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China and the American Election

Previously, I’ve presented both John McCain and Barack Obama’s statements on China. However, with recent vice-presidential picks and developments, there’s new information to be considered.

While both Presidential candidates have at times “talked tough” on China, it’s important to remember that traditionally much inflammatory campaign rhetoric has been just that, rhetoric. The China Backpedal of talking tough in the election campaign, then pursuing a conciliatory relationship once in office, is well-documented.

Ultimately, however, since you (the reader) also possess interest in China, I think it’s also useful to hear some of your responses on which president you think would be

(1) best for continuing peaceful relations, and/or (2) best for long-term strategy (from America’s point of view).

As you read the analysis, feel free to retort with your own opinions.

It appears John McCain’s past interest in free trade implies he would encourage a positive relationship between heavy trading partners America and China whilst preserving American economic strength and military investments in the Asian region.

McCain appears to have a balanced opinion in regards to China. He counseled Bush to “avoid confrontations” on his Beijing Olympics trip to China, saying that some of China’s actions are “also regrettable, but I don’t think China is regressing the way that Russia is. We have a greater opportunity to work in a cooperative way with China.” McCain “hopes Bush will tell the Chinese leadership that “we understand, as the [DL] does, that T$3b$t is part of China but we hope Tibetans are not repressed or oppressed.” Importantly, McCain met relatively recently with the D$$ai L$$a in Colorado (Washington Post).

McCain’s main foreign policy focus will be on Iraq and Iran. Being a military man, McCain doubtless realizes there is little to be gained by forcing America to further overextend forces to posture against China over issues that present relatively minor relationships to immediate American interests. On the negative side, it is possible the McCain presidency will continue the dubious Bush policy of benign neglect of ASEAN and South-East Asian relations, which would allow China to increase its influence in that region.

Running-mate Palin’s foreign policy experience is slighly less than Obama’s (she hasn’t yet visited Iraq or Europe on state-trips), and regrettably there are few easily located documents on any statements tied to her positions on China.

Ultimately, a McCain presidency appears to offer continued peaceful relations with China.

Barack Obama would be pressured by both his party [Nancy Pelosi is a noted China-basher] and his own conscience and campaign rhetoric to “get tough on China.” Obama has made several tough statements on how America is “shipping jobs overseas.” If he carries through with campaign promises, Obama might work to roll back certain aspects of China-trade, perhaps creating more jobs in the United States. If he succeeds, that would certainly harm US-China relations and raise prices of goods that were formerly cheaply made-in-China, or assembled therein. At a minimum, Obama might seek to set up administrative hurdles to US-China trade, as Experience Not Logic implies in its analysis of Obama’s acceptance speech and the Democratic primary debate.

Obama’s running-mate, Joe Biden, is even more negative on China trade, saying; “If I were president, I’d shut down any imports from China, period, in terms of their toys — flat shut it down. Imagine if this was Morocco selling us these toys, we would have shut it down a year ago.”

Obama’s anti-trade policies may ultimately strengthen domestic American manufacturing that does not depend on imports of parts. However, it appears monentary policy moreso than trade policy can help much American manufacturing return. With the decline of the dollar and the rise in the price of oil/barrel, foreign companies are opening manufacturing in the United States (Also see this article on the role of foreign investment in the US economy). Nevertheless, if an article in the WSJ by Brian Wesbury is to be believed, although manufacturing jobs as a percentage of all jobs is off from their height of nearly 20% in 1985, and have declined to nearly 10% (similar to the percentage in 1950), industrial production, and therefore productivity in America has increased significantly, up 75 points on a 100 point index scale– which means that America has invented away a need redundant manufacturing jobs.

Despite Obama’s anti-trade rhetoric, one Chinese journalist believes that because much of Obama’s expert team consists of Clinton-era officials, his relationship will be pragmatic. Still, that same journalist believes “an Obama administration would put more pressure on China, even to the point of being more likely than the Bush administration to use the WTO to confront China in court on related issues.”

On the plus side with Obama, he will probably talk to Hu Jintao, and not overtly pressure China beyond token expressions of dissatisfaction. At least, talks will happen if Obama isn’t forced to burnish an image of diplomatic weakness, like former US President Kennedy needed to do in order to establish credibility. If Obama is perceived as “weak” after having unsuccessful talks with Iran or Syria or Hamas, then he will need to regain his political capital somehow– and that somehow could be through bashing Russia or China- traditional bugaboos.

It is a little uncertain to say what Obama’s ultimate China policy relationship will be, but it is promising to note his advisory staff contains several people who possess deep knowledge concerning China.

