Vice President Joe Biden’s highly publicized visit to Turkey next week is likely to prove critical, if inconclusive. Whether he is able to establish a new relationship with a North Atlantic Treaty Organization [NATO], the one with by far the largest military forces after the U.S., is crucial to the whole Middle East as well as the U.S. bilateral alliance and with its European NATO allies.
Biden is seen as trying to make a new bargain with Pres. Recep Tayyip Erdoğan. In the past few months, Erdogan has accelerated his accumulation of power through the usual machinations of a popular leader but with authoritarian tendencies, shucking elements of Turkey’s secular constitution. The recent failed military coup – apparently by the last remnants of the secularists who through military dominance have been the guardians of an effort to maintain the non-Islamic state – has been an excuse for increased repression and rampant anti-American propaganda.
The fear is that Erdogan is now turning his back on almost a hundred years when the country tried to move to a modern state with top-down Westernization. The abandonment of the state capitalist role for liberalization of the economy over the last decade had delivered unprecedented growth and prosperity. But that boom has ended, in part another victim of the worldwide economic slowdown.
Turkey had always been a model for other Moslem governments trying fitfully to break away from traditional Islam which combines government with religion. That struggle goes on among the 1.3 billion people in the Arab-Moslem world – from Morocco to Indonesia. And while no adequate response has yet surfaced, Turkey had been perceived to have made the transition. That now appears dubious at best.
But once again, the world is in one of those periods when 1500-year-old concepts of Arab-Moslem conquest and forced conversion has been part of the religion’s creed. That many, perhaps most, Moslems would ignore this concept is not enough to block a determined, fanatical minority from jihad – propounding the duty of a Muslim to maintain and spread his religion by whatever means.
Erdogan has played a clever game. He has managed, despite the bitter rejection by many outspoken European Union officials, to continue the hope of Turkish adherence to the Bloc. His flirtation with the Islamists — with such moves as reestablishing the death penalty — has now, however, vitiated that prospect.
He blackmailed German Chancellor Angela Merkel for free movement of Turkish nationals within the EU, swapped for Ankara stemming the flow of Syrian and other Middle East refugees into Western Europe. But Merkel’s original welcome resulting in more than a million migrants entering her country last year is increasingly producing a backlash. Integrating newcomers with completely different cultural values has failed spectacularly, demonstrated in highly publicized crimes including rape.
Unlike the Europeans, Biden has the luxury of negotiating from a stronger hand, unlike the Europeans’ proximity and increasing problem of their growing largely unassimilated Moslem minorities. He can exploit Erdogan’s wildly fluctuating foreign policy which has failed in establishing a neo-Ottoman regime building on its once imperial presence in the region. A flirtation with Moscow – which supplies half its energy thereby running a huge trade deficit — is a feint aimed at Washington and its European allies. But just as they find themselves on different sides in the Syrian civil war, Erdogan cannot ignore Moscow’s threatening attempt to reinstall the Soviet role in the Black Sea and the Balkans.
Biden has to come home with something. One trophy would be at least promises for Turkey to tighten its borders, stop permitting aid to flow to the Muslim terrorists, and promising a more active Turkish collaboration in fighting Daesh [ISIS and ISIL], hoping that Erdogan recognizes that his Islamicism will not protect him from rising Moslem terrorism. But getting Turkey firmly back into the Western alliance would require stronger leadership of those partners than the Obama Administration can muster.
Category Archives: oil economics
Vice President Joe Biden’s highly publicized visit to Turkey next week is likely to prove critical, if inconclusive. Whether he is able to establish a new relationship with a North Atlantic Treaty Organization [NATO], the one with by far the largest military forces after the U.S., is crucial to the whole Middle East as well as the U.S. bilateral alliance and with its European NATO allies.
Back in 1887 the famous poet and storyteller Oscar Wilde quipped: ‘We [English] have really everything in common with America nowadays except, of course, language’. We got another example of this malediction in the blah-blah-blah which has attended Britain’s decision to leave the European Union. What is most apparent to all but the Talking Heads is that London’s negotiating a two-year exit from the EU will result in a revival not only of the vestiges of empire – as much legend as reality – but a renewed emphasis on the Anglo-American alliance, “the Special Relationship”
Like so much of traditional diplomacy, Pres. Barrack Obama and his former secretary of State, Hillary Clinton, gave that relationship short shrift. Obama, imbued with the Left’s religion of anti-colonialism – a view of the world which is not only unrealistic but ignores the actual relationship of the Metropoles of Britain, France, Italy, and once Germany, to their 19th centuries acquisitions. True, they were exploitive relation ships but they also accelerated the arrival of at least portions of modernism to pre-industrial societies.
