North Korea knows how to put on a show for honoured guests. Visiting Chinese Premier Wen Jiabao was this week treated to a special performance of the "Arirang" mass games, the world's biggest choreographed extravaganza with as many as 100,000 participants.

Part circus act, part rhythmic gymnastics, the display features dancing girls, goose-stepping soldiers and a massive flip-card section animated by ranks of performers, which this time included one-off Chinese messages added for Wen.

But in the time honoured tradition of opaque Communist regimes, the slogans were likely meant as more than just a simple part of celebrations, and certainly suggested that the isolated regime keeps a very close eye on political developments in the northern neighbour that is one of its few allies.

In almost flawless Chinese they spelt out a giant welcome message that acknowledged their visitor's populist reputation in China: "Grandpa Wen, so happy to see you!" -- which may have been as heartfelt as it was enormous, given there is hardly a steady stream of top international leaders beating a path to the door of North Korean leader Kim Jong-il. 

This was matched with a string of more formal tributes to President Hu Jintao, whose official place in the pantheon of China's top communist leaders (along with national icons Mao Zedong and Deng Xiaoping) was cemented at massive national day celebrations in Beijing on Oct 1.

"Build a harmonious socialist society," might not sound like a rousing paean, but in fact it is one of Hu's key slogans, part of a campaign to make the country's growth more equal after decades of frenzied development. There was also a stodgy but politically impeccable homage to Hu's role as general secretary of the Communist Party of China, and a nod to one of his other key rallying calls, for a "people-centred concept of scientific development."

When he touched down in Pyongyang earlier this week, Wen became the first Chinese premier to visit North Korea since 1991, according to Beijing, and he arrived at a time when the secretive regime, shunned internationally for its nuclear weapons programme, is struggling economically in the face of a recent round of tighter sanctions.

China is vital as a key supplier of aid, a conduit for dialogue with less friendly nations, and in the past a defence against Western calls for tighter punishment of Pyongyang for its nuclear ambitions -- though Beijing did sign up to tougher UN controls, after North Korea's second nuclear test in May.

The North Korean government signalled during Wen's visit that it could return to nuclear disarmament talks it had declared dead six months ago, but a report that it was near restoring its atomic plant underlined the secretive state would keep stakes high.

With so much in play, and China's role key to the eventual outcome, the North Koreans must be hoping Wen's team took plenty of snaps of their giant tribute to show off back in Beijing.

[Photographs of Wen Jiabao and Kim Jong-il and the Arirang mass games]

President Obama and the leaders of France and Britain have deliberately raised the stakes in the confrontation over Iran's nuclear programme by dramatising the disclosure that it is building a second uranium enrichment plant. Their shoulder-to-shoulder statements of resolve, less than a week before Iran opens talks with six major powers in Geneva, raised more questions than they answer.

It turns out that the United States has known for a long time (how long?) that Iran had been building the still incomplete plant near Qom. Did it share that intelligence with the U.N. nuclear watchdog, and if not, why not? Why did it wait until now, in the middle of a G20 summit in Pittsburgh, to make the announcement -- after Iran had notified the International Atomic Energy Authority of the plant's existence on Monday, after Iranian President Mahmoud Ahmadinejad had delivered a defiant speech to the U.N. General Assembly on Wednesday and after the Security Council had adopted a unanimous resolution calling for an end to the spread of nuclear weapons on Thursday?

Is this all part of Obama's choreography to  build international pressure on Iran by getting Russia, in return for the dropping of plans to put a U.S. missile shield in Poland the Czech Republic, to threaten more sanctions against Tehran? A U.S. official says Obama shared the intelligence with Russian President Dimitry Medvedev at the United Nations this week and China had only just been informed. Did Obama try and fail to get Medvedev and Chinese President Hu Jintao -- both in Pittsburgh -- to join the three Western leaders on the podium? Or was his hand forced on timing by the fact that the New York Times had got wind of the Iranian nuclear plant and was set to publish the news on Friday?

