On the professional side I have spent the past few weeks working with a company that is about to be taken over by a larger one and the key hurdle that needs to be taken is always valuation, or relative valuation: what is the value of each company relative to the other or how many shares are we getting for rolling our company into the other company? This usually leads to fairly interesting negotiation sessions as most of the executives and key employees in these companies tend to be significant shareholders, they have a lot at stake and this may be the one chance they get to realize some great upside or achieve a measure of safety and survival by becoming part of a larger entity. What has changed since the 1990s is of course that valuations have come down to realistic levels, the tech-boom expectation level resulted in absurd numbers and these days you can look at companies, their balance sheets, intellectual property, people and revenue and accomplish a valuation level that bears some relation to what a company actually can realistically be expected to deliver in terms of revenue going forward. It is never an exact science, hardly, but the days of highly inflated valuations of below average start-up companies are well beyond us and that provides us with an opportunity to do deals that make sense in building companies that have a good chance of survival and long-term profitability.

The importance of adjusted valuations can not be overestimated. I have lived through one major meltdown in the late 1990s which was the Asian currency crisis and the lesson from that was that whatever was left standing after the crash is probably for real, has quality and will survive. So if you are in the investing or financing business a meltdown will probably hurt a lot but it will also give you a very clear perspective of where to go next and how to get there. There are no risk free investments and there is always a good chance that survivors will go down after all, but it is much easier to navigate the landscape once the storm is over. One of the basic reasons for unrealistic valuations and consequent risky deals is the enormous pressure that people are under to make money and I am talking from direct experience here. Either they work for a company in the finance business that requires them to bring in lucrative deals or they have a company of sorts and they know that now is the time to cash in and realize the value that they believe they have built up in that company. During my investment banking days in Asia, especially when the markets peaked in the mid 90s the boom attracted many players which in turn made it a very competitive place. This put a lot of pressure on those participating in the market to deliver profitable deals. Working for a bank that often meant bending backwards to accommodate to the wishes of the client, working for a venture capital firm that often meant accepting ridiculous valuations just in order to get a deal signed. I have seen first hand how intelligent, well-educated business people started to chase deals that had no solid footing in reality whatsoever. As an example one of my superiors in Asia launched what he called an Asian template for telecom financings. This effectively meant throwing large amounts of money at telecom deals (and I am talking in the hundreds of millions of dollars) in the form of loans with the idea that these loans could be taken out (refinanced) by way of an equity offering or IPO, bond offering or a combination thereof. The complication was that these were very often shaky deals in the first place as the clients took advantage of the competitive situation and negotiated aggressive deal structures, and secondly by the time the refinancing was due the market to launch an equity or bond offering had practically evaporated as a result of the financial crisis. During the peak in Asia I spent a lot of time working on deals that had a fantasy imprint on them and as a sound businessperson I had to very often question the underlying rationale of these transactions. On many occasions there was none and the only justification was: “we have a deal, let’s finance it!” Next time you think that we are heading for a meltdown you know what one of the warning signs is: seeing established players executing questionable deals.

The benefit for some of the financial players in retrospect was that once the collapse in Asia had taken effect there was a ton of work in terms of restructuring deals. All the money spent on pie-in-the-sky financings needed to be recouped one way or the other, and the companies that were left standing needed some serious help in their survival process. By the time I had started my consulting efforts in North America a similar crunch was enveloping the markets and it was impossible to raise money for technology and media companies based on the valuations for some of the early stage ventures I worked with. Today is even worse but the reality is that the financing deals that are being done are deals that have a basis in reality and contrary to what happened in the 1990s, scrutiny of deals by the various players is intense, people have learned their lesson and are not very likely to repeat the errors made during the 1990s.

I will return to discussing the most recent decades in the months to come but I want to start here by qualifying the 1980s as a period of restructuring. The welfare state of the 1960s and 1970s was reformed in the age of Reagan and Thatcher and together with the liberalization of markets in Asia, Eastern Europe and Latin America these reforms set the stage for the unprecedented economic growth during the 1990s. With the 1980s qualified as the restructuring years, the 1990s as the years of excess, I will not hesitate to label the decade that has started only recently as the years of moderation. Moderate growth, moderation of valuations and, more importantly, moderation of expectations. If we are able to moderate our expectations, and that is not an easy thing to accomplish for many given the wealth that some thought was coming their way during the 1990s, we are able to live and transact business in a more down-to-earth and sensible manner.

Today the new Palestinian cabinet was inaugurated following substantial international pressure and last minute behind the scene negotiating, the latter a measure to placate Arafat’s hard-line Fatah supporters. My background on the new Palestinian Prime Minister is limited, however Mahmoud Abbas’ biography points to him being a moderate Palestinian with a willingness to help formulate some sort of deal with Israel. The fact that as a moderate he is still alive is either a miracle or he may not be as much of a moderate as we are lead to believe. The fact of the matter is that at this point it is not even relevant what strain of political thought he espouses, as on the day of his inauguration hardliners such as Hamas and Islamic Jihad have made it very clear that they are not going to lay down arms. Not for Abbas, not for Arafat, not for anyone. This is not a surprise to anyone, of course. They will not disarm until their goal of an end to the Israeli occupation has been realized and we know very well that the term “occupation” does not necessarily apply to the West Bank and Gaza only.

Developments on the political side are always responded to with violence as I discussed in my piece on the Baltic Exchange bomb below. Today is no different as a suicide bomber attacked a bar in downtown Tel Aviv killing four, sending a clear message that we can roadmap whatever we want with Abbas and his new cabinet, that roadmap will be drenched in blood as far as Hamas and Islamic Jihad are concerned. The asymmetrical peace process is at work here and a peace settlement in Israel unfortunately has a very long way to go.

