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Economic Nationalism and Espionage

By Rajeev Srinivasan
April 12, 2006 18:10 IST
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Lenovo is a Chinese company that surprised everyone when they picked up giant IBM's desktop and laptop computer business for a song. The fact that the iconic IBM PC had passed on to a Chinese company did raise a few eyebrows. But the general feeling was that the desktop and laptop computer had become a commodity business, and that IBM was wise to dump it and concentrate on more lucrative servers and services.

Be that as it may, there is now a bit of a storm brewing over the fact that the US State Department (yes, those old Cold Warriors of Foggy Bottom) has contracted to buy $13 million worth of Lenovo computers. The redoubtable Lou Dobbs of CNN has led the charge accusing the Chinese of malfeasance.

Dobbs is an ultra-nationalist. His tirades against software outsourcing were legendary. I remember this especially vividly because my old friend Narayan Keshavan, a journalist and political pundit, passed away immediately after stoutly defending India a couple of years ago on the Lou Dobbs show against the charge of stealing US jobs.

But is there something to Dobbs' charge about China? The obvious response is that there isn't, and that he is over-reacting; this is the line taken by the New York Times in a contributed article on the topic.

But industrial and other espionage is by no means unknown. There was the celebrated case of the US embassy in Moscow, which was discovered to be so chock-full of listening devices that KGB spooks would have had a field day listening in.

Not that the US is above a little monkey-business itself. Before the First Gulf War, it is reported that the US sold computer printers to the Iraqi military. To the casual observer, these printers appeared to be quite normal. However, they were doctored up with a Trojan Horse, a special GPS chip which, when remotely triggered, could broadcast its location accurately. For instance, the printers attached to mobile anti-aircraft batteries advertised their locations to US bombers, which then bombed the heavy guns to smithereens. This was one way in which the US gained air superiority very quickly.

So there is a legitimate question as to whether the import of commercial goods could have significant side-effects based on trap-doors left in them by a manufacturer, especially one as jingoistic and prickly as China, where the army has been preparing for a 'total war' involving all possible weapons. In fact, knowledgeable people have been getting concerned about the rash of industrial espionage involving Chinese-Americans and Chinese students: the Wall Street Journal had a story about this in August 2005 (Phantom Menace: FBI sees big threat from Chinese spies; businesses wonder

There is more to this than the possibly justifiable concern about national security: we are seeing a new bout of economic nationalism. Most visibly, the fuss over Mittal Steel's proposed takeover of Arcelor, a European-Union 'champion'. Although the decibel level has fallen, the subtext is obvious: no European company is going to be taken over by an Indian, although Mittal Steel is itself a European company.

Similarly with the attempted takeover by Chinese government-owned oil company CNOOC of the oil firm Unocal of California. After heated debate, the deal was nixed as being against the 'national interest' -- the one thing that is sacrosanct in the US. How I wish this were true in India too, but alas, national interest comes dead last, way below the fattening of one's wallet and loyalty to certain dubious ideologies.

The same national security argument was applied to the takeover by Dubai Port World of certain major American ports; and once again the deal was cancelled. However, it is clear that Indian politicians do not see Dubai Port World in the same light. Thanks to reader Cacoethes for a pointer to a report on the NDTV television channel that suggests, startlingly, that the Indian Navy's submarine and other operations in Vishakhapatnam may have been jeopardised to accommodate construction of nearby Gangavaram port by the selfsame Dubai Port World. Once again, national security is being sacrificed for short-term individual profit.

Similarly, another startling and irresponsible act is leading to India's deepest-water port being constructed by a Chinese government-owned company! The media, which is supposed to be a watchdog on such matters, has been completely silent.

China has an avowed 'string of pearls' strategy with which is has striven to -- largely successfully -- contain India with bases at Gwadar in Balochistan, the Cocos Islands in Myanmar, and an attempt to lease to an island or two in the Maldives.

The crown jewel in this is a low-hanging fruit that has fallen into the Chinese lap, as it were: the port of Vizhinjam at Trivandrum, which the Kerala government has contracted out to a consortium consisting largely of Chinese companies. One or more of the Chinese firms is owned by the Chinese government.

Now Vizhinjam is not just not any port: it has roots going back to hoary antiquity, and some believe that nearby Poovar is the famous Ophir referred to as an exotic location exporting 'ivory, apes, peacocks, sandalwood, cedarwood and sweet white wine.' Vizhinjam also happens to have a draft of over 56 feet, one of the deepest in the world without the need for dredging. This means the largest ocean-going container ships can dock there, instead of docking in Singapore or Colombo as is done today and trans-shipping the containers to smaller vessels thus slashing cost and time.

And they could only find the Chinese to build this port? Incidentally another container terminal is being constructed at Vallarpadom near Cochin by the ubiquitous Dubai people, who therefore have a foothold on both the Malabar and Coromandel coasts.

Trivandrum has strategic and sensitive installations, including the Vikram Sarabhai Space Centre where India's PSLV and GSLV rockets (read: potential ICBMs) are built; Cochin has a shipyard where India's first aircraft carrier is being built. The two are the locations of the Southern Air Command and the Southern Naval Command, respectively. Strategic enough for you? Nearby there are also the mineral sands of the Kerala coastline, containing 31 per cent of the world's thorium, usable for fast-breeder reactors.

There is a very good case to take a second look at the awarding of this contract. And that puts me into a moral dilemma: for, there has been no investment whatsoever in the Trivandrum area for a long time, as the Kerala government has diverted all its efforts to please northern and central Kerala. The Vizhinjam project is one of the very few where there is money being spent on southern Kerala. That this effort, alas, has the potential to harm India substantially is a cruel irony.

Comments at my blog at

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