Cirque De Obama

Election '08: Barack Obama says we can't afford four more years like the last eight. What, exactly, is bad about winning a war on terror, keeping Americans alive and free, and letting us keep more of what we earn?

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We weren't expecting Sen. Obama to thank President Bush for keeping America and its citizens safe from terrorist attack since 9/11, or for winning the war in Iraq and bringing democracy to the heart of the Middle East.

But we hoped for more from The One than a proclamation that he had come to lift us out of the bondage of the Republican Dark Ages.

Delivered in a stadium with a corporate logo and built with capitalist profits, Obama's acceptance speech was workmanlike as promised, albeit staged on what looked like a movie set left over from the World War II propaganda film, "Triumph Of The Will."

Still, Obama's performance was enough to move Oprah Winfrey to tears. "I cried my eyelashes off," she said. It was enough to make us cry, too.

On Iraq, he said he'd "end this war responsibly." John McCain would end it in victory. Obama hid the fact that he opposed the surge that defeated the jihadist insurgency.

In January of 2007, Obama introduced legislation in the Senate to have all U.S. troops out of Iraq six months ago. Had we listened to him, there would no free and democratic Iraq today. We'd have snatched defeat from the jaws of victory, as Democrats forced us to do in Vietnam, and the jihadist victory would have rivaled the killing fields of Cambodia. Our troops would already be home, their sacrifice in vain.

Obama pledged to "finish the fight against al-Qaida and the Taliban," forgetting it was President Bush who took the fight to the enemy with Obama in opposition. The fight in Afghanistan isn't over. But Obama failed to explain why, as chairman of a subcommittee having jurisdiction, he held not a single hearing on a theater of operations he now deems critical.

On the economy, he said: "Unlike John McCain, I will stop giving tax breaks to corporations that ship our jobs overseas, and I will start giving them to companies that create good jobs right here in America." Yet he once proposed doubling the capital gains tax to punish the very risk-takers he now purports to champion.

When it was pointed out during a primary debate that higher capital gains taxes can generate less revenue and discourage economic activity, Obama mumbled something about "fairness." Thursday night, the code words were "mutual responsibility." But it's all about redistributing income.

We need more, not fewer, tax breaks. The average combined federal and state tax rate on corporations is now 50% higher than the average of our international competitors. At 39.3%, it's second only to Japan's. In some states, including California and Pennsylvania, it's the highest in the world.

The average European nation has tax rates on corporate income some 10 percentage points lower than ours. Ireland has a corporate rate of 12.5%. If you were a businessman, where would you locate?

"I will cut taxes — cut taxes — for 95% of all working families," Obama said, "because in an economy like this, the last thing we should do is raise taxes on the middle class." Apparently Obama thinks you are "working" only if you produce perspiration, not inspiration. The fact is, he'll raise taxes on everything and everyone, directly and indirectly, open and hidden.

According to a study by the Heritage Foundation, letting the Bush tax cuts expire, as Obama intends, will reduce our annual GDP by $100 billion with the loss of up to 900,000 jobs. Over 10 years, taxes would increase by some $1.7 trillion. For the 116 million Americans paying taxes, that's an annual tax hike of about $1,800 a year.

Last year, Heritage analyzed the effect of eliminating the Social Security earnings cap, as Obama has also proposed. In the first year alone, the take-home pay of 10.3 million workers would be reduced by an average of $5,650. Taxes would also be raised on four million workers over the age of 50.

Taxes would also be raised on 3 million small-business owners. By 2015, the number of job opportunities lost would exceed 865,000 and personal savings would decline by more than $55 billion.

And if you think this would raise taxes only on the "rich," think again. According to Heritage, taxes would be raised for 97,065 carpenters, 110,908 police officers, 254,992 nurses, 208,562 post-secondary teachers and 237,000 dentists.

Eliminating the earnings cap would raise taxes for many middle-class families, impose a huge burden on small business, slow the economy and cost jobs. You don't help the people riding the wagon by punishing the people pulling it.

On energy, Obama said that "in 10 years, we will finally end our dependence on oil from the Middle East" and that he "will tap our natural gas reserves." Yet he opposes drilling where huge amounts of oil and natural gas are to be found — in locked-up areas such as ANWR, the Outer Continental Shelf and in federal lands out West.

He also said he will "find ways to safely harness nuclear power." But we already know the ways countries like France safely store and reprocess nuclear waste. John McCain wants to build 45 new nuclear power plants nationwide by 2030 to meet a demand for electricity that is expected to grow 25% by then.

