Ekaterina Kudashkina:  This time our program is taking on a distinct Chinese flavour. We shall start with looking at the Chinese Vice-President Xi Jinping’s five day visit to the United States. As the most likely successor to the current Chinese leader Hu Jintao, Xi Jinping has received extraordinary welcome which once again stressed the importance the US policy makers are attributing to relations with China. So what would be the nature of the US - Chinese relations in the coming decade? What are the challenges for each of the parties and what do we need to expect of the change of leadership in Beijing? These are the issues we’ll be focusing on in the first section of our program – Beyond the Headlines. 

We shall then shift our focus to the Eurozone, struggling to contain the debt crisis, with its somewhat controversial policies on Greece. While Greece is virtually caught between the troika demands to implement more austerity measures – something that has already triggered major popular unrest - and the troika demands to carry out structural reforms – something quite impossible under the said circumstances. Greek default might trigger a chain reaction in the rest  of the Old World economies. The globalist paradox in this case is that none other than China might turn out to be the brave knight coming to the rescue of the Eurozone economies - and this is something we’ll be discussing in our next section – Between the Lines.

And finally we shall look at another important international player, who is also the old-time ally of China – Pakistan. Our Man in the News this time is going to be the country’s Prime-Minister Yousuf Raza Gilani who might become another casualty in the escalating standoff between Supreme Court, backed by powerful Pakistani military and civil Government. With political turmoil in Pakistan gaining momentum, it is not only the future of that country, but the future of the whole of the region that is at stake.

Sergey Strokan:  Well, Katya as for Xi Jinping’s visit to the United States – this is more than a summit as I see it. You said that one of the questions is how it will tell on the Chinese relations. But looking from Moscow, I think for all of us here it is more appropriate to understand how all those love – hate relationship between two major world economies will affect the world economy as a whole and how it will tell on our national interests.

Ekaterina Kudashkina:  I believe that what we are witnessing now is a start of the new world architecture.

Sergey Strokan:  Yes, so we have to understand how we fit in that architecture. What I’m saying – this is not typical American and Chinese story when we speak about the summit.

Ekaterina Kudashkina:  But Sergey, I’m not sure that summit is the right word, I suppose it’s still a tour. It’s obvious that Mr. Xi is not the first person in the country yet.

Sergey Strokan:  Yes, I agree that formally we have no right to call it summit as such since Mr. Xi Jinping so far is not the Chinese leader but at the same time…

Ekaterina Kudashkina:  He is a leader in waiting.

Dmitry Polikarpov:  We can soon expect this political change which will bring him to power really.

Ekaterina Kudashkina:  So, then let’s get started. This week Chinese Vice President Xi Jinping came on a five-day visit to the United States.

Sergey Strokan:  You know, Katya, I was watching the visit and I was quite impressed by the welcome he got. I don’t think a visiting Vice President has ever been granted such honors like the Secretary of Defense meeting him on the steps of Pentagon, or the 19-gun salute.

Dmitry Polikarpov:  Yes, Sergey. We can really see several elements of the state visit - a red carpet welcome. Are you surprised?

Sergey Strokan:  Well, I’m impressed, but not actually surprised. Xi Jinping has been treated like – shall we say – the heir apparent to the Chinese throne.

Ekaterina Kudashkina:  A head of state in waiting, like we said, - someone the US would have to deal with for the next decade. But the general understanding, at least as expressed in the media, both American and Chinese, has been that Mr. Xi has successfully passed the exam, you know.

Sergey Strokan:  Katya, but the hosting party made sure there’d be no uncomfortable moments during the visit. There was no press conference, no surprises.

Ekaterina Kudashkina:  But there have been some unpleasant moments, though I agree – these could have been anticipated well in advance.

Dmitry Polikarpov:  Do you mean protests of the Tibet opposition or human rights talk?

Ekaterina Kudashkina:  Well, but that’s the usual stuff. However there are two things which I found particularly interesting. First - the agenda of the trip. Mr. Xi has met practically every key figure in the US political and business establishment, correct?

Sergey Strokan:  That’s right.

Ekaterina Kudashkina:  He met President Obama for a lengthy and, reportedly, frank discussion at the Oval office, he visited the Pentagon, he visited the State Department, Congress, Department of Commerce, the US-China Business Council. And he traveled right across the country - from Washington to an Iowa farm town to Los Angeles.

Sergey Strokan:  Little wonder – they all needed to see what kind of person the future Chinese leader is.

Ekaterina Kudashkina:  Well, but his visit to Pentagon has been seen as quite an unusual one.

Dmitry Polikarpov:  What’s so strange about it, Katya?

Ekaterina Kudashkina:  Because Mr. Xi is a civilian public figure. His most military position is Vice Chairman of China’s Military Commission.

Sergey Strokan:  And what do you make of that?

Ekaterina Kudashkina:  I’m sure – same as you are making of it, Sergei. Because look, the man is going to become the leader of a country whose army has been seen as the fastest-modernizing military force in the world, right?

Sergey Strokan:  No more toothless tiger, as it was described, say, several years back.

Ekaterina Kudashkina:  I have never heard such a description – toothless tiger. Who was so unwise to say so?

Sergey Strokan:  Well, if I’m not mistaken I read that something in Newsweek or in TIME Magazine.

Ekaterina Kudashkina:  Well, I suppose that was their gross mistake.