As I discussed over the weekend, weblogs are having a fairly dramatic impact on the way people gather news. The underlying message of my post yesterday was that I was looking forward to the 2004 campaign not only because of its unpredictable course but also because it is going to provide ample material for this blog. Well, today Howard Kurtz runs an article on just that (link via InstaPundit) explaining that if the campaign is blogged then the candidates will in turn blog about the blogosphere’s comments on their campaign. Consequently, weblogs will no longer be just a source of news, discussion and analysis, with presidential candidates blogging they will make news.

Solport last week alerted us to the importance of Bob Graham, like I did a little while ago here. The interesting thing about Graham's candidacy is of course his Floridian origins, but more than that he is a candidate that carries some weight when it comes to attracting the middle ground. I bet he will be able to lure more Republicans into Democrat arms than John Kerry or Howard Dean. Graham was in the picture to be on the Gore ticket, but there were apparently some issues over his suitability and one of the reasons was that he keeps meticulous diary notes which some considered to be odd and might expose him to some sensitive information coming out in public. In any case Bob Graham is back and interestingly, he hit the news on Sunday with some expected attacks on the Bush administration (economy, concerns over war on terror) but also with some good points like comments on Syria's sponsorship of Hizbollah and Hamas. These are coming straight from the Ledeen book on terror and will help Graham to position himself to the right of Bush. He also alerted us over North Korea:

"I'm surprised we're treating North Korea with such kid gloves," he said. "We went into Iraq on less ... We made a mistake early on by not engaging the North Koreans on a one-to-one relationship and allowed the situation to deteriorate. Now we're paying the price for that deterioration."

Correct, Bob. Both his comments on Syria and North Korea will go down well with foreign policy hawks and therefore Bob Graham is a credible candidate going forward, although he is more likely to end up as a Lieberman running mate, as I do not think he comes across as a candidate that is able to connect with the man on the street. I am not trying to give some strategic advice to the DNC here, really, but I am just getting excited over what promises to be a very interesting campaign next year. Both the democratic primaries and the showdown between Bush and the Democratic challenger will prove to be a lot more interesting than the entire boring 2000 campaign and I include the Florida recount in that. I can’t wait.

In addition to Den Beste, there was another great link over the weekend by OxBlog referring to my Regime Raiding Rumsfeld piece. That title would do well in any British tabloid and I could not resist using it once I had created it. In fact, I guarantee you I will recycle it once Rummy takes on the tyrant of the island.

Regarding Pyongyang, it appears that we are making some progress by trying to involve the Chinese in a so-called regional solution, but I remain somewhat doubtful over the speed with which this can be achieved. Remember, China is in the midst of a power change and it takes at least a number of years for a clear decision making structure to crystallize in Beijing. Hu Jintao as the new President has to walk a very tight line as he will have to a large extent answer to former President Jiang Zemin who continues to chair the Central Military Committee. It is hard to get a clear decision out of Zhongnanhai at any time, but with the shifting power balance and yes, SARS, it will be challenging to get the Chinese leadership to commit to a clear path of dealing with North Korea which inevitably involves a move toward regime change in Pyongyang. Both SARS and North Korea will require the Chinese leadership to increasingly work with, and listen to, outsiders and for a new leader to be teaming up with the Bush administration is not exactly the most logical approach to establish strong leadership credentials in China, on the contrary. In the meantime, Colin Powell is today looking at yet another plan from the North Koreans that would ultimately deal with the nuclear issues.

Some progress with the asymmetric peace deals over the past few days, both the IRA and the Palestinian Authority appear to be making some progress towards peace. My regular readers will be aware of my skepticism towards these arrangements and I do not want to dwell on them much further for now, but what I wanted to reflect on was the memory I have of an IRA attack that came close to home.

It was in April 1992 when I was working in the City of London that I went on my first real business trip. For a young guy, a great milestone in a career and the location was not bad either, Athens in Greece. It was a business development conference and that week, apart from the conference, was pretty much dominated by the very close election race back in the UK where the unexciting John Major eked out a narrow election victory over the clueless Labour Party. By the way, this was the victory that set the stage for the Conservative Party’s journey of self-destruction and Tony Blair’s subsequent comfortable election victories. On Saturday morning as the conference wrapped up we heard the news that a big bomb had gone off in London’s financial district, the area where most of us worked. There were no clear indications of the exact location, casualties or damage other than it was a fairly huge explosion. Those were the days before the internet, so we digested the news slowly and did not race to our laptops to have a complete minute rundown of events. I stayed the extra day and when I got home on Sunday night one of my managers was on the phone shortly after my arrival asking me whether I had heard about the attack and how the trip to Athens had been. I never cared too much for the guy so I summarized what I had to say briefly and let him know that I would give a full report of my trip the next morning. Well, Pieter, he said, you are going to have a few days off because the bomb exploded at the Baltic Exchange and our office building is in such a shape that it is very unsafe for staff to return to work. This was quite a surprise, our office was at the northern end of St Mary Axe, in fact everyday I walked right past the Baltic Exchange at the southern end of St Mary Axe, the place were the bomb had gone off.

