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What scared the living daylights out of the Rajapaksas?

[Lakbima News, Saturday, 25 February 2012 17:54 No Comment]

The regime’s headlong capitulation

A friend from overseas e-mailed me and asked “What on earth did Maria Otero and Robert Blake do to the Rajapaksas that put such a scare into them?” Apart from the collapsing economic and political situation, honestly I am not privy to any nuggets of juicy personal threats. After the war victory, success in the 2010 election cycle, and the improving economic climate, I said in this column that the government would be stable for at least the first half of its term of office, that is for three years plus. That expectation now appears to be off the mark by about one year. A comrade in Colombo asked a few days ago “Will the government last another six months?”

Let us count the dominoes that are down. The amazing thing is that it all happened within one week.

  • The defence of the rupee exchange rate has been abandoned and the currency allowed to float; where it may settle is unpredictable and an effective devaluation of 5% to 10% is likely.

  • Interest rates are being raised, initially by 0.5% but this is a first step only. There will be an impact on the economic growth rate and I don’t expect much above an annual rate of 6.5% growth in 2012 as opposed to the government’s 8.3% expectation.

  • Petrol, diesel and kerosene prices have been raised, the last two by 36% and 40%, respectively; electricity prices will go up between 25% and 40% depending on user category. All round prices are escalating. Mass protests have broken out and getting sharper.

  • After stoutly denying human rights violations for three years, the army, out of the blues and obviously on the instructions of its political masters, has appointed a Court of Inquiry to look into targeting of civilians, white-flag events and the Channel-4 video.

  • General Sarath Fonseka is to be granted a presidential pardon before the end of the month.

  • An action plan with timeframes will be issued to implement the LLRC recommendations.

  • An agreement is soon to be signed between the TNA and the government.

The last three items are from anti-government website LNW which is illegally blocked. Hence these claims should be verified by other sources. Still, taking the list as a whole, there is no  gain saying that this it is an unbelievable upside-down and inside-out somersault by the government. “What’s up?” everybody is asking!

The personal or the political?

lk18-1 There are two types of explanations, or a combination thereof. The first is a personal type explanation; for example, the Americans may have got their hands on some incriminating stuff with solid proof and have threatened to release it with disastrous consequences for one or more ruling-clan sibling. The reason I speculate thus is because the siblings do not care a fig for the economy, good governance and such like public virtues. If they panic it must be some personal peril. You can’t keep anything secret for long in Sri Lanka; so if this hunch has anything to it we will soon find out. Leaks pouring out of Wikileaks are already compromising Gotabaya and Basil, and very damaging.

The other explanation of course is the very obvious and manifest all round economic and political crisis. Two weeks ago (February 12) I told you that Lanka’s external finances were in a terrible mess and a big crisis was going to hit. Well, I didn’t realize that it would happen before the printer’s ink was dry on the newsprint. Maybe the government is in such choppy waters that it is scared out of its wits and capitulating to pressure on all sides. It is amazing how fast it caved in to the Water Board, CEB and Petroleum Corporation trade unions when they threatened to strike. They were promised a 25% wage hike with hardly a fight – will it be implemented, that’s another matter.

Public unrest is worsening and the popularity of the government is plummeting. I told the Sinhalese people over and over again, that once the state finished with the Tamils it would turn its guns on them; at the time they did not take notice, but now see what’s happening! Wijeya Warnakulasuriya, brother-in-law of Anthony Fernando who was shot dead in Chilaw, wails: “They (STF and Police) treated us like LTTE cadres; they attacked us with the same mindset.” Do I need to say more?

One matter I did not touch on in my external finances article was the Iran-Israel-US crisis. The US does not want Israel to attack Iran because the consequences of a war in the Middle East cannot be foreseen. Israel on the other hand is determined, whatever the risk, to end Iran’s nuclear programme. Therefore the US is hell bent on stopping the programme by threats, sanctions, strangling the Iranian economy, even regime change, but it wants to forestall an Israeli attack. Because of the absurd US-Israel relationship and inane American public attitudes, all US presidents and houses of congress are slaves of Israel; otherwise they will lose elections.

Iran will not stop its nuclear programme (I am sure it is developing a bomb) and I don’t care what the fine print in the Non-Proliferation Treaty says, it should not stop. At least one Islamic country in the Middle East must have a bomb. Otherwise it is suicide since Israel has a lethal arsenal of 200. Iran should stop its nuclear weapons programme only if all nuclear weapons throughout the Middle East, including Israel, are eliminated.

It is not possible to make exact predictions but for Lanka the oil shock will worsen. US sanctions can close down our international banking system – so we are already begging for permission to buy oil from Iran. The Sapugaskanda refinery is tuned for Iranian crude and this is 90% of our imports. Even if the US grants an exemption it will insist on systematic reductions over a short time. Secondly, the world oil price may in any case stay over 100 dollars a barrel, or may increase during the rest of this year. The opil price hike cum rupee devaluation is leading to steep increases in all prices.

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