Sergey Strokan:  No, it used to be a toothless tiger for a time being – in 90es.

Ekaterina Kudashkina:  But look, Sergey, I suppose it was back in 1971 that Mr. Kissinger went to a secret trip in China on the mere reason that the US political establishment already understood the potential of the huge country.

Sergey Strokan:  The potential is great but still.

Ekaterina Kudashkina:  Ok, I trust you, you’ve seen that description but it is still rather amazing to me. But anyway, Mr. Xi has been speaking to the effect of expanding military cooperation with the US and this is something to ponder on.

Dmitry Polikarpov:  Particularly with the new American focus on the Asian-Pacific region.

Sergey Strokan:  That is going to be another issue of tension between the two powers. It is not going away, I’m sure.

Ekaterina Kudashkina:  But then  you could admire news reports of the Pentagon meeting, just let me quote some of them: “Mr. Xi urged defense officials from the two countries to enhance dialogue, cultivate trust and accommodate major concerns to establish a mature military relationship… During Tuesday's meeting, US military officials said they want to enhance ties with China.” And the reports are also quoting the US Defense Secretary Leon Panetta saying - "The US and China are Pacific powers ... we want to work with China to build an open, transparent and inclusive regional security order." So, how does that sound to you?

Sergey Strokan:  Well, the beginning of a new architecture.

Ekaterina Kudashkina:  What do you mean Sergey?

Sergey Strokan:  Well, on the one hand we obviously understand that it is the United States and China which will largely determine the future of the global village in upcoming decades and it is in their relationship that this new architecture will shape up. On the other hand if we look at their bilateral relations – we will realize that this is really a bag full of problems. There is a problem of huge trade deficit for the United States, there is the problem of expansion of Chinese export.

Ekaterina Kudashkina:  But now we are talking about military cooperation.

Sergey Strokan:  When we speak about military cooperation, then I see obviously certain limitations to it for simple reason that China still regards any military activity of the United States as an attempt to sideline China, to isolate it…

Ekaterina Kudashkina:  But, Sergey, as far as I remember there’s been a major US – China military exercise not so long ago.

Sergey Strokan:  Well, but those exercises, they having a sort of instrumental importance, not more than that.

Ekaterina Kudashkina:  I suppose there are some common threats like providing security of Sea Roots for instance.

Sergey Strokan:  Well, of course they can cooperate and they are cooperating but at the same time we have to understand that two nations have their entirely different concepts of the world politics and they are standing in the world. And just yesterday I spoke to Alexander Lukin who is pro-rector of Russian Diplomatic Academy and one of the brightest Russian experts on China and he told me, he was back from Beijing last week, and he told me that in Beijing they still are very much afraid of American military built up and they fear that the United States are trying to use that military blocks to isolate China, to put pressure on China.

Ekaterina Kudashkina:  You know, it’s very interesting because as far as I remember there has been a poll conducted both in the United States and China just before the visit of Mr. Xi to the United States and the results of the poll are quite amazing – it shows that the majority of the Chinese and American population show distinct distrust vis-à-vis each other.

Sergey Strokan:  So, if there is a distrust what sort of a military cooperation…

Ekaterina Kudashkina:  But all those people still acknowledge that the further development of ties and development of further cooperation is essential for the future of their countries.

Sergey Strokan:  So, this is a sort of love – hate relationship or something.

Ekaterina Kudashkina:  I wouldn’t say hate.

Dmitry Polikarpov:  Well, I would agree with Sergey that it could be potentially a wide field for cooperation in the region.

Ekaterina Kudashkina:  I’m afraid he didn’t say so, it wasn’t his point, it was my point.

Dmitry Polikarpov:  Yes, but my point is that to me at the current moment it sounds more like a courtesy than a real agenda.

Ekaterina Kudashkina:  Courtesy on the part of the United States?

Dmitry Polikarpov:  Just to please the visitor, I mean offering him bright prospects also in the field of military cooperation.

Ekaterina Kudashkina:  Oh, that’s interesting! But I’m sure you would be interested to find out what Robert Ross – one of the leading US experts on China has told us about that.

Robert Ross:  The fact that the two most influential countries in the world today – the United States and China both have vital interests in the East Asia and East Asia is the most dynamic economic region in the world, so this makes the East Asian necessarily be focused on the great powers’ relations.

Now, in this context the United States has worked very hard for cooperation with China. But as China begins to develop its military and begins to press more on the status quo and as its domestic politics increasingly pressure to adopt a more contentious diplomacy, it will make it difficult for the two countries to maintain a cooperative relationship.

So that increasingly we are going to see a greater mix of cooperation and competition. The challenge for both countries is to minimize the conflict over unnecessary issues, to minimize unnecessary conflict that may simply reflect domestic pressures. And to the extent we are successful in doing them, I believe there are many opportunities for that. It will make it easier to cooperate on common interests whether it’s piracy or the economic stability and so on and so forth.

Sergey Strokan:  Well, Katya, but Mr. Xi is still seen as a rather enigmatic person. No one seems to be quite sure where he and his team are going to take the country.