The next morning, the day off, I went to the area, camera in hand, and what I witnessed perplexed me completely. The area that had been damaged not only extended well beyond to what anyone would have believed knowing the location of the bomb; the damage done to that area, now cordoned off by police, was phenomenal. The impact of the explosion had covered the direct area with endless mountains of glass as nearly all of the windows of the adjoining Commercial Union skyscraper were knocked to smithereens. The force had also seriously damaged many other buildings, destroyed windows over a vast area, damaged cars and what amazed me and for some reason stuck in my mind: it left most traffic signs in a very wide area curved. The damage had thus also affected our building at the very end of St Mary Axe, although from the outside things did not look that bad. Apparently, there was significant damage and one of the greatest concerns in situations like that is structural damage that is not directly visible to the eye. Hence our few days off, in fact we spent the next two months in some reserve office space the bank had available near St. Paul’s Cathedral.

The background to the bombing was soon clarified in the press. The IRA’s political affiliates had apparently lost a seat during the election (Sinn Fein did contest seats in Westminster but they never occupied them) and the heinous attack was a “punishment” for the conservative victory. Three people were killed and I remember very clearly that one of them was a teenage girl who had happened to be there, waiting in a car while her mother picked up her dad from work. The other victims were also innocent bystanders and all were killed by flying glass. It was a miracle that not more people were killed, the bomb had gone off around 7:00 PM by which time most people had gone home.

I never directly linked the attack to myself or the chance that I could have been killed by it although the bomb went off right on the route that I walked every day from the Underground station to the office and back. I just did not happen to be there that day, I was in Athens, and there was, and is, no other way to look at it. During my stay in London Downing Street 10 had been attacked by a rocket propelled grenade launcher and one day the entire Underground system was shut down leaving my then girlfriend, and now wife, Irene presuming I was dead, however I was just four hours late being stuck in a bus somewhere on Picccadilly. The terror never felt like it was directed at me, or us, or to anyone close to me and I never got the sense from my British colleagues that they felt like they were the object of terror. It was a constant, it was there, and if it came close to home it was sure to move on to another location. I never sensed fear, pain or worry. The nature, origin, much less a solution was ever discussed. The IRA was qualified as a group of isolated fanatics who did not even have majority support in their own ranks, losing a seat during the election was yet more evidence of their failure, isolation and irrelevance. For me, it left a very vivid image of the physical impact of a bomb attack and it makes it easier to picture what will happen to human beings if they are in the vicinity of such a dreadful blast. Whenever I hear that we are close to a final deal in Northern Ireland, and we have been hearing that for well over five years now, I see these colossal mountains of glass right there on St Mary Axe, claiming the lives of three people.

Today Peaktalk is hitting its two-month anniversary, and no, I am not going to mark every monthly anniversary, but it is a good time to do some analysis. It may be a coincidence, but the two-month mark coincides with a link from Den Beste for which I like to thank Steven and welcome all who have come here through his USS Clueless. I have had about 1300 unique visitors since the launch of Peaktalk, the majority of them from the US, followed by Canada, The Netherlands, the UK and Germany. The traffic to a very large extent was generated by the following top referrers:

1. InstaPundit
2. USS Clueless
3. Pejmanesque
4. Segacs (Sari Stein)
5. Stud Lee

The Instalanche came at a very awkward moment; I had barely started so there was not that much content at the time and that got me a little worried. In any case, I have had some generous referrals over the past two months and where possible I have always returned the favour or referred to sites that are just worthwhile linking to.

Links have also determined my ranking on the Truth Laid Bear’s ecosystem, the unofficial blog rank list where Peaktalk is now qualified as a Slithering Reptile on number 628. To be honest, rankings and numbers are not that relevant at the moment, but somehow regardless of that you start to measure yourself against these very numbers which is not a very wise strategy. What is important is that I wanted to run this blog in order to engage in writing, analyzing and discussing current affairs which has been a lifelong passion but I have never had the time or the venue to really explore the writing and analyzing part. What happened is that I have started to write about a variety of topics, analyze them and develop opinions and ideas that I probably would only have had subconsciously before. An audience forces you to think it through, word it and re-word it until it clearly crystallizes what you want to say. That in itself is a great achievement and that is certainly why I will continue on this interesting journey. Thanks for visiting and reading.

The other thing that happened is that my mode of newsgathering has changed: other blogs have now become a source of primary newsgathering. That brings me to the following point, below.

I think it was Glenn Reynolds who alerted the world to the fact that during the Iraqi war 4% of people now use blogs as their primary source of news. If that is true then that is an amazing number. Think about it. If we take the North American market with approximately 300 million people as the population of this analysis then let’s conservatively say that some 150 million gather news in some form or the other. That means 6 million use the blogosphere as their primary source of news, but it also means that those who use other sources may very well turn to blogs to get their secondary news fix, which is analysis, discussion and background information all of which are the real essence of blogging. Let’s say the secondary group consists of another 6 million people. That’s a total of 12 million in an industry (for lack of a better word) that is less than 3 years old. I have no clear idea of where we are in terms of internet usage per household but I would assume that even in North America it has some ways to go, especially given the fact that in a lot of places dial-in rather than high speed connections are the norm. There is potential that over the next five years there may well be over 20 million consumers of bloggage. I know, this is very simple ‘back of the envelope’ accounting, but I believe there is some merit to it and it is probably not unrealistic to think that the blogosphere will become a major media outlet, if it isn’t already. And remember, I have not included the rest of the world in my sketchy analysis.