"Sen. Obama has said that expanding our nuclear power plants 'doesn't make sense for America,' " McCain says. "He also says no to nuclear storage and reprocessing. I couldn't disagree more. I have proposed a plan to build additional nuclear plants. That means new jobs, and that means new energy.

"If we want to enable the technologies of tomorrow like plug-in electric cars, we need electricity to plug into," McCain said recently at Michigan's Fermi II nuclear power plant.

Obama also proved once again how wrong he is on foreign policy, taxes, the economy and energy.

"On Nov. 4," he said, "we must stand up and say, 'Eight is enough.' " But as far as we're concerned, it's just a start. Under a President McCain, the Obamas would be safer and more prosperous than if they themselves occupied the White House.

Conventional Wisdom (Day One for Republicans)

SAINT PAUL, MINNESOTA--Political conventions used to feature pitched battles among party factions, and the challenge to convention planners was to muffle these internal wranglings sufficiently so that the nominee could get his message across to the public on Thursday. The Democrats feared this kind of convention in Denver, but Barack Obama avoided it. The Republicans haven't had a convention like this since 1992 when the Buchananites made a ruckus--and this one continues the peaceful trend. There are clearly differences in the party, but John McCain and the Republican National Committee have submerged them under the flood waters of Gustav and the threat of a Democratic victory in the fall.

With party factions stilled, McCain and the RNC have been able to concentrate on getting their message across to the public and to the delegates. They will do the former primarily through television--and Gustav has probably helped rather than hurt their effort, because it has allowed McCain to reinforce his own message of "Country First." They will do the latter primarily through meetings the first two days of state delegations and party groupings (such as women and youth). I attended some of these. As Noam pointed out earlier, Republicans are much better at message control than Democrats; there was uniformity in what people said at these meetings--both in their public statements and in interviews. They clearly had a line that had been handed down to them and they adhered to it.

The Republicans stuck to the convention strategy of putting country before party while Gustav raged in Louisiana. They wildly praised McCain, but I heard no criticisms of Obama The most I heard was a statement by Sen. George Voinovich at a Young Republican luncheon that he much preferred McCain to "Mr. Obama." There was a furious attempt to gin up enthusiasm for McCain. Speakers continually painted McCain as a hero. Said Mike Huckabee at an Arkansas delegation meeting I attended, "I recognize in John McCain we have a true honest-to-God American hero." Soldiers who had been imprisoned with McCain at the Hanoi Hilton spoke at both the Arkansas and Mississippi meetings.

Perhaps, the emphasis on McCain was to be expected, but when I attended a few of these state delegation meetings at the 2004 convention, most of the discussion was about how to get out the vote in November. The convention planners in 2004 took the enthusiasm of the delegates for the party nominee for granted. In 2008, they don't seem take the delegates' enthusiasm for McCain for granted. They were still trying to get the delegates excited about him.

Ditto vice presidential nominee Sarah Palin. I went to the Mississippi delegation's meeting partly to hear former UN Ambassador John Bolton talk about foreign policy, which I expect to be a major issue in the fall. But Bolton devoted his entire speech to praising Sarah Palin. He enumerated the details of her life (and her husband's snow machine successes); he cited Alexander Hamilton's praise in the Federalist Papers for the "energy in the executive"; and in his one mention of foreign policy, he said that when he met her during a National Review cruise-stop in Alaska, she "knew the ins and out of the missile defense issue." Bolton was clearly acting on orders; and the orders were to create enthusiasm for and remove doubts about Palin.

The Mississippi and Arkansas delegations didn't seem to need prodding about Palin. They were on the ultra-conservative side and responded enthusiastically to the idea of "pro-life, pro-family" candidate. Pat Harris, the emcee of the Arkansas meeting, which was sponsored by Wal-Mart, declared that, "When the Lord comes back down, he has three shots of finding me: I'm at school, I'm at church, or I'm at Wal-Mart." I also couldn't nudge former presidential candidate Gary Bauer, a speaker at the Arkansas meeting, into confessing misgivings. Bauer thought that Palin would bring McCain "working class voters" who backed Hillary Clinton, but for whom "life issues are not going to be a stumbling block."

But you could detect some misgivings from the politicians. Both Huckabee and Voinovich praised Palin, but well toward the end of their speeches, almost in the form of a "P.S." And the young Republicans, who tend to be less conservative on social issues, also didn't display the same kind of enthusiasm for her as the state delegations. Still, I am not sure, and my colleagues and I will have to interview some delegates to find out whether there are any doubts or misgivings about Palin.