Ekaterina Kudashkina:  But, Sergei, as a far as I understand – these are not the 70-s, nor the 60-s, nor the 80-s… It was then that Leader Mao, or his immediate successors could rule by decrees. Now it seems that new Chinese leaders need to take more factors into account. There is a growing middle class and a growing group of the Chinese oligarchs who also want a say in the country’s politics. And there are various groups in the Chinese political establishment. So, my point is that the new Chinese leader is bound to search for compromise with those different groups inside the ruling elites. So, I’m not sure the future of the relations is as much dependant on a personality of a single person, though this personality of course is very important.

Dmitry Polikarpov:  Well, Katya, let us not forget that the Chinese politics are so complicated and I would even say unclear especially when seen from abroad.

Sergey Strokan:  Katya, I think you raised a very important question – the role of a leader as such in shaping up foreign policy. There was Mao Zedong, there was Deng Xiaoping, then there was Jiang Zemin, then now we are having Hu Jintao and finally we are already now discussing the upcoming epoch of comrade Xi. So, the basic question is – to what extent the leader as such can determine foreign policy? Is t his own initiative or he has to rely on the groups of interests, on that consensus within Chinese elite taking into consideration that Chinese leader, unlike American leader or Russian leader, is not elected but selected by a narrow group of people who under the closed doors decide who will run the country? And as this is a sort of an official deal he in return has to meet the aspirations of those who just brought him to power.

Ekaterina Kudashkina:  Sergey, I hate to sound cynical but as far as the situation in developed democracies goes this year has shown that most leaders there are also selected not elected because the election process has also become a little bit too murky and in fact this is manifested in that Occupy movement which is circling the world claiming that the real power is not with the so called elected politicians.

Sergey Strokan:  Well, let me once again explain what I mean. Look, now we are witnessing that presidential race in the United States. If I ask you the question who will be elected next US President you will say – probably Obama, probably Mitt Romney or Rick Santorum - so the question is still in the air. But if we take China – there is no intrigue, there is no question. Who will come as a new Chinese we know already now. It will be Mr. Xi Jinping. And this is the basic difference between democracy and Chinese models.

Ekaterina Kudashkina:  You know, Sergey, if you remember everyone was trying to guess who is going to be Mr. Hu’s successor and all those speculations, most of them were vain, I mean their process of, ok let’s use your word – appointing the head of the state of course it is different from practices of Western democracies but then it is no less intriguing because really we do not know the sentiment and all those policy intricacies which are concealed from our eyes because we are not in China. We are not even in the Chinese upper echelons of power and I’m sure the power struggle there, I suppose it is even more fierce.

Sergey Strokan:  Well, but whoever takes the White House, he will have to deal with those bags full of problems I was referring to.

Ekaterina Kudashkina:  Yes, of course. But those two states have also something like a continuity of their policies regardless of who comes to power. The most important decision makers remain the same both in the US and in China. So, yes, I would agree with you that whoever comes to the White House after this election is going to deal with Mr. Xi.

And what are your impressions of Mr. Xi, Sergey and Dima?

Dmitry Polikarpov:  Well, I would say to me he seems something like – more western-style, a better counterpart for the United States from this point of view.

Ekaterina Kudashkina:  Interesting, meaning he looks more like a person who speaks the same language.

Dmitry Polikarpov:  Not the same language but a more comprehensive language.

Ekaterina Kudashkina:  But if you remember that his daughter, I believe she is a Harvard student right now, and Mr. Xi is reported to be an admirer of Hollywood war films, so perhaps you’ve got a point, yes Dima.

Dmitry Polikarpov:  Yes, he’s got a good contact.

Ekaterina Kudashkina:  Better contact. But now I suggest we might listen to Alexander Gabuev who is expert on China and participant of the UN Millennium Program.

Alexander Gabuev:  He belongs to a grouping which is called princelings which is basically children Mao Zedong and Deng Xiaoping era of bureaucracy and this grouping has a reputation of supporters of Chinese nationalism, even chauvinism you may say. And we don’t know much about this side of Xi Jinping but it seems that Xi Jinping will be very vocal in defending national interests and he will try to come to an agreement with the United States only if it serves the interests of China.

Ekaterina Kudashkina:  And that was the assessment of Alexander Gabuev - expert on China and participant of the UN Millennium Program.

By the way Xi Jinping himself has a solid entrepreneurial background. And he also describes himself as pragmatist. By the way you could feel that during this visit.

Dmitry Polikarpov:  You mean his invitation to US business leaders to develop cooperation with China?

Sergey Strokan:   I wonder is there any room for more? Over the last decade, trade between the two countries has increased over 275%, to something like half a trillion dollars a year.

Ekaterina Kudashkina:  Half a trillion dollars a year!

Sergey Strokan:   That’s an astronomic figure.

Ekaterina Kudashkina:  That’s a huge figure!

Dmitry Polikarpov:  Yes, and this figure makes a serious problem for the Americans.

Ekaterina Kudashkina:  Meaning it makes them uneasy?

Dmitry Polikarpov:  Yes, it makes them really uneasy and Mr. Xi has heard a lot of criticism about unfair trading practices and hurdles to American investment, for example, people at the Congress were also accusing of China manipulating its currency to help its exporters.

Sergey Strokan:   Well, we were speaking about military and technical cooperation between the United States and China but I think what the most turbulent area of the cooperation is – of course it is economy. I have mentioned huge trade deficit – this is really an irritating point for American side. And I remember how in his last State of the Union Address President Obama hinted that all efforts should be focused on giving a new impetus, giving a new life to that…

Ekaterina Kudashkina:  To the brand.