The division of labour between Obama, Sarkozy and Brown was striking. The U.S. president sounded stern but his tone was measured. He stressed his commitment to dialogue and negotiation with Iran and to Tehran's right to peaceful nuclear energy. He did not mention sanctions, let alone the possibility of military action. It fell to the Europeans to inject a tone of menace.

Sarkozy accused Iran of defying the international community and taking the world on a dangerous path, and said that unless Tehran changed course by December, there would be tougher sanctions. Brown charged the Islamic Republic with deception and said the international community had no choice but "to draw a line in the sand", and that he did not rule out anything although sanctions were the preferred route. 

Will the latest disclosure on what Iran insists is a peaceful nuclear programme persuade Russia to renounce the sale of advanced S-300 anti-aircraft missiles to Tehran? Will it persuade China, which reaffirmed its scepticism about more sanctions this week and has begun supplying gasoline to Iran, to change its mind? The West sees Iran's dependency on imported fuel as a key vulnerability.

Friday's dramatic announcement was a clear effort to appeal to the world court of public opinion and maximise pressure on Tehran before the Oct. 1 talks, but there is no sign that the Islamic Republic's leaders are even considering yielding on their nuclear ambitions. On the contrary, they seem convinced that the nuclear standoff will enable them to patch over deep internal divisions over the disputed June presidential election by playing the patriotic card.

A $16 billion oil deal between China and Venezuela signed this week illustrates Beijing’s growing economic might and political influence in Latin America.

Trade between the region and China has swelled from $10 billion in 2000 to more than $102 billion in 2008.

Latin American leaders — not just leftists like Venezuela’s Hugo Chavez but also moderates such as Brazil’s Luiz Inacio Lula da Silva — have beaten a path to Beijing and Chinese officials are frequent visitors in return.

China is gobbling up Latin American commodities from soy to iron ore and at the same time eyeing a market of 500 million people while growth in its traditional trade partners remains flat.

And increasingly, China is a source of financing and investment in a continent that the United States has traditionally considered its backyard.

“It is important to recognise the Chinese engagement is significant and is having a significant effect,” R. Evan Ellis of the Center for Hemispheric Defense Studies in Washington said at a presentation at London’s Canning House. “Latin American politics and economics are coming of age and the region is looking to a number of players, not just the United States.”

Former U.S. President George W. Bush’s government is widely seen as having paid too little attention to Latin America during its eight years in power. Some U.S. politicians have raised the alarm about communist China’s intentions, warning that it poses a security threat. So should the United States be afraid?

Ellis believes there is no direct security challenge from China.

Beijing’s main intention is to secure supplies of resources, increase its clout in international politics, and to isolate Taiwan. It does not appear to be interested in a military presence or cultivating client states, he said. China also needs to stay on good terms with West so their economic relationship can continue to prosper.  “There is no need for China to antagonise the West for little benefit,” he said.

Although China supplies some non-lethal military gear to Latin American countries and has discussed selling a radar system to Venezuela and Argentina, Russian is the favourite weapons source for the populist governments.

There is an indirect threat however, Ellis said. China’s close business and economic ties with countries hostile to the United States such as Venezuela, Ecuador and Nicaragua means it act as “enabler” for them. “It does not want to get dragged into a fight but it is useful,” he said. “It is does not have a nefarious interest but it has strategic interests.”

A second threat is the spread of Chinese organised crime in Latin America, especially in money-laundering and human trafficking. Chinese and Taiwanese mafia are already active in the tri-border area of Paraguay, Brazil and Argentina.

Thirdly, there is the question of how China would react if its business interests are threatened, either by a change of a government’s policy or by other players.

Meanwhile, China is growing even stronger in Latin America. As well as its ties to anti-U.S. states, it is an important partner for U.S. allies Chile, Peru and Colombia. It is also helping fellow BRIC Brazil in its rise as an emerging power. It is transforming infrastructure with projects to develop ports from Mexico and Panama to Chile and to open up transport corridors between the Pacific coast and the continent’s interior.

In the future, we can expect to see more Chinese exports of value-added goods such as motorbikes and computers, Ellis said. Chinese companies are buying into the commodity sector while assets are low, especially in Peru and Brazil. There will be more investment and financial deals at preferential prices, for example using its currency reserves to pay in advance for commodities. China is creating a world that is safe for its remergence as a global power,” he said.

