officers and other government employees, casting into doubt as never before whether these public systems will be able to keep their promises to future generations of retirees.

The upheaval on Wall Street has deluged public pension systems with losses that government officials and consultants increasingly say are insurmountable unless pension managers fundamentally rethink how they pay out benefits or make money or both.

Within 15 years, public systems on average will have less half the money they need to pay pension benefits, according to an analysis by Pricewaterhouse Coopers. Other analysts say funding levels could hit that low within a decade.

After losing about $1 trillion in the markets, state and local governments are facing a devil's choice: Either slash retirement benefits or pursue high-return investments that come with high risk.

The urgent need for outsize returns by these vast public pension funds, which must hit high investment targets year after year to keep pace with rising retirement costs, is in turn fueling a renewed appetite for risk on Wall Street.

Before the crisis, many public pension funds had experimented with risky trading techniques or committed more of their money to hedge funds and other nontraditional firms, which in turn invested some of it in complex mortgage securities. When these melted down, pension funds got burned.

Now, facing an even bigger funding gap, some systems are investing in the same securities, betting that a rebound in their value will generate huge returns.

"The amount that needs to be made up is enormous," said Peter Austin, executive director of BNY Mellon Pension Services. "Frankly, they are forced to continue their allocation in these high-return asset classes because that's their only hope."

Some pension experts say the funding gap has become so great that no investment strategy can close it and that taxpayers will have to cover the massive bill.

The problem isn't limited to public pension funds; many corporate pension funds have lost so much ground that they are also pursuing riskier investments. And they, too, could end up a taxpayer burden if they cannot meet their obligations and are taken over by the federal Pension Benefit Guarantee Corp.

Public systems still have enough to meet their current obligations. If governments take no action, retirees could keep drawing full benefits for the foreseeable future even under the most pessimistic projections.

But already, some funds are seeking to trim benefits to conserve money. Some governments have also proposed increasing the amount of public money paid each year into the funds. In practice, however, some political leaders have begun doing the opposite -- cutting annual contributions to pension funds -- as a way of balancing state and local budgets buffeted in the recession by falling tax revenue and rising costs.

Around the country, governments are struggling with the pact they've made with employees.

In New Mexico, lawmakers passed legislation this year requiring public employees to contribute about 1.5 percent of their salary to cover retirement benefits. Labor unions representing 57,000 of the workers sued the state in response.

In Philadelphia, officials delivered an ultimatum to state lawmakers: Allow the city to take a two-year break from contributing to its pension system or Philadelphia would lay off 3,000 workers and cut sanitation and public safety services. Last month, the lawmakers not only granted the request, but extended the funding holiday to thousands of cities and counties, despite severe pension deficits in many of these places.

In Montgomery County, officials last year committed to setting up an investment fund to finance about $3 billion in retiree health-care benefits promised to employees. But when it came time to put the first round of seed money into the fund this year, county officials balked, citing budget constraints.

"We know we've got a huge health-care liability," chief administrative officer Timothy L. Firestine said. "Our plan was to work gradually to fund that. And this year we abandoned that plan."
Swift Change of Fortunes

Just a few years ago, it seemed far-fetched that Virginia's pension system would hit hard times. In 2003, the state's primary pension funds either had more money than they needed or, at a minimum, were nearly fully funded. And like their counterparts across the country, state officials assumed they would earn around 8 percent a year from investing in financial markets for years to come given the outstanding performance of stocks in the 1980s and 1990s.

But officials in Virginia and elsewhere soon began to wonder whether those two decades were a fluke. As pension deficits began to rise, officials questioned whether the investment assumptions were too optimistic. In 2006, Virginia's pension officials suggested scaling back benefits or requiring current employees to begin paying into the pension fund. The state's lawmakers took no action.

Then the crisis hit. Virginia lost 21 percent of the value of its portfolio, or about $11.5 billion. Maryland and the District, meantime, suffered drops of 20 percent.

The losses were typical of what pension funds suffered around the country. State and local government officials had predicted before the crisis they would have $3.6 trillion in their accounts by now, according to the Center for Retirement Research at Boston College. Today, they are $1.2 trillion short of that mark.