 Sergey Strokan:   of made in USA.

Dmitry Polikarpov:  And I remember that brand, can still remember it.

Ekaterina Kudashkina:  I was referring to the speech of Mr. Obama.

Sergey Strokan:   Yes, and as I see it, that reference to the brand – made in USA, was a sort of asymmetric answer to growing expansion of goods with the label – made in China.

Ekaterina Kudashkina:  Well, this is one of the challenges.

Sergey Strokan:   This is one thing. The other thing is that I’ve mentioned also that election campaign in the United States – the presidential race is in full swing. And whatever Obama is doing is under a close scrutiny of Republicans who used to criticize White House for being too soft with China on very sensitive human rights issues, on Tibet and other questions. So, Obama was, as I understand it, in a difficult situation. On the one hand he had to establish businesslike, pragmatic relations with the future Chinese leader. On the other hand he couldn’t allow himself the privilege of bypassing and ignoring that sensitive issues understanding that Congress which is dominated by Republicans will not understand it.

Ekaterina Kudashkina:  And of course yes, there are human rights issues. But what you are talking is rather pre-election rhetoric, isn’t it, to a large extent.

Sergey Strokan:   To a large extent, but that also determined the atmosphere of the visit. And by the way, have you also heard that Congress Speaker John Boehner has handed Mr. Xi a letter regarding Gao Zhisheng - a dissident and human rights lawyer who is currently jailed?

Dmitry Polikarpov:  Well, I would maybe disappoint you Sergey, because to me, as I see the human rights agenda or human rights issues have become the very distant second or third, or even fourth point in the…

Ekaterina Kudashkina:  But they are still making a good pretext on exerting pressures on all countries in the world.

Dmitry Polikarpov:  Well, I see it more like words than actions.

Ekaterina Kudashkina:  If you look at Libya, you’ll see a materialization of this rhetoric.

Dmitry Polikarpov:  But China is not Libya and never will be like Libya.

Ekaterina Kudashkina:  Yes, of course.

Dmitry Polikarpov:  And the US, they realize this perfectly.

Sergey Strokan:   I remember like during his election campaign Bill Clinton still not a President said that we will not coddle tyrants from Bagdad to Beijing and at the same time trade was booming. So, there are too many hurdles in the way of cooperation and this was the case with Obama Administration, this was the case with Bush Administration and that was the case with Clinton Administration.

Ekaterina Kudashkina:  Of course Sergey, but you know, I also liked what Mr. Xi said addressing former senior US officials, and Henry Kissinger among them, talking about different generations of American politicians, just let me quote him: "This year marks the election year of the United States. I believe no one of insight from the US side would like to see that the election factors would have a regrettable impact on the development of ties between the two countries … We should deal with friction and differences in bilateral economic and trade cooperation in the spirit of seeking mutual benefits and win-win results through a positive and constructive way."

As for the trade specific and pragmatic approach Mr. Xi pointed out that 47 of 50 US states had seen their exports with China grow in the last decade.

Dmitry Polikarpov:  I enjoyed another quote. Addressing the top people of corporate America, Mr. Xi described deeper Sino-American ties as an "unstoppable river that keeps surging ahead."

Ekaterina Kudashkina:  And it is not only to the US that the unstoppable river is making its way. 

Dmitry Polikarpov:  Just another poet coming from China.

Ekaterina Kudashkina:  A pragmatist I would say. What I’m referring to is that this very week reports have come that China and the European Union are starting negotiations on a series of issues this year. And one of the most important issues is initiating talks on China-EU investment agreements. The EU is the largest trade partner for China. Starting from 2008, China has sent more than 30, mind you, 30 trade and investment promotion delegations to the European Union, leading to agreements worth $150 billion. Of course there is a long way to go the level of US – China cooperation. But anyway, that takes us to the next section of our program – Between the Lines,stay tuned.

Greece has became this week the Eurozone’s hottest point once again as local parliament was debating, under pressure from the European Union, an unprecedented package of drastic austerity measures amid street battles between police and protesters which left buildings ablaze in Athens and the streets in chaos. Finally, Athens agreed with the EU and IMF on how to fill the 325 million euro hole in a set of 3.3 billion euros in budget cuts. Some 100 million euros would come from defense cuts, about 90 million by bringing forward some public sector wage reductions and another 135 million would be taken from the health, labor and interior ministries.

In our previous programs we have watched closely the position of leading Eurozone´s members, like Germany and France, concerning the situation in Greece. In a move to see the debt crisis from inside we shall now analyze an editorial entitled “Jobless and Hopeless” which was published by the Athens News. This English language newspaper tries to look at the budget cuts from the point of view of those who are going to feel them on their own skin.

Sergey Strokan:   Jobless and hopeless… sounds rather gloomy.

Ekaterina Kudashkina:  Yes, Sergey, if we put aside for a moment the macroeconomic considerations, we could realize that the bailout package would cost very dearly to Greeks. Let me offer you an opening quote.

Dmitry Polikarpov:  Please, go ahead, Katya!

Ekaterina Kudashkina:  Thank you, sir. So, just let me quote the paper: “The real question is not why people are reacting with shock and anger over the harshest austerity measures yet to be drawn up as part of the terms of the country’s latest bailout, but why the response has not been even more intense. Not yet, anyway.