Ellis’s book “China and Latin America: The Whats and Wherefores” has just been published.

(Reuters photos: Venezuelan President Chavez arrives in Beijing and Chinese Vice-President in Caracas)

Back in 2008, even before Barack Obama was elected, Washington pundits were urging him to adopt a new regional approach to Afghanistan and Pakistan involving Russia, India, China, Saudi Arabia and even Iran. The basic argument was that more troops alone would not solve the problems, and that the new U.S administration needed to subsume other foreign policy goals to the interests of winning a regional consensus on stabilising Afghanistan.

It would be simplistic to suggest that the Obama administration's decision to cancel plans to build a missile-shield in eastern Europe was motivated purely -- or even primarily -- by a need to seek Russian help in Afghanistan. But it certainly serves as a powerful reminder about how far that need to seek a "grand bargain" on Afghanistan may be reshaping and influencing policy decisions around the world.

"Securing Afghanistan and its region will require an international presence for many years, but only a regional diplomatic initiative that creates a consensus to place stabilizing Afghanistan ahead of other objectives could make a long-term international deployment possible," Barnett Rubin and Ahmed Rashid argued in their much-cited 2008 policy paper titled "From Great Game to Grand Bargain". (pdf document).

Many of those arguments reappeared in a more recent report by the Asia Society (pdf document) -- formerly chaired by U.S special envoy to Afghanistan Richard Holbrooke -- so they are worth studying closely.

The ideas were ambitious and far-reaching, from remapping relations between Russia and the United States, prodding India and Pakistan towards a peace deal on Kashmir, seeking help from Iran and drawing in China and Saudi Arabia.  Some of those ideas were blown off course by the financial crisis, by the row in Iran over its disputed election, and by last November's attack on Mumbai which undermined U.S. attempts to steer India and Pakistan towards a peace deal.

And recently, they had been almost completely drowned by the media focus on military tactics and the merits of sending more troops to Afghanistan. With the U.S. decision to cancel the missile shield, one of those ideas -- about seeking Russian help in Afghanistan -- may have finally managed to break above the surface again.

In the case of Russia, the question was always about what price the United States was willing to pay to win Moscow's help in Afghanistan, possibly through less ardent support for NATO aspirants Ukraine and Georgia and a review of the missile shield due to be set up in the Czech Republic and Poland.

Obama already moved to try to assuage fears in Moscow and elsewhere that the United States might be seeking a permanent military presence in Afghanistan, a long-standing concern in Russia wary of having U.S. troops in what it sees as its backyard. “Make no mistake: we do not want to keep our troops in Afghanistan. We seek no military bases there," Obama said in his speech in Cairo in June. 

But it has been unclear how much further he might be willing to compromise to win Russia's support for what has become widely known as "Obama's war" in Afghanistan.

As discussed in this post, the Moscow Times spelled out what it saw as the price of Russian cooperation in Afghanistan in an op-ed published before Obama's inauguration:

“Afghanistan may well define your foreign policy legacy the way Iraq defined Bush’s," it said. "You will need all the support you can muster, including from Iran. You will also need Russia’s support. Moscow understands that the stability of its southern flank will hugely depend on what happens on the Hindu Kush mountain range in eastern Afghanistan and northwestern Pakistan. But Moscow is torn between giving support to the West and preparing for the West’s withdrawal from Afghanistan. The latter would mean cutting deals with the Taliban locally and relying on China strategically. You can help Russia make the right choice.”

Of course, there are many other reasons for, and consequences of, the U.S. decision on the missile shield, as discussed here and here.

But if anyone wants a steer on the likely direction of U.S. foreign policy, and its implications globally, it's probably worth rereading Barnett Rubin's "grand bargain" proposal from last year. Diplomacy is the art of the possible, and nobody expects the recommendations to be followed to the letter. But with Obama a considerably more cerebral president than his predecessor, the old "Read my Lips" slogan probably needs to be replaced with a new one: "Read the pdf."

