Transcripts For CSPAN2 Today In Washington 20101111

out. >> which of those states has got the lowest national debt and percentage of gdp? >> welcome as as they say,. >> and four years time on the current projections, which will have the lowest? >> germany. >> why is that? >> well because they have been fiscally prudent. [laughter] >> the percentage of gdp is 73%. >> i have got the imf figures here but. >> but my point being, we can argue, we can argue on the german versus u.k. but certainly it is very close. but my point is, up to six countries, we have the lowest national debt of any of them, significantly lower than many of them. so why are public sector workers paying the price of the extravagance and access of the risk-taking bankers? >> the point i would make here, which normally the question is, how do we handle national debt? you have just agreed we have got a much lower national debt and those. >> but what i would say is this. the budget deficit is the amount in which the national debt increases by each year and when you are running an 11% budget deficit which is the highest in the g20, then it adds and our debt is rapidly increasing in the percentage rate and indeed up the ranking. but the question is, what you are doing far more than all the others, we have a lower national debt. >> first of all we have a much higher deficit and our debt is increasing faster. second, many many countries in europe are undertaking physical fiscal consolidation, including, we mentioned germany but we look at the-- what is happening in france and spain and other countries. look at the debate in the united states of america. >> they have got a higher national debt. >> the deficit adds to the debt and the debt was rapidly rising up. it is rapidly rising. >> you are overstating. you are overstating-- let me take the imf numbers. is gone from 45% to 7476. that is by the way taking into account some of the measures in the budget. that is what their consolidation. so in other words, i think you know we have to accept that 100% national debt, many economic study show get themselves into very dangerous places and we are taking a risk. >> we are certainly today, today the lowest of those six in terms of national debt. >> they imf hear--. >> the national debt which is actually the factor, the fiscal factor in this. let me ask you a question if you are overstating the case with your budget. your officials said that there will be families who will have to lose their homes and move. how many children as a result of what you were doing well have to lose their homes and move? >> no one should be without housing. >> how many children all have to move? >> as they say, we know the numbers of households affected by the benefits cap, household benefit caps, right? 21,000, 70,000, but as they say, they are going to get up to 20,000 pounds a year in housing benefits. currently, the maximum limit on housing benefits, the maximum limit which is 104,000 pounds a year. >> how do you justify that? >> how many children will be moved out of their homes as a consequence? >> as they say no one should be without a home when we have a housing benefit. >> well homelessness increase or decrease under your watch as chancellor in this parliament? will homelessness increase or decrease? >> no one should be without a home under the housing benefit package. >> so you are saying homelessness should decrease? >> i'm nets making a a forecast. >> you make a forecast on all sorts of things. will homelessness increase or decrease as a result? will. >> let me remind you of what the labor manifest is. >> hold on. will homelessness increase or decrease as a result of your forecast? >> i don't make a forecast. what i'm saying is world there be more full-time police officers? >> i'm trying to get some answers. i don't what the labor party policy is. i want to know, will there be more homelessness? i want to know will there be. >> what i would like to here is the reply on the police numbers, both the labour party and the liberal democrats have accepted there will be fewer police numbers. what we want to do is maintain the visibility and availability of policing on the front lines. there are currently many police officers working not on the front lines, it doing the tasks that qualify people. so what we want to do is maintain the visibility of policing at its current level and we would like to improve that, but--. >> there will be no. >> and availability and policing in our community. they have regularly told us this parliamentarians there are significant efficiencies that can be made. >> will there be any reduction in special-needs provisions for children? >> special-needs education, which we are looking at this and the role of special schools. your best a very specific question which frankly goes to special education needs of the policy. but we are looking at the appropriate balance between special-needs schools provisions >> one last question. >> chancellor told me, i just want to know about the implications. [inaudible] >> i say that leap oath take responsibility for the difficult decisions, since you voted for the budget. >> no, no. >> i am bringing these. >> we are not getting an answer. >> the exchanges between you and the exchequer. >> the floor is yours. [laughter] >> what i would like to do is go do something completely different. during the discussions, you seem to describe quick deals. i wonder if you can confirm to the committee that bp was happy with that deal and bullet points the way forward in the future? >> first of all i think that-- whether they are happy with agreement. i mean i think it is a good agreement. i think it recognizes that they are a public audience effectively under former taxation for licensing and that they too need to make savings and they need to contribute, and you know i want to thank mark thompson for engaging in that process. and agreeing to take the funding of the central government funding through the foreign office budget and funding various other things as well. and, d.c. monitor and parts of-- and also agreeing to freeze the figures and i think that will help keep them a bills down over the next years. so i think it is a big-- good package. the negotiations with the bbc were one of the last to conclude that actually discussions have been taking place for many many weeks if not months on for example of the elements of the package and have been engaging in discussions about licensing as well. so, they were brought together and i think a good deal was had for the bbc, for the british public and for the british government. >> thank you. on drugs, that will be an importantly-- an important part. the forecast of 290,000 public sector jobs will go. and rebalancing the economy going for world mean it should focus on the private sector for job creation. in the northwest, a number of people employed in the public your has gone up 70% of the last 10 years and the their flatlined at 24. so given that context, what degree of confidence you have for the regions who will deliver on jobs across the northwest? >> the first point i make is that the 490,000 figure comes from an independent body. it is a budget responsibility. it is not a secret it was published at the time of the budget, and if you are going to use that figure, you will have to accept the credibility that they give then you have to accept the credibility of the other estimates on employment. and they forecast a 1.3 million net jobs will be created, so they will be the first one and that of course comes from private sector growth. now, what we are seeking to do, and this is a big challenge and again, something i would suggest an interest in is how we move the british economy from a model where there was excessive, economic growth was fueled by excessive leverage in the banking system in the households and in government and also a model of growth where too much growth happened in one quarter of the country in one sector of the economy, financial services and where we need to move to a more balanced economy in many respects, geographically and a balance between the private and public-sector. i think a striking fact is that for every 10 jobs created in the southeast england, one is created in the north. so that is a challenge. we are seeking to use a number of different tools. capital investment in the regional growth fund. we are trying something which no one is tried in the country before which is a tax break for hiring new people that only applies to regions outside of the south east and the eastern areas. that is a geographically-based tax measure. we are also seeking to have a highly competitive corporation tax rate, and i believe the reforms to education, higher education will also produce structural improvement in the british economy. so, it is a number of tools. producing a new model of growth, which is not so dependent on dead or-- is a major turn for this department and i would agree with you. >> you mentioned about the-- an emergency budget. you said that needs to stop at 10 to 20%. hasn't started? are there any signs? >> that has started and they are are quite encouraging signs, but actually one of the things we ought to do is make sure that many people are aware of this and it is being taken up in across the country. i was in west yorkshire the other day and it was a good take up there, but actually they the take-up was hired by some people who are eligible for it. that might be, as they come to complete their taxes, their new business so they come to pay their national insurance and they will be aware of it and certainly i will be instructing to make sure people are completely aware of all they are entitled to because i think it is potentially are useful. >> further communication requires. >> i would say it is working well. it is one to say it is working better. >> would you anticipate or look at the possibility of extending that, given the importance of growth? >> i don't want to actually write the budget here, and so i'm not saying that would be in the budget are not in the budget. i'm not going to comment on the individual tax proposals. obviously it would be more expensive to deal with the stock of businesses rather than the flow. >> i know that it will be talked about in more detail in a minute that you have made several comments about the importance of tanks providing credit and i think most people around the state and members of of the parliament would accept that view but what steps can you take to get the banks to do what we think is important to the states economy? >> i think it operates at a number of levels, and i wish it would be-- right now. i think they are a number of tools some of which are working in some of which need more work. actually most important of all is getting international standards on capital liquidity and definition of capital because that at the moment is causing this problem not just in the united kingdom but many other countries, so this is not a unique problem to the u.k., but getting certain day on the capital liquidity requirements of the international banking system is essential and i hope the g20 at the end of next week, that will be-- second i think there are specific measures that the banks themselves can undertake and they have come forward with actually with a 1.5 billion version of small business lending funds which will help particularly startup funding. is a welcome thing that they have come forward with. it is not the last word necessarily but it is a good important step forward. we have extended and you can underpin some of the funding guarantee. we are also doing that so there are those three things and actually as it happens, the new lords chief executive is someone -- spectacularly increased small business spending and his-- [inaudible] and that is our largest retail bank. >> can i ask you a question? you have given the licensing monies, get they are highly resistant to what they are asking for which is community enterprise funds leading to that. will you use your powers to direct them to give monies to community enterprises imperative to the people? [laughter] i tread with trepidation in this area. one of the things i have had to sort out is the funding, because the mechanisms that have been in place for decades expired at the time of the general election and no arrangements had been put in place. you know what i sought to do is, with the agreement and consent of the palace, is put in place sensible restraints on current expenditures and as you correctly note, there is a freeze which is having an impact this year and next year, and then trying to develop and by the way you will all be glad to know this is the subject of primary legislation in the house of commons, a future funding mechanism for the sovereign, which is linked to the growth in the receipts and the revenues. we are just trying to create a permanent mechanism as part of the specific.. i suggest that we have not decided before then to introduce the community measures that you propose and you might want to raise them. >> was a point in the last parliament in this committee when we did the inquiry. the serious point is that there is a real opportunity to help communities to grow for commercial developers to look at that. calling on to-- speak and you just give us the likely timing of that legislation? >> the secretary and i have particular responsibilities for the royal finances. [inaudible] [laughter] >> if you could give us a rough idea. >> thank you. we have had evidence for a number of sources about the markedly different impacts that the measures taken will have within different regions. and, my question is, in this regard, is it inevitable collateral damage that these regions will not prosper as well as others. or, if the government-- is the government taking specific measures to help those regions? >> first of all know, i don't accept them, the terms. any particular region should work out of the economic government policy. we have a bit more of a rebalancing of this economy geographically in the