What the Vodafone Case Says About India

At one level, it is very simple to explain the position of British phone giant Vodafone in India: because it paid abroad in black money for a lucrative property in the country, it claims that no taxes are owed.

How this situation developed is almost impossible to explain because much that needs understanding is buried in post-colonial debris of which most Indians, including our so-called political class and Intelligence agencies, seem blissfully unaware.

For example, how can we explain the lack of alarm that a British company has become the second largest player in the strategic Indian telecommunications market? No one seems concerned that Britain is the nerve center of the most intense international surveillance effort in history or that it has a long and consistent record of abusing every advantage it has ever been given in India.

To understand our political torpor it is necessary to look to the past and take into account the role of Indian financiers and agents in bringing on and sustaining colonial rule.

When the Europeans first ventured into Indian trade five centuries ago, they found a well-developed market system here, with local, national and international networks of commerce and finance. Indian bankers provided credit and insurance facilities, set exchange rates for a variety of gold and silver coinage from as far afield as Greece and China, and set the terms of trade. European traders found it impossible to operate without Indian partners to help negotiate the system, both to get the loans they needed and to actually buy the supplies they shipped back to Europe.

In the 17th and 18th Centuries the largest and most influential Indian banking houses were run by Marwaris from Rajasthan and Chettiars from Tamil Nadu. Numerous accounts by Portuguese, Dutch, British and French traders attest to their heavy dependence on the support of those houses and on a variety of other Indian agents to trade in the country’s principal marts.

By all accounts, the wealthiest banks in that period were two Marwari houses. One, established by the jeweler turned merchant-banker, Virji Vora operated a pan-Indian network out of Surat (the main Mughal port); it dominated for a 50-year span ending in 1670. The other, founded by a Patna saltpeter trader Hiranand Shah in the last quarter of that Century, became by the early 1700s under his descendants Fateh Chand and Mahtab Rai in Bengal, India’s formally acknowledged “Jagat Seth” (world banker).

While these merchants had excellent business acumen, they had little political sense. That was not a serious failing as long as the Mughal Empire was strong, but after Nadir Shah sacked Delhi in 1739 they were increasingly at sea.

The lack of strategic sense is nowhere clearer than in Jagat Seth Mahtab Rai’s disastrous decision to lend Robert Clive the money with which to bribe Mir Jafar to run away from the 1757 “Battle” of Pilashi (Plassey). He probably thought of it as a convenient way to get rid of the arrogant new Nawab of Bengal, the teenage Suraj-ud-Dowlah; he foresaw neither his own swift ruin and ignominious murder nor the severe famine British oppression would let loose in Bengal, killing some seven million people, a third of the total population.

Throughout British rule in India such death tolls from the famines they created were frequent; yet, amazingly, the many Indian financiers and agents that made colonial rule possible never seem to have had the least compunction about what they were doing to their own people. The nationalist movement drove them into the shadows but they continued to serve the darkest British ends, including arranging for mass communal violence and Partition. (Neither would have been possible without Indian financiers and dalals.)

In the absence of any post-colonial accounting, those who thrived under British rule became part of  independent India’s power structure, and they continued to be wedded to their old paymasters regardless of national repercussions. That continuity is the key to understanding how Vodafone arranged to sneak into India and then was able to pretend that it was the injured party.

However, the collaborators who paved Vodafone's way into the country were not the old dalal breed but two young entrepreneurs, Shashi and Ravi Ruia, whose father, Nand Kishore, had come from Marwar to Madras in 1956 to trade in iron ore. After his sudden death in 1969 the Ruia brothers, both then in their early twenties, expanded their business interests rapidly; that happened just as Britain was consolidating its post-colonial money laundering empire and finding many new clients among Indian businessmen.

In India, the face of that new empire was HSBC, the Hong Kong bank set up in the 19th Century by British drug traffickers; it took over Bombay's Mercantile Bank in 1959 and became the country’s primary conduit for black money.

All who made use of its facilities became vulnerable to blackmail, and to understand how that pertains to the Vodafone case we have to look briefly at how the British used their new clout to take control of Indian mass media.