After the state meetings, I wandered into the RNC Political Leadership Briefing because I thought I would hear some political discussion about McCain's prospects, but instead I heard about how the RNC plans to get out the vote in November. It was the kind of discussion that took place in the delegations four years ago, but was taking place (as I discovered when I was ordered out after an aide discovered me) in private at this convention. When I entered the room, Rich Beeson, the political affairs director of the RNC, was talking. He explained that the new technology that the RNC was using would permit it to out-organize the Obama campaign in 18 battleground states.

Beeson cited a number of figures: With the new technology, it would take 190 Obama workers to accomplish what 100 Republican volunteers could do. It would allow Republicans to make 13,700 phone calls to 7,200 for the Democrats. It would bring in 8,500,000 votes at $.90 a vote in battleground states. What was the technology? I missed the earlier part of his presentation, but it had to do with automated calling and voicemail.

Beeson did enumerate one feature of the new technology. When a Republican volunteer, calling from his home in Kansas, telephones targeted voters in New Hampshire and Missouri, those voters would see a local area code on their telephone ID and would therefore be more inclined to pick up the phone. Is this an innovation? I'm not sure, but to anyone who dislikes telemarketing, it borders on phone harassment.

After Beeson, Danny Diaz, the RNC's director of communications, began to explain the RNC strategy for avoiding embarrassment in the wake of Gustav. "The media will be looking for split screen shots of devastation in the Gulf and Republican partying in St. Paul," Diaz warned. I didn't learn how the RNC hoped to exert party discipline in St. Paul--that's when I was ushered out of the room, apparently the meeting was closed to the press. But based on my first day's experience, I have no doubt they will succeed. This is a pretty docile group that wants to do anything to win in November.

--John B. Judis

P.S. I forgot to mention that the RNC's leadership meeting, where they unveiled the "new technology," was orginally scheduled for the Mirage Room of the Hyatt, but was later moved to the Regency Room.

Understanding Russia

Moscow's aggression is aimed not at Georgia's territory but at Europe's new democracies.

THERE WAS a telling juxtaposition of headlines from Russia yesterday. On one side you had President Dmitry Medvedev claiming a "sphere of influence" outside Russian borders and Foreign Minister Sergei Lavrov warning the West not to arm Georgia. On the other side, you had the murder of Magomed Yevloyev, a journalist whose independence had angered the government. He was arrested, shot in the head by police while riding in the back of a police car, and dumped by the side of the road.

This is a moment for clarity in thinking about Russia, which is forcibly occupying sizable chunks of a neighboring country and claiming it has every right to do so. Some in the West are tempted to agree. After all, the United States and its allies invaded Iraq and attacked Serbia; why can't Russia do the same to Georgia? Why can't it have a NAFTA of its own?

Here's why. The United States, Britain and other nations deposed the Iraqi dictator Saddam Hussein because he repeatedly violated his promises to the United Nations, after his earlier invasion of Kuwait, to rid himself of weapons of mass destruction and prove that he had done so. They invaded Serbia to protect the people of Kosovo from mass ethnic cleansing and destruction. In both cases, reasonable people can argue that it was wrong to act without U.N. authorization; they can make a case that the campaigns were unwise on many other grounds.

What they can't argue is that the allies were motivated by a desire for conquest or occupation; as the presidential campaign has shown, the American people can hardly wait to pull their troops out and leave Iraqis to manage their own affairs. NAFTA, meanwhile, was freely entered into by three democratically elected governments. If Canada wants out, the United States will not seize Ottawa.

Russia, on the other hand, is seeking to overthrow a democratically elected government precisely because that government does not want to be subjugated to Moscow. Mr. Medvedev's claim of a Georgian genocide, after his own government published casualty figures of 200 or so, is deliberately preposterous; he is mocking the very idea of humanitarian intervention. As Russia under president-turned-prime-minister Vladimir Putin has become less and less democratic, it has become increasingly aggressive toward neighboring democracies. The more democratic those neighbors become -- see Ukraine, Poland, Estonia, Lithuania, Latvia -- the more hostile Russia becomes.

The brave Mr. Yevloyev, who returned to his hometown in the province of Ingushetia despite ample warning that Mr. Putin's thugs were waiting for him, may seem like a footnote to all this. But his death -- like the deaths of Anna Politkovskaya and so many other journalists and liberal politicians before him, like the death of the free press and open debate -- is at the heart of the story. Mr. Putin is turning Russia into something very like a fascist state, and its natural inclination will be to replicate itself abroad. "The Cold War was clearly about ideologies," Russia's ambassador to the European Union, Vladimir Chizhov, noted yesterday, and then claimed: "We are living in a different world today. There is no ground for talk about a second Cold War."