Pension funds were not equally affected. Officials in Arlington County, for instance, say their funding levels remain above 90 percent. And even those that suffered huge losses say they have enough money to payout retirement benefits for years to come. Virginia, for instance, still has nearly $43 billion in its accounts.

But Virginia officials now estimate the funding level of its major pension funds will sink to about 60 percent by 2013.

From there, the deficit will grow even wider, according to Kim Nicholl, the national director of PricewaterhouseCoopers public sector retirement practice. Even if public pension funds were to hit their 8 percent investment targets every year, Nicholl calculated they would have less than half of what they need by 2025. This is because a greater share of the population will be retired and those who are will live longer, thus collecting benefits longer, she said.

"I don't think you can invest your way out of this. Plans are going to have to make changes," Nicholl said. "The scale of the losses was just so great and the liabilities are growing so fast, much faster than they can keep up."

For these reasons, billionaire investor Warren Buffett has called these pensions ticking "time bombs." The financial crisis, experts say, shortened the fuse.

Last month, Virginia Gov. Timothy M. Kaine signaled he would consider the politically sensitive step of requiring the state's 100,000 employees to contribute part of their 2011 salaries toward their pensions. But the two candidates running to replace him -- and who would have to carry out the proposal -- have said they oppose it.
More Risk or Lower Returns

This is the dilemma confounding pension funds as they emerge from the wreckage of the financial crisis: If they shy away from riskier investments, they would be settling for lower returns that leave future shortfalls unaddressed. But by aggressively pursuing the higher rates of return they need, pension funds increase the chances they will be burned again by investment bets gone bad.

"State pension fund directors face enormous pressure trying to recover their investment losses. It will be tempting for them to consider investments that promise a high rate of return," said Sue Urahn, managing director of the Pew Center on the States, which plans to release a report on pension losses within weeks.

Traditional investment strategies, which rely on stocks, haven't fared well in recent years. To meet their obligations to retirees, pension funds tend to assume they will earn an eight percent return on investments each year. The stock market, as measured by the Standard & Poor's 500-stock index, is actually down 32 percent this decade.

Like many states, Maryland had begun moving money from stocks into hedge funds and private equity before the financial crisis. The goal was not only to earn a higher return but to diversify the investment portfolio. Should stocks sink, the thinking went, less traditional investments might hold up.

The financial crisis offered a shocking retort. Nearly all investments, save for government bonds, tumbled at the same time.

Yet Maryland is now continuing its shift away from stocks and into nontraditional investments. Pension officials argue they have little choice.

"How do I act in the new environment? There aren't any ready answers for that," said Mansco Perry, chief investment officer for Maryland's pensions. "But I have difficulty throwing away 30 to 40 years worth of knowledge and practice and say that doesn't work anymore."

Some pension funds are also continuing to engage in other investment practices that got them in trouble during the crisis.

One such trading technique is called securities lending. In this transaction, a pension fund lends a stock it holds to a hedge fund and receives cash in return as collateral. The deal is meant to provide a twofold benefit: The pension fund can make money by investing the cash collateral and can continue to benefit from the stock through its dividends and any appreciation in its value.

Before the crisis, states committed billions of dollars to this practice. But when the credit markets seized up last year, pension funds got stuck. They could not access the investments they made with the cash collateral. Some had to sell off other investments at a loss to pay retiree benefits.

California's pension fund lost $634 million from securities lending as of March 31, but the total could reach $1 billion after a full accounting is done, according to a report from the system's consultant, Wilshire Associates. Still, the pension fund says it remains committed to the practice because it boosted returns in the two decades before the financial meltdown.

Pension funds have also been aggressively pushing into real estate and troubled mortgage securities that were crushed in the crisis. California's pension fund is putting $2 billion into buying these toxic bank assets. Financial analysts say the prices for these assets have fallen so far that they may be a better bet than in the past. But the crisis showed how unreliable these investments can be. And their prices may not yet have hit bottom.

In August, California's pension fund took a similar gamble by investing $463 million in shopping centers across 17 states and the District of Columbia, though many experts forecast a prolonged slump in commercial real estate.

Even if these strategies succeed, the shortfall may still be insurmountable.

In Ohio, for instance, the teachers pension system reported that it would take 41 years for its investments to catch up with the costs of meeting its obligations to retirees. That was before the worst of the financial crisis.