If there’s scope for a viable business model to support all of this remains to be seen. Andrew Sullivan has devoted quite a few posts to this subject in the past and has had to revert to ‘pledge week’, in order to sustain his blog, yours truly cutting him a very nice Christmas cheque, but I think he deserves it and that is precisely the point. People are willing to pay for what they deem to be a useful and interesting service. Others have their ‘tipping point’ but neither system can claim to support a viable business. Yet with the potential market there should be a strong business case and I think established media will have to come to some realization that there is a new kid on the block that is nibbling on what some of them would have believed was a captured market. My intake of news from traditional sources (magazines, newspapers) has already reduced significantly thanks to the phenomenal assortment of news and analysis presented by the blogosphere. And, people lead fairly intense lives and clicking through your top ten list of favourite blogs is not that time consuming, especially given the fact that a significant group of people has internet access both at work and at home. It may be too early to transform blogging in into a sustainable and profitable business model but while analyzing the 4% number I started to work on a case imagining there was a group of extremely hard-nosed venture capitalists sitting in front of me. They will not buy into weblogs as a business, for now. Until that moment we do it for the love of writing and discussing the news and whatever else keeps us preoccupied. It’s great to be part of that experience.

I have been tempted to write on the SARS epidemic but I can honestly say that I have not found the right angle to approach it from. The WHO travel advisory was a matter of both prudence and telling the world that they were on top of things as opposed to the Chinese Government. The Hong Kong Government has stepped up to the plate this week with an economic aid package and that is telling, whenever the frugal team of Tung Chee-Hwa starts to fork out cash for the economy, things are really in bad shape in Hong Kong. The latter is a sad conclusion, I have reported earlier on the tough times that the former crown colony is experiencing. The last thing they needed was a crisis like this. As there was quite a bit of feedback on that particular issue I have included “What Now, Fragrant Harbour” under Peaktalk’s favourites on the right. If you want to have a piece of vintage Hong Kong and its government's frugality in relation to this crisis, go here. Sad but very true.

Today the White House broke its silence over the Santorum issue and it is evident that they will stand by him, there will definitely not be a Trent Lott style reckoning here.

There are a number of reasons for this support, one of them being that Santorum has a very good working relationship with the President as opposed to Lott. The more important reason however is an electoral one as dropping Santorum would really alienate the GOP’s large conservative base. As I discussed earlier, it was alienating that very conservative base that cost Bush Sr. a second term. The GOP has to maneuver very carefully here in order to ensure that as many people as possible stay under the Republican umbrella and going out to bat for gay Americans just does not make electoral sense at this point in time. Yet, Bush may have lost some valuable voters over this issue and he will need to mend some fences over the next few months otherwise this issue will come back to haunt him during the campaign trail. By not disapproving Santorum’s comments, Bush will open himself to criticism that he believes that the government does have a role to play in people’s private lives and that may cost him more than just a few gay votes.

Following some links I came across this blog, Oscar Jr., (thanks for linking Peaktalk) who has been trying to classify blogs by country. Interestingly, classifying Peaktalk generated some problems as you can see from the comments section attached to his bloglist by nation. Categorizing blogs by country brought back memories of my early days as a trainee banker in London when I had to classify various corporate clients into specific industry groups. It works for a great number of them, but there are many that just do not fit into one category, and the system never allowed you to create any additional categories or to ignore the categories altoghether. It sometimes is impossible to fit something into one particluar group and the same goes for Peaktalk. Ideologically I feel American; physically I am now in Canada. Together you could construe that as North American but that description does not fit into a specific national box. Then there’s the emotional part, Dutch yes, but also Asian for I have spent quite a bit of time there. If you look at it technically the blog itself sits on a server somewhere in the US as does the designer who helped me put it together. In summary, you can not easily categorize Peaktalk one way or the other. As the saying goes: just read it.

More evidence of the fundamental imbalance of peace deals between democratic and terrorist entities has emerged today in Northern Ireland. Tony Blair who rode to the unique position of international statesman in the wake of the crisis in Iraq now has to apply his moral stature to the deal he is negotiating with Sinn Fein. This article highlights a number of the issues that are currently preventing the full implementation of the power sharing peace arrangements in Northern Ireland. The IRA base fears a future of irrelevance through the required decommissioning and democratization process, as it will no longer be able to achieve its stated goals and no longer hold a grip on the people it claims to represent. Absent from my earlier analysis of asymmetrical peace was the fact that the terrorist organization loses another important franchise:

The IRA had offered a substantial act of arms decommissioning, although apparently not its entire stock of weapons. But it refused to budge on the issues that would infringe on its criminal, money-making activities.

The economics part, of course. It is always about politics and markets, isn’t it?

With the Trent Lott affair well behind us, the Republican Party once again finds itself in a negative spotlight, this time as a result of the comments made by Pennsylvania Senator Rick Santorum, who has, in summary, equated homosexuality with incest. It appears that once again some serious damage has been done and that the senator’s attempts to alleviate his comments are in effect making the situation worse as they suggest Santorum has no problem with gays but believes that the sex they engage in is illegal. Underlying his comments is an apparent belief that government has a role regulating the private lives of its citizens. This is something that the Republicans can not afford with, as Karl Rove has acknowledged earlier this month, a close 2004 Presidential election race ahead.

The Republican Party is an amalgamation of various interest groups including old-fashioned rural conservatives, religious interest groups, anti-abortionists, Cuban refugees, anti-government libertarians, urban business and professional elites, crime fighting law and order advocates, and yes, even some Hollywood types. The trick is to keep the party unified and to assure that all these various interest groups find themselves under that same Republican umbrella when it comes to election time. That umbrella will also have to extend to certain minorities that until recently found their home in Democratic circles and both gays and African Americans are key examples. Homosexuality has gone mainstream and many gays are affluent professionals that have very little in common with the tax and spend left. In fact they are more at ease with a political party that emphasizes freedom from government interference. Many African Americans have been able climb the social ladder and are also likely to go with a party that promotes low taxes and freedom from government interference. There are many voters in the middle who, given the right message, will migrate to the right and cast their vote for George Bush.

