By Barrett Sheridan

Last week, the world cheered a little when an Indian warship said it had encountered a Somali pirate “mother ship” in the Gulf of Aden and, after being fired upon, blew it to smithereens. International shippers needed a reason to celebrate. Earlier that week, Somali pirates had captured their biggest prize yet, a Saudi supertanker carrying $100 million of crude, and, with nearly a hundred attempted hijackings so far this year, were making waters around the Horn of Africa about as welcoming as a bed of nails.   

Well, put away the champagne glasses. CNN is now reporting that the sunken “mother ship” was actually a Thai fishing trawler and that, while pirates were in the process of commandeering it, the vessel still had 14 innocent fishermen onboard when it was sunk by the Indian navy. One of them, a Cambodian, spent six days adrift before being rescued by a passing ship. (One other is confirmed dead; the rest are still missing.) The sailor is now recovering in a Yemeni hospital, where he had the chance to inform the Indian navy of their mistake.

The event underscores the difficulty of tracking pirates in waters where they easily blend in with fishing trawlers or other private watercraft. “The bulk of Somali coastal dwellers are still fishermen,” says Peter Lehr, a lecturer in terrorism studies at Scotland’s University of St. Andrews. “They are now caught in the fray and being attacked by western warships. How can you divide a real fisherman and a pirate from one another? They use the same vessels.”

That means recent military operations in the region—the European Union and NATO now have forces there—might not be a very adequate defense against the pirates. So what line of defense is left? The ships themselves. Armed guards aren’t an option, because they’re too expensive for ship owners, and firefights are risky onboard ships carrying two million barrels of flammable crude oil. But there are alternatives. Hanging barbed wire around a ship’s perimeter is a simple way to dissuade would-be boarders. Electrified fences also work, but they’re out of the question on ships carrying volatile cargoes. The Long-Range Acoustic Device, or LRAD, has become popular after it effectively repelled an attack on a cruise ship in 2005; it blasts a deafening wall of sound at targets up to 300 meters away. Fire hoses also do the trick at shorter ranges. Even simply gunning the engines and picking up speed can deter pirates, who look for easy prey.

It’s worth trying anything to avoid being taken hostage. Although the Somali pirates, which are currently holding 300 hostages, treat their captives fairly well—they are, after all, worth a lot of money to them—negotiations can last weeks or months. The MV Faina, a Ukrainian ship carrying 33 Soviet-made tanks, was captured in late September and is still being held in the port of Eyl, in the Puntland region of Somalia. “These guys are very patient people,” says Stephen Askins, a maritime lawyer at London firm Ince & Co. “One guy may be having a bad day and he’ll say, ‘I want $5 million,’ and the next guy might say, ‘Well, I’m a bit more reasonable than that.’ It’s not like buying a car. It’s a very long, drawn out process.”

By Anna Nemtsova

Moscow, Russia -- As the financial crisis deepens, the Russian government has been amplifying its anti-American stance, and Robert Schlegel, the youngest deputy in the Russian Duma, is leading those efforts on the streets. On a recent day, Schlegel was standing along Garden Ring Avenue in Moscow, across from the U.S. Embassy, looking for a convenient place to set up a video screen. The screen will come in handy during the anti-American protest that Schlegel, in cooperation with the Nashi, a militantly pro-Kremlin youth group, will hold there on November 1st. He expects 15,000 young Russians to show up in Halloween costumes, holding pumpkins and candles and shouting slogans like "Stop your Big American Show!" and "Revolution Now!"
 
Schlegel lived most of his life in authoritarian Turkmenistan. A former activist for the Nashi, Schlegel is best known for organizing street protests and pranks targeting Putin's few domestic critics. Now he drives an Alfa Romeo, wears an expensive coat and goes on business trips to London and Germany. In other words, people like him are no longer marginal. In his role as a Duma deputy, Schlegel is responsible for Moscow's “information policy.” He’s founded a government-supported television channel for youth, “BL” (which stands for “Beautiful Life”), which has produced a video for the protest.