 For those who need to see it to believe it, the news that the minimum wage is indeed to be reduced by 22% from its current 751 euros a month is to be found towards the bottom of page 20 of the 32-page memorandum. And if you have the misfortune to be aged 25 or under, your salary could be 32% under the current minimum - or 510 euros before tax.

 Sacrificed at the altar of continued Eurozone membership, Greece’s youth are paying the highest price for the politicians’ inability to implement virtually any of the reforms stipulated in the first bailout memorandum.”

And to me that really sound very alarming because if those reforms, if those austerity cuts are targeting the young, people who are younger than 25 – doesn’t that spell a lot of long term problems for that country?

Dmitry Polikarpov:  I agree with you, Katya. But I can see at least two main points in this editorial piece. The first one says that the cuts which demand the Eurozone core countries drive into a corner the most vulnerable social groups in Greece – the youth, as you said. The second important point is to blame for the current crisis the country´s political elites. This editorial is at the same time pro-Greek and anti- Greek. Do you agree with me, colleagues?

Ekaterina Kudashkina:  It depends on what you imply by saying anti-Greek. To me it looks like a piece filled with the pain for their own country. I’d say it’s pro-Greek, not anti-Greek.

Sergey Strokan:   Well, let me explain what I think of this pro-Greek or anti- Greek dilemma. I think that the Greek Government should be definitely blamed for the credibility gap which allowed German Finance Minister Wolfgang Schäuble to describe Greece as a bottomless pit.

Dmitry Polikarpov:  I would say it’s rather strong expression.

Ekaterina Kudashkina:  Not exactly diplomatic but he is the Finance Minister.

Sergey Strokan:   Yes, he went even further by saying this Wednesday that Greece was unlikely to fulfill its new promises adopted by Parliament early this week.

Ekaterina Kudashkina:  Well, of course this is a note of exasperation, I understand that. But anyway those words in fact caused harsh response from Greek President Karolos Papoulias. And he is an 82-year-old veteran, he is the veteran of the resistance by the way to Nazi occupation of Greece during World War II.  That’s what he said: "I cannot accept Mr. Schaeuble insulting my country. Who is Mr. Schaeuble to insult Greece?”

And by the way this - shall we say – anti-German rhetoric was also widely used by some 100 000 protesters in Athens who carried slogans saying "By 2020 we will be the Germans' slaves." Just listen to that – German’s slaves! So, doesn’t it also push up the level of nationalist feeling in that country, I mean the whole policy of the European Union and the IMF towards Greece does look a little bit controversial to me, to say the least.

Dmitry Polikarpov:  Well, I agree with you Katya. And I would really disagree with these harsh words of criticism like “bottomless pit” and I see it like a kind of insult.

Ekaterina Kudashkina:  You know, my question to you both is – do we get it right that the whole bunch of problems which Greece if facing now has stemmed largely from Greek politicians, Greek elite taking loans in the European Central Bank, is my understanding correct?

Dmitry Polikarpov:  Yes, Katya, I think you are completely correct.

Ekaterina Kudashkina:  Which means that these problems have been building on for quite a while and nevertheless the European Central Bank…

Dmitry Polikarpov:  Yes, Katya, that’s what I was going to say…

Ekaterina Kudashkina:  So, I took it out of your mouth.

Dmitry Polikarpov:  Yes, despite those accusations of blackmailing and pressuring on Greece I would rather agree with German economist and a former member of the board of the European Central Bank Otmar Issing, who told The Voice of Russia this week that we should remember “that Greece has been receiving Marshall’s plan money for 30 years”.

Ekaterina Kudashkina:  Sorry Dima, but I was referring to a different thing. I was referring to the ECB granting loans to the country which was evidently not in a very well position to take the loans.

Dmitry Polikarpov:  Yes, but I think it’s the similar problem. The problem how to manage the money they get.

Sergey Strokan:   As a follow up to what Dima said, the EU Structural Fund has been supporting Greece for 30 years, more than other countries taken together. But they couldn’t use these funds to improve the economic situation, let us just be frank.

Ekaterina Kudashkina:  Yes, of course but now my question still is – just why would the ECB lend money. Those loans were not a part of Marshall’s plan money, there were other loans but they were still lent to a country. As far as I understand it for the mere reason that the ECB needs to get on with its operations, it was a totally different reasoning. I mean, of course I would never buy that the Greece’s crisis came unexpectedly, everyone was watching it but was not doing anything to prevent it.

Sergey Strokan:   I think this is the price for integration, for that euphoria over the integration. So, to show that the process is not losing its steam they were supporting Greece and now they are paying high price for that.

Ekaterina Kudashkina:  I suppose this is rather the Greek who are paying high price for that.

Sergey Strokan:  Well, but at the same time this is a heavy burden for the European Union, for Germany as its locomotive. And I understand the feelings of Greek President who is very much feels offended and is saying – who is Mr. Schaeuble to insult Greece? But my question is – who is going to pay for the mess of Greece? It is Germans who are paying for that. So, probably they have the right to say it.

Ekaterina Kudashkina:  I think that those are rather the Greek, ordinary people in Greece who are paying for that.

So, let us turn back to those people.