An interesting article in the Economist this week dispels the notion that Bush Sr.’s election loss was the result of the slow economy (he won Desert Storm but lost the economy). The article suggests that a collapse of the Republican political machinery was the key factor of the 1992 defeat and that to a very large extent that collapse was the result of alienating the party’s conservative base. With Iraq behind us and a challenging economy ahead Bush today will above all have to ensure that all the constituent parts of the Republican Party are under its umbrella and at the same time ensure that ditherers in the middle will find some good reasons to vote Republican. By letting senators like Lott and Santorum disseminate reasons to not vote Republican, the party finds itself in a hotspot where it can ill afford to be. Bush has already made considerable progress in creating a unique platform for a variety of interest groups that may carry him into a second term, but if off the cuff comments from some senators start to affect the strength of his platform it is going to be a very close race indeed.

As I committed to keep you fully up to speed on this trial it is my duty to inform you that following the prosecution appealing the lenient sentence last week, the defense team has done the same today. The latter appeal however focuses on the severity of the sentencing, needless to say. Expect a long drawn out battle that may even find its way to the Dutch Supreme Court.

The Shiite rallies in Iraq over the past few days point to a very disconcerting reality as Michael Ledeen today reports. I have linked to Ledeen a number of times because I think he usually presents some excellent analysis on terror and its origins in the Middle East and has been trying to alert the world that the staunchest terror masters reside in Tehran. His analysis today clearly points to the fact that we have to fear those who will ruthlessly exploit the current situation in Iraq rather than the Arab Street which has been relatively quiet so far. It is a sad irony that the newfound freedom that the Shiites now enjoy is already being abused to further the interests of the ayatollahs. Like Syria, the case needs to be made for regime change in Iran without using any direct military force, for some background I outlined the various options available to us to deal with both Syria and Iran earlier. Supporting the democratic movement in Iran is the first and most obvious step in that direction.

The North Korea issue dropped off my radar screen a little bit given the developments in Iraq and Syria, but things started moving again last week, although I was not entirely clear how to transform everything into a Peaktalk post. Yet, this piece of news brings it back right to the epicenter of attention and to these pages. A secret memo from Donald Rumsfeld calling for regime change in North Korea was leaked Monday. As I have argued before, North Korea is topping the list of places requiring immediate attention, especially now that Iraq appears to have been settled and Syria is back in its cage following some brisk and unanimous rhetoric from the Bush team. The Rumsfeld memo however reveals an old rift over North Korea in the administration. The State Department is favoring talks with North Korea, whereas the Rumsfeld team is rightly opting for a more vigorous approach, which does not necessarily mean military action. The lesson from Iraq is evident in that weapons inspections and prolonged talks do not work. My arguments last Friday over asymmetrical deals between democracies and terrorist organizations can easily be applied to agreements between democracies and rogue nations, and if there is ever evidence that agreements of this nature are not honored it is the failed implementation of the deals the Clinton administration cut with the hermit in Pyongyang.

Swift regime change in close co-operation with the Chinese (and for that reason alone a direct military approach would not be likely) rather than talks are the most logical step forward. What makes it easier compared to Iraq is that we will not have to engage in nation building afterwards, we can just hand the keys to Pyongyang to South Korea and invite them to dust off their reunification handbooks which they will surely have somewhere.

Following my post last Friday on the difficulty of negotiating peace deals with terrorists it seems that the Palestinian Authority is struggling with the appointment, under international pressure, of a Prime Minister. So if appointing a new face is already a major problem, just try to think of what issues a real election would bring. Arafat wants to hang on to as much power for as long as possible, making it impossible to negotiate any credible and lasting peace arrangement.

The prosecution in the Fortuyn trial has decided to appeal the light sentence, as expected, and the appeal will be heard by the higher court in August. The sentencing was considered to be so lenient that even the Dutch Minister of the Interior felt it was necessary to breach the separation between the executive and the judiciary in order to record his dismay over the 18 year sentence. Not a wise move from a legal and political perspective, but it tells you something about the mood in The Netherlands.

Great referral from Steve of Little Tiny Lies over the weekend. He calls Peaktalk a "Surprising Quasi -Dutch Blog" and like so many others is surprised to find a conservative Dutchman. Well, I blogged about the latter a while ago, the notion of the "liberal European" is deeply ingrained in North America. In any case, it is great to receive such positive feedback from fellow bloggers, especially when it is suggested that Jacques Chirac should read your work at gunpoint. I likewise recommend a visit to Little Tiny Lies.

As I referred to yesterday in the wake of the Abu Abbas arrest, the question has been asked to what extent we can allow terrorist organizations certain concessions when we are trying to achieve a peace or ceasefire arrangement with them. The 1990s produced two such arrangements, both fairly high profile: the deal between the UK and the IRA, the so-called Good Friday accords (five years ago today) and the deal between Israel and the Palestinians, the Oslo accords which go back to 1993. Both arrangements to date have not been fully implemented and one could even argue that they have failed miserably. The peace process in Northern Ireland has been very challenging with continued reluctance by the IRA to disarm and the Israeli-Palestinian negotiation collapsed entirely when Arafat walked away from the Camp David negotiations during the final days of the Clinton administration.

The key reason for the inability of the parties to get both peace agreements fully implemented is that they are agreements between a democratic and free nation on the one hand, and a terrorist organization on the other. If we call war waged by terrorists on democratic societies asymmetrical, then it is not too much of a stretch to conceive of a peace deal between them as asymmetrical too. Relations between the two, in peace and at war, are fundamentally unbalanced. Those who negotiate on behalf of the democratic entity are accountable to their electorate who in general would like to see a lasting peace deal that ensures freedom, stability and above all, safety. However that deal should not come at any price. If it means that too many concessions are made that would allow the terrorist group to continue to operate using the same asymmetrical tactics as before the deal, then it is probably not a great deal and it will be a deal that would be rejected if it were ever tested at the polls.