way that i was just describing. the absolute precondition of investments in a country where the private sector is not as private as anyone would like it a dubious economic stability and they think they keep going back to the big picture which is this kind -- my government was not prove providing credibility and all parts of the country would suffer potentially. the parts where investment is marginal. the second, there are very specific regional tools that we are using that have heard for example that his jewish vision of the capital project, where they are located, partly through the regional growth regionally-based tax reduction which is again-- so there are a number of tools which also i think help. >> we were talking, you were talking earlier about traditionally in this country we have i think over relied on bank financing and i think it's response to financing a private sector recovery, where it says serious over capitalization of ritter small businesses, especially compared to the u.s. needs to be addressed. how can we go about encouraging more equity, and making, and what forces will the government do to actually get us toward a culture of less dependent on banks the i think currently the use of various funds, some of which are provided by the banks themselves and some of which are provided by the government, flows from venture capital. i think there is the tax treatment of equity which is also an interesting area, where actually the playing field is not particularly tilted in the favor of equity investment, and that is worth looking at. as i say don't want to prejudge the budget on the so i think you are a number of tools, but it is quite-- because you you are exay right. by the way i think also this applies to micro-businesses, what they are trying to get more of a corporate market developed in this country and the way of the united states. that is an important step again take. a number of tools to get away from a model that was over reliant on banks, and banks who around the world have in deleveraging. >> the banks 7.5 million growth fund he referred to could be very helpful and not, but not if they run-- which is to it to take sufficient and well-adjusted investment risks and companies that are looking or the same thing. how much will you be able to in the country, how much will you be able to direct so that lending goes to where the book is going to come from? >> as? >> as i say first of all their incentives you can bring. i mentioned the tax system. second, a the growth they are creating. >> some of the riskier start up investments which there are not enough of in the u.k. and there's a striking imbalance between that market here in the u.k.. in terms of directing lloyd's and rbs and other institutions, my general impression has been my predecessors in this regard, which is i don't think the idea of a politician directly running the bank is a good idea and we have the u.k. set up by the previous government. but of course, in my meetings with those chief execs, and make it very clear where i believe that prior to should be and as i say, the chief executive announced lloyd's, someone with a particular track record in increasing the lending which we were very aware that all so we are going to increase malt business lending so i think there are various tools. >> thank you. >> chancellor, think chancellor i should start by saying i'm going to enjoy future years when you are cheerful. seems to me this is a-- again i just raise something? i am going to raise regional spending but i just wanted to gently, peacefully get to the point where yesterday or the day before we were approached by-- who said your policies were right because the country was heading inexorably towards a financial crisis. the bad luck, were you not concerned chancellor that the final figure, the original estimate from that public borrowing in 09/10 was about $177 billion. the final figure is $165 billion so rather than having an economy running out of control, the last wave of government, we have actually taken over 20 billion off what was going to be borrowed. can i also ask you to confirm, just gently, that this year you might tell us how much money is coming out of med borrowing this year but as i understand that your contribution is 6.5 lien. now the amount of money coming out is considerably in excess of that, from the march budget. now, i liked your statement where you said to a collie, whoever won the election would be doing the same thing. you see i think you played a magnificent game in terms of politics and i take my hat off to you as a professional politician. the fact that a crisis happened, receipts dropped as they were spending come in because we were in a crisis, we didn't think it was opportune to cut expenditure until they got onto firmer, more confident economic ground which is economically sensible. but it is clear from mr. dowling's budget last march, as you said, we were all going to do what you were going to do. the difference in time. you are going to go further, shorter and the only difference between the two parties is that sensible in terms of the fragility of the recovery? do you care to comment? >> there a couple of points. a couple. a couple of points. first of all the fiscal forecasts of the previous of course was decided upon by the chancellor of the exchequer and the prime minister, and it is true that the march 2010-- turned out to be lower than they said it was going to be several months before. >> could i just interrupt you for a second? the point i'm making is the original estimate, the original project--. >> there were various estimates given. there was an estimate given by the government and now it turned out to be less than the estimate one was being very cynical and of course you might say with an election approaching they put it up there. we have created and independent office with budget responsibility that makes these forecasts on a central-- you referred to earlier and i do want to take too much time with this but actually a budget deficit was emerging before and i know paying people-- at tony blair says he was the primacy of the time come we should also accept that from 2005 onward, labor was limiting or eliminating the potential structural deficit. the fundamental savings review was enriches that the much bigger error than i ever thought of the time. he was the prime minister at the time and the institute of fiscal studies and the government have both made the point that the recession pudding and mourners damaged back an enormous strain on the finances but it was emerging in the middle part of the last decade and there was a--. >> when it was running at over 3% by the time the financial crisis came along, so it was designed to express the point made by the government of the bank. the fact is we came into this crisis with fiscal policy that was not sustainable in the correction was needed so we were ill-prepared. other countries use the good years to reduce deficit to build up surpluses and the opposite thing happened in britain. so that would be the second i would make her. the third i would make and i think this is-- the third i make is you asked about-- all political parties in britain want to eliminate the structural budget deficit. the structural budget deficit is the structural budget deficit. with anything there are more dead interest you have to pay, so the decisions we have to take which are structural loans like reducing child benefit for higher tax benefits these are decisions that will reduce the structural deficit. they are the kinds of decisions that anyone would have to take whether one to four, five or six years or eight years or whatever stood. you have still have half left in you have to make a further decision. it is not simple enough to say if we stay longer we can avoid these decisions. this is a structural deficit, not the actual deficit which of course is more volatile with the economic cycle. >> no, i think the conversation is a bit more calm and more objective. are you actually saying to the treasury committee that you would have no borrowing in the future? >> there is a fiscal mandate that is very clearly about the structural deficit, particularly adjusted so we are absolutely clear. >> it is a or dannatt. is very clear that the automatic stabilizers, and the fiscal mandates does not in any way-- so absolutely. >> just two years ahead, if that is not looking too far ahead what would you estimate? i am not trying to pin you down but are you saying it would e.-- i would be surprised if there is a western world government, country that doesn't have it. the e.u. is 3%, is that? >> the previous consolidation plan by the previous government. we put it then they all make country not to hit the 3% criteria even with the year extension. >> that is what i'm saying. to try to take the hysteria out of that whole debate. european nations except 3% of the upper limit, 3%. it has been labeled a hysterical over spender and for most of the time the structural side has been about for. a 1% difference between our colleagues. >> i will go one to the regional stuff. >> i just say by setting the fiscal mandate as the current structural deficit, and having a second target given extraordinary situation to get-- by the end of this parliament,. [inaudible] setting the fiscal mandate i think allows the automatic stabilizers to operate and actually also provides freedom among capital expenditure which is then matched by the debt target. >> i think there's a difference between us in the time and amount but it was certainly going the same direction. we were going slower and you are going faster. which brings me to the worry we all have. now one of the things we worry about is the defendants on many areas of public sector jobs, and that rings us to the idea of-- now you have cut the rda and you have abolished the rda and taking the 4.2 billion pounds that would then spent by the rda's and you have substituted 1.4 through the regional fund. now the prime minister was saying, a relentless focus on growth, because of this we are going to be in some trouble. economy. >> my constituency -- make in my judgment of the constituency, the rda which covered all of the scottish border, just got too large and unfocused and after all, if you ask a question how is it that even after a decade of having regional development agencies, for every one, 10 were created in the southeast. >> it is the amount of resources, and the resources have come down from four-point two-to-one .4 over three years, which is if these are the engines for growth, it is worrying. but as i say, i think the rda resources word deployed as effectively and the fact that the economy was actually becoming more and balanced variations were growing. >> the previous created-- to increase the growth in particular regions and deal with the regional disparities in the economy, but actually at the end of more than a decade, the gap between the regions will grow so this was not an effective tool. >> the gap to train the northern regions and in the southeast was growing but we were still in better shape, but it is not about the ideas of, the ideas of body. is about the fact that he replaced it with the regional growth fund and local enterprise partnerships, and the funds available to the local enterprise partnerships are a third of what we have for rda's. >> if you would like to look at--. >> can i make another observation, which is, because we haven't really talked about it at this hearing. a reproach to capital spending has been very different from previous government. we aggregated all of the potential capital decisions across all the departments and simply gave the departments and said you make your decisions. we aggregated them all as road projects, hospital projects, investment in science and infrastructure and took all the capital to the government and then we sought to actually make sure that they were distributed in a geographically appropriate way as well, which we could take because we could make that judgment. i think you'll find that some of the capital projects are very specifically targeted in parts of the country which have not seen this much growth. >> in my area, the gateway is a big project in the area that has been underfunded for years. we been able to fund it and that will provide growth. >> you one last question. are you aware, if you work it through, how much money is coming to example to 11 local authorities. it will amount to just over 17 million pounds a year regeneration. now, that is not the price of one primary school. now, that is how the division reduce the sum. when you spell it out, it amounts to 17 million a year. >> the way he were coordinating economic policies across different councils and having the whole of the option under one regional agency. second their other decisions. for example, the traffic on the m. 62, the rebuilding of the lead station, which will help that economy, that local economy as well, as well as, and in leeds for the yorkshire businesn referring to-- quite a good take-up of the national insurance tax cut or new businesses, so they are a number of tools that are available but i don't think the rda will be the be-all and end-all because we'll probably would not have this unbalanced economy if they were. >> chancellor, this relentless forensic focus on growth at the prime minister speaks about requires a green economy, green jobs, green manufacturing and green investment. that will be driven in large part by the green investment-- what is the setup of the bank? >> well, i want to get enough money as soon as possible and we will come forthwith proposals on how it is going to be structured in the next, simply between now and christmas and of course i will set aside money to go into the green investment bank. in the csr, this is government money. i want on top of this, i want don't want this to be the only money going into the green bank that this is an important backstop. on top of that, future assets we should look at putting some of the