Judging by the E.U.'s feckless response yesterday to Russia's aggression, many European leaders still want to believe Mr. Chizhov. But what is happening in Georgia is very much about ideology, and the longer the Europeans pretend otherwise, the greater the damage they will have to contain.

Sarah Palin: Deeply Threatening to the Left?

By Andrea Tantaros

The moment the McCain camp confirmed it had chosen Alaska Governor Sarah Palin as its choice for VP, conservatives, females and many mothers across the country rejoiced. She brought so many positives that I couldn’t help but wonder how long it would take the left to dig for the negatives.

Shortly after the announcement a friend asked me “when do you think the weird, rural farmer’s daughter rumors will start?

Apparently, not long after.

The Daily Kos (or as I like to call it, The Daily Gross) has stooped to a new low by repackaging a plot line from last season’s “Desperate Housewives” and publishing it as a disgusting hit piece alleging Palin’s special needs son is really her grandson. — And that she pretended to be with child to cover up her teen daughter’s underage pregnancy. Now, we’ve just learned Palin’s teen daughter Bristol is pregnant, debunking this awful rumor, yet still igniting the attacks of angry liberal bloggers.

This could only mean there must be something about Sarah Palin that is deeply threatening to the left, a constituency that has long believed they have cornered the working mother market. Five kids? She should be at home begging Democrats for a handout. A husband in a union? He should be on the picket lines.

Liberals like to pretend they are tolerant and accepting of those who are different but when it comes to anyone not ensconced in their progressive, elitist dogma they mock and attack their lifestyle to inspire hate. But because governor Palin is endearing, authentic–and with this latest revelation–easy to identify with, she invokes panic in the left. Why else would they assail a very popular, promising lady and her children?

The key question here is: what is the extreme left trying to prove? How does this make Sarah Palin unfit to serve? And how exactly will this story look bad to voters? A mother stands behind her child. I can think of worse stories than “Palins Come Together to Support Teen Daughter.” This is America. This is life. And this is private.

Ridiculing McCain’s VP pick for her commitment to family, poking fun at her hobbies and pushing smear about her kids will only bite back. Remember there’s a reason the naked protesters who ran up and down Eighth Avenue in New York City during the 2004 convention helped Republicans: they made liberals look cuckoo for cocoa puffs.

Perpetuating laughable legend and assailing the American family is akin to the in the buff boycotting. –It makes the lefties look desperate, unstable, paranoid and downright mean. And it will hurt the Democratic brand if it continues.

The back story here has nothing to do with Palin and her family but more to do with the extreme left. All Americans should take note: if liberals aren’t going to show Governor Palin or her family any respect, voters shouldn’t expect their policies to either.

Now Basra basks

By Andrew England

When asked about the militias that until a few months ago controlled Basra, a young Iraqi soldier stamps his boot to the ground as if crushing a beetle. Clearly feeling confident in his camouflage uniform and red beret, he then swishes his hand as if it were an axe to chop at his legs.

The point he is animatedly trying to make is that he believes the Shia Islamists who had wreaked havoc have been crushed. But could they return? “Never,” insists the soldier, giving his name as Assad.

That assessment is open to contention. But Iraq’s second city and main economic centre shows signs of a remarkable turnround following an Iraqi-led operation to purge the city of gunmen and end more than two years of rule by gangs and rival factions.

A prosperous Basra, which is home to 70 per cent of Iraq’s proved oil reserves and its only deepwater port – and which as a result accounts for 90 per cent of government revenue – will be crucial for Iraq’s future. The ability of the Iraqi forces to maintain security will test how far they have developed, as will the willingness and capacity of the Shia-led government in Baghdad to use the security gains to provide the public services that have been lacking and promote economic progress.

Last December, as British troops were handing Basra province over to the Iraqi authorities, Basrawis spoke of a city where fear, intimidation and death were the norm: kidnappings were commonplace; dozens of women were murdered for dressing or behaving in a way the militias considered immoral; few people dared venture out after dark and many intellectuals, doctors, businessmen and teachers had fled for fear of being targeted.

British troops, who had been responsible for the south since the 2003 US-led invasion of Iraq, had controversially withdrawn from downtown Basra in September after a constant barrage of deadly attacks. When they did venture beyond the confines of their heavily secured base at the airport, they avoided routes where their presence might antagonise the militias. British diplomats, meanwhile, had not dared enter Basra city since late 2006 because of the security risk.