Leaders of terrorist organizations have a completely different constituency that they have to respond to. They are not accountable to the people that they claim to represent for they have never been elected in a democratic manner; the only accountability they have is to those who are a member of their own group. Membership of these groups has been defined by waging war on the perceived enemy over a long period of time with all means available using a military command structure, negating any open and democratic way of decisionmaking. In order to achieve cohesion within the group, adherence to a radical creed is mandatory, otherwise it is impossible to hold the group together and ask it to commit extremely violent crimes. Sitting around the table with the enemy not only brings an end to the conflict by way of a compromise; it also brings an end to the raison d’etre of that very terrorist group. In other words, the members of a terrorist group will be out of a job and they will not have achieved what they have been fighting for, as the end result will be a compromise that does not fully address the agenda they had been pursuing. Indeed the compromise in itself negates the cause that so many of their fellow combatants have died for. The indoctrinated core of the terrorist group will instinctively reject any peace deal and that is why Arafat walked away from the Camp David proposal (without returning with a counter offer) and that is also why Gerry Adams is not fully able to come to terms with the implications of the Good Friday accords. Even if Arafat and Adams were willing to go far enough to achieve peace, they would have to answer to their uncompromising base who will have very little to lose and are therefore quite willing to reject any peace compromise and continue to fight.

It is therefore not unusual to see that many are demanding that the Palestinian Authority becomes more open, democratic and accountable to the Palestinian people for as long as its leadership is only accountable to intransigent terrorists chances of any lasting peace arrangement are remote. In Northern Ireland the parties are closer as there have been elections, but as long as Gerry Adams is primarily accountable to a hardcore group of IRA members chances of a comprehensive and fully disarmed peace continue to be difficult to achieve.

In the world of the 1990s it was believed that terrorist groups would abandon their warfare, as they would not be able to achieve their objectives through these violent means. The next step in the argument was that it was therefore possible to work out a peace with those terrorist groups. Bill Clinton and Tony Blair both believed that this could be achieved and we should not fault them for thinking this, but now that a number of years have gone by we can conclude that in general it is very hard to make these deals work. We have learned and are now sadder and wiser. The reasons as to why these deals do not work are very simple as by achieving peace the terrorist organization becomes irrelevant and may even lose its grip on the cause once it transforms itself into a political entity seeking voter approval at the ballot box. In essence the peace deal brings to an end the fundamentals on which the terrorist organization is built: (a) the goal of complete realization of the group’s goals; and (b) the group’s role as the only representative of the people whose goals it claims to represent.

The Palestinian claim that Abu Abbas should be exempt from prosecution is only a symptom of a fairly complex problem that it is enormously difficult, but not impossible to solve. It requires terrorist leaders to abandon their grip on power, open their constituencies to a democratic process and disarm the reactionary base of their organizations. That is a very tall order and that is why it takes so long to achieve peace in both Northern Ireland and Israel.

Disturbing news from the Netherlands where the Minister of the Interior had to acknowledge that about 100 to 200 young muslims in the country are involved with Muslim terror groups. This information is based on reports from the Dutch intelligence services.

Islamic centres in Amsterdam and Eindhoven have been singled out as particular hotbeds of Muslim extremists and a report in newspaper Het Parool said two hijackers involved in the September 11 terrorist attacks in the US, including Mohammed Atta, possibly received ideological training at the El Tawheed mosque in Amsterdam.

Maybe it is time to act on the reports rather than sit back in parliament and discuss them. Pre-emptive measures maybe?

It is good to see that so many in the blogosphere jumped on the Abu Abbas story and I am sure most of those reporting vividly remembered the brutal way in which Leon Klinghoffer was murdered. A Palestinian cabinet minister came out with a statement saying that PLO members should not be detained or tried for matters that were committed before the signing of the Oslo accords in September 1993. Well, the answer to this is probably no, he should be detained and tried because: (a) the acts of terrorism carried out by Abbas were committed in the name of the Palestinian Liberation Front and thus not the PLO which apparently is exempt; and (b) the Oslo exemptions only apply to criminal prosecution by Israel or the Palestinian Authority, and so do not extend to immunity from prosecution by the United States, or in this case Italy. The latter is a great loophole by the way; if you can not bring them to justice in Israel, send them to the US or any other country that knows how to deal with terrorists. Abbas will have to be tried for the heinous actions that have his fingerprints on them and this is the case with so many other terrorists that still need to be brought to justice. It is disconcerting to see that senior Palestinians are looking for ways to get some of their more notorious friends off the hook at a moment when many believe that the time has come to start seriously working on an Israeli-Palestinian roadmap to peace. The Palestinian Authority would be well advised to sever its ties with terrorist elements in order to deliver some sort of peace arrangement for its people but that would include finally getting rid of Yasser Arafat and I guess we are not quite there yet. So Abbas gets to benefit from some support from his erstwhile partners.

Comments on the Abbas case have been peculiar; look at these excerpts from a Washington Post article:

Intelligence officials said privately, however, that Abbas has not played an active role in terrorist activities for at least a decade, and the PLF is not believed to have any connection with Osama bin Laden or the al Qaeda network. Abbas has said in press interviews that the Klinghoffer killing was a mistake and that the hijacking should not have happened.