proceeds of those into the green investment and also of course private money as well. >> indeed that was in the csr statement. the governments and business models of the bank, but that is not an inflationary at all. >> the thinking is pretty advanced. this is something new for the united kingdom, so we want to get them absolutely right and even though it is not just a discussion within government, which is quite easy to have, we have just got to make sure this is actually going to work. if we launch something and then it doesn't attract the private sector capital, that it won't be a great investment. so it keep getting this right and there is not an off-the-shelf model in the u.k. but just a few months after coming into office we have committed funding to it and i think that is a good thing. by the way we would hope that the scottish government is able to engage with us on the-- and make sure some of that money can be spent specifically in scotland. >> i'm sure the scottish government is already engaging with the u.k. government, but in terms of scotland, for the growth forecast to be met, they presumably need to tap into this 25% capacity, and the 20,000 jobs we estimate can be created in that field, bringing 7 billion plus into the u.k.. now, you will be aware i am sure of the decisions which made in the next six to 12 months. you must be concerned that the absolute-- may delay the investment decision. >> as they say we were elected in may. now and november, i hope i christmas to have the structure of this bank bear and the thing being created. more money coming from government asset sales and from the private sector and sitting alongside some other policies which are directly benefited to the united kingdom this area. renewable heat incentives, support for wind turbines technology which is something the trade unions want to see and i met with tc-99 and we went ahead with that so i mean there are a number of things we are we are doing in this area which i think will help stimulate the green jobs that we want to see. >> the developments are incredibly important and very supportive of those but i'm trying to focus specifically on these other projects. you talked about finding a billion pounds in this is really the crux of this because a large chunk of the 100 lion so far is the fossil fuel levy that ought to have been available for use by the scottish government but would require a clawback on existing funding. why did you take the decision not to release that so we could have stimulus of these activities in scotland rather than-- and my fears that the bank may not be ready perhaps until 2013, 14 when the investment decisions are taken this year? >> it has come to my attention, on the fossil fuel blending the previous government would have no discussion about this at all. my predecessor did and want to talk to the scottish government about this. now what we are doing is engaging, talking and engage in an and second of all without going into if all the details, as you well know the release of that money would lead to an increase in public expenditure and in a way that the scottish government-- what we are offering is a different route which is to have the money channeled through the bank. absolutely for use in scotland and no other parts of the country, but i think that is, i hope-- we are trying to find their way through a problem which allows government didn't even want to look at. >> i mean, we will see if we get a solution to this, and they know the discussions-- [inaudible] the key concern and a new hope you take this on board that the possible delay in the investment decision to be taken quickly, we have a detrimental effect very quickly. that is the concern. >> i was one of the people in the development policy. we are seven months after the general election. is a complicated thing that has not been created before in britain. there are elsewhere in the world, but we are working you know very very hard to get the proposals out there so that it works. the last thing they want is for us to announce some proposal that sounds great on the day. i would rather get it right, get it right between now and christmas than something does not attract private sector investment. i provided the billion pounds as a backstop has what i hope is that substantially more resources are found from government assets but also from the private sector, leveraging in the green infrastructure and the whole united kingdom. >> chancellor thank you very much for coming to see us this morning. you have given some good answers and you have engaged in all sorts of issues since he became chancellor, not the least the lvr, where we are now collaborating on the appointment of the senior people at the odr. you have been announced to look at the tax policy, and we sent you a letter about that and we appreciate if you would consider that being put in the public domain today. today you have asked us to look at the methodology being used to assess the distribution again, and we will certainly do that. you have also responded to the great transparency by sending us a letter, which on the-- which i think is important. we are grateful for your openness on all of this, and i would be very grateful to the committee. we can adjourn for three minutes but-- [inaudible] thank you very much. this is an hour and a half. >> welcome to the elected council. president musharraf, it is an honor to see you again. my last interview with you before i left "the wall street journal", where i was editor, to run the atlantic council, was in january, 2006 in davos. i will give a couple of lines from the interview to illustrate how much can change and how little can change. we talked about something that had not made the news much until that time, and that was the notion of the gas pipeline that would run from iran to pakistan and potentially run to india. one of the things we are working on at the atlantic council in the southeast center -- southeast asia at center is how does one drive this kind of cooperation? we talked about drones. they're just been an attack on a village where al qaeda leaders were expected to a head dinner that killed pakistani women and children and set off street protests in pakistani cities. you talked in the interview of how you had not been informed in advance and the pakistan -- and told the u.s., "we do not want anyone to operate in pakistan, even if that meant a slow response to intelligence." mr. president, we established a seouth asia center two years ago because we recognize the centrality of these sorts of questions and the centrality of the bilateral relationship with pakistan in its regional context. you are an unusual man, talent that understands both the region and washington. and we have picked a leader for our center who is probably the most unique person in understanding, he is an insider in both societies and an outsider, which is a frightening bit of schizophrenia to bring to the leadership of any organization. he knows how washington and pakistan works, and it gives us a leadership that has a position where the south asia center is not an american center. it is a global center talking about a region and bringing us real expertise that has put us at the center of this debate after just two years, less than two years in operation. only by understanding that the relationship with pakistan, with this kind of sophistication, can we move forward. there may be no more important bilateral relationship in 2011 for the u.s. than this one, president obama's trip to india, notwithstanding. so, we want to talk about the geographic subcontinent in the center -- afghanistan, central asia, iran. we think this the lives -- a solution to the problems we look at will only come from this link. john kerry has called our work on u.s.-pakistan relations seminal. since the center's launch, we have published an updated report. the first report we did was in 2009. we did an updated report on the tenuous relationship, and we remain committed to our mission of waging peace. let me quote the first sentence from that report. "perhaps no bilateral relationship in the world matches that of the u.s. and pakistan when it comes to its combustible combination of strategic importance and perilous instability." so, that context is as important as is our speaker today, a man who understands the context and the challenges as well as anyone on earth. few people in the world have an understanding of the inner workings of pakistan better than president musharraf. he worked his way up through the military and political ranks to become general and army chief of staff in 1998. he took over as president after a bloodless coup in 1999 and led until his resignation in 2009. his life story tracks the history of the country and the region. he is not only a person of history in the region but as we will hear today, he is very much a person also of the present. president musharraf, the floor is yours. [applause] >> mr. kemp, president of the atlantic council, members of the council, it is indeed my unique privilege to be talking to all on a very important subject, the subject of our region, what is happening there. it is the happening place today and the strategic focus of the whole world is to our region. therefore, i would like to say that we must understand the region and there is no doubt that the world and indeed the united states coalition forces and pakistan must cooperate fully to be merged successful and what ever they are battling -- to emerge successful in whatever they are battling. therefore, i am going to talk to you on regional development, on the current situation there in the region, and also the ups and downs of pakistan and the united states relationships. as you said, it's a strategic relationship of great importance, but may i very frankly say that yes, indeed, in words, but in actions, one would expect much more to show or to demonstrate the strategic importance that pakistan enjoys in that region. i will no annunciate debt to whatever i'm going to say. i would like -- i will not enunciate whatever i'm going to say. i will start -- from that, sorry. rings]l phone [laughter] shut it off. i take the historical perspective, dividing into a certain periods, and with that, i will extract the relationship of pakistan and the united states and why there have been ups and downs. the first period is 1979 to 1989. since 1948, pakistan has been a strategic partner of the united states. and we have been with you all these years for 42 years, right up to 1989, very clearly. we launched a jihad against the soviet union, the united states and pakistan, because we wanted to withdraw mujahedin from the world, 25,000-30,000 from almost all muslim countries. so this continued as a teacher relationship with the united states, and continued since 1948, especially in these 10 years, we fought a war together in afghanistan. for 10 long years, this jihad was wages. the elites of afghanistan abandoned afghanistan for the united states and europe. it was spearheaded by the militant groups. in a negative aspect, also, the glue that held afghanistan together, the ethnic groups, translates into a national coventant. this group, after the king was deposed by the soviets, was no more. therefore, when we talk of political revolution, we are talking of a new national covenant, homegrown national covenant, giving the pashtuns the dominant position in government. for this period of 1979-89, ended in a soviet defeat in 1989, but what happened after 1989? the next. period is 12 years of disaster. firstly, pakistan and afghanistan was totally abandoned by the united states. not only abandoned, there was a strategic shift in the united states towards pakistan -- against pakistan towards india. there were sanctions imposed on pakistan and cozying up of relations with india, starting in 1989, despite of the fact that we were the strategic ally for four years and we fought a war together for 10 years. this led to a sense of betrayal within the people of pakistan. which exists even now. so 1989, the abandonment of the region, was the first great blunder committed by the united states. not only these of the pakistan, but also the 25,000 mujahedin -- not only vis-as-vis pakistan but also the 25,000 a shot had been coalesced into al qaeda. -- the mujahedin coalesced into al qaeda. for six years, battling each other -- even the pashtuns were divided into eight groups -- and they ravaged the country. the fighting was then between al qaeda on one side and the northern allianz, minorities on the other side. this then destroyed afghanistan years.anothehr six afghanistan yeasrrs, became of ghost country. i visited afghanistan. kabul was worst than somalia. so this was kabul, a ghost city. this is what happened in these 12 years after having won a victory in the soviet union. because the strategic focus was euro-centric because of the cold war, warsaw pact, reunification of germany -- all that gains went into york. what did afghanistan or pakistan get? nothing. for 12 years, pakistan bought 4 million refugees in the process into pakistan. we had to fend for 4 million refugees, warlordism in afghanistan. pakistan alone to protect its own interest in these 12 years. that was the -- of pakistan- united states relationships. they thought the united states had used pakistan and abandon the spirited and kim 9/11 -- then came 9/11 and the terrible terrorist attack here in the united states. pakistan again becomes important. pakistan is needed again. and therefore, we again become a strategic partner. but then we became strategic partners, the question i was asked all the time, what makes you think the united states will not again use us and abandoned us? it is important, ladies and gentlemen, today when we are trying to take the decision whether to stay or quit, are we again to be abandoned -- question mark -- in the minds of every pakistani. so now the next blunder that i will talk of which is very significant -- after 9/11. the taliban were defeated with the help