(You can also find regular updates on the progress in relations between India and Pakistan -- one of the key themes of that report -- on "Pakistan:Now or Never", most recently in this post)

(Reuters photos: Girl in Afghanistan; Holbrooke, Obama)

One thing we’ve learnt from the crisis is that if something sounds funny it probably is. All that talk about slicing and dicing subprime debt to turn it into triple-A securities was hard to understand at the time and now we know it was just the 21st century equivalent of alchemy.

The current debate about the responsibility that surplus countries like China, Germany and Japan share for the crisis has a similar ring.

Plenty of people warned that the huge deficits and debts that countries like the United States, Britain and Spain ran up over the past decade were unsustainable. Recently the argument has been made that the countries that sold the Americans and Brits all those things they bought on credit share the blame.

In economic terms, it takes two to tango: if one country has a deficit, there must be a surplus somewhere else. In fact, if you run a big surplus, you are practically forcing someone else to have a deficit.

Well before the crisis broke, in March 2005, Fed Chairman Ben Bernanke discussed the “global savings glut” as an explanation for the persistent and rising U.S. current account deficit.

In recent weeks, The Economist has subjected the economies of surplus countries China, Germany and Japan (as well as that of the United States) to critical examination in a series on “rebalancing the world economy”. In its latest edition, for example, it describes the Japanese as “serial exporters”.

People in those countries need to loosen up a bit, spend more, take longer holidays (the Germans? oh the Japanese), deregulate their service sectors and stop obsessing about selling us stuff that is so cheap or of such high quality that we can’t resist it. That way they’ll help us to spend less and save more and the world will be in perfect harmony.

To be fair, the Economist acknowledges that the last attempt to get the Japanese to spend more, in the 1980s, got out of hand, creating a huge bubble whose effects Japan and the rest of the world are still recovering from.

But doesn’t this sound a little like an effort to spare American and British voters from having to make painful adjustments?

We all know from looking at our own communities and circles of acquaintances that, usually, if you live beyond your means you eventually have to pay a price, which may mean tightening your belt and doing without things for a while.

It’s hard to argue that the guy up the road who works hard, lives frugally, and never runs anything up on his credit card is somehow responsible for our plight. We can resent his smugness and pity his boring life, but blame him for our mess? Hardly.

You can imagine a village where some people work hard and others sit back and enjoy themselves. Of course, if everyone else is so poor or in debt that they can’t afford to buy anything, the honest craftsman may have trouble selling his wares. To that extent surplus and deficit countries are linked.

But the basic difference between thrift and extravagance has been understood, intuitively, for thousands of years. Aesop described it quite well in his fable of the grasshopper and the ants.

PHOTO CREDITS:

Tango REUTERS/Marcos Brindicci

Bubbles REUTERS/Claro Cortes

Grasshoppers REUTERS/Marcos Brindicci

Ants REUTERS/Juan Carlos Ulate

China and India are sitting down for another round of talks this week on their unsettled border, a nearly 50-year festering row that in recent months seems to have gotten worse.

China's Vice Foreign Minister Dai Bingguo and India's National Security Adviser M.K. Narayanan are unlikely to announce any agreement on the 3,500 km border, even a small one, but their talks this week may well signal how they intend to move forward on a relationship marked by a  deep, deep "trust deficit", as former Indian intelligence chief B. Raman puts it.

While the entire Himalayan border is disputed, including the Aksai Chin area, it is the row over large parts of India's Arunachal Pradesh in the eastern stretch of the mountains that has strained ties in recent months.

The Chinese, says Raman,  are demanding that at least the Tawang tract of Arunachal Pradesh, if not the whole of it, should be transferred to it.  They are apparently adamant that if that doesn't happen, there won't be any border settlement, he says.

India's position is that there can't be a transfer of populated areas in any border settlement. Tawang is a populated area, its citizens are Indians, New Delhi says.

So firmly have the Chinese dug their heels in, that they refused to endorse an Asian Development Bank  irrigation project in Arunachal Pradesh in June on grounds that it was its territory. Last month, India's Foreign Minister S. M. Krishna confirmed to parliament in a question-answer session media reports about the Chinese objection to the project which appeared to have stung India.