Sergey Strokan:  Well, but Katya let me make my point finally. Perhaps, it is a matter of reluctance to timely deal with the real issues. Some Eurozone members say Greek political leaders use to do the minimum possible at the last possible moment since the country was first bailed out in 2010.

Ekaterina Kudashkina:  But the same applies to the Eurozone's crisis response over the last two years, ok? Anyway, like I said, let us turn back to common people who are often just not seen behind the numbers, as Public Order Minister and former EU commissioner Christos Papoutsis said in response by the way to an angry outburst by Greece's President over German suggestions the country could go bankrupt. Let me offer you just another quote from the Athens News editorial piece.

“The latest unemployment figures, released only hours before confirmation of the coalition party leaders’ agreement to the bailout terms, showed the number of jobless reaching another record high - 20.9% in November 2011, up from 18.2% the previous month. For the first time, more than a million people (around a quarter of Greece’s workforce) are now out of work.”

That’s a staggering figure, an unemployment at 20.9% is a staggering figure!

“But now consider the jobless figure for the up-to-25-year-olds: a scarcely fathomable 48%,” and this is according to national statistical authority Elstat.

48% just imagine – half of the 25 years and under are unemployed!

Dmitry Polikarpov:  Yes, but let me continue the quote, Katya. “Today’s monthly unemployment benefit is little more than 500 euros a month, though this too is certain to be reduced. Given the new minimum wage, why work at all?” the newspaper asks.

Ekaterina Kudashkina:  Well, and that’s a good question. So, what we are witnessing now is an accumulation of tension in the youngest, in the most active part of the population. If you remember some ten years ago the West has been reproaching Iran for the same thing. They were saying that there are a lot of the young who are unemployed and who can in fact become a detonator for the whole situation inside the country. By the way we have seen something similar in the Arab Spring. So, do the Eurozone countries really want something like that in Europe?

Sergey Strokan:  Obviously such an amount of young jobless people- this is a powder keg for a country like Greece and nor only Greece.

Ekaterina Kudashkina:  For the whole of the Eurozone.

Sergey Strokan:  Yes, they have to handle it somehow. But at the same time, just to sum up our discussion, I have a feeling that in all that rhetoric which is coming from Athens and those angry rebukes from the leaders of the European Union who are more and more irritant over the stubbornness of Greece to implement that painful reforms, I have a feeling that this is sort of a vicious circle and I don’t see the way out of it.

Ekaterina Kudashkina:  How about China?

Sergey Strokan:  China is not the member of the European Union or you mean the Chinese money that will come and help.

Dmitry Polikarpov:  Yes, but China can come forward as a savior.

Ekaterina Kudashkina:  I suppose this is one of the questions which was at the center of the agenda of Ms. Merkel’s visit to China.

Sergey Strokan:  So, let us wait for Mr. Xi Jinping to step in, probably he will handle this.

Ekaterina Kudashkina:  Why? It is still Mr. Hu who is going to meddle in. But do you think that this could have some positive effect on the European economy?

Sergey Strokan:  Well, as we used to say – this is a double-edged sword, I mean Chinese involvement.

Ekaterina Kudashkina:  That’s a good answer, could you expand on that?

Sergey Strokan:  Obviously Chinese economy can come to rescue the European Union and we know that the European Union leaders are repeatedly sending strong appeals to Beijing to come to rescue. But at the same time Chinese are counting their money and they have to understand what they will get in return. They don’t want the European Union to milk them.

Ekaterina Kudashkina:  I remember that one of the key Chinese officials said that China could lend some money, could invest more into the European zone countries but saving the EU economy is really the job of the European Union. And here I can see, it’s not exactly a risk but a prospect of a civilization clash because the Europeans seem to be really too relaxed about the future of their economy and here comes China which is young, very motivated and very high disciplined. So, how do you see the situation is going to develop?

Dmitry Polikarpov:  Well, I would say that the general idea to inflate the Eurozone economy with money coming from China doesn’t look very promising. It can ease the debt crisis, no doubt, but my question is why China should be so interested in bailing out Europe investing in risky markets I would say?

Ekaterina Kudashkina:  Well, I suppose the Chinese are wise enough to look at the conditions of their investments.

Dmitry Polikarpov:  Yes, I agree with you but I mean perhaps because Europe is one of the important markets of China.

Ekaterina Kudashkina:  Do you remember that also something like a decade ago there was a major trade war between the European Union and China?

Dmitry Polikarpov:  Yes, the competition and trade war. And now Europe is apparently seeking bailout.

Ekaterina Kudashkina:  Interesting. I suppose this is an issue we could discuss with our expert – Diego Hidalgo, who is Founder and Honorary President of FRIDE– a Spanish think tank based in Madrid.

Diego Hidalgo:  I am a little bit skeptical about it for several reasons. I think that there is a qui pro quo in which Europe could initially grant international market status to China. And in exchange for that there could be a real for China to invest in the Eurozone. China is one of the countries which doesn’t reveal its distribution of foreign exchange savings. It has 3.2 trillion of which about 25% is believed to held in euros, but most of it is held in German bonds which of course is not what needed right now for the Eurozone and in fact it increases the spread between German bonds and the southern bonds the of countries that are in trouble - within Spain and Italy.

I think that Europe could probably negotiate with China that if China would increase its holding of Eurozone bonds in exchange for the international market status. On the other hand the European Union knows very well that China is stepping up in subsidization of Chinese companies exporting to Europe and it’s unlikely to grant that status and it will probably consider that it will do more harm than good. That’s one thing.