of the northern alliance, because the minorities -- taliban dispersed, ran, al qaeda ran into the mountains and cities of pakistan. they were in total disarray -- taliban. afghanistan no was available for the political instrument to be used. [unintelligible] by giving -- we were forced and the military dominant position in afghanistan. and now a political solution available to be executed in afghanistan. but, unfortunately, the political solution did not come about. what is the political solution? you cannot govern afghanistan with a minority dominating the government. they are only 8%. afghanistan has always been governed by pashtuns, 55% of afghanistan. now, he was the situation early in 2002, where we could have changed policy, taken pashtuns on board and put a pashtun- dominated government in kabul. unfortunately, we did not do that. the environment was available. we failed to do that. and therefore, the country is governed by the minority, the biggest blunder with which we are persisting even out. now we are trying to talk to moderate taliban or taliman. what we should have done in 2002-273, from a position of strength, now we are trying to do from this position of weakness. that was the next blunder. and now we are in the pro cess of taking a decision whether to stay or quit. ladies and devin, this decision has to be taken very carefully. -- ladies and gentlemen, this decision has to be taken very carefully. we cannot commit a fourth blunder. in afghanistan, a lot of people ask whether we can win. i would like, my reply is, we must not lose. even if the answer to win in maybe 50-50, but we must not lose. and let me say with 100% conviction, if we should resolve, we will not lose. and we are not losing. so therefore, my food for thought here is, ladies and gentleman, that we must not lose first and then work out the winning strategy. and i have said that pakistan is supposedly a strategic partner. i don't know. the people of pakistan are not to shore whether we are the strategic partnership -- the people of pakistan are not too share whether we are strategic partners. what are the sensitivities of pakistan? integrity, our world being, of course -- our well being, of course, and the world showing us concern and giving us the importance that is due to us. the other is the kashmir dispute. it is important, not only that it is a dispute in the united nations but today, it is causing a lot of terrorism and extremism. -- within our society. in 1989, when kashmir erupted, dozens of mujahedin groups sprang up within pakistan, and thousands of people were volunteering to join to go to india, near kashmir, to fight against the indian army. and all these maligned names of -- mujahedin, etc -- are products of the 1990's. now there is another intifada movement by people of the indian -held kashmir, and that is suppressed by the indian army and with the dozens killed. these mujahedin it groups again start rising and people give them support. its impact to terrorism and extremism must be understood by the world. and therefore, the significance of resolution of the kashmir dispute, not because pakistan wants it, it has been necessary for the region, for the world to fight terrorism and extremism. the other sensitivities are nuclear capability. ladies and gentlemen, pakistan is as much as rogue nuclear state, islamic bomb. i don't know why india is not a -- bomb. [unintelligible] pakistan is nuclear as a defensive, existential threat exists on it. our strategy was of defensive military rate from 1948, and we quantified this into army-navy, air force. only conventional type. in 1974, india went nuclear. so, therefore, the strategy became untenable. therefore, pakistan had to go nuclear. and when india started firing missiles in the early 1990's, pakistan had to make missiles to restore the balance and restore the strategy of defense, which we did. so, therefore, pakistan's nuclear capability is an existential compulsion which is with inida. dia. no pakistani will understand the logic of what pakistan's nuclear assets are disturbing the world. this is a sensitivity. our strategic assets is the pride of every man walking the streets of pakistan. so any indication of negativism coming from abroad, the threat coming on the strategic capability of pakistan is viewed extremely seriously by every individual pakistani. so this is the compulsion. oto president obama's visit india. i do not want to talk much. i do not believe in caucus and indo-an being centric. i believe in the bilateral importance of relationships. the united states president was to go to india, absolutely. he has all the rights to do everything. but if pakistan is the strategic partner, pakistan has strategic significance, pakistan is suffering because of so many bomb blasts, hundreds if not thousands of people dead. the army has suffered 2500 dead. isi has suffered 300 dead. and then we had this flood, massive flood, unprecedented. so many casualties. i thought president obama should have shown some concern for this small strategic partner and visited pakistan. no mention of kashmir. i have explained the issue. it is sensitive in fighting terrorism and extremism. the concern of india is that no third party is to be involved. yes, indeed, it should not be involved, and we should resolve the kashmir dispute bilaterally, which we were doing in my time, and we were near a solution. but certainly from the sole superpower, one expects concern for pakistan being a strategic ally of importance and also sensitivity to terrorism and extremism, because kashmir does contribute negatively toward terrorism and extremism. while there is concern in the united states or interest in the united states, because india wants to purchase $45 billion of arms purchases, yes, it is of commercial and economic interest, but i remember in my time, pakistan -- there was the question of the european union and united states for a free trade agreement or preferential trade agreement on additional market access. i believe in trade not aid. it means opening of factors, job creation, poverty elimination, unemployment reduction. unfortunate, it was not given. lastly, ladies and gentlemen, i talk of the political scene and pakistan. here in united states, all said, pakistan's strategic significance. therefore, we are to be concerned what is happening in pakistan and what the future holds for pakistan. we must ensure that pakistan's integrity, its solidarity, is stability is maintained, because we have to fight terrorism and extremism and defeats it. and if we want to do that, we look at the political realities in pakistan. today, pakistan is on a downward turn. its economy, its government, political turmoil, and of course, terrorism and extremism. in this situation, let's look at the future. one has to look at the future. otherwise, -- react when it is too late. we need to see is there light in this darkness that pakistan is facing today? and that light will come through the political alternatives. i do understand that democracy has to be maintained, but through democratic, to the process of elections, is light visible? we will have elections in 2013, hopefully, when the government completes its tenure. some people are saying midterm elections or whatever. what will be the result of those elections? will we have a government that will deal with -- that will take pakistan forward in this darkness to light, fight terrorism, and sure the solidarity of pakistan? i don't see that light, unfortunately. therefore, ladies and gentlemen, i personally thought that i need to get involved. maybe there is a chance that i will produce an alternative that may be viable for pakistan. and therefore, i joined politics. one has to analyze the future of pakistan. we must insure the stability of pakistan for the stake of contain further turmoil in the region. i know i have less time. i am open to any questions you may want to ask. [applause] >> thank you, mr. pres ident. as usual, there was a sweeping vision that you reflected in your talks. i'm going to pick up on some of the points you raiasesed, particularly on the u.s.- pakistan relationship. i am reminded of a quote of the ambassador. he said that being friends with america is like living on the banks of the great river. every four years, it changes course and it leaves you flooded or high and dry. and one could get that flavor from your commentary on the u.s.-pakistan relationship. tepn you took the fateful se of joining the coalition of the course after 9/11, you agreed to provide access to the united states to pakistani territory, to launch the attack on afghanistan. and there is enough evidence that some of the drone attack, which led to public outcry, were launched from pakistani airfield originally. there was no -- taliban in pakistan at that time. resulted largely of -- because of the army into the border region. looking back, do you think there was too much haste aceding to the u.s. request? >> this is the argument many people have given. i have faced this question many times. first of all, pakistan's decision to join the coalition and the united states. the first question i asked myself before joining -- what is in pakistan's interest? does pakistan want a talibanized government in pakistan? and do we believe in and the views of islam that the taliban holds? the answer was no. 99% of pakistanis would say no. we do not want that. with all that confidence, it was not in our interest to be supportive towards taliban. notas pakistan's interest, u.s. interest. then i went further. if we did not join, what could happen? and my answer, which i do not want to elaborate, was that it would be dangerous for pakistan. because india was ever prepared to join and certainly the united states would attack afghanistan. how did the attack afghanistan from india? pakistan's sovereignty and aerospace or land. from all points of view, bravado is good at a personal level, but when it nations and states are involved coppe, bravado is not the solution. i took the decision. in hindsight, most of the pakistan is believe it was the right decision. ttp was not there. there was dnsm. which was more serious. he was the leader. and he is the man who's stronger in this malikahn divison. ion. then there was notheanother leader. these are products because of what has been happening. these are products because we defeated after 9/11, taliban and al qaeda were defeated. then 2003, or in 2004, we had a two year period to execute a political solution in afghanistan acceptable to the people with pashtun. i coined the term that all taliban are pashtun, but all pashtun are not taliban. --'s get them o noun our side the pashtun. now that was not done, so therefore, taliban emerged in 2004. they are starting out to go towards taliban. they are few in numbers, but taliban have emerged. you cannot put that on mine, that i did something -- and then kashmir, yes, indeed, as i said, kashmir, freedom was -- this at all this dynamics. some religions militancy in afghanistan, and after 9/11, yes, they turned it towards me. so, therefore, our national establishment -- the extremism went on the rise occurred because of the. so i think we need to heed the history but see the future, the realities of today, and battling in the future and winning. i think we should concentrate on that. back to the drone, s, every single person on the streets and pakistan is opposed to them. then why allow the drone attacks to cross your sovereign boundary? >> yes. you did ask. now, drones. there's a dilemma here that we share with you. the dilemma is that these drones are militan. t. i know that. at the same time, indiscriminate use of drones causes >> in my time, i never allowed [unintelligible] we needed drums of for giving us information about targets. where is the target? that is the main thing. surveillance is important to spot the militants. you can send your helicopter gunships, or we have created a force called special operations taskforce for the special services group. there are various methods. i was for the use of armed forces. i think that there were only a few grown attacks in those times. i've always objected to them. the use of drones is causing in- a negative. that is the dilemma. the pakistan armed forces. united states law comes into play, and these are unusual circumstances. >> this is the element of distrust that prevails between the strategic partners. let me take you back across the border and say something quite important about afghanistan. can we win? your response was, we must not lose. it has been almost 10 years since there were connecticut operations in afghanistan. what, in your mind, is that missing strategy? >> first, i check the important part. do not lose. when we talk of quitting, it has terrible impact,-on both sides. -- impact, negative on both sides. every partner in the coalition including pakistan would like to evaluate the situation. certainly, i am reminded of 1989. millions of refugees in pakistan, so pakistan will have to think. the sphinx -- must think. negative. the enemy is very clear. if i was a taliban commander, god forbid, time is on my side. or the -- what a negative thing. ladies and gentrelemt -- gentleman, in tribal culture, chivalry is respected. this is never expected. therefore, stay there. now we have to certainly win. what is the winning strategy. how can we do it? we first have to be in the military dominant position. never speak from the position of weakness. how do we do that? our forces, the u.s. forces, coalition forces, they are diluted because there is too much space. think of going across the pakistan border, it is increasing space. you will be defeated. you will suffer more casualties. never make that mistake. therefore, how you do away with the dilution of space. do we know that the national army today -- what a blunder. 