Yet today, residents talk about being able to enjoy family picnics on the banks of the Shatt al-Arab waterway and late-night dinners at restaurants. Women are able to wear brightly coloured head scarves and show their faces instead of being fully covered in black robes. While the soldier was speaking outside a hospital, a young nurse wearing a brown headscarf with blue trim walked up and joined the conversation, showing a confidence among male strangers that would have been virtually impossible before.

“Security is better, so everything will be better, inshallah [God willing],” says Assad Hassan, a doctor, adding that three of his medical colleagues at the hospital who had fled the mayhem have returned.

British development officials are also cautiously starting to make trips into the city as they seek to help the Iraqi authorities tackle rampant unemployment and dilapidated basic services. Through the rear bullet-proof window of a Mastiff armoured vehicle, a development official keen to highlight the changes points to freshly planted trees and piles of new paving stones waiting to be laid.

“You cannot discount a resurgence [in militia activity] but I think it is unlikely,” says Nigel Haywood, Britain’s consul general in Basra. “Our policy will be to continue to cement in the security gains by actually addressing the issues that have disaffected people: this is the water, sewage and electricity and trash issues on one hand and tackling unemployment on the other. We are determined to push ahead with these to fill the space that would otherwise be filled by terrorists or potential terrorists.”

Last week, Mr Haywood joined the Basrawis on the banks of the Shatt al-Arab for dinner with tribal leaders, a rare night trip out in the city. Back at the airport, however, UK staff were diving to the ground that evening as rockets were fired into the base. It was the first such attack for about three weeks and the rockets failed to detonate, but it illustrated the threat that still exists.

The improvements that have taken place can be traced back to a military operation dubbed “Charge of the Knights”, launched by Nouri al-Maliki, the prime minister, at the end of March. The mission – primarily intended to clear out fighters of the Mahdi army, which is nominally loyal to Moqtada al-Sadr, the firebrand Shia cleric – was initially greeted with scepticism. There were reports of hundreds of government troops refusing to fight and others joining the militias. Not for the first time, the credibility of Mr Maliki, who set up shop in Basra palace to lead the operation, was in question.

British officials were caught off guard. General Mohan al-Firaiji, then the head of the Iraqi army in Basra, had been planning to build up his forces and launch the operation in July. It was a move both the Americans and British supported, a UK officer says, but under Mr Maliki’s orders Gen Firaiji telephoned his British counterparts telling them the operation was to be launched within 48 hours, the officer says.

After initial setbacks, the 30,000 or so Iraqi troops were boosted by US air support, as well as some 800 American troops, with the US playing a vital role in the predominantly Shia region that had previously been Britain’s responsibility. Before Charge of the Knights, there were fewer than 20 American soldiers in Basra.

UK forces provided logistical and air surveillance support. A ceasefire agreement between the government and the Mahdi army – mediated with the help of Iran, which both the US and UK have repeatedly accused of arming and financing Shia Islamist groups in Iraq – put an end to the worst fighting. The Iraqi army moved into districts that were previously militia strongholds but the extent of the damage done to the Mahdi army is still unclear.

“They did melt away, they put down their arms, they were never an army . . . These were part-time fighters who had, like any other Iraqi, a gun at home, so it was very easy to put your gun away; you don’t even have to take off your uniform because you don’t have one in most cases and you go back to your part-time job or whatever,” says Joost Hiltermann, analyst at the International Crisis Group. “But that also means they can be summoned again to fight.”

The British officer, however, sees things through a different lens, arguing that many of the senior militia leaders fled, either to other parts of Iraq or across the porous border to Iran, or were detained. “The Sadrists have spun that they made a deal that allowed the army to take over Basra. The reality is that even during the ceasefire, which Maliki agreed to enable the foot-soldiers to lay down their weapons and go home, the hard core were still being rounded up by the army with almost no resistance,” he says. Nearly 6,000 mortars, 690 rockets and more than 300 explosive devices were recovered, according to British figures. In a mix of pick-ups, bigger trucks and armoured personnel carriers, the Iraqi army – with some 20,000 troops in Basra – now patrols the city.

Basrawis are clearly relieved about the security improvements but many still harbour doubts. Two weeks ago, Malik Noori al-Ibrahimi treated his wife and children to dinner at a restaurant on the Shatt al-Arab. It was the first time he had risked such an excursion in more than two years and “people were very happy”, he says. But he has also recently heard that police arrested a man who had arrived from Iran with a list of people who should be killed by militia, including doctors, teachers and managers.