The video has high production values and makes a good effort to rile up viewers. It features a computer-generated cartoon of President Bush, who wears cowboy gear, slurps whiskey and revels in American power. At one point, the cartoon Bush says, "I control the world's oil, economy, wars, culture, science and information. I will tell you how we achieved that. I call it ‘A Big American Show.’” Graphic images of World War I, Nazi Germany, the Vietnam War, and Sept. 11 set the tone. As Schlegel says, “The American Empire Show, as we call it, is threatening Russia's stability. We young Russians have to put an end to it.”

And young Russian are heeding the call. As Russia grows richer and nationalism grows, the size of pro-Kremlin patriot youth movements crescendos. Nashi involves at least 200,000 activists. The Youth Guards have another 100,000 activists. The New People and Young Russia each attract tens of thousands of young patriots.

But of all youth movements, Stal, or Steel, a Nashi sub-movement, most fully reflects the new nationalism fostered by Vladimir Putin. “We are going to change the world from knowing nothing about Russia to respecting and even recognizing Russia as a new fashion,” says Nadezhda Tarasenko, 23, the leader of Stal. “It is important to consolidate around our leader, so nobody inside or outside the country can damage our stability and unity. One thousand activists in my movement are not afraid of using tough methods to stop America's influence on Russia.”

By Michael Miller

The financial crisis has hit the banking industry hard. The market values of the top 20 banks in the world have dropped significantly. The biggest losers, of course, are those banks that were heavily involved in mortgage backed securities--American lenders like Citigroup and Bank of America.Over the past year, Bank of America has lost more than 40 percent of its market value. A number of European banks have also suffered from subprime lending. UBS, a Zurich-based bank heavily invested in securities, just received an $8 billion bail out from the Swiss government. Its market value has plummeted more than 56 percent since this time last year. In comparison, Credit Suisse, another Swiss bank much less reliant on derivatives trading, is in much better shape, opting for a private capital infusion.

Yet while some institutions are now shadows of their former selves, others may eventually emerge stronger than ever. Chinese banks, for instance, have emerged from the crisis in pole position. Despite sizable losses of their own, China’s big three banks are flush with funds and have unmatched market-to-book ratios—an indicator of market strength. This newfound swagger has already led the Industrial and Commercial Bank of China (ICBC) to open a branch in New York City, a powerful symbolic gesture. That said, even Chinese banks could be hiding serious problems. In the past, China’s banking industry was plagued by bad loans made to state-owned enterprises. Whether these loans are still lurking under the surface somewhere is anyone’s guess.

The runaway winner in all of this is Wells Fargo. It alone among the world’s top 20 banks has seen its market value rise—an almost unreal 10.5 percent—over the past year. Not only did it beat out Citigroup to scoop up Wachovia, but also it had to be forced into accepting Congress’s bailout package. “Wells Fargo is generally considered the best run of the major banks,” says Beim, an impression reinforced by its handling of the past few months. Coming in second is HSBC, the only major British bank to avoid PM Gordon Brown’s capital infusion plan, with another American bank, US Bancorp (USB) a close third. Both HSBC and USB have managed to keep leverage low while generating high return on assets. 

Brazil today boasts 1,100 privately owned helicopters (half of them in São Paulo), the world's third largest fleet and growing at the clip of 15 percent a year. For those below, condemned to battling one of the worst rush hours on the planet (on a bad day, traffic pileups can run to 160 kilometers or more), the view isn't so inspiring. But like the crowded skies, the clotted streets are emblems of the remarkable new moment in a nation that has hoisted itself from the ranks of chronic underachiever to emerging market upstart. (Read this week's magazine story, Weathering the Storm.)

The new bullishness has taken many by surprise. For half a century Brazil has been flirting with greatness, aiming for the clouds and then flaming out. At its loftiest the country has charmed a host of believers, but their convictions have wavered. Fleeing Europe to Brazil ahead of World War II, the Austrian writer Stefan Zweig famously declared his adoptive country “the land of the future” but then lost hope in the world and downed a lethal dose of vironal in 1942, in the middle of carnival, at that. The future would have to wait.  Charles DeGaulle looked down his spacious nose at much of the world, but the Brazilians always took personally his generic snub that  "Brazil is not a serious country."