50%, 55% is ethnic. how can you do this? there has to be a balance in the army. there has to be more. secondly, is then any other element? i think there is, even now. we should have done it in 2002. if you see a tribal culture, to things that i want to highlight. their confined to their mosques. over the centuries, where are they? they are supressed. but they are tehre. -- there. everyone here is a weapon. each side has its armory. it is a weapon culture, weapons and good weapons. let us look at tribes that have no ideological affinity with taliban. and tribal maliks that have some -- i don't want to use the four- letter words. [laughter] they are raised, armed, give them their pride. let them fight the taliban. tribal people have always fought with the pakistan army against india. let's create those. this is to gain military dominance, and the political instrument, the military will never give you a solution. so a political instrument. we have to get them on board. term ofagree with this moderate taliban. do what you can to get them on board. they are not a monolithic. they have good command structure like the army. there are a number of groups operating. in fact, let me tell you [unintelligible] their people hvae -- have clashed with each other. 150 dead, killed by the group. they ambushed them. there is -- it's very good that there are a number of taliban. managing political affairs. but from opposition. >> thank you. one last question before i share you with the audience. this is picking up on your point regarding the 2013 elections. you said you had decided to join politics, and some said that you joined in 1999 when he took over the government. what has changed from the time that you left pakistan that would allow you to go back? and the obstacle that you face, the legal challenges. that is a question of the presidency, but the national assembly members voting for the office of the president. it has only just been launched. the think there is any realistic chance? -- do you think there is any realistic chance? in a journey starts with the first step. -- >> any journey starts with the first step. you think of it as too big. you don't have that leadership in new -- you. i presume it's not too big. because, number one, i left not because my popularity was rock bottom. i was the most popular man in pakistan since 2007. there is no doubt in my mind, i know that. i understand the people and the masses of pakistan. it was in 2007 the political turmoil took place. for which there was a reason and i don't want to get involved in that. it is not that pakistan was going down. the socioeconomic development of pakistan was not going down. it was not that the condition of the people, the welfare and well-being of the people was going down. the poverty in pakistan according to the [unintelligible] the 2008 figures were reduced from 32% to 17%. the people of pakistan no way. -- know it. now, this is one. my popularity did go down, but it was not rock-bottom. i was popular and a lot of segments of pakistan. the other point is, pakistan is suffering today. is that the reason for the gain? i said, in the darkness, the people of pakistan are not seeing the lights. what is the choice? i don't have to elaborate. everyone knows what is happening in pakistan. the alternative, twice and failed miserably. in 1999, pakistan had $300 million in the foreign-exchange. all our indicators, it might be a little better than the united states today. and it was -- the economy was in a terrible state. people were crying, i was a chieftain. i know how many women and men came to me and asked when i was going to take over. if i gave the names of some of them, even those at this gathering would know them. they told me to take over before pakistan has gone in 1999. this condition now is almost the same. people looking to run away, inflation, people committing suicide? people in the streets. now they are remembering what they missed. the important items, sugar is one of the sanctioned items. in 2006, the sugar price went from 21 to 23. i called the sugar mill growers, why is this to be increased? today is 115. this is what will happen in two years. it is just one thing. the pakistan people are yearning for deliverance. that is why the first step has a lot of relevance, and i think there is a chance of success. i cannot be sure, but i believe it is better to try and fail and then to not try at all. >> i will open it up. i will start at the frontier. if you could please wait for the microphone and identify yourself. >> welcome back to washington. very fond memories. also the first meeting that you had with president bush at the united nations, our official residence in new york after 9/11. my question build on what you were just talking about, the economic situation. i remember the economy was growing. it was something like 7% per year. i stand corrected. and i recall we were talking about different ways of economic cooperation including trying to create reconstruction opportunities so that we can give preferential treatment to pakistan products that would come to the united states. can you elaborate on what your -- getting pakistan back on its feet economically, given the opportunity? >> a cherished my memory with you, sir. your very frank in your approach and i appreciate that. you also appreciated by frank s. -- my frankness. for the development of the socioeconomic development of the tribal aras. -- areas. nothing came about. that is the negative. what i want to say is, we have to be fast. we have to be trusting. we have to move fast, delivering and doing something for the people. today, the economy of pakistan is nosediving downward. why is it going down, sir? immediately after 2008 when the elected government came into being, one thing that happened, [unintelligible] pakistan is running away with their money. the dollar was held at 60 rupees for 8 years. today it is 87 rupees. fbi has gone down considerably. the reduction in fdi. exports have half the effectiveness. revenues have gone down. your balance of payment deficit increased. i don't know the latest figure. these are the negative trends, why? because of lack of trust and confidence in the government. i personally think that if people have trust and confidence in the government, without doing anything, there will be a reverse flow of money. pakistan wants to invest in its own country. why should they take their money out? halo bring their money back. -- they will bring their money back. i believe that the policy and relations mostly, interstate relationships have to do with interpersonal relations. i am very sure that everyone will be -- could be persuaded. the economy will start doing well. i have no doubt on that. our position today, before an exchange reserves are there. from $300 million to $18.50 billion. it is there. it is not $300 million. and also, we raise revenue collection to one trillion. it can certainly go down, but not that much. the stock index had gone to 14.5000. 14,500. -- gone to 14,500. what is required is confidence of the people in the government. i have a simple definition. it is my own definition for any leader or any government. ensure the security, progress, and development of the state. this is the definition i have. it can be ensured. all other things are secondary. i know i am talking to a u.s. audience. democracy, ladies and gentlemen, it is a tool to deliver the progress of the state and the welfare and well- being of its people. it is not in and of itself, it must deliver to the state and to the people. if you have a democratically elected government running people down to the ground, i don't think that kind of democracy is the democracy that any state or once -- wants. the welfare of the state, the well-being of the people. that must be ensured that pakistan can deliver to the people. >> we have a question there. there is great demand for questions. >> i apologize, i am giving long answers. >> thank you for coming. i agree entirely with your analysis, but where i respectfully disagree is that i don't think we can wait until 2013. i recently returned from another trip from pakistan and i believe the situation is far more dire than the people in this country appreciate. the dialogue only procrastinated the inevitable which will be a collision between the united states and pakistan because of a profound misunderstandings. what, if anything, can the united states or pakistan do in the short term to turn around what i believe is going to be this collision? >> think you, sir. i am surprised and glad to hear what you say. well, what the united states can do is to help pakistan. helping pakistan, i have been very bluntly indicating that what is happening is not really helping pakistan. we have to help pakistan economically. but concerns of corruption, there is no doubt. you ask a difficult question, frankly. if i were there, i would have asked for market access so i can create jobs and open factories. i can reduce unemployment, i can reduce poverty. that is certainly a thing that the united states can certainly do. immediately. remaining -- i think pakistan on the law-and-order side, we are being -- a the the term is extremism. the united states needs to develop a better understanding of the army instead of blaming the army for collaborating with terrorists. i don't understand why this is done. the army has suffered 2500 dead at the hands of them. they are killing the army men, and you're blaming the army? i don't understand. they are killing the personnel, about 300 dead, officers all over pakistan. we are collaborating with -- there is a mismatch. please try to understand. i will leave micromanagement to pakistan. be concerned with their intentions, that they do not want taliban and al qaeda. be concerned with strategic delivery and don't micromanage for them. they understand who to talk to, how to talk, what enemies to take on. and we will leave this micromanagement to the people of pakistan. the this is the second, i think. we need internal stability in pakistan, political stability. i don't know if the united states can contribute and to bring in political stability. that is the ultimate requirement because the political stability would bring about economic stability and good governance. i don't know if the united states can assist. >> thank you, mr. president for your very candid presentation. if i might draw you out on what seems to be a tension in your presentation. he spoke to the president's visit of the region and or resentment in regards to depictions of pakistan that your assessed with india. you spoke of the fact that a nuclear capacity of your region is a compulsion, it is an existential come posen. does it have to do with india or something else? how do you reconcile the comments, please? >> if i were to tell you very briefly, and indian forces today are based on 33 infantry divisions. 25 of them are oriented towards the pakistan border. there are about six armored and mechanized divisions. all six are organized at pakistan's border. they are used for an offensive. the navy, may be oriented towards pakistan's shores. the incidents like the attack on the parliament, the whole army came on to the borders of pakistan. the situation developed. or do you x -- what do you expect pakistan to do? there force is three or four times bigger than pakistan. and when incidents take place, the politicians in india are crying for punishment, attacking pakistan, it is a trifecta. what can the leadership do? it has an existential threat. the military strategy is of manila and defensive deterrents in the conventional and unconventional. previously, it was conventional with india going nuclear. >> thank you for your frank comments. stepping back from the immediate issues you have been discussing that are very important, those like myself have lived in pakistan, where are very concerned about the educational system there. i have been the many villages where it says that there is a school there, but there is no school there. you helped initiate a good program, but international measures say that only 40% of kids that are school age are in school. how we get pakistan to head towards those goals that are so crucial. for the long-term benefit of pakistan? >> i could not agree with you more, sir. the long-term strategy. education, poverty, unemployment. this is a knowledge-based economy. that is a long-term strategy. i understand we have to do something. what needs to be done, more allocation of funds for education, how do we talk about allocation of funds? we increased the budget from 2.9% to 4%. a 1% increase is 170 billion rupees. that is the kind of money that is a 1% increase. the total of pakistan between 88 and 99 used to be about 90 billion rupees for the public sector development project. it was to 520 billion. out of this 1% increase, therefore, the difficulty and money requirement. i agree with you that government has not been performing. your 100 percent right about those schools. 