Mr Ibrahimi works for a US-funded development agency, making him a potential target, so the fact that he is willing to talk to a journalist and have his name used indicates a new confidence. However, he is still cautious. “We are afraid that someday the militias will come back again . . . It’s safe but not 100 per cent,” he says. “This is our main concern here in Basra.” He trusts the army but has little faith in the police force, a body notoriously infiltrated by the militias.

Mohammed Naeem, an information technology manager, agrees, saying that while the army is made up of soldiers from outside the province, most of the police are Basrawis with questionable loyalties. “After Saddam’s [Hussein] fall, all the police were owned by militias,” he says. He and others say few of the intellectuals, professionals and businessmen who fled have returned to Basra. Mr Naeem wants to see more done to tackle unemployment, which UK estimates put at 17-30 per cent.

Progress will depend heavily on successful development programmes and a revitalising of Basra’s economy. Along a street of small shops lined by crumbling pavements, one man after another speaks of the improved security but then complains about the lack of jobs and poor electricity supplies – several Basrawis say they receive two hours of electricity followed by four hours off.

Another main factor will be the strategy of the Sadrists and the Mahdi army, which has drawn much of its support from unemployed, disaffected young men. Mr Sadr last week extended a ceasefire with US troops indefinitely and has recently been saying he would divide the movement into two wings, creating a political and social organisation alongside a fighting force.

The British are keen to see the Sadrists – which were responsible for many of the attacks against UK forces – take part in provincial elections. “You can change your approach; you are allowed to – look at Northern Ireland,” Mr Haywood says. “The main thing is to stop them espousing violence and to have them in the political process.”

The elections are supposed to take place in October, but Iraq’s parliament has not yet passed the required legislation. Analysts say a motive behind Mr Maliki’s decision to launch Charge of the Knights was to discredit and reduce the power of the Sadrists ahead of the elections. But attempting to marginalise the movement could be risky. “If Sadr is excluded from Iraq’s political process, feels the process is unfair, or chooses to mix politics with violence, the JAM [Mahdi army] could again become a major threat,” analysts at the Centre for Strategic and International Studies wrote in a report last month.

Many uncertainties linger, from Iran’s influence, which is murky at best, to the aspirations of Mr Sadr, the capacity of the Mahdi army and the ability and willingness of the government to allow greater political participation from other groups. “Everybody is waiting for elections,” says Mr Hiltermann at ICG. The American race in November is of obvious importance, he adds. “What is the US posture going to be – are they going to withdraw?” But the Iraqi provincial polls would also help determine what happened, at ground level.

“You can make the argument, not only for Basra but for the whole of Iraq, that nothing is sustainable without political solutions. We can look at the security progress everywhere and say it looks great, but you cannot sustain this without progress on the political front.”

‘HOW CAN I HIRE? MY BUSINESS IS STAGNATING’

As Michael Wareing, the chief executive of KPMG International, clambers out of a helicopter, British troops crouch with rifles to their shoulders, forming a security perimeter and keeping an eye out for any hostile Iraqi fighters.

With a briefcase in one hand and a flak jacket over his shirt and tie, the head of the accounting firm makes his way into a vocational training college in Basra to speak to Iraqi businessmen and students. Mr Wareing (pictured) is there as co-chair of the Basra Development Commission, charged by Gordon Brown, the UK prime minister, with promoting investment in Iraq’s south.

Reviving the stagnant economy and reducing high unemployment will be critical to the future stability of Basra, as Shia militias have been able to draw much of their support from idle young men and the urban poor. An unashamed optimist, Mr Wareing says Basra is “definitely on the radar screen, just because of the natural resources” in terms of interest from foreign companies.

The hope is that the improved security situation – which made his visit to the city possible – and abundant oil revenue will boost the interest from investors bold enough to pour money into the war-torn country.

ArcelorMittal, the international steel producer, has already submitted a proposal for a venture with a state-run steel plant that would have an initial investment of $1bn (£555m, €685m), later rising to a total of $3.2bn, according to UK officials. The company, confirming that it had submitted to the Iraqi government, says it is looking to tap into the market for steel in Iraq as reconstruction pushes ahead, as well as meeting steel demand throughout the Middle East.

“In time, steel will prove important to the reconstruction effort in Iraq,” says a company official. “We would only invest if we felt we could guarantee the security of our employees . . . The first thing is to see how the Iraqi government responds to our proposal.”

The exact nature of any foreign investment deals is still up for negotiation and any form of privatisation would be a sensitive political issue for the government. Still, Mr Wareing says that his commission is working with about 15 companies that are interested in investment in Basra, a mixture of regional groups and multinationals.

