WHITE HOUSE ADVISER SAYS U.S. HAS 6 MONTHS TO ‘KNOCK OUT’ RATTLED QAEDA LEADERSHIP

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 [The comments by Mr. Lute, a retired three-star Army general who has served Presidents Obama and George W. Bush, were the most specific public description of the Obama administration’s military strategy against Al Qaeda’s surviving leadership since Bin Laden’s death in Abbottabad, Pakistan, on May 2.]

By Eric Schmitt And David E. Sanger

ASPEN, Colo. — President Obama’s top adviser on Pakistan said Friday that the United States had six months to deliver “a knockout blow” to Al Qaeda’s senior leadership in Pakistan while the group was still in turmoil after the killing of Osama bin Laden.

The adviser, Douglas E. Lute, a deputy national security adviser, said the United States needed to increase covert action in Pakistan to take advantage of the disarray within Al Qaeda’s senior ranks.

His comment was widely interpreted to refer to drone strikes, although he did not refer to the operations by name. The United States does not publicly acknowledge the drone strikes, which are classified. “This is a period of turbulence for our enemy,” Mr. Lute said in rare public remarks at a security forum here. “This is the time to double down on the opportunity to defeat Al Qaeda.”

Killing or capturing the group’s half-dozen or so top leaders in the next six months would “seriously degrade Al Qaeda’s ability to regenerate,” he said. “We need to go for the knockout punch in this window of opportunity.”

The comments by Mr. Lute, a retired three-star Army general who has served Presidents Obama and George W. Bush, were the most specific public description of the Obama administration’s military strategy against Al Qaeda’s surviving leadership since Bin Laden’s death in Abbottabad, Pakistan, on May 2.

In the prelude to Mr. Obama’s announcement last month that he would withdraw 33,000 “surge” troops from Afghanistan by September 2012, administration officials described a plan to rely more and more on counterterrorism missions, many launched into Pakistan from Afghanistan.

Mr. Lute took sharp issue with remarks made Thursday here by Dennis C. Blair, who was forced to resign last year as Director of National Intelligence. Mr. Blair said that the United States should halt all drone strikes carried out by the Central Intelligence Agency in Pakistan’s tribal areas unless they were conducted in cooperation with the Pakistani government. Pakistan has repeatedly called for an end to the strikes.

Mr. Blair said the unilateral American strikes had worsened the administration’s relationship with Islamabad, which has plummeted to new lows since the Navy Seal raid that killed Bin Laden. He suggested giving Pakistan more say in what targets the drones hit and when, despite Pakistan’s record of tipping off militants when it gets advance word of American action. For that reason, Mr. Obama told the Pakistani government nothing about the Bin Laden raid until it was over.

Mr. Lute and Mr. Blair spoke at the Aspen Security Forum at the Aspen Institute here. The New York Times is a media partner of the conference.

Responding to questions from the audience, Mr. Lute acknowledged that the administration failed to anticipate the depth of embarrassment suffered by Pakistan’s military by the revelation that Bin Laden had lived comfortably and with local support in a fortress-like home near a leading Pakistani military academy for more than five years, and that American commandos swooped into their country on a two-and-a-half hour mission undetected and unchallenged.

“We underestimated the humiliation factor,” he said. That reaction has prompted Pakistan’s military to take several steps since the raid to recalibrate its relationship with Washington and distance itself from the Pentagon, including expelling some 150 American Special Forces trainers for Pakistani paramilitary troops.

Despite those tensions, Mr. Lute said the administration had shared with the Pakistani government the names of three to five surviving Qaeda leaders believed to be in Pakistan, including Ayman al-Zawahri, Bin Laden’s longtime deputy and successor. He said that both countries agreed that going after them was a top counterterrorism priority.

The C.I.A has conducted more than half of the 43 drone strikes in Pakistan this year since the raid on May 2, according to the Long War Journal, a Web site that tracks the strikes. That suggests a major acceleration of the effort, despite Pakistan’s complaints.

Mr. Lute’s comments joined the larger debate now roiling the administration over the impact Bin Laden’s death and the Arab Spring movement has had on Al Qaeda’s core leadership in Pakistan.

Some senior officials, including Defense Secretary Leon E. Panetta, have said the United States is within reach of strategically defeating Al Qaeda in Pakistan.

Mr. Lute said that judgment was premature. “We’re not ready to declare victory here,” he said. Referring to the Al Qaeda’s operations base in Pakistan, sometimes referred to as “Al Qaeda core,” he said, “I’d rate Al Qaeda core wounded and impeded but not yet defeated.”

@ The New York Times

U.S. CREDIT CARD FIRMS WANT TO GET MORE PLASTIC INTO CHINESE WALLETS

[The issue is about more than simply opening a potentially lucrative market to American credit card companies. The United States has asked China to shift from an export-led growth model to a more consumer-led economy. Chinese people buying more Chinese-made products would help reduce the U.S. trade deficit with China, and one way to spur domestic consumption, economists and business leaders say, is to put more credit cards into the hands of China’s newly rich consumers.]

By Keith B. Richburg, 

BEIJING — Jin Jitao, an editor at a textbook publishing house, may be the prototype of China’s new urban consumer. Though he had never even heard of credit cards until 2004, he now owns 79.

He has a card embossed with his nickname, one with a photo of his family, a pink Barbie card and two with Garfield the Cat. He has a card especially for dads, and several with Chinese cartoon characters.

“I like beautiful cards,” he said.

In a country that still largely runs on cash, and where the idea of saving money seems embedded in the cultural DNA, the use of credit cards and debit cards is skyrocketing.

China issued 230 million new credit cards in 2010, an increase of 24 percent over the previous year, according to the China Banking Association, and the use of plastic for retail sales is up more than 40 percent this year.

It is a growing market that American credit card companies such as MasterCard, Visa, American Express and Discover are eyeing enviously as Americans are tightening their belts.

“In the next 20 years, more and more people are going to switch from cash to credit cards,” said Arthur Kroeber, managing director of GaveKal-Dragonomics, a Beijing-based economics research firm. “The growth is going to be spectacular.”

But for now, a single Chinese company, China UnionPay, enjoys a de facto monopoly over that market. Foreign credit card firms cannot issue local cards, unless they are co-branded with the UnionPay logo, and all transactions must be processed on the UnionPay network.

The American card companies are here, but they work in a forced marriage with China UnionPay.

American Express, here since 2004, signed a new “memorandum of understanding” to “explore the expansion of our current cooperative activities,” said Luisa S. Megale, international public affairs vice president for American Express.

MasterCard and China UnionPay signed an agreement in Singapore in June that allows UnionPay cards used outside China to be processed over MasterCard’s worldwide network. Visa is in an ongoing dispute with UnionPay over who can process its co-branded cards outside of China.

With UnionPay’s monopoly in China, the American companies cannot offer most of their well-known customer services, such as replacing stolen cards. The foreign companies can issue cards only in dollars, not in the local currency, which most Chinese would want. And UnionPay gets a cut of every transaction.

Chinese card users apparently also want more choices. Jin, 34, belongs to an online discussion forum called “I Love My Credit Cards,” where he said the UnionPay monopoly has been a constant topic.

“Lots of people think it’s unfair that China UnionPay has a monopoly,” he said. “If other credit card companies in China could issue their own cards, people would fight to apply for them.”

Newly rich consumers

The issue is about more than simply opening a potentially lucrative market to American credit card companies. The United States has asked China to shift from an export-led growth model to a more consumer-led economy. Chinese people buying more Chinese-made products would help reduce the U.S. trade deficit with China, and one way to spur domestic consumption, economists and business leaders say, is to put more credit cards into the hands of China’s newly rich consumers.

“Go back to the 1960s, which is when credit cards took off in the United States,” Kroeber said. “There is pretty good evidence that that helped increase the vitality of the consumer economy.”

The American card companies have found support for their fight from the Obama administration. In February, U.S. trade officials asked the World Trade Organization to set up a panel to resolve the dispute with China, and the panel members were named on July 4.

The card companies declined to comment directly on the pending WTO case, and in some cases tried to distance themselves from the case for fear of hurting their business interests in China.

Groups such as the American Chamber of Commerce in China and the Washington-based U.S.-China Business Council have long made liberalizing China’s electronic payments market one of their top concerns.

“We have argued that financial-sector reforms in China would probably have a bigger impact on bilateral trade issues than, say, the exchange rate,” said John Frisbie, president of the U.S.-China Business Council. “We don’t think this would eliminate the U.S. bilateral trade deficit with China, but it could further boost U.S. exports and narrow the trade gap somewhat.”

Economists and others also argue that using cash contributes to corruption and the “gray economy,” for example, by helping merchants avoid taxes. And businesses dealing with large amounts of cash have extra costs, for security and office safes, for example.

China’s spending habits

The irony, some economists say, is that the United States is pushing China to open up its credit card market just as Americans are putting their plastic away. The Great Recession in the United States was largely caused by an overextension of credit, and many economists believe that another crisis — a household debt crisis, largely due to credit card overspending — is just over the horizon.

Experts caution that while card use is increasing in China’s large coastal cities, cash is still king in the interior, where buying on credit remains largely an anathema.

And while the number of cards in circulation in China is huge, experts said that is because many people, like Jin Jitao, own more than one. In a country with no real history of personal credit ratings, the people who get cards are largely the people who already have them.

Jin may also be instructive of China’s consumer habits. Like most card users in China, he never carries a balance — “I always pay them off,” he said. “Why pay the extra interest?” — and he mainly uses them to get discounts and special promotions, like half-off dinners and lower-priced movie tickets.

By using plastic, he also doesn’t have to worry about counterfeit bills — a large problem in China. Plus, he added, “it’s also clean. Cash has lots of bacteria.”

Researcher Liu Liu contributed to this report.

@ The Washington Post