20% of teachers in pakistan are ghost teachers. it was 1996 or 1997. there is a corps commander in my region. the total survey, 20% schools. teachers are ghosts, only on paper. we have to do something more than the government. and we create -- he was a doctor here, having a very good practice. he gave me this idea of education and helping at the grass-roots level. he gave me the idea that we would have freer schools. the spending of money. we take schools from the villages. the teachers from that >> and i bought the idea, i told him to come to pakistan, and hek did that. and since 2001 that nchd spread to 110 districts of pakistan, mn they opened thousands of feeder schools and thousands of adult literacy centers. then there are a lot of philanthropics in pakistan. a lot of philanthropic activity where they are involved in collecting money, donations and opening schools, and they are m the best. because they do it with a passion. and there are dozens of them. i personally think the government should reinforce the philanthropics because they do things with passion.ith and make them expand. so i think it has to be a multipronged strategy to educate the people of pakistan which isn so important not only for economic development, but also fighting of terrorism and extremism. it is the root of terrorism. so i wouldn't agree with you more, sir. >> thank you, mr. president. over there. >> when you were in power, you came across as a pakistani leader who genuinely wanted a kashmir solution, and you made many, many efforts to reopen the debate, to think outside the box, and it was important that you were very close to doing an agreement with india on kashmir. is it true?oing and if it is, can it be derived today? >> you get me letter and i revive it. [laughter] >> so be itment. >> the issue, yes, i think you're right. we were. i used to be called a man of war which i was, i was in uniform, but i call myself a man for peace, and i said that with conviction because i said i have seen the ravages of war, i fought all the wars and all the confrontation with india all inf the region elsewhere, internally against uprisings, et. so i have seen ravages of war, and my own best friend has been killed in war.end my son is named after my best friend so, therefore, nobodyfrie understands the ravages as much as i have, i do. so, therefore, i am a man for peace. a lot of people in india are mail tear men -- military men. therefore, i am for peace. n and with that idea i initiated the process -- [inaudible] and i initiated the process, and i am proud of it. yes, indeed, we were proceeding well. there are three qualitiess required in a leader, i think. i've said this everywhere. for a deal, for some agreement on disputes to succeed. one is is sincerity. sincerity to resolve the dispute from the heart.sincer from the heart and soul and d mind. the other is flexibility.flex flexibility to accept others' point of view. third one is the problem area, and that is boldness and courage. why it is required is whenever you reach a deal like on an issue like kashmir, there is give and take. none of the two sides will be naive enough to give everything, so there has to be a give and take, and you will have to give, india has to give, and pakistan will have to give also. that give part becomes problematic because there will be agitation in your own backyard. and if there is a leader who buckles under pressure, then he'll be thinking that my political clout will go down, my popularity will go down, and thi people of -- well, then that interferes in the fast movement towards peace. so i think boldness is required. we were proceeding reasonably fast, in fact. we had worked out the parameters, and we were drafting an agreement. so i think it's a pity that we couldn't reach conclusions. fleeting moments come in the lives of leaders and countries, and the key to suck is to grasp the fleeting moment and don't let it fly past. unfortunately, they flew past. we need to grasp that. >> thank you, mr. president. we've got about 15 minutes lefte but we have a number of questions. i'm going to try and go throughu them quickly. we have christina lamb over there. the microphone's coming to you, christina. >> [inaudible] >> thank you. good to see you again, mr. president. i wanted to ask you, you talked about the blunders made in afghanistan -- >> sorry? >> you talked about the blunders made in afghanistan by the u.s. i wanted to ask you -- >> the blunders? >> yes. i wanted to ask why you allowedu the taliban leadership safe haven and enabled them to recruit and train? were you really and fully in control of isi? there's lots of evidence isi had been helping the taliban, or do you share the view that some of these people -- including the haqqani network -- are actually strategic assets to pack, pakistan. >> i have to be very careful answering you unless you write something which disagrees witht us. which you did before. [laughter] yeah. no. i've forgotten your question. [laughter] >> safe havens for the -- >> yeah. >> -- taliban. >> yeah. safe havens? no. if you think i provided safe havens to taliban, i mean, what answer can i give you? people who attack me, who are trying to kill me i am providing safe havens to them. i can't answer anything othern than this: we talk of shula. there is a cia office in qatar.c have they identified where this office is? qatar shula is a big statement. there are refugee camps around there, the biggest camp is 100,000, about 90,000 which you must be knowing.00,0 have you gone inside this camp? i have flown in a helicopter around the camp because i thought maybe if one day we havm to put in a military action there, let me see what kind of d place this is.e la there are lands inside this where two men cannot cross each other, so close and so congested. and 90,000 people living like this. it's a nightmare be there's any military operation in this area. now, all these refugee -- and there are dozens of such refugee camps in the pakistan. all these camps are used for all purposes. they must be coming and staying inside, there must be people who are harboring them. but to think that i as a president of pakistan is allowing this to happen is not the case. porous border. we introduced check at the main border where thousands of people come and go every day, including the people who go to kandahar, who go to german border just outside. we introduced biometric system there and passed a system so that we can control the movement across the border. on the afghan side -- [inaudible] and in spite of my best effort to introduce a similar biometri system on the other side, nobody has done that. so we have been trying our best to control movements, but on thm other side there is no response. so, therefore, i would fear that while these refugee camps may be a safe haven for any kind of activity, it is not government sponsored. that is what i would like toot say. a so there's no safe haven created or no habiting with the taliban to come and stay there. after all, all the al-qaedal and taliban leaders of significance, fell me what -- tell me one who has been caught. in afghanistan. all have been caught inn pakistan, and by whom? by pakistan law enforcement agencies and intelligence, thele isi in cooperation with cia, yes, indeed. so i think these are sensitive issues which really disturbs everyone in pakistan when we put all the blame on pakistan, all blame for movement across the in afghanistan is on pakistan. i don't understand why. why is it not on the coalition forces and afghan forces? if afghan taliban come into pakistan, why is pakistan only responsible? why are the coalition forces not responsible? why do they allow them to come into pakistan? we should share the blame 50/50. so i don't understand this -- this is what really develops the mistrust and lack of confidence in each other. >> thank you. [inaudible] >> president musharraf, let me joan others in welcoming -- join others in welcoming you here. >> thank you. lovely meeting you. >> i'd like to ask you about the role of pakistan and india in afghanistan. many people say that the two p countries areeo engaged in a pry war in afghanistan, and since you were just talking about peace, is it possible for indiak and pakistan to wage proxy peact in afghanistan? >> yes. >> both countries have interests there. pakistans has strong security interests, india also haspa interests. what would you do to move away from proxy war to proxy peace? >> thank you, sir. but who's initiating the proxy war is the first question. w now, what is happeningar in afghanistan? i mean, i am from pakistan, obviously, so, please, don't think that i am saying all this just to protect pakistan. but i'm, i know there are many indians who are maybe sitting here, but we -- unless we face facts and we fight this terrorism with unity of talk ant action, we will fail. what is happening there ands what is happening to pakistan, i would like to just enunciate. there is an indian consulate in jalalabad that you all know, why are these two there, on the pakistan border? this is there an indian commitment there? the is india doing some trade there? what is the interest of india in the these two continents? nothing other than carrying out aiding, abetting against pakistan, stabbing pakistan in the back. i have documentary evidence of this. i know indian intelligencentel agents coming into these consulates. i know the construction acttivity of roads they've been doing, and i've been telling president karzai, don't give construction access to indians on our border.you why do they want to build road? we will build the roads for you. but, no, they must build there where there agents come because they want to pump in terrorists into pakistan. our terrorist who's the grandson of one who was killed in afghanistan, in pakistan and who is against the -- [inaudible] and he said this on television, in the media, that he doesn't, that they don't believe in pakistan. he's sitting in the kabul, sir. he goes to delhi, he's received by agents. i have seen the photographs, so let me say this to this august gathering. all training of diplomats, police, military intelligence takes place in india.kes i have been offering everything to karzai.g nothing in pakistan, all in india. what is happening, sir?noth we are being stabbed in the back. so what does pakistan do?ed i what should isi do? isi's supposed to protect pakistan's interest, and that is all they do. so, therefore, the united states must understand what is happening. and let me say i've said this very openly to everyone. help pakistan in stopping all this. there must not be a proxy war there, i totally agree with you. but, please, understand who'ser. doing it and why it is happening.ease >> thank you. >> thank you. thank you, mr. president. you made some remarks earlier on regarding the conduct -- by the way, my name is paulo. some remarks of the conduct of military operations in afghanistan, and can you made some suggestions regarding empowering local tribes anding leaders, etc. now, that seems to run contrary? to what is the, at least, official strategy of isi and general petraeus of building up the army and the nationalon police.al now, do you see a possibility of your ideas or similar ones ofur empowering tribes and localpo leaders to take place? is there anybody that can listen to this, or are we doomed to fail because of this idea that we need to build national o institutions first and foremost, the army and the police? this thank you. >> it's not in conflict if we are developing afghan national army and police and we can raise them to a level where we can have dilution in space, as i, said, that is a good selection.. but i had said an added possibility. if we cannot have that possibility of -- [inaudible]po the national army, i am not against it at all. police and afghan national army is the answer. ultimately, they are to take over. but my grouse against that is that i hope ethnic balance is being maintained.ined now, if they are to be, again, tajik, i am afraid you'reng pushing more opportunity to the taliban, and the moment you leave with this kind of a force, there'll be war there. total war with all pashtun fighting these people. revival of '89. so, therefore, we must have ethnic balance, and we must have pashtun in dominance, in government pollutions.osit not having one or two ministers having been given useless portfolios and saying that we have ministers there.rtfo karzai himself is a pashtun. but under these rules of one national army all tajik, so how is this happening? and this is what alienates the pashtuns. therefore, if the police and afghan national army is being raised in large numbers enough to police the border and the cities and towns of afghanistan, that's very good. i am, i think that's the righto. strategy. >> thank you. mr. president, we're gettingstra near the end of our time, so i'm going to request the last two questions, and this is in the order that i recognize them.gniz pam constable over here and then mr. segalin at the back. >> good morning, general. very nice to see you again. i'd ask, i'd like to ask you about a different militancy problem, not one coming from afghanistan, but one coming from within the country, particularly punjab. particularly, l.e.t..b, you mentioned the dilemma of drones. pakistan also faces a dilemma oe how to deal with groups that have been very helpful to it inf the past with india, and i believe has even offered, again, to join with the army againstlle india if necessary but there are, in fact, causing havoc. i have heard from u.n. officials as recently as yesterday sayingg that l.e.t. saw the mumbai attack as a fantastic success because of the fact that it destroyed so many promising fan chances for peace between the two countries. and given the fact that you banned so many of these groups and they came back and they came back, i'd also like to ask you one of many things i'd like to ask you about your own time in office, i will ask you only one. given everything that has happened since july of 2007, did you make a mistake? thank you. >> did you make a mistake -- after that? >> attacking the brothers. >> l.e.t. and -- i have hinted at the history that in 1989 kashmir freedom strugglest started. and with kashmir freedom struggle, the first group that acted was the mujahideen ine] india and kashmir. because of the suppression of the indian army, they ran into pakistan.y so hezbollah hue mujahideen came about in early '90s. and later toward the end it was -- [inaudible] and many other names which i don't even remember, frankly. dozens of mujahideen groups came about in pakistan. there was such public sympathyt, that no government really did anything about it. any and also, may i say, since they were going to kashmir and fighting the indian army, it went along with the psyche of the people of pakistan, with everyone. cause has to be followed. and india was refusing to even table it in any form. it was not allowing pakistan any room towards revolution in the united nations or anywhere. therefore, it went along, this mujahideen activity went along with the psyche, with the thinking of the entire population of pakistan.po then comes 9/11. and now we join the coalition, and there is taliban