As Obama’s attempts to “transform” American foreign policy have either miscued or collapsed over the last seven-plus years, his attempt to derail the historic relationship between the U.S. and Britain has also gone astray. Common language, shared democratic values and concepts, special interests throughout the work, have made a working relationship between Washington and London an irreplaceable part and parcel of U.S. internationalism.
The combination of Obama’s war on this tradition, his buffoonish attempt to influence British voters on withdrawal from the EU which boomeranged, and the U.S.’ expanding interests in the post-World War II world have tended to eclipse that relationship. That illusion was enhanced when London seemed to be throwing in its lot with the movement for a united Europe, one which had been a special project of American strategy for a half century, but not always with its final destination in view.
Now, the latter project is in deep trouble. Few Europeans want to face the reality of German domination as by far the largest and economically the most powerful of the EU states. That will halt the perfectly “logical” calls by Berlin that the EU must go forward to further political integration or collapse. But the French, once Germany’s twin partner in European unity, in a miraculous and real transformation, are for the first time abandoning dirigisme, French promotion of economic planning and control by the state, under the pressure of the competitive drive of “globalization” is being abandoned – and that under a socialist government! The concept had defined the distinctive character of French politics, inherited in part from its royal and multi-republican past, and which it had passed on to the Brussels Eurocrats it had largely supplied and still dominated.
London ‘s withdrawal — although it will continue to bargain for special trading and other economic rights inside the EU, whatever it means in the short-term — means a return to Britain’s diminished but continuing role as a world economic power. The good sense and good luck that kept Britain out of the EU’s now faltering monetary union means that once again, in parallel with the dollar, sterling will resume an stronger international character.
London’s City, which was ceding its role to Frankfurt and Zurich, will be reinvigorated in the longer term by the British withdrawal. That role of London as the world’s second financial center after New York will be felt all the way through the Middle East oil countries [with their traditional ties to the Colonial Office] to Hong Kong and beyond. [What the Japanese will do with their heavy investments in British manufacturing as a base for the EU remains to be seen. But it would not be the first time that Japanese business has had to make major adjustments to its successful formula for being the only non-European power to have made it to First World status].
The revival of the Special Relationship will have new and totally different aspects – again, despite Obama’s original high-priced energy policies, the U.S. and its Shale Revolution has put a new floor under world energy prices. It is one the Mideast producers can meet, of course, but not without cutting back on their enormously spendthrift policies of the past. It could well be that Special Relations II will see the U.S. as Britain’s major supplier of energy and energy technology for development of its own shale resources, environmental freaks notwithstanding.
Prime Minister David Cameron may have to go as a sacrifice on the altar of City business interests and the universal “internationalization” panacea which has dominated both U.K. and U.S. politics under his Conservatives – as well as the Democrats in Washington. And that may introduce new uncertainties along with some disturbing personalities.
But the dye is cast: Special Relationship II has begun with the British voters’ decision that they wanted autonomy and not collaboration at too high a price in cultural values with a Continental bureaucracy and its economy That bureaucracy, too, is now fatally wounded and events will lead to new and likely unpredictable changes in Paris, Berlin,.Brussels and the other EU capitals.
The Saudi family is engaged in a struggle to overhaul their notoriously pragmatic if autocratic regime.
Younger, foreign [many American] educated members of the farflung family recognize that The Shale Revolution has changed the whole nature of the world energy market. They recognize that despite opposition from enviromentalists and lack of technology in some countries, the exploitation of shale oil and gas deposits widely distributed around the world is going to continue to produce fossil fuel surpluses. That may even be the case if the world economy and consumoption take an upturn from the near-recession conditions in Europe and China reverse.