During the last fiscal year, Ohio's fund lost 31 percent. Its most recent annual report detailed how long it would now take for its investments to put the fund back on track. Officials simply said: "Infinity."

This report is the fourth in an occasional series.

Inside Indonesia - Islam and nation

Review: Edward Aspinall’s ambitious study of the Acehnese rebellion provides valuable insights into this complex conflict

Steven Drakeley

I always invite my students of Southeast Asian politics to reflect upon the similarities and differences between the rebellions in Aceh, Patani, and Mindanao. Protracted conflicts involving rebellions against central governments by Muslims, they involve complex concepts and questions, including those of identity (nationalism, ethnicity, and religion) and state-building in the wake of the decolonisation process. Brighter students become intrigued by the starkly different trajectory of the Aceh case, including the ‘puzzling situation’ of ‘how a society famed for its Islamic piety gave rise to a guerrilla movement that ended up rejecting the Islamic goals of its forebears’, as the cover blurb of this new classic puts it. My future students will find in Aspinall’s excellent study many of the answers to the questions raised during their reflection on the rebellions. They will find much else besides.

Although expressed with characteristic modesty, this is an ambitious study. Aspinall has set out to provide a balanced and thorough historical narrative of the Aceh conflict, while simultaneously discussing the Acehnese case in relation to a broad array of theoretical debates and comparative studies associated with Islam, nationalism, civil wars, and internal conflict. The objective is not merely to employ these theoretical perspectives as analytical tools to facilitate his study of Aceh, which he does to great effect. The aim is also to contribute - through his treatment of the Acehnese case - to the broader comparative debates. Based on years of painstaking research, including several hundred interviews conducted in Aceh as well as in other countries such as Sweden and Malaysia, this study succeeds in attaining its lofty aims. In the process Aspinall has delivered an abundance of important insights, packaged into a sustained and subtle series of interconnected arguments elegantly presented which add greatly to our understanding of the conflict in Aceh and to its apparent resolution.

My future students will find in Aspinall’s excellent study many of the answers to the questions raised during their reflection on the rebellions. They will find much else besides

Amongst his key findings, Aspinall shows how a series of contingent circumstances and some specific decisions by key individuals led logically (but certainly not inexorably) to the re-emergence of an Acehnese rebellion in 1976 in a separatist and nationalist form as GAM (the Free Aceh Movement); rather than reviving as something along the lines of its earlier Islamist form (despite the strong family links between Darul Islam and GAM participants). He goes on to persuasively explain how the intrinsic logic of GAM’s goal of an independent nation state compelled the construction of a nationalist narrative and an Acehnese identity sharply differentiated from Indonesia. Combined with other factors, including its internationalist strategy and certain sociological changes, this propelled GAM further in a nationalist and secularist direction. Later the same factors, combined with shifts in the political context, notably the collapse of the Suharto regime, propelled GAM towards adopting a democracy and human rights discourse. Paradoxically, at first glance, Aspinall goes on to show how ‘some of the ingredients that had helped GAM’s growth as a nationalist insurgency also proved critical to its decision to abandon the independence goal’.

Based on years of painstaking research, including several hundred interviews conducted in Aceh as well as in other countries such as Sweden and Malaysia, this study succeeds in attaining its lofty aims

There is much more for those interested in the Aceh conflict, including sophisticated and unromanticised analyses of GAM’s (relative) success as an insurgency, and of its multi-dimensional nature including its sometimes ambiguous relationships with the state apparatus. The book also succeeds admirably on its comparative studies level, sustaining a rich and fruitful dynamic between the particulars of the Acehnese context and ‘wider theories about nationalism, its relations with religion and about civil war’. Those interested in these wider questions rather than in Aceh per se will surely find this work equally rewarding.

I took (only) this book with me to read on a recent short visit to Aceh, my first since 1978. Quite apart from the book’s intellectual worth, I am immensely grateful to its author for providing such a ‘page turner’ for the flights and airport waiting - not a comment that can often be made about academic studies. ii

Edward Aspinall. Islam and Nation: Separatist Rebellion in Aceh, Indonesia. Stanford, California: Stanford University Press, 2009. 312 pp.

Steven Drakeley (S.Drakeley@uws.edu.au) is a lecturer in Asian and International Studies in the School of Humanities and Languages at the University of Western Sydney.