and al-qaeda and everything. these were mujahideen groups whose orientation was kashmir. they've gone inwards and develop new york stock exchange i with taliban -- nexus with taliban and al-qaeda. now, this is the bigger probleme area, that they are involved ind terrorism in pakistan. therefore, as you said, i hadalo banned almost all of them. you bring me back, i'll ban them again maybe. but it's yeers said than done. -- easier said than done. allow pakistan government and the intelligence organizations, allow them with patience sometime. you can't rock the boat so much that the boat cap sizes. so so, therefore, while these things have to be done, allow piecemeal, gradual action through a well-thought-out strategy which does not disturb the entire law and order situation in pakistan. so this is what i would like to say. yes, indeed, there's a requirement of reining in the these groups. by the way, this other wing, the -- [inaudible] did the best work in earthquake. did an excellent job in the relief operations just now ins flood. so you're dealing with a situation which has popularity in the people. when they weren't fighting kashmir, it's very popular with the people of pakistan.it the mujahideen are fighting in indian army. why? kashmiris are being killed. it's a difficult situation. frankly, that is the root. and that is my concern that president obama doesn't even talk of, for heaven sake. if you're in this war at all,bl] you're a superpower. you have responsibilities towards everyone. so, therefore, i thought maybe at least he should have mentioned that you need to m resolve this kashmir dispute. so that's all. the other part, certainly i didn't do anything wrong. it's in the heart of islamabad. people take over the red mosque, 2,500 people there.er about another 2,500 with weapons, ammunition, explosivesi suicideci jackets inside the mosques in there. we were being humiliated. the government was being ip subtled. -- insulted.was the government was challenged by these, and only one kilometer from the diplomatic enclave. i remember the alarm that was called in the diplomats, they're sending their families out, and these people getting chinese and beating them up inside that mosque. so we had to take action. but before taking action i did a everything to bring them to an understanding, and i used all religious lobbies. the council of islamic ideology. i called the imam from saudi arabia and everyone. then everything failed, but wewn succeeded in the getting the thousands out, and only 150 terrorists were left. there was an attack, and that is why pakistan cannot be declared a banana state where it can't act when the government is challenged. at least not under me. >> at the back. >> i wanted to ask if you become the next leader of pakistan, nex will you stop all drone attacks and prevent all drones to fire missiles? will you allow them to be used just for allowing intelligence? >> we'll cross the bridge when i -- when we reach that. [laughter] first you get me there, then i'll decide what to do about it. [laughter] i said it's, there's a dilemma. we have to resolve of this dilemma. res while we must target militants, we must not do something which disturbs public opinion massively in pakistan. so we must get to some solutions. the dilemma has to be resolved. i don't know how to resolve it but, yes, it has to be resolved. >> mr. president, on behalf of fred kempe and my colleagues at the atlantic council, i want to thank you for your very frank -- [inaudible] [applause] >> thank you. >> thank you. >> thank you. thank you, indeed. thank you, sir. >> pleasure. >> thank you.[cap [inaudible conversations] >> in a few moments, a discussion on the role of energy and foreign policy in the middle east. >> we'll bring you live coverage of a couple of veterans' day events today. vice president joe biden and veterans affairs secretary eric shinseki will lay the wreath at arlington national cemetery. then we'll be live at 12:50 p.m. eastern with ceremonies from the vietnam vet rans memorial. ken salazar and retired general war -- barry mccaffrey will be speakers. >> this weekend, c-span3's american history tv learns how the longest-serving first lady used the media to communicate her idea. we'll see how very different thinking american and british leadership worked together to defeat the nazis. then a conference marking the 150th anniversary of the civil war, on the the experience of slaved and freed african-americans during the war. and then a daylong symposium on the civil war as prominent historians discuss the impacts of the war. american history tv, all weekend every weekend on c-span3. >> this year's student cram video documentary competition is in full swing. make a 5-8 minute video on this year's theme, washington, d.c. through my lens. upload your video to c-span before the deadline of january 20th for your chance to win the grand prize of $5,000. for all the rules and how to upload your video, go online to student cram.org. -- student cam.org. >> the national council on u.s./arab relations' recent conference included a discussion of the role of energy in foreign policy. this is an hour. >> those who end danger in conversation, would you move to the back of the room, please? so it does not disturb the speakers? ladies and gentlemen, please, take your seats. one of the most misunderstood of the issues between the united states and the arab world in this terms of how the american public perceives it is that we have moved from a consensus four or five years ago on energy security to a situation where in the last two presidential state of the union addresses, in the last go of the previous administration's state of the union addresses call for ending america's -- lessening america's reliance on foreign oil. for most specialists, this has been a code word for arab and islamic oil. it's not that americans are in favor of driving less, it's just that the political policy implications have been driving less on arab and islamic origin oil. we have randa fahmy hudome to chair this session, a member of the board of directors. she's worked in high-ranking policy implementation in making sectors of the u.s. department of energy. he heads her own firm, she's been intimately involved in libya and increasingly with the oil and gas producers of arabia and the gulf. chairman randa fahmy hue done. [applause] >> thank you, dr. anthony, and thank you to the national council for not only sponsoring this seminar on energy which is, you're right, so important with respect to our relations between the u.s. and the arab world, but also for all the work that the national council does throughout the year. many of you may know about the model arab league and other types of events, but this past year dr. anthony and the national council upon sored an event on -- sponsored an event on capitol hill attended by about 200 policymakers, men and women who advise the senators and congressmen, and it was probably one of the most enlightening sessions they had had regarding the issues of energy. i'd like to quote the ambassador yesterday when he said when you talk about energy issues with respect to the u.s. and arab world, sometimes it becomes the silly season. right now in the political elections season of america here, it's the silly season. but those of us who have to live in washington all year round are constantly bombarded by the silly season here. some of the truths that i like to talk about and some of the truths that our expertise panel are going to talk about today with respect to energy, source of supply and security has to do with the real facts of energy supply not only throughout the world, but here in america. for instance, as dr. anthony said, we oftentimes like to talk in evil sorts of ways about the relationship between the united states and arab world when it comes to petroleum. truth? the majority of oil imported into the united states comes from canada and mexico. truth, the united states is going to be petroleum-dependent for the next 20 years. that being said, countries like qatar, the united arab emirates and saudi arabia are moving forward on the highest technology for energy efficiency. truth, on security issues since the oil embargo of the 1970s the oil producers -- particularly in the arab world -- have never again used oil as a weapon and have promised to never do that again. and finally, on the issue of price the truth of the matter of why the price of gasoline fluctuates is i saw tom doggett somewhere here, he's the reporter that we love to love from reuters, and he would dog the energy secretary, he would dog the minister of petroleum from saudi arabia, he would dog the opec oil producers. and his questions were always the same, right, tom? what's the price of oil? what's the perfect price span? what sets that price? the truth of the matter is in 2008 when you saw the price of gas rise and the price of oil rise on the market, it was the speculators from wall street who were driving up the price of oil. and congress finally understood that when they not only held hearings regarding that matter, but implemented new regulations regarding that. so as i mentioned today, we're here to hear more truths from our expert panel on sources, supply and security. our first speaker is jay pryor who's going to talk a little bit about partnership in the quest for energy security. jay's presently the vice president of chevron in the corporate business development. he's been at the corporation for 31 years which is the hallmark and trademark of an excellent corporation, they retain their best and brightest. he's worked in places such as asia, europe, russia, turkmenistan, nigeria, chad, and equatorial guinea. but most importantly, he took a leadership role in the center for sustainable energy efficiency in ca tan where the -- qatar where the center trains engineers, science and students on energy efficiency issues. so, jay, please, take the microphone. thank you. >> thanks, randa, for such a nice introduction. i hope i deserve only half of that. it's a pleasure to be here again to share with you some of chevron's perspectives that are really the dynamics of reshaping our industry. in a role of business development, i spend a lot of time in airplanes. and probably far too much time for someone that's a petroleum engineer who's really shaped most of his career about the subsurface. but it gives me a lot to think about, a lot of time by myself to really contemplate issues around the industry, energy consumption, demand and supply and those sort of things. not to mention the complexity i've seen in my 31-year career and how much it's changed and become much more complex both from an energy/technology point of view, but just the pure geopolitics of energy. the global financial crisis has shifted the focus away from our long-term energy supply issues. but trust me, that issue has not been resolved. people everywhere have similar aspirations. they all want reliable and affordable energy. they want it to be produced responsibly. they want things that energy can provide like heat, mobility. and in some cases 24-hour texting, tweeting, e-mails. as a big global system today, it's become even bigger because of the world's industry base continuing to grow. new technologies are invented and, of course, the population expands. just consider this: americans make about 13 billion requests for google searches in a month. that increase is actually roughly the same amount of energy, -- same amount of energy 4,200 homes use in a month. by 2030 there'll be 8.2 billion people in the world, all of them needing to maintain their lifestyle at least, maybe improve their lifestyle, and no doubt, make even more google searches, tweets and texts, and what else could be going on by then? that will take a lot of energy, and most of the estimates at the world energy demand -- and randa's kind of gone through a little of this -- we talk about increases between 30 and 40% by 2030. what's interesting to note is is a sizable volume of that demand will come from the middle east it. itself. in fact, the middle east's total energy demand is projected to grow roughly 90% between 2007 and 2030. that'll be 10% of the global growth. apart from asia, that will be the fastest-growing region of the world. middle eastern oil demand is expected to increase 70% over that same period of time. and will, on an absolute basis, match the growth of india. those demand projections sound very big and maybe even daunting. the more you understand about energy and its critical or criticality as a building block of economic growth, you'll understand the sheer size and scale of these issues. the world's energy needs go far beyond the capacity of one resource or one technology. as randa talked about, under any scenario oil and natural gas will be the largest part of that portfolio for at least the next three decade. so what does it mean for us to achieve energy security? well, i think there's probably three things we need to focus on. integration, diversity and, importantly, partnership. in a region like the middle east, greater integration can enable each resource holder to have the capacity of developing their resource to the best advantage. we'll say more efficiently. what happens when countries realize you get a best economic return on assets by sending resources to their best use are consuming them at home when economically and sending abroad were more advantageous becomes a problem. this is important not simply on individual countries, but also on global energy markets. when energy is consumed more efficiently, all people benefit. we talked about energy efficiency and how chevron feels strongly about that. internally, we've decreased the amount of energy we consume per unit by 20% in the last so 15 years -- 15 years. we think leadership in this area is is needed. with an approach that incorporates diversity, countries of all types and abilities can meet their needs in a variety of ways and from a variety of energy types and resources. of