It's poetic justice of sorts that the Brazilians are looking down on much of the serious world today. In the quarter century or so I've been keeping an eye on this country, this is the first time I can recall that the dark talk of "crisis" refers not to some domestic debacle but to the mess beyond national borders. "Hey, Bush, we've been waiting 20 years to grow," scolded president Luiz Inácio Lula da Silva in an impromptu speech the other day, referring to the global spillover from the U.S. subprime credit crunch. "Get your act together."

Except for on the football pitch or the catwalks, such hubris is new for this chronically underperforming country. Maybe it's the currency. When I first arrived in Rio, in the early 80s, with inflation topping three digits, the greenback was almighty. Converted into wads of pink and green cruzeiros or cruzados or new cruzeiros (pick your perishable banknote), a hundred U.S. dollars could buy you a week on the town. Now and then the officials in Brasília tried to do something about it, lopping three zeros off the currency and decreeing drastic price freezes, so bringing only a flicker of stability. It wasn't as bad as Bolivia, where I once saw them weighing money instead of counting it in the Chapare district, but it left the continent's biggest country dysfunctional, all the same.

I keep a box in my drawer stuffed with inflation memorabilia from those days. Lost in the rubble of half a dozen versions of soiled bank notes and a kilo or so of useless coins, there's a small paper chit with the number 2147 stamped on it. It's the waitlist number I drew for the São Paulo-Rio de Janeiro air shuttle, which thanks to the price freeze during the so called Cruzado Plan, of 1986, cost $38, about half the current bus fare. When prices are kept steady, goods tend to disappear, and the Cruzado Plan was no different; Brazil's airports became flop houses as stranded passengers waited hours for an available seat.

It's not always easy to pinpoint a nation's turning point, but 1994 has to be a modern Brazilian watershed. That was the year of the Plano Real, a radical new stabilization plan named for the eponymous currency, backed this time by fiscal discipline, not a price freeze or any of the other "heterodox" hocus pocus of former plans. Brazilians were skeptical and who could blame them, after a quarter century of band-aid reforms and Monopoly money?

Today, with foreign investors tripping over themselves to pour money into Brazil, the real has outgunned the world's top 16 currencies, from Euro to Yen, gaining 13 percent against the dollar this year alone, and nearly 60 percent since 2004. To my knowledge Brazilian supermodel Gisele Bündchen never actually turned down work for U.S. dollars, but when the rumor that she had went viral in Brazil I knew the earth had shifted in this part of the hemisphere. Now it's outbound Brazilians changing their reals into wads of greenbacks and having the time of their lives in Paris or Disney World.

You don't have to go that far to watch them frolic. The boom that has seen Brazil's economy soar has also deepened pockets. The country now boasts 20 billionaires on the Forbes list (up from just four in 2003) and 140 millionaires, a 19 percent rise year to year, against a 6 percent rise for the rest of the world. Boutique banks and private asset managers have decorated the skylines with their logos and heli-pads.

The bonanza is not just for those commuting in choppers. Climbing wages (overall payroll is up 16 percent year to year), a flood of consumer credit (growing by 30 percent yearly) and plenty of new jobs (1 million this year, 7.3 million since 2004), have hoisted countless poor into the consuming classes. Much is made of how China's surging economy has lifted tens of millions out of poverty. In fact, Dragonomics has increased the wealth gap, while Brazil has managed to reduce inequality at the same it booms. Brazil's poorest ten percent have seen their wages grow by 57 percent in real terms between 2002 and 2006, against a nine percent rise for the richest tenth, says economist and poverty scholar Marcelo Neri of the Fundação Getúlio Vargas, a business school.

And while the middle class in the developed world moans about slipping downmarket, Brazil's just keeps on rising. Some 20 million Brazilians have moved up to the middle class in the last decade, and are now putting 800 new cars a day on the road in São Paulo alone. Sound exaggerated? Check out rush hour.