America is again emerging as a gas and oil exporter to challenge the longtime hold of the Saudis as the arbiter of world prices. Pres. Barack Obama’s “deal” with the Iranians, whether successful or not, for ending their pursuit of weapons of mass destruction, has begun to lifted sanctions against the Tehran mullahs. And Iran is slowly moving back into world markets with its reserves, among the largest in the world. Other smaller producers are emerging in West Africa and throughout Asia and Latin America. To some extent they will compensate in the world market for any temporary blocs against Libyan, Syrian or other Mideast producers.
Thirty-year-old Mohammed bin Salman, the deputy crown prince and the king’s favorite son is leading the charge for a radical departure from the norm. Saudi policy in the post-World War II era, after securing a tacit alliance with Pres. Franklin D. Roosevelt, has been preservation of the status quo. As the guardians of the Moslem holy shrines in Mecca, they have had disproportionate influence not only on their fellow Arabs but throughout the Moslem world. [One of the religious duties of all Moslems is to make at least once in a lifetime to these shrines.]
Bin Salman recognizes that the kingdom’s public finances are unsustainable and unlikely to rebound in a future oil market . He wants to radically change all that with. “Vision 2030”. The plan aims to slash wasteful government spending, develop a non-oil economy and wean the population off its total dependency on cradle to grave benefits. It also aims to boost private sector investment and job creation. Khalid al-Falih, the new chairman of state-owned oil company Aramco, recognizes that he is unlikely to hold the central role in the Organization of Petroleum Exporting Countries [OPEC], that in the past dictated world oil prices.
The Saudis are late in following in the footsteps of their oil-rich neighbors who have moved away from crude oil. Abu Dhabi, much wealthier on a per capita than Saudi Arabia, has struggled to do so. But fellow emirate Dubai has engineered a transformation over the past 40 years that has weaned it almost entirely off oil, which once contributed 50 per cent of its GDP.
The planned changes will be extremely difficult to execute. Public wages are to be reduced as a proportion of the budget to 40 per cent by 2020 from the current 45 per cent currently, a goal that could increase public opposition given expectations of rising inflation. It would mean a decrease in total salaries from Sar480 billion to Sar456 billion by 2020, with two-thirds of Saudi workers state-employed.
Other equally difficult targets include raising non-oil revenues to Sar530 billion from Sar163.5 billion last year by 2020 through an increase in government fees and taxes, including a sales tax, income taxes on non-Saudi residents and “sin taxes” on harmful products such as tobacco. The Saudis aim to balance the budget by 2020, with debt rising to 30 per cent of GDP by 2020 from 7.7 per cent currently. But the IMF forecasts a budget deficit of 14 per cent this year.
All this is to be accomplished while the Saudis continue to try to mobilize their fellow Arabs – with American support – against the continuing threat of Daesh [ISIS or ISIL], terrorists in Syri and Iraq threatening its neighbors. Crossing the Sunni-Shia, these Saudi enemies will try to exploit the traditional unrest among Saudi Arabia’s Shia minority in the critical southeastern oilfields.
No Middle East phenomenon matches the long-time outcome of these events in Saudi Arabia.
With gas [and oil] gushing out of our shale deposits and the Persian Gulf states [now including Iran courtesy Pres. Obama’s appeasement policies and lifting of sanctions], it is time to readjust our policies toward the oil exporters, not least Saudi Arabia.
U.S. policy, rightly or wrongly, has put up with too much guff from the Saudis for decades because it was the arbiter of world oil prices and the cost of our own growing imports.
But all that is a part of the past for the foreseeable future.
In fact, the Saudis – and now the Persians, are pumping like mad, while counter intuitively, attempting to set up agreements to limit the fall in prices. In a recession-prone world economy increases in consumption are severely limited. We doubt that their attempts, now even supposedly including the high-cost Russian producers, will bear any more fruit than such attempts to set up cartels in the past. Even the vaunted Organization of Petroleum Exporters [OPEC] was only partially able to control prices for a short time in a formerly much narrower market.
As American exports grow – they have already started – so will the free for all.
What brings all this to mind is the idiotic report that the Saudis have just zipped off one of their star soccer players’ Mohawk to the consternation of his fellow teammates on the sidelines of an opening sporting event because it was considered “un-Islamic”.