Whether or not al-Qaeda is part of the equation is completely irrelevant. The man committed serious crimes and is directly responsible for the death of innocent civilians and it is not relevant whether they occurred five, ten or thirty years ago. Any remorse over the Klinghoffer killing only serves Abbas to escape or mitigate judgment. The article has more: I. Michael Greenberger, a University of Maryland professor and Justice Department counter terrorism official in the Clinton administration says:

The Bush administration "can be vindicated . . . if he has been in active collusion with terrorists today; that would moot all the issues," Greenberger said. "This is a coup that they picked this guy up, but it does not support the theory that Iraq was crawling with terrorists. This was not the kind of guy that people were losing sleep over."

What? We picked up a key terrorist leader but “it does not support the theory that Iraq was crawling with terrorists”. What about Abu Nidal who until his violent death a while ago had been living comfortably in Baghdad? The place was full of terrorists altough most of them by now will have packed up and gone to Syria, Saudi Arabia or Iran. As for the statement about losing sleep over Abbas, ask the Klinghoffer family whether they have been losing any sleep over this. I have a feeling as to what their reply might be. The article goes on to say that:

Abbas was captured during a U.S. raid Tuesday in south Baghdad, which, according to witness accounts, lasted two hours and included intense firefights between Special Operations forces and Abbas supporters. Abbas had attempted escape to Syria at least twice in the week before his arrest, U.S. officials said, but was turned away by the Syrians.

Hm. Syria is adopting some changes to its entry policies following this week’s events?

I will return to the issue of cutting deals with terrorist groups later. Arrangements which allow terrorists with blood of innocent civilians on their hands to walk away with a deal that either sets them free or exempts them from prosecution are questionable and it is time that the 1990s practice of cutting deals with terrorists is revisited. High profile deals with the IRA and the PLO have not only been impossible to implement, they have also allowed many terrorists to walk free.

Today was not a great day to blog, too much activity on the consulting side that kept me busy for the entire day without any good opportunity to blog. Tomorrow morning I will return with some further analysis of the Abu Abbas case.

One more thing on Fortuyn, his death now over a year ago left Dutch politics in disarray and there is still no government with a clear mandate as I reported earlier. Dutch blogger Jurjen in Washington state has a good overview of what happened over the past 12 months.

Update: Dilacerator also has an interesting analysis.

Reflecting over the sentencing today I realized what the three premises are of criminal justice: prevention, retribution and rehabilitation. In the Netherlands the first two have pretty much disappeared from the scene and the focus has been entirely on rehabilitation. I remember when I studied law that the criminal law faculty at my university was dominated by the so called “abolitionists”. The word says it all: their theory on criminal justice evolved around the idea that the criminal justice system as we know it should be abolished and be replaced with something that would focus entirely on rehabilitation, preferably a process that would involve both the defendant and the victim. It is unfortunate that in many cases that enter the courts these days the victim is no longer around to assist in the rehabilitation process. The abolitionist ideas have had a big impact on justice in The Netherlands although I believe their have been many other contributing factors to the Dutch lenient sentencing culture.

It is telling that on the same day Pim’s killer gets 18 years another murderer who beat someone to death in the southern part of The Netherlands is looking at a possible 10 years, as demanded by the prosecution. If the court follows that sentencing request, that killer will be out on the streets within less than 7 years. Do you know why he beat his victim to death? During a trip to the supermarket the victim asked the defendant while he was driving on a motorcycle in a pedestrian area to watch out for an elderly lady. He was killed for that. So within 7 years that person will be out on the streets again and do we have any illusion that he will be rehabilitated after that period?

In short, the principles of retribution and prevention have gone pretty much out of the window and that is something that deeply saddens me. While I realize that severe sentences are not always the solution in dealing with escalating crime rates, it does seem to me that the rights of the victim, the feelings of a victim’s family as well the overall safety of society at large should be paramount considerations in dealing with criminal elements. Rehabilitation is a worthwhile cause but success is often very limited and it should never be the priority.

In sentencing Fortuyn’s killer the court outlined that prevention is indeed an important part of sentencing but that a life sentence is not necessarily the way to achieve that. Well, what is it that the judges suggest can be done to implement some measure of prevention? The Dutch criminal justice system leaves little room as it can apply a life sentence (which the court did not do) or a maximum of 20 years (of which only two-thirds are mandatory) so the option effectively was between life and 13 years. There is nothing in between and given the Dutch abhorrence of life sentences and the seriousness of the crime it would have been better to go for that middle ground of, say, 30 years without parole. This would also have met with Fortuyn’s family expectations:

Simon Fortuyn, Pim Fortuyn's brother, told reporters he "was not so filled with rancor that I have to see him behind bars for the rest of his life."

I will keep you informed of the appeal that the prosecution team will file shortly.

Whoever said that the war in Iraq would distract us from the war on terror? Is it not one and the same thing? Well, here's more evidence: today US forces captured Abu Abbas in Iraq, the mastermind behind the hijacking of the Achille Lauro in 1985. Just to refresh the memories: these were the hijackers that shot disabled American tourist Leon Klinghoffer and threw his body overboard with his wheelchair. This arrest is good news, especially on a day when it seems that justice is not always served.

Today the Dutch justice system delivered, as expected, a very lenient sentence in the Fortuyn case, sentencing assassin Van der Graaf to 18 years in prison. This effectively means that the killer will walk after having served two-thirds of his sentence, less any time spent in jail. In other words he'll be free in 2014. Needless to say, many were deeply disappointed by this sentence especially in light of the prosecution demanding a life sentence given the seriousness of the murder and the fact that it disrupted the democratic process in The Netherlands. Apparently, the judge did not accept the prosecution's argument that damage was done to democracy, nor did he believe that there was a chance of repetition. The judges also felt that there was a good chance for rehabilitation.

