Kenya’s Post-Election Violence Kills Over 1,000, Kosovo Declares Independence from Serbia, Bear Stearns Collapses and Raúl Castro Becomes Cuba’s President

Jamaica Homes Global Conflict & Caribbean Impact Review | Published 3 April 2008 | Reporting Period: 3 January – 2 April 2008

Quarterly Briefing

• Kenya’s disputed December 27 presidential election, in which Mwai Kibaki was declared winner over Raila Odinga, triggers ethnic violence along tribal lines that kills over 1,000 people and displaces 600,000 by the time former UN Secretary-General Kofi Annan brokers a power-sharing agreement on February 28; the crisis reveals the fragility of African democratic institutions under competitive pressure.
• Kosovo declares independence from Serbia on February 17 with the backing of the United States, the European Union, and most Western nations; Serbia and Russia reject the declaration as illegal under international law; the precedent it sets for secessionist movements globally — from Tibet to Abkhazia to the Western Sahara — generates deep controversy.
• Bear Stearns, one of Wall Street’s largest investment banks, faces a liquidity crisis on March 14 and is acquired by JPMorgan Chase for $2 per share — later revised to $10 — with the Federal Reserve providing a $29 billion backstop; the rescue signals that the US subprime mortgage crisis has entered a new and more dangerous phase.
• Raúl Castro is formally elected President of Cuba on February 24, replacing his brother Fidel Castro who has not appeared in public since his surgery in July 2006; Raúl signals a pragmatic reform agenda, including allowing ordinary Cubans to own mobile phones and stay in tourist hotels; the substance of political change remains limited.
• Tibetan monks and civilians stage the largest protests in nearly two decades on March 10, the 49th anniversary of the failed 1959 uprising; Chinese security forces respond with force; violence spreads across the Tibetan plateau; international calls for China to exercise restraint ahead of the Beijing Olympics intensify.
• Pakistan holds general elections on February 18 following the assassination of Benazir Bhutto in December; Nawaz Sharif’s Pakistan Muslim League-N and the Pakistan People’s Party of Bhutto’s widower Asif Ali Zardari win decisively; President Musharraf’s party is routed; a new government is forming without the military’s preferred candidate in power.

Prologue: Democracy and Its Discontents

The first quarter of 2008 offered, in swift succession, examples of what can go wrong when democracy is practised imperfectly. Kenya, which had been regarded as one of Africa’s more stable multi-party democracies, descended into ethnic killing within hours of a disputed vote count. Pakistan, attempting to restore democracy after years of Musharraf’s military-backed rule, successfully conducted elections but remained uncertain about whether its military would accept the result. And Kosovo’s declaration of independence — supported by the West and rejected by Serbia and Russia — raised the fundamental question of what the international community meant by “self-determination” and whether the principle could be applied consistently. For the Caribbean, Cuba’s succession was the most immediately relevant: the formal transfer of power from Fidel to Raúl after nearly five decades of one-man rule opened, for the first time in living memory, the question of Cuba’s political future.

Cuba’s Transition and Caribbean Geopolitics

Raúl Castro’s formal assumption of the presidency completed a transition that had been de facto in progress since Fidel’s intestinal surgery in July 2006. Raúl was 76; he was not the agent of radical transformation that some Cuban reformers hoped for and some Cuban-Americans feared. His early signals were pragmatic rather than revolutionary: he acknowledged that Cuba’s wages were insufficient, that its agricultural system was inefficient, and that some consumer restrictions could be relaxed. Cubans could now legally own mobile phones and could, in theory, stay in hotels previously reserved for foreigners. But political prisoners remained imprisoned, independent media remained banned and the Communist Party remained the only permitted political organisation.

For CARICOM, Cuba’s transition carried long-term significance. The regional community’s relationship with Cuba had been managed, for decades, against the background of the US embargo and Fidel’s ideological solidarity with left-aligned Caribbean governments. Raúl’s more pragmatic orientation might create opportunities for normalisation with the United States, depending on whether the incoming American administration had the political will to pursue it. Jamaica’s relationship with Cuba — built on educational, medical and cultural cooperation — was substantive and not dependent on ideology; a more open Cuba would, over time, have significant implications for Caribbean economic and political dynamics.

Bear Stearns and the Financial Crisis

The Federal Reserve’s decision to guarantee $29 billion of Bear Stearns’ assets to facilitate its sale to JPMorgan was an extraordinary extension of the lender-of-last-resort function into investment banking territory. The Fed had, until March 2008, provided that function only for commercial banks, whose deposits it regulated and whose failure threatened ordinary savers. Bear Stearns was an investment bank with no deposits and no formal safety net; its rescue was justified by the systemic risk that an uncontrolled failure would create. The precedent was clear and its implications were alarming: if Bear Stearns was too interconnected to fail, so were Goldman Sachs, Morgan Stanley, Merrill Lynch and Lehman Brothers. The question was whether the Fed’s guarantee extended to all of them, and if so, on what terms and at what public cost.

Looking Ahead

Kenya’s power-sharing agreement has stopped the killing but not resolved the underlying ethnic political tensions; its implementation will test both parties. Kosovo’s independence will complicate international law and relations between the West and Russia for years; the Russian government’s fury at being overridden on a Security Council matter — through what it regards as illegal unilateral action — will shape the US-Russia relationship through the rest of the Bush presidency. Pakistan’s new elected government faces a Taliban insurgency, an economy under stress and a military establishment that has not fully accepted civilian authority. And the global financial system, having survived Bear Stearns, faces continuing uncertainty about which institution will be next to require rescue and whether the resources and political will for rescues will be available.

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Jamaica Homes Global Conflict & Caribbean Impact Review is published quarterly, examining how wars, geopolitical tensions and major international crises have shaped Jamaica, the Caribbean and their economies.

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