The other thing is the investments of the Chinese in the European real assets which indeed have happened in the last few months and even weeks, they are still very low, I think that investment in Europe from China is 3.5% of the total foreign direct investment by China. China prefers to invest in real assets, in raw materials and these are mostly in Africa and Latin America. And although it has been buying some companies in Europe I don’t think at this time they will step up very much buying the euro bonds.

So, the Chinese certainly have the capacity to help but I think that they won’t do that without the steps by Europe that are probably difficult to take for them at this time.

Ekaterina Kudashkina:  What kind of steps?

Diego Hidalgo:  The recognition of granting China international market status and that is going to cause difficulties for European companies in the international market, particularly in items like solar energy panels and so on. The Chinese banks are right now subsidizing and giving loans at very low rates to manufacturers of goods that are directly competing with the Europe produced goods. And if that continues, and if Chinese get carte blanche in that by granting the international status by Europe, then they would put many of the European companies out of the market and increase the prices of the market.

So, I think that Europe would have to sacrifice very much in terms of export potential of its industrial goods just to get increased help in buying of bonds by the Chinese Government. So, I think that’s unlikely to happen at least in the short or medium term.

Ekaterina Kudashkina:  Sir, thank you very much.

And now let us come to our last section Man in the News and this time it is the Pakistani Prime-Minister Yousuf Raza Gilani who was summoned by a Supreme Court on the 13th of February to face charges of contempt. If he is found guilty, Prime Minister Gilani will be stripped from power and could be jailed for something like six month.

The news of the escalating standoff between Supreme Court and the civil Government plunged the South Asian nation of 130 million into a new political turmoil, which could send many heads rolling, not only the head of the Prime Minister. But the stakes in Pakistan are, probably, much higher.

Dmitry Polikarpov:  Yes, Katya. Judging from what I read, it can be the first case in Pakistan’s independent history when the Prime Minister can go to jail strait from his office, am I right?

Ekaterina Kudashkina:  Well, but if we look at the Pakistani history we will see a certain trend.

Sergey Strokan:  Katya, if we look at the Pakistani history we will discover that it is dangerous to be Pakistani Prime Minister, or Pakistani President, or even prominent Pakistani political figure. Pakistani politics will never make analysts yawn. It is very exciting, extremely exciting but very dangerous.

Ekaterina Kudashkina:  Extremal politics.

Sergey Strokan:  Yes, let me just elaborate on that. Look, legendary Pakistani leader Zulfikar Ali Bhutto, do you remember what happened to him? He was jailed and hanged after being ousted from power by a general Zia ul-Haq.

Ekaterina Kudashkina:  True.

Sergey Strokan:   His daughter Benazir Bhutto, who was a charismatic ex-Prime Minister and opposition leader, was assassinated. And military leader President Zia ul-Haq who handed Zulfikar Ali Bhutto died in a mysterious plane crush, which is believed to be a plot.

Dmitry Polikarpov:  Really sounds like a survival test.

Ekaterina Kudashkina:  But it is a survival test and it becomes increasingly so in the current situation. And of course a large number of Pakistani ex-leaders today are living in exile in London and elsewhere, this is the only way for them to protect themselves.

Dmitry Polikarpov:  It may sound a bit cynical, but judging by what you say if Prime Minister Gilani is jailed for six month it can be very Pakistani way of life, so to say.

Sergey Strokan:   Dima, I believe, that what is at stake today is not the personal fate of Prime Minister Gilani, though this is a moment of truth for him also. But what is at stake - is the fate of troubled Pakistani democracy.

Ekaterina Kudashkina:  Troubled Pakistani democracy, what kind of democracy are you talking about, Sergey? I believe it is still the democracy in the state of forming.

Sergey Strokan:   That’s what I’m saying. Ok, if you don’t like the word – troubled Pakistani democracy - we may say democracy in transition. But look, we have discussed Pakistan for many times in our program, but I think that it is probably only now that Pakistan is entering into the most turbulent period of civilian rule which was established after ousting from power its military ruler General Pervez Musharraf in 2008.

Ekaterina Kudashkina:  Sergey, I have an impression that starting from 2008 the period has been becoming more and more turbulent and it is not even four years since Mr. Musharraf left the country. So, I think that it is the common trend under the rule of civilians in that country, don’t you agree?

Sergey Strokan:   Well, probably it even has some relevance with what’s happening in Egypt today.

Ekaterina Kudashkina:  So, are you saying that those countries need a firm military hand?

Sergey Strokan:   No, I mean that Egypt also started a transition from the strong hand. Of course President Mubarak was not a military ruler…

Ekaterina Kudashkina:  But he had a strong military background.

Sergey Strokan:   That’s right but they have started transition to democracy though now Egypt is ruled by military.

Ekaterina Kudashkina:  De facto, with the strong chance that the Muslim Brotherhood is coming to power ultimately. But anyway, I think we need to explain just what actually triggered this political crisis making Prime Minister Gilani the Man in the News. Could you do that, Sergey?