course, the question of uncertainty around the future energy and security and supplies don't really involve the resources themselves. i'm a petroleum engineer, and there's plenty of molecules out there. instead, uncertainty really hedges on the level of collaboration -- hedges on the level of collaboration taking place. this raises the third and most important issue of energy security, and that's partnership. in a sense, our ability to partner will power the future. to meet the world's future and current need, strong interaction is needed between iocs, nocs, resource-holding governments and, of course, the general public. and not simply more activity, but greater understanding and in-depth understanding of each other's issues. importantly, we're seeking to increase interaction even as the nature of partnership grows much more complex. partnerships have always been critical, but from near east to far east, from africa to asia and other regions in between. i've visited a lot of these over a year, and i can tell you some of the issues they think are important. partner countries are going much beyond just seeking a world class project development capability or a technology. or to even help maximize the value of their resource. many can do that themselves. i think three priorities are starting to emerge. in the conversations i've had with a lot of the owners and operators in the regions. safety and operational excellence is now an issue that's discussed openly again. environmental stewardship, always been an issue, but a lot more discussion these days about those issues. greenhouse gases, issues around water, issues around land use, all those are big issues. innovative approaches to energy production and economic development. in other words, power to wellhead or how do you get the molecules to be usable in a way that communities and, of course, the overall world population can use it. this is creating a lot more complexity in our traditional partnerships. i can tell you, let me give you a couple of examples. one new partnership that we formed is a very new and interesting partnership. in russia we just signed a deal to work on with rossneft, the black sea water area. 8600 square kilometers in the russian black sea. what's interesting, this is very close to the resort city of socci which is, of course, a warm water recreation area in russia in the black sea, also the host to the winter olympics in a couple of years. what they were very interested in was talking about environmental stewardship and how to keep and focus on the right things to develop a very new region of deep water in the black sea. this would be the first development in a deepwater scenario in the black sea. accordingly, activities will need to be conducted to make sure the most current, up-to-date, leading technologies for deepwater will be employed in addition to management systems that mitigate any potential for an accident. turning to some of the older partnerships, many of you know i've been in this forum before, and i know prince turkey's sitting here in the audience. but we have been proud to be in saudi arabia since the '30s. the first discovery well there and the first production of oil that was exported was in the '30s, and chevron was proud to be one of the early partners with saudi. as the legacy continues, though, we have to keep looking forward, not look in the past. many unconventional resources in the kingdom. it poses an opportunity to look at things in a different way. we're looking at three fields, and in 2004 had produced around three billion barrels in what's called the petition-neutral zone between the kingdom and kuwait. in 2009 we implemented a steam flood pilot project first in the world to talk about the ability to produce out of a carbonate reservoir. we certainly started injection of steam, and we'd like to say the results are very promising. what's important about this not only is the technical expertise, but the partnerships we had with the kingdom around the saudi petroleum services polytechnic and supporting educational programs that will empower young people to be a part of this development from day one. in both cases the solutions were created for partnerships while securing global energy supplies. we see this as a way of the future, an enabler of continued business growth. stronger partnerships create deeper market integration, create deeper diversity of supply and are pathways to greater stability and predictability of global production. and as i said earlier, partnership will power the future. thank you. [applause] >> thank you very much, jay. now we'll have a presentation by dr. herman france seven, one of those legendary names that i heard when i served at the department of energy, someone who has had an extraordinary amount of expertise in the energy industry. presently, he is president of the international energy associates, but his previous posts have included senior adviser to the minister of petroleum for oman, the chief economist at the international energy agency. at the department of energy he was directer of the office of international markets analysis, and he also served at the congressional research service setting those members of congress a little more straight ther on those issues of energy. so, dr. franssen. >> are thank you very much, madam chairman. john, i want to thank you very much for inviting me to this conference as you have done on occasions in the past. and if our mutual friend, the late joe malone, would have seen what you have done with this conference, he would have been very, very proud how this conference has developed over the years. i was asked to talk about the relationships and the importance of arab oil to the world and to the united states. this is just from the bp statistics, and to show the greatñi importance of arab oil n the world. 60%, you add north africa, about 65%. it is huge compared to anything else in the world. why am i optimistic about the growth of demand for oil? this well, the world i was born in -- shows my gray hair -- was a world of two billion people. now we have a world of almost six, about six and a half billion people growing to eight and a half billion people by 2030. and most of the growáh, most of the growth is now taking place in if asia -- in asia and"p countries like brazil. the china alone from '79 until now has taken 400 million people out of poverty into the money economy, and their current plan is to take at 400 million out of the rural areas into the money economy, and that will lead to massive volumes of energy including oil and natural gas. and india, which is about 50 years or so behind china, will go through similar cycles. now, what is so good for those who are involved in the oil and gas business -- maybe not is so good for us from a geopolitical point of view -- is that those countries are very poor in terms of oil resources and somewhat less poor in terms of gas resources. so they need, when they grow, they need to import more and more oil. this is important. a lot of things on this particular guy, but what it shows is the return to normal positions. until the 1820s india and china together were close to 50% of world gdp. they declined, reasons for it, but in 1950 they reach about rock bottom and each are about 5% of the world economy. now they're back to significant growth, both china and india, and perhaps as early as 2020 china will have sur passed the united states as the number one economy and india is likely to be 50% of the e.u. economy. these, gentlemen, ladies and gentlemen, are the new giants. and in the process they will need massive, massive volumes of energy. here you see the changes that the ia projects what this will do to the oil sector. look at china, look at the middle east itself because it's getting, it has enormous economic growth insideq @&c @&c% middle east. it is the second large itself in terms of expected growth in demand. on the other hand, the old world, the old, there isn't much in it for producers because we have linked the problems in part because of population growth. we no longer have population gro)hr' europe and japan's actually declining. united states is str&l growing, but finally and both mr. bush and mr. obama, we have initiated the cafe standards that will once and for all change it from building the least efficient cars in the world to cars that are just as efficient as the ones produced in asia and in europe. now, changing oil patterns are going to be very important. %hina and india together, these two and a half billion people only have 20 billion barrels of oil reserves compared to 28 12 billion in europe. now, add it -- even add that up of these giants of the china and india together, and compare that with the gcc. %he gcc alone holds up to 500 billion barrels, and the gcc provide iraq and iran some 750 barrels. so whatever we have is a tiny fraction of what you find in the middle east. between the countries that i just mentioned, the they import 32 million barrels a day of product, and the middle east is is the biggest area of export of oil, exports over 17 million barrels a day. now, we think and some of our dreamers believe that we are not going to be in a situation of importing much more oil, but the latest assessment in january of the international energy agency -- sorry, of the eia shows that 25 years from now we're importing just as much oil and product as we do today. despite the massive efforts to improve the efficiency, despite the massive efforts to go into competitive sources, other forms of energy in the transportation sector. china's expect today go from four to 13 million barrels a day of oil imports and china from just over two to close to seven million barrels a day. what does that mean? >> that means the competition for oil is going to be heating up i' the coming decade and thereafter. now, on the supply side doesn't look all that optimistic when you look at the decline rates in the existing provinces. the decline rate is between somewhere between 4 and 7%. i think companies like halliburton would know a more accurate number, but these are around by the eia, iea and others. what that means, in the coming quarter century we have to fr'd every other year another saudi arabia in term t of production capacity to meet all this need of additional oil in the world. oil production by source, you see this yellow area. see what the iea projects that we will need, quote-unquote, from the middle east. well, of course, we do not knju whether they're going to increase the capacity to that level because the way we designed is is almosá a neocolonial way of looking at the world. we do this and then you're forced to do that. well, it's interesting to see that only recently king abdullah of saudi arabia said that he didn't really favor additional exploration for oil. why? because he said we should reserve some of it for our future generationses. easy to wean the economy away from the dependence of oil and gas and derivatives. and the king is a very wise man. just a matter of supply security. i've always found it insulting when we and all the >> had a similar type of text. now, why such hostility? it's related to the 1973 embargo, the only time in the past three decades when supply was disrupted by opec. why? because we, in the middle of a war against what we have been telling our enemies to do, resupplied with weapons. that's why it happened. and it was very short. the panic created the massive increases, actually, of prices not so much the actual embargo it. and what what about our own sanctions over that same period? they've taken more out of the market than the arab embargo ever could have dreamt to do. and what about china's recent policy on rare earth minerals? they embargoed for two weeks japan. why? because of a dispute in the east china sea. and rare earth is the oil for the future high-tech society and economy. so imagine that web site of the kingdom of saudi arabia would be something like, well, we have to reduce dependence on american weapons and american food because the american people really don't like us. these are so petty, we shouldn't do it. secondly, it really doesn't, is is of no consequence because why? oil is is fungible. even if we buy zero from saudi arabia, zero from the middle east, when prices are going up based on a disruption of supply or just paced on market force -- based on market forces itself, the price goes up for everybody. the chinese pay the same price of oil as we do, as the europeans do. now, this shows, actually, our dependence on persian gulf oil, should say arab gulf oil. it's about 15% of total imports which is less than 10% of our total consumption of oil. so it is minuscule. really, it's not all that big. and trying to reduce it further has, also, another side to it. when you become -- when you import less from the gulf, you also trade less with the gulf. you trade less with the gulf, somebody else will take you slot. i was surprised when i had to give a talk two weeks ago in many oman where i spent ten years, and when i left oman the biggest buyer of manny food was japan. who is it now? china. by far. china is building refineries in iran, china is developing a big new field in iran regardless of our sanctions. so the world is changing very, very rapidly. just as far as the transition, there are those who believe you and including our former vice president, al gore, that this transition to other forms of energy is easy, it's going to be great. we can do it in this ten years. that's never happened before. it usually takes about half a century to do this kind of a job. it's a massive effort, and i believe it's going to take us many, many decades to achieve that. and in the meantime, we will still need to import a lot of oil. we have been very good in, on improving the efficiency, now, of cars, so we're going to have much more efficient cars in the future. but i have some doubt about this one that we're going to see such a rapid increase of

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