Unfortunately, most of the individual Saudi billionaires’ nefarious actions are not as ludicrous, and indeed are a major menace to world peace and stability. It is no secret that Islamic terrorists often get their financing from Saudis, perhaps even indirectly from the rather fragile and multifarious Saudi government of the ruling family.
The Saudis are already shaking in their boots from the growing thrust of the Tehran mullahs to carve for themselves a Shia regional hegemony. Tehran’s ability to reach across the Shia-Sunni divide to become the sponsor and supplier of Hamas in Gaza, originally a creature of the arch-Sunni Moslem Brotherhood, makes the case. Our former Sunni Persian Gulf allies’ growing suspicions of Obama’s strategic intentions in the area have even driven them into a tacit alliance – as is the case with Egypt – with their old sworn, bitter, blood enemy, the Israelis.
To expect the Obama Administration, with its total absence of foreign policy experience – and now successes in seven years — to subtlety move in on the Saudis to end their Islamic excesses is probably too much to ask. But to do so effectively would go a long way toward defusing the radical Moslem terrorist sects now, unfortunately, coagulating in Daesh [ISIS or ISIL].
With its continuing hold on Syrian and Iraq territory, despite what Obama has called a gradual campaign to unseat them, Daesh is the prime menace to international peace and security. The incremental additions to American force being used against them – the Administration has just quietly moved B52s into closer range in the region – is not the way to go.
Vietnam, Iraq and Afghanistan have all taught us the simple lesson that if you go to war, it must be with the anticipation as so many generals have said, that all war plans are kaput once the first shot is fired. It is, ultimately, as another American general so succinctly put it, a case of who gets there the “fustest with the mostest”. Obama’s “subtleties”, based on his lack of real knowledge of history and experience surrounded by advisers who have even weaker credentials, have retaught us this lesson.
The news that Mexico is moving one more step to break the monopoly of Petróleos Mexicanos [Pemex], the government-owned producer and until now monopoly retailer, is big and good news.
With the world’s tenth largest economy, Mexican growth at between four and five percent over the past few years is considered well below its potential. The World Bank reckons less than 2% of Mexico’s population lives below the international poverty line but the Mexican government estimates a third of its population in moderate poverty and some ten percent of that in extreme poverty.
Competing with Brazil as Latin America’s largest economy, the country has vast disparities of income, including between those more prosperous states bordering the U.S. Mexico City and the south. Growing remittances, largely from the U.S.’ southwest, are an important part of the country’s income, more than $22 billion in 2012. But all this produces tax revenues of less than 20 percent of GDP , the lowest among the 34 OECD countries.
Although Mexico is the sixth largest oil producer in the world, its exports have fallen from just under 62% of total exports in 1980 to just over 7% in 2000. Most observers agree this is a result of the inefficient monopoly over its oil resources and distribution by Pemex which has neither the capital – even though it provides more than 60% of government revenues – nor the technology to expand to meet domestic and foreign demand. But long the holy of holies for Mexico’s left, opening it up to competition and collaboration with foreign oil companies has been fought at every step since the 2014 decision was made to privatize at least some aspects of the monopoly.
Now the government has announced it will allow private companies to import gasoline for the first time since the late 1930s. That will permit the country’s independently owned 11,400 filling stations now all bound to Pemex franchises to link with other companies. The government had already permitted Pemex to form joint ventures with foreign companies to explore for more oil and increase production. But that may be years away given the bureaucracy and the long neglected technological aspects of the company.
Opening service stations to other franchises is going to be the most visible aspect of the new more liberal strategy and, hopefully, encourage faster development of the whole process. London-based Gulf Oil International already has plans to slap its Gulf de Mexico brand on a few stations in the largest cities, to expand to a wide scale national network. Motorists will be enthusiastic because of the poor service of most Pemex stations including shortchanging customers according to widespread convictions by Mexico’s consumer-protection agency.
Still, it is going to be a slow process. Mexico already imports more than half of its daily consumption of gasoline from the U.S. because the country has only six refineries. Pemex controls virtually all of the oil and gas infrastructure — pipelines and storage facilities — and the government is encouraging investors to expand the infrastructure to supply the newly freed stations. .
With trade running at well over $530 billion in 2015, the U.S.’ number three trading partner, American have a special interest in seