Continuing excerpts from Disinvestment Minister Arun Shourie's Cariappa Memorial Lecture 2002

Every country works solely for its own interests. There's little use in invoking justice, morality or law: indeed, doing so can be counter-productive -- by sticking to ideals, so to say, we cleared the way for China in Myanmar. If I could I would burn into the consciousness of every policy-maker in India the conversations between Henry Kissinger, Richard Nixon, Chou En-lai, Huang Hua. Every country works solely for its own interests as perceived by it at that time: this may not accord with our interests, or with our perception of what is in the interest of even that country itself. for eg: US aid to Pakistan in the wake of 9/11.

The US approach was well set out by Kissinger in his account of the period when the USSR and China fell out: ''The challenge for the United States was to make sure that it always had more options than either of the two parties within the triangle. This obliged the United States to stay closer to both Moscow and Beijing than they were to each other, with a tilt towards Beijing since it was the Soviet Union which represented the more immediate and by far the more powerful threat.''

This is what US policy will be in dealing with India vis-a-vis Pakistan, India vis-a-vis China: and it sets a limit to the extent to which it will heed India's interests.

The way countries deal with us depends also on what the record has led them to believe is our nature: China has carefully cultivated an image of being a porcupine-one that will brook no nonsense, one that will use force to wrest what it feels it should have. Perception about us is ambiguous, at best, given events such as Goa, Sikkim, atomic weaponry, the 1971 war that broke Pakistan. But if 61,000 had been killed in the US, China or Russia by terrorists trained, equipped, armed by a country, what would they have not done to take out the source of the assault on them?

Security is a multiplicative function, not an additive one: the expression the Chinese use is indeed apposite: 'Comprehensive National Strength''. Among the pillars on which it is built is economic strength.

Does anyone need armies today to bend Argentina and Brazil? Of the ones who keep counselling us to open a dialogue with Pakistan, how many counsel President Bush to open a dialogue with Mr Saddam Hussein? Why is it that Russia can be bent today on cryogenic engines, on Iraq, on nuclear disarmament -- and China cannot? Economic strength and independence make all the difference.

Today economic levers are routinely used to achieve political and diplomatic ends. To safeguard our freedom of action, our sovereignty, the first requisite is that we do not have to succumb to economic pressures. Nor is it enough that ''our fundamentals are strong''. Nothing happened to the ''fundamentals'' of Southeast Asian countries in 1997. The ''fundamentals'' of Japan continue to be as strong as they were 12 years ago-but the political stalemate has ensured that it has not been able to lift itself out of a bog for a decade. The ''fundamentals'' of Mexico, Argentina, Brazil did not collapse overnight -- but their economies did, and with that their freedom of action.

Therefore, when we do anything that slows economic progress, when we block the reforms that are necessary for that growth, we weaken the country. We expose it to danger: should we, for instance, have to turn to the IMF today, we would be squeezed not in spite of our atomic weapons, but because of them!

And how easy it is to slip: two years ago when we were losing almost a billion dollars every month; a single wrong decision -- for instance that the value of the rupee must be protected ''at all cost''-could have resulted in a run. Nor is it that when we thwart a reform -- for instance, by blocking steps needed for containing governmental deficits -- or by bringing work or trucks and trains to a halt, all we do is to slow down economic progress. That is not the only consequence. We confirm the perception that India is not able in the end to carry through its announcements. That perception itself is temptation to an enemy.

The lightning speed at which technology, the balance between countries, relations between them are altering: our policies have to be ''omni-directional'' and our processes have to be swift enough to match these.

The countries that were to eventually form ASEAN had approached us at the very outset. We paid insufficient attention. The result is that a few days from now, China will be meeting the ASEAN leaders to finalise an agreement for a free-trade area. We will be meeting them to commence discussions for a trade and investment area of which we too can be a part.

Faced with a decision, our first instinct must be to see the repercussions it will have for national security -- take the case of ground handling at airports. But simultaneously, we must bring our ideas about national security up to date. Take the signs at our airports ''No photography allowed'' in this age of satellite photography, when satellite images of half-meter resolution are becoming commercially available.

We must face some facts: of inundation from Bangladesh, the Islamisation of Bangladesh, the madrasas on our borders, the Chinese advances in Myanmar, the current ''denial mode'' in regard to Chinese economic advances. A senior intelligence official said, ''One word has killed us: examination.'' We were asked in the early '80s to identify Jamaat cadre who had infiltrated into the Kashmir administration, to identify madrasas that had become centres for secessionist activity. What happened thereafter? There were reports of the demographic inundation of the Northeast. What happened? Only 850 kms of 3286 kms of fencing has as yet been completed on the Bangladesh border.

Insularity does not mean independence. Put to use, close economic relations fortify security. Consider an example: There are at any time about 60,000 Chinese students in Japan. By contrast, there were just 250 Indian students in the country. Two and a half million Japanese tourists visit China every year. By contrast, only 60,000 visit India. Every week there are 282 direct flights from Japan to China. There are only 7 to India. The trade between China and Japan is a colossal 90 billion dollars. By contrast, the trade between Japan and India is just three and a half billion dollars.

The point holds just as well for foreign and security relations. In the wake of the Tiananmen killings, few lobbied harder to keep the US from taking any consequential steps as American firms that had invested in China: after all, for American firms China is today important not just as a market but as a manufacturing platform for exporting to third countries; after all, American firms earn about 7 to 10 billion dollars a year from China, a figure that is a fifth higher than the next source -- Mexico; after all, with a trade surplus of approximately eighty billion dollars every year vis-a-vis the US, China has accounted for a tenth of the total purchases of US Government securities.

Today few work as assiduously to promote China as an investment destination as the merchant bankers and consulting firms that have been used by China for its IPO's in the New York stock exchange and elsewhere, few work as resolutely to keep up China's image in the investing public as the Fund Managers whose principals have invested billions in Chinese issues.

Is it any surprise, then, that an American analyst should observe as follows? ''In other words, if the United States should opt to curtail commercial links with the mainland, it may be effectively cutting off a key source of foreign capital -- something the world's largest debtor nation can hardly afford.''

Now, if there is an eruption on the Sino-Indian border in Arunachal, which side would the Americans or Japanese be pre-disposed to believe?

We must multiply manifold intellectual work on security issues: how often we have to turn to US and European sources for material on countries that are much more liable to endanger us than Europe and the US? Get over the inhibitions of ''political correctness'' -- report of the US-China Commission on Security Implications of US-China Economic Relations. The wealth of information on which even this open-source report is based. Equally important, the candour with which it states the facts.

Governance is the central task. Defence forces cannot remain an island forever: the inertia, the vices that come to infect general governance cannot but infect the armed forces. Can it be that corruption in civilian life will become as pervasive as the very air we breathe but that affairs touching defence forces will remain pure? Can it be that delays will mar all governance but purchases of snowmobiles and bullet-proof jackets will be executed on time?

Second, in our system the higher command remains in the hands of the ones who have come up through the same political system. And I don't mean just the final decisions -- of going to war or not, of returning Haji Pir or not. Day to day decisions-budgetary allocations, postings and transfers, even such minor things as awards and decorations -- also affect morale, and therefore the fighting ability of the defence forces. And these remain in the domain of the political and administrative establishments.

Third, even if the top leaders are of the highest calibre, their decisions are bound to be affected by the general level of persons in public life: which Prime Minister or Defence Minister will shut out the clamour in Parliament or the media from his awareness? And so, the calibre of the generality of the political and administrative class, indeed of the entire lot that is in public life and discourse is certain to affect the formulation and conduct of security policy. And this is our Achilles' Heel today.

That is why I will leave you with the one image with which I began, and with the two questions that I asked.

• An image to bear in mind: Defence forces are to a country what an iron railing put around it is to a tree: in the end, howsoever strong the railing, howsoever sturdy and well-polished it looks, it cannot protect a tree that has been hollowed by termites from within: the storm shall fell it.

• A question to take home: Think of Bihar. A population of 83 million, that is a population 30% larger than that of Britain, of Italy, a population equal to that of Germany, and an area 40% as extensive as Britain. In this vast area, over this huge population, governance has evaporated. If you were running the ISI, would you waste lives in Kashmir? Or would you just smuggle 23,000 AK-47s through Nepal into the state?

And another one: When the horizon of the political class is the hulla of the day in the legislature, or the debating point that can be extracted from the headlines of the day, or the next bout of elections how can the policies and strategies that alone can enable us to deal with Pakistan and China be sustained and implemented for 20-30 years?