Much of the focus is on hydrocarbons – although the government has yet to pass legislation to allow international companies a greater stake in the sector – as well as on rundown state-owned entities in Basra province and possibilities with Umm Qasr port.

But hurdles will need to be overcome before it will be possible to speak of an economic revival. Westerners still have to travel amid high security; the banking sector is dilapidated and the absence of financing is a big problem for local companies; electricity supplies are intermittent; corruption is widespread and the regulatory environment is poorly understood.

The Iraqi private sector is also underdeveloped: of the some 12,000 companies in Basra, only a few have more than 20 employees, according to a UK official.

“How can I employ new people when my business is stagnating?” asks one Iraqi businessman at a meeting with Mr Wareing. He responds by saying that the private sector would be one of the main focuses of the development commission, which is involved in launching a pilot youth training scheme.

“I realise that much needs to be done, but we are very focused on a range of initiatives,” says Mr Wareing. “But I agree just having projects like this without having real jobs . . . is not helpful.”

McCain Refuses to Meet with Iraq Veterans Against War

OBAMA SEES CONVENTION

Republican convention to resume

Tuesday's events at the Republican Convention will focus on Mr McCain and Mrs Palin

The US Republican Party's convention is due to resume its main agenda now that Hurricane Gustav's threat has passed.

The gathering in St Paul, Minnesota, will see John McCain nominated as the Republicans' presidential candidate.

President George W Bush is due to address the convention via videolink from the White House in the evening.

The main talking point so far has been the announcement by Mr McCain's running mate, Sarah Palin, that her unmarried teenage daughter is pregnant.

Most of the first day's political events were suspended out of respect for communities affected by Gustav.

Instead, Mr McCain's wife, Cindy, and First Lady Laura Bush made calls to support those under threat.

Mrs Bush told delegates that such events transcended party politics and reminded people that they were Americans first.

Laura Bush and Cindy McCain make appeal

"Events in the Gulf Coast region have changed the focus of our attention and the first priority is to ensure the safety and the well being of those living in the Gulf Coast region," she said.

Gustav was downgraded to a tropical storm after making landfall west of New Orleans, where hundreds of thousands of people had been evacuated.

The hurricane came three years after Hurricane Katrina struck, killing more than 1,800 people and resulting in huge damage to the city and its surrounding area. President Bush was strongly criticised over his handling of the crisis.

Palin talking point

The BBC's Adam Brookes in St Paul says the Republican Party convention is now getting down to work after the uncertainty brought on by Hurricane Gustav.

Tuesday's events will focus on Mr McCain, a concentrated piece of political image building with a keynote speech from Joe Lieberman, the Democrat-turned-independent senator, who has decided to support the party's candidate, our correspondent says.

Sarah Palin's announcement has so far overshadowed the convention 'Stormy' dilemma for Republicans Republican Convention diary

President Bush will also address the convention via a live video feed from Washington. He cancelled his planned opening night speech amid concerns that overt political campaigning would play badly with voters at a time of potential crisis.

But many Republicans will be glad he is not here in St Paul in person, our correspondent says, and much of this week will be about defining Mr McCain as very different to his unpopular predecessor.

Sarah Palin, the governor of Alaska who was presented as Mr McCain's choice for running mate on Friday and is facing an ethics investigation back in her home state, made the announcement of her unmarried daughter's pregnancy on Monday.

She said Bristol, 17, planned to have the baby and would be getting married.

Mrs Palin, who is opposed to abortion, said her daughter would "have the love and support of our entire family" and appealed for privacy for the young couple.

The news of Sarah Palin's daughter's pregnancy is gut-wrenching for Republicans BBC North America editor Justin Webb Read Justin's thoughts in full Teenage pregnancy in spotlight

Our correspondent says her selection as vice-presidential candidate has caused great excitement among social conservatives and evangelical Christians here.

But across the broader Republican Party there seems to be some unease - she is an unknown quantity, and when she is finally brought out onto the convention stage on Wednesday, many McCain supporters will be crossing their fingers and hoping she performs, he adds.

The 72-year-old Arizona senator is expected to formally accept his candidacy in a prime-time speech on Thursday evening.

The speech is deemed to be among the most important events of the campaign for his chances of winning the White House in November.

Meanwhile on Monday, police in St Paul used pepper spray as they arrested more than 100 protesters, some of whom threw bottles and broke windows. Many of those involved in the violence identified themselves to the Associated Press as anarchists.

Several thousand anti-war marchers had earlier demanded the return of US troops from Iraq.