They had begun the process before independence by arranging to sell the Times of India to a trusted comprador family, and in the decade that followed other financiers who had thrived under colonial rule took over all major publications. Even when there was no change in ownership, as in the The Hindu, British clout soon became evident in editorial content.

In newer media organizations the links were far more overt. The India Today Group emerged from a collaboration of “Lord Thomson of Fleet” and a Punjabi financier who had been neck deep in colonial British intrigues. NDTV was founded by the Anglo-Indian son of an employee of the British multinational Metal Box, and it has yet to cut its umbilical cord to the BBC.

All this led to Indian “elite” media reflecting, at best, a highly Anglo-centric worldview and at the worst becoming conduits for outright British propaganda – recent examples include the Purulia Arms Drop documentary on Times Now, and the vicious anti-Sri Lankan films on Headlines Today.

Not surprisingly, Britain’s devoted – or blackmailed – Indian claque raised no alarms as Vodafone made its stealthy entry into India.

To see just how many times the alarms could have been sounded, we have to return to the story of Shashi and Ravi Ruia, who had in 1976 reconstituted their father's company as ESSAR (S & R, their first name initials).

In 1992 ESSAR teamed up with Hong Kong-based Hutchinson Whampoa, a company that traces its origins to an opium “Dispensary” in Guangzhou established in 1828 by A.S. Watson, under which name it is now the world’s largest retail chain.

A.S. Watson is now part of a conglomerate that takes its name from two other British opium related enterprises, the Hongkong and Whampoa Dock Company and the John D Hutchison Company. Hutchinson Whampoa is now controlled by Chinese billionaire Li Shi-feng who has repeatedly been cited in American media, citing Intelligence sources, as closely linked to the Chinese People’s Liberation Army (PLA). He got his controlling share in the company from HSBC.

That dispensation of Opium Era goodies to the Chinese paved the way to the “One Country-Two Systems” deal that Margaret Thatcher negotiated in returning Hong Kong to Chinese sovereignty in 1997. It cut the corrupt Chinese political-military elite into Britain’s global criminal empire and gave enormous new heft to the “all-weather” alliance between Beijing and Britain's narco-terrorist proxy in Pakistan.

Much of this information has been in the public domain for over two decades, but none of it was reported in Indian media as ESSAR – in the wake of a sudden financial crisis – helped Hutchinson Whampoa enter the Indian market.

In May 2007, Vodafone paid $11.1 billion in black money for the Chinese company’s 67 per cent share in Hutchinson-ESSAR, beating out Reliance Communications, the Hinduja Group and ESSAR itself (which had the remaining 33 per cent of the company).

If the UPA government had not been so riddled with corruption, it could have stopped the transaction altogether on the grounds of national security (as the United States did in preventing a Hutchinson Whampoa takeover of the telecommunications firm Global Crossing). But with moral flakes like Kapil Sibal and Palani Chidambaram representing Indian interests that was never in the cards. The demand for $2.6 billion in taxes was the most assertive action the government dared to take.

Our Brit-proxy media have presented even that demand, and the retrospective law affirming its legality, as deep injury to “investor sentiment” abroad.

Not once has any Indian news organization looked at the dire implications of allowing a massive British company into the innards of our communications system. Not once has anyone complained at Vodafone’s temerity in trying to bully its way out of obeying Indian laws.

As far as our mass media are concerned, we could be back in the days when there was no one to observe or comment on Robert Clive’s insulting offer of a pension of Rs. 1250 to the scion of the Jagat Seth family that he had robbed of uncounted crores.

That is no overblown comparison. Our contemporary merchant princes are being every bit as dumb as the ill fated Jagat Seth. And it is not just the Ruia brothers.

Mukesh Ambani blindsided the Indian government and public in selling an $8 billion stake in Indian offshore gas to BP (British Petroleum), the most predatory oil company in the world; he consummated the transaction in the British Prime Minister's office.

Our media reported that Ambani then asked for police protection but showed no interest in explaining why. They also reported with the same strange lack of curiosity, the statement by the then Oil Minister Verrappa Moily that he had been threatened, as had his predecessors. No one made a connection between those strange reports and the new UPA policy of "freeing" gas prices that exposed the entire Indian economy to rampant inflationary pressures.