Sergey Strokan:   Yes, if you allow me, I’ll do it with pleasure. So, when Mr. Gilani appeared in the court this week the judge read a two-page charge-sheet. It says the Prime Minister had violated the Constitution by refusing to obey the Supreme Court order to ask Swizz authorities to reopen corruption cases against Pakistani President Zardari and his late wife Benazir Bhutto. Those cases were shelved in 2008 after Mr. Zardari was elected President and got immunity.

Ekaterina Kudashkina:  But as far as I remember this is not the first case of corruption against Asif Ali Zardari, I think he was accused of corruption even when Benazir Bhutto used to be the Prime Minister.

Sergey Strokan:   We will come to it later.

Dmitry Polikarpov:  I have a question to you Sergey. Could you please explain us how this Pakistani scandal is related to Switzerland?

Sergey Strokan:   That’s a question, yes. How come Switzerland when we speak about Pakistan? Let me explain it. It was reported that Mr. Zardari and his late wife Benazir Bhutto were suspected of using Swiss banks to launder some $12 million in alleged bribes paid in the 1990s. So, today Swizz authorities say that they are unable to prosecute Mr. Zardari since he enjoys immunity right as a head of state.

Dmitry Polikarpov:  Do I get it right, Sergey, that by not obeying the Supreme Court ruling Prime Minister Gilani enables President Zardari to withstand mounting pressure on the part of his numerous opponents?

Sergey Strokan:   Exactly. What Pakistani opposition needs most of all is the head of the President, not the head of the Prime Minister, we have to understand this. Anyway, by blocking the reopening of criminal cases against Mr. Zardari Prime Minister Gilani is providing some sort of a suspension belt for the President in a turbulent environment of Pakistani politics. And finally Mr. Gilani can turn into a scapegoat in the whole story. This is how the situation is evolving.

Ekaterina Kudashkina:  Well, quite an intricate scenario I’d say. But it’s interesting that if we look at Yousuf Raza Gilani as a political leader, like I said, and a personality, we will discover that his personal reputation was never marred by major corruption scandals on contrary to the case of the Pakistani President Zardari.

Sergey Strokan:   Exactly. And you were speaking about that background of Mr. Zardari, so it is an open secret that Mr. Zardari was nicknamed “Mr. 10 percent” already in 90’es when he served as a Finance Minister in the cabinet of his wife Benazir Bhutto.

Ekaterina Kudashkina:  Yes, that’s right. That what I was referring to. And much spoken “ten percent” was his personal alleged share in the deals which were never written in the state budget. That is awful, you know, if you come to think about it – it is absolutely disgraceful.

Sergey Strokan:   But now he is elected President. And before being elected President, Mr. Zargari has already spent 11 years in jail on charges ranging from corruption to murder.

Ekaterina Kudashkina:  How come a person with a criminal record could become a President of the country?

Sergey Strokan:   That’s another good question. This is the part of the deal which was made with the then President Musharraf in 2007 but we will come to it later. But let me explain one more thing. I think we have to explain that by disobeying the Supreme Court and risking to be prosecuted on the charges of contempt Prime Minister Gilani is trying to save not only the President, but tens of high ranking Pakistani politicians.

Dmitry Polikarpov:  How come?

Sergey Strokan:   That’s a good question and this also can come as an answer to what was asked by Katya, when she asked how Mr. Zardari after being jailed can become a President. So, the story goes back to the year 2007 when the then President Pervez Musharraf issued the so called National Reconciliation Ordinance or NRO. This was a decree which granted amnesty to several thousands of Pakistani officials – from grass-root to top level, officials who were charged with corruption and embezzlement. You may ask why did he do this?

Dmitry Polikarpov:  Yes, Sergey.

Sergey Strokan:   Well, this is the way how deeply unpopular Pakistani leader at that time understood national reconciliation process. By giving pardon to Pakistani corrupted elite, some of it living in exile, Musharraf simply wanted to buy back its support and remain in power. So, the National Reconciliation Ordinance has freed Mr. Zardari and an army of his associates from all charges.

Dmitry Polikarpov:  And what were the consequences?

Sergey Strokan:   December, 2010 Supreme Court has nullified the National Reconciliation Ordinance, but the court ruling has not been put into effect yet due to resolute “no” from Prime Minister Gilani, who according to Constitution had to take appropriate action to implement it. So, this is the reason why Mr. Gilani is accused of contempt and can go to jail.

Ekaterina Kudashkina:  So, dramatic! A man not marred in corruption scandal can lose his top post and go to jail for protecting the President with, to say the least, the dubious reputation and hundreds of corrupted officials. And we are talking about the establishment of the rule of law in that country!

Sergey Strokan:  Well, what’s happening with Mr. Gilani, there is a full irony in this story, bitter irony. But while this is an extremely dramatic story, it is dramatic not only for Mr. Gilani, but also for the country because this is a sort of a watershed in Pakistani history as I see it. And as I learned, speaking to my Pakistani friends, these days the society is split on the Supreme Court verdict. Split meaning that some say that the Supreme Court’s actions are a badly needed advance for the rule of law and accountability in Pakistan. But others argue that the Supreme Court’s decision is bad for democracy, as it ensures the supremacy on non-elected body, which is Supreme Court, over elected.

Ekaterina Kudashkina:  Ok. But Sergey, as far as I understand that means that we see more differences and less order in Pakistan. However the Gilani case is far from over which also means that we are going to follow it very closely in our future programs.

And with this we end this edition of Red Line.