It seems to me that the judge has ignored the serious and premeditated nature of the murder and is underestimating the fact that such a light sentence sends an absolutely wrong message to other fanatics or potential murderers in society. And, I believe there is a case for repeat crimes, the killer is a cold blooded radical showing no signs of, or feelings of, remorse and may well be drawn into radical circles again. The family was deeply hurt that the judge had accepted Van der Graaf's defence and are hoping that the prosecution will appeal the sentence.

The discussion and diplomatic activity over Syria grew quite intense today and it now seems that the White House has determined that it will not go to war with Syria, at least not immediately. This response addresses the immediate question raised by many as to why Syria has been playing such a dangerous game in recent days. PatioPundit likened it to rabbit going up against an eagle. The reason why Syria would take such a risky approach is not entirely unimaginable. Here are a few good reasons.

First of all, Assad has rightly assumed that the US does not have the political stomach for another war following its swift victory in Iraq. There are a few nation building exercises underway and the cost of war is substantial, as early as tomorrow Bush will refocus some of his own energies towards the US economy and another war would have a detrimental impact on any short-term plans to re-ignite an economy that, even now that Iraq is behind us, is weak. Secondly, the Syrians have gained a measure of confidence from the support offered by the French and the Russians as I suggested yesterday. Although that support might not translate itself directly into military support (although the Russians seem to be well out of control in this department) it would strengthen the Syrian case in the court of international approval. Thirdly, the Syrian leadership may go for the notion that it has very little to lose and gamble that they will survive defying the US forces, or gain such a measure of support and martyrdom in the Arab world that the gamble is well worth it. This may not be likely, but we should not underestimate the relative strength of radicals in Syria itself which brings me to the position of Assad himself as he does not have the firm grip on his country the way his father did. By importing an excess of terrorist elements into the country ranging from Hezbollah members to Baathists to Palestinians to al-Qaeda sympathizers, it may be hard to get a grip on whoever is residing in the country and who is crossing in and out. Border-crossing terrorists may get a hand from some disgruntled rank and file members of the Assad security apparatus as it is not inconceivable that many of them are not that impressed with the western educated son of Hafez Assad and may be considering a regime change of their own.

In any case a direct conflict appears to be postponed for now and Bush, Rumsfeld and Powell may well have engaged in a bit of rhetoric in order to ensure that Syria backs off, but also to set the stage for more direct steps in the near future. The argument is put forward that Syria will feel Saddam’s collapse in its pockets and may now be more susceptible to economic sanctions. Recent history however has taught us that economic sanctions are a pretty obsolete tool in dealing with tyrants, wherever they live. The stage has been set for regime change in Syria and over the months ahead we will be looking at an indirect way of achieving that, but that does not mean Syria is off Washington’s military radar screen. On the contrary.

The quagmire in Baghdad’s streets did not materialize and neither did the last stand at Tikrit as Saddam’s hometown was captured today without much of a fight. I somehow had that feeling last Saturday evening when CNN reporters were driving around Tikrit unhindered, running into a only a few wandering Iraqi soldiers, some of them even unarmed. With the US now pulling two aircraft carriers out of the Gulf it is evident that Iraqi Freedom is coming to an end. The rebuilding effort is gaining momentum as is the pressure on Syria which I have been discussing below, more on this here. It will take some time but I will not be too hard to do an accounting exercise on Iraq’s military assets and determine what has been destroyed, what has survived and what has gone missing. In the latter case, the missing parts may well be safe and sound inside Syria as is a significant group of former Iraqi leaders.

One of the signs of failed political leadership is the inability to present a vision for the future. Even worse for a leader would be to voluntarily provide evidence that you continue to live in the past. Now that Bush has cancelled his state visit to Canada, Canada’s Prime Minister Jean Chretien has decided to fix this inconvenient turn of events by scheduling a meeting with … Bill Clinton.

As I discussed yesterday, many believe that democratic change in Syria will start in Lebanon which has effectively been under Syrian rule for the past 20 years. Yesterday the Lebanese Foundation for Peace issued a comprehensive letter to President Bush highlighting the need for regime change in Syria and substantiating this with a brief history of Syria's contributions to terrorism as well as its role in helping out Saddam over the past few weeks:

Let us not forget that it is Syria who drove the U.S. influence out of the Middle East. Syria pressured Lebanon to abrogate the pro-American May 17th agreements to sign a peace treaty with Israel in 1982, by assassinating Lebanese president-elect Bashir Gemayel, by organizing later, with the complicity of Hezbollah, the bombing of the U.S. Marine´s barracks in Beirut, by periodic hostage-taking that humiliated America for a decade before America gave in to the blackmail of the late Hafez Assad, by offering Lebanon to the Syrian occupation. What did the U.S. gain after two decades of Syrian military occupation of Lebanon? More terrorism, more blackmail by terrorist organizations and a self-serving Syrian vote for U.N. resolution 1441, which was designed to help Syria, yet with Syria actually supporting the Iraq of Saddam Hussein.

Go read the entire letter.

Another aspect of the Syrian issue is of course the Golan Heights which were annexed by Israel after they were captured during the Six-Day war in 1967. Israel has always made it very clear that it will never allow hostile troops on the strategically located Golan Heights. Syria in return has consistently frustrated any chance of peace between the two countries as it felt that a return of these heights was a precondition for a peace deal. Any regime change in Syria in the near future may well set the stage for revamped discussions between Israel and Syria, although I seriously doubt whether Israel will ever take the risk of giving up the Golan Heights.