So where do they go from here ? India's decision to deploy additional troops along the border in Arunachal Pradesh and beef up its air defences in the region have deepened the sense of unease, more so by making a public announcement of the military moves.  It might be concerned about Chinese buildup in the area and of growing border violations, but to talk openly of the Chinese threat and moves to counter it hardly inspires confidence.

There is a history to this: in the months leading up to the 1962 war between the two countries, India, according to some people at least, took fairly strident positions in public against China, only to be humiliated in the brief conflict.

There are some signs of a calmer, more measured stance in New Delhi and Beijing ahead of this week's meeting in the Indian capital. There was no need to "demonise" China as a potential threat, India's top level cabinet committee on security headed by the prime minister concluded last weekend at a preparatory meeting, acording to a report in the Indian Express. But New Delhi will be watching China closely, it said.

Beijing for its part said the two countries must exercise the "greatest political wisdom" to arrive at border settlement. The People's Daily quoted China's ambassador to India Zhang Yan as saying: notwithstanding the "twists and turns" in ties, the two countries had the same responsibilities of developing their economies and improving people's lives.

Bilateral trade, as the People's Daily in a separate article notes, has flourished despite the strained political relationship. "China has become one of India's largest trade partners, and India is now one of the most vital investment and overseas project contracting markets for China," it says.

So is trade going to be the glue holding the world's two most populous nations together?

(Photographs of India's Manmohan Singh and China's Wen Jiabao and Nathu-La on the border between India and China)

The unveiling of India's top secret nuclear-powered submarine, three decades after it was conceived, has been greeted with much tub-thumping.

Even for a nation hungry for success and even more than that, global recognition, some of the adulation seems excessive and perhaps premature as many are starting to point out.

INS Arihant, or destroyer of enemies, has just made contact with water, as it were, with the navy flooding the dry dock at last weekend's launch in the southern port city of Visakhapatnam.  It has to be tested in the harbour, then out at sea. The nuclear reactor, the heart of the new technology, has yet to be fitted. Perhaps a bigger moment will be when that reactor goes critical.

"The Arihant is far from reaching operational status, as it currently is little more than floating hull," as this piece in defence professionals says.

To say that the launch by Prime Minister Manmohan Singh completes the third element in India's nuclear triad based on missiles, aircraft and underwater strike capability is jumping several years ahead.

As former navy commander Premvir Das notes, an underwater vertical launch system is about the most sophisticated and complex weapons and it is not going to happen any time soon.

Das is worth quoting just to put things in perspective. "For the present, a few years are needed to prove the platform and its systems, first on the surface in harbour, then on the surface at sea and finally, under water, progressively at increasing depths. All along there will be need for corrections and modifications."

What is significant about the launch is perhaps the announcement itself. For years New Delhi has refused to confirm the existence of the Advanced Technology Vessel project, although anyone who covered the defence ministry got to know about it, sooner or later.

Part of the reluctance was because of the stiff sanctions on import of technology that were already in place because of the nuclear programme.  And it really made little sense to show off a project as cutting edge as this, when you are already blacklisted.

Some of that has changed, with the India-U.S. nuclear deal that virtually recognises India's nuclear weapons programme. Is that why the project has been unveiled? Or is New Delhi making  a declaration of intent, to raise the game in the Indian Ocean as China begins to extend its reach there.

"What is significant about the launch is that now India has publicly acknowledged its quest to acquire a nuclear submarine and has shown it has the ability to design and build such a platform," Uday Bhaskar, a former naval commander and now head of the National Maritime Foundation, is quoted as saying in defence professionals.

To be sure the ability to build a nuclear submarine that allows you to remain underwater for long periods and hence travel great distances is a game-changer for any military.  For a nation committed to no-first use of nuclear weapons this allows you to disperse your nuclear weapons deep at sea.

As foreign affairs expert C. Raja Mohan notes here ; "Building a submarine is one of the more complex arts. Powering it with an atomic reactor and arming it with nuclear tipped missile that can be launched from underwater is the acme of modern industrial skill."