The Vodafone case is thus just the tip of an iceberg of British temerity.

More than six decades after our formal political independence India continues to be trapped in a network of British criminalities that range from relentless proxy wars and economic subversions to the threat of biological-bacteriological assault (on which I will elaborate in a later post).

Is Satya Nadella's Success a Slap at India?

Amidst the general Indian celebration of Satya Nadella’s ascent to the top of Microsoft R. Jagganathan, Chief Editor of First Post, has put out a classic piece of feel-bad journalism.

He thinks it is a “slap in the face” for India because Nadella succeeded not here but in another country.

He thinks if “Satya Nadella had remained in India, he would probably be working as a coder in Infosys or TCS. Earning a high salary no doubt, but an unlikely candidate for CEO.”

Between the headline and that final indictment comes a relentless flow of negative observations about Indians.

No Indian science Nobel laureate since independence is a citizen of the country. We “kill future heroes.” Only one per cent of applicants get into IITS and IIMs because “our system is designed to keep people out, not get them in.” It is because only “superlisters” get into those institutions that they “shine no matter what the quality of faculty or the curriculum.”

That exclusivity “comes from our caste system, where castes try and keep others out.” India “encourages talkers rather than doers.” That makes us "obstructionist rather than problem solvers. Our politics is about name-calling and running others down, not about doing something yourself.”

We do have "rare achievers" like Election Commissioner TN Seshan, CAG head Vinod Rai and Delhi Metro chief E Sreedharan, and we celebrate them "so highly” but call them “dictators.” That shows we “prefer autocratic rulers rather than democratic ones.”

“We are risk-avoiders rather than risk takers.” That is why “when our kids want to become artists or cricketers, we tell them to forget it and study for IIT-JEE or CAT, never mind your own passion.”

“We celebrate mediocrity … Our system kills initiative… Our successes are more the result of accident than real effort.”

Two things are obvious from this obtuse, self-hating flow of calumny.

The first is that it comes from a man who obviously has never personally achieved anything real -- he could not dismiss success so lightly if he had.

The second is that Jagannathan is deeply dishonest in ignoring what is undoubtedly the most corrupt, imitative and third-rate area of our national life, the “elite” mass media.

The criticisms he makes are meretricious. As I have pointed out in an earlier response to feel-bad journalism, India is hardly lacking in homegrown successes.

What we lack is a media establishment capable of seeing and celebrating the great positive elements in Indian society that have allowed us to maintain our independence, democracy and traditions through a period of stress and danger unprecedented in history.

Those qualities are not abstract. They are the daily realities of hundreds of millions of individual Indian lives, endurance, ceaseless effort, equanimity in the face of high risk, love of family and a clarifying sense of the sacred rooted in ancient history but perennially renewed.

When combined with professional skill and high intelligence, it makes for a Satya Nadella.

To see the lack of similar success for many with shared qualities in India as a slap in the face of an anonymous "system" is typical of our deracinated "elite" media. It is based on the stupid and dangerous presumption that our society can and should be an imitation of the United States.

I have split my life in almost equal halves between the two countries and know they are fundamentally different.

The United States is the most modern of social experiments, founded in a written constitution just past its 225th anniversary (2012). It has been a work in progress, evolving towards the ideals of human freedom and democratic governance until the Ismay-Churchill coup of 1946 empowered an unconstitutional "military-industrial" establishment. With Edward Snowden the fight to regain constitutional America has been joined, and it will unquestionably be won. 

India is a society that has evolved for many thousands of years, its castes rooted in tribes that unified under the philosophical recognition of a common sacred reality. It has seen many ups and downs over the millenniums, and  is now in a period of renaissance that Guru Nanak set in motion over five centuries ago. That upsurge won Indian political independence but has not yet returned our society to its ancient capacity for original thought and social adaptation.   

Although the Indian Constitution borrowed heavily from the American, the challenges we face are far more complex than in the United States. While seeking the same democratic life we must move the whole complex apparatus of our ancient society without permanent injury to the many groups unable at present to defend their own interests.