A competing jumble of climate change negotiations have turned the forum itself into a debate topic as polarizing as the carbon markets and global targets being proposed. Not one, but two extra groups have joined the G8 at Hokkaido, each with the potential to reach its own set of conclusions. The G8 + 5 group brings major developing emitters like China and India into the fold, and the Major Economies Meeting (MEM), George  W. Bush’s brainchild, adds three other big carbon emitters—Indonesia, Australia and South Korea—into the mix. Together, the groups account for 80 percent of greenhouse gas emissions. Washington would prefer to settle the major points at the MEM before tackling the unwieldy 200-country United Nations gatherings, which are coming up against their deadline for a post-Kyoto treaty to be approved in Copenhagen in December of 2009. Coming out of Hokkaido empty-handed will make pre-Copenhagen talks this fall just that much messier.

Still, while none of the three groupings at Hokkaido will likely produce a major consensus on emissions caps, they are producing a lively diplomatic chess match. E.U. members, who want the group to commit to steep cuts in carbon emissions by 2050, are butting heads with Bush over his unwillingness to commit to numerical targets. Meanwhile, Japanese Prime Minister Yasuo Fukuda is trying to broker a compromise. With a more green-friendly Obama or McCain administration only months away, Fukuda apparently believes that a tussle with Bush is counterproductive. Instead, he’s pushing for agreements on less-polarizing issues, such as encouraging carbon capture and storage technology for coal power plants, promoting nuclear energy and lowering tariffs on clean technology.

By Mary Hennock

China's parliament is frequently dismissed as a rubber stamp body whose delegates agree with every government measure and avoid controversy. This year's session has seen a new trend at work. The two-week gathering of the National People's Congress has seen protesters lobbying hard against a key government policy. No, not Tibet independence activists, angry farmers, or unemployed workers, but company bosses. Many delegates are entrepreneurs, and they're objecting to China's new labor contract law, introduced just over two months ago. "The law is overly-protective of workers' rights," delegate Zong Qinghou told Reuters, adding, "It isn't reasonable." Zong is the chairman of Wahaha Group, China's biggest private soft drinks company.

Beijing isn't alone in its "edifice complex," the massive urban makeover that has transformed the Chinese capital in the run-up to the Summer Olympics. In Shanghai the remodeling of the city's famous Bund waterfront has led to some raised eyebrows. My colleague Duncan Hewitt writes from Shanghai:

When Shanghai does something, it doesn't do it by halves. For years, local urban planners have admitted that the city made a mistake in the 1990s, when it routed one of its major highways right along the famous Bund waterfront. Since then conservationists have dreamt of the day when the traffic would be rerouted, or even put underground in a tunnel, to spare the historic structures from pollution and improve the view of the famous old stretch of colonial-era buildings.

In Brazil these days, armor is the new normal. From bullet-proof luxury rides to the caveirão, a police assault wagon built like a tank, Brazilians have fortified themselves against the hazards of modern living. In Rio, one evangelical Christian church in a crime-ridden favela is raising a steel-plated, 30-meter containing wall to keep the flock from harm's way when the shooting starts. So fashionable is the concept these days that Brazilians have even come to believe that their charmed economy is innured to world economic downturn.

No doubt there is some ground for optimism. Inflation is under control. Hard currency reserves are topping $160 billion, a continental record. Foreign debt is history. And while the largest economy on earth skates on the edge of recession, Brazilian officials confidently project growth of 5 percent or more this year, or, if the international markets tank, "maybe a little less," shrugs Finance Minister Guido Mantega. Give us your best shot, the bulls in Brazil seem to be saying, for Latin America's drowsy  giant has not only stirred but "decoupled" - or broken free - from the vagaries of the globe's overlord economy. 

The War on Terror has burned through America’s human and financial resources and empowered radical Islam. But for China, it’s been a lucrative reprieve.

However weakened are Sino-US ties – and they’ve taken a beating this year – the most important trans-Pacific relationship would be a lot worse if not for the Bush administration’s pre-occupation with the Middle East. His predecessor will likely declare a victory of sorts in Iraq and Afghanistan and slowly draw down the US military presence there. The White House will focus on domestic concerns like health care, immigration, and trade. Media interest in the terrorist threat will wane. (If there is a clash of civilizations and no one around to videotape it, does it get posted on YouTube?)