Only five nations -- the U.S., Russia, France, Britain and China -- have mastered the technology so far. India took a small step last weekend,.

(Photograph of a an old Russian aircraft carrier that was bought by India and Indian military exercises)

China's troubled Xinjiang region shares borders with eight countries, which is perhaps one reason President Hu Jintao dropped out of the G8 summit to head home, underscoring the seriousness of the situation and the need to quickly bring the vast oil-rich region under control.

Xinjiang touches Russia, Pakistan, Afghanistan, India, Mongolia, Kazakhstan, Kyrgyzstan, Tajikistan, besides the Tibet Autonomous Region.

China, as this piece for the Council on Foreign Relations points out, has long been concerned that these states on its periphery both in central and south Asia may be tempted to back a separatist movement in Xinjiang because of the Uighurs' cultural ties to its neighbours.

To that extent it has cultivated close ties with some of these neighbours, even trying to promote direct trade between Xinjiang and the provinces of neighbouring countries just over the border.

In April this year, the Xinjiang Uygur autonomous region signed an agreement to establish friendly provincial relations with Pakistan's North West Frontier Province, according to this report in the state-run China Daily.

The two sides agreed to explore partnership in oil and gas resources, bilateral trade and agriculture besides vowing to accelerate work on a long-planned direct rail link.

More importantly, Pakistan's ambassador to China, Masood Khan, who signed the agreement, said the two sides must deepen their partnership to oppose "terrorism, extremism and separatism."

Beijing's concerns over the instability in Pakistan especially in the NWFP spilling over into Xinjiang have frequently surfaced, although in perhaps characteristic style, they have gone about it in low-key manner, quite different from the Western approach.

In March this year, Xinjiang governor Nuer Baikeli, speaking on the margins of China's annual parliament meeting said his region faced threats from violence rippling across south and central Asia. Militant attacks in Pakistan and even the one in Mumbai and the violence in Afghanistan showed Xinjiang had reason to fear, he said.

The links go back to the Soviet occupation of Afghanistan. As the piece for the Council of Foreign Relations noted, many Uighurs travelled into Pakistan and Afghanistan in the 1980s and 90s, where they were exposed to Islamic extremism.

China has worried ever since about the militants slipping in and out Xinjiang.

Pakistan's Daily Times noted the Chinese concerns, but said Islamabad could only play a limited role given that it was itself fighting to regain control of its territory in the northwest from the militants.

[PHOTO: A boy runs past an overturned car just outside the Uighurs neighbourhood in Urumqi in China's Xinjiang Autonomous Region July 8, 2009. REUTERS/Nir Elias]

Foreign Policy magazine has just released its 2009 list of failing states or those at risk of failure and South Asia makes for sobering reading.

All of India's neighbours, except for tiny Bhutan, figure in the list of top 25 states that are faltering, although their rankings have improved marginally over the previous year.

So Afghanistan remains at number 7 in the table of failing states topped by Somalia. Pakistan is ranked 10th, just marginally better than its 9th position in last year's table which perhaps reflects the belief that the state has begun to fight back the militants who threaten its existence.

(The higher you are on this list, based on 12 indicators measuring state cohesion and performance, the closer you are to failure)

You can see the full report of The Failed States Index 2009 here.

But just to distil it, here are the rankings for South Asian nations as they changed over the past year. Myanmar is ranked 13th which is what it was in 2008.

Bangladesh has moved down to 19th position from 12th the previous year, reflecting perhaps the return of an elected civilian government there.  But it remains at risk and as a Reuters analysis here points out there is a tendency to neglect the militant threat in Bangladesh, with all the attention focused on the violence in Afghanistan and Pakistan.

Sri Lanka takes the 22nd spot and Nepal 25rd, both slightly less at risk this year than in 2008 but still very much in the world's top 25 states.

And India? Foreign Policy puts it at 87th position, a healthy score for a country that some thought wouldn't survive especially during the Sikh revolt of the 1980s, and other insurgencies in that period.

Giant neighbour China, according to the editors of the magazine, is more at risk with a score of 57.

[Photo of a U.S. Marine in southern Afghanistan]