That is what makes India "inefficient" in Western eyes; it is what offends the murky interests behind Narendra Modi; it is the reality that the bought and sold analysts of our "elite" media do not see.

Unless we have inspired political leadership, the current situation will lead to violence, for there is a great deal of unscrupulous greed closing in on India. An example is the Essar Group (the Ruia brothers, whose initials, S and R make up their corporate name); its "BPO unit" in the United States is staffed predominantly with American servicemen who could at some point generate a Blackwater type private army. Some years ago, an Essar employee was caught with money for Naxalites, and before that, the corporation helped insert Vodafone into the Indian market using black money and avoiding taxes. Clearly, the brothers let very little stand in the way of making money.

If the so-called radicals and corporate mercenaries engage in an escalating conflict India could easily end up like the Democratic Republic of the Congo, with a variety of militias fighting endlessly for turf as corporations steal our resources and ruin our society.   

Jagannathan and his tribe will probably see that as a necessary step to "development."

Money Launderers Discover Their Inner Policemen

In a comic opera turn of events those who run the global money-laundering system are declaring their sudden discovery of the need to oppose themselves.

Prime Minister David Cameron of Britain has written to other European Union leaders, urging that the June G-8 Summit he is hosting initiate "radical" international action to crack down on tax evasion and avoidance.

His Minister for Middle East affairs, Alistair Burt, told the Deutsch Press Agency (DPA) that the British Foreign Office would create a special team to help with the return of stolen assets to the “Arab Spring” countries. (The former dictator of Tunisia is reported to have decamped with about a ton of gold.)

Prime Minister Juliana O’Connor-Connolly of the Cayman Islands (among the most active of offshore tax havens), wrote to her British counterpart pledging support for the initiative on a multilateral automatic exchange of tax information. She called on other national leaders to participate in the system to “ensure efficiencies of cost and resources,” and “avoid the risk of multiple competing standards.” (More plainly, Don't bother investigating the specifics of who actually drained trillions of dollars from developing countries.)

Juergen Fitschen, executive head of Deutsche Bank AG declared on German Radio that there would be "zero tolerance" for tax evasion. "Tax evasion is a criminal offense. That says it all," he said.

The reason for all this righteous zeal?

The secrecy surrounding the payments system of the global black market is falling away under pressure from the American and German governments; also, developing countries, newly aware of their losses, are raising the issue in international forums.

African countries especially, have made it a joint priority to stop the haemorrhage and have established a high-level panel on the matter chaired by former South African President Thabo Mbeki. They have made it a key target of their post-Millennium Development Goals (MDG) development agenda.

Meanwhile, the super-rich around the world have been making their own adjustments to the loss of hideouts. Businessweek reported last week on how a number of Russian and Western European billionaires were running for cover. Reuters carried a story saying wealthy Americans were filing tax returns showing their long-standing secret accounts as if they were newly opened.

But does all this mean the end of money laundering and the Global Black Market?

Not by a long shot.

Last week Indian mass media ignored or reported sotto voce that British telephone giant Vodafone would be partnering with ICICI bank to introduce the “mpesa” in India. The “mpesa” is Vodafone’s system for moving money over mobile telephones, and it can undercut all efforts to make financial institutions responsible for knowing their clients and monitoring suspicious transactions.

Which part of the government authorized the launch of the “mpesa” system in India has not been reported, but the Finance Ministry cannot be without a role.

There should be an investigation to see who specifically was involved.

Did they take into consideration that ICICI bank is currently being probed for money laundering? Or that Vodafone’s massive tax problems with the Income Tax authorities centre on the use of tax haven funds to buy into the Indian mobile market? Or that the company it acquired was a joint venture of ESSAR, which was caught funding the Naxalites, and Hutchinson Whampoa, the Hong Kong conglomerate with close links to the Chinese People’s Liberation Army (PLA)?

The “mpesa” mobile phone currency would make it impossible to track the funding of violent individuals and groups in India.

There are many other ways that money can be laundered and moved, and the government should consider carefully the implications of “economic reforms” that make the country increasingly vulnerable to groups with a long record of international criminality.

Rather than pussy-foot around this issue, perhaps it is time to do some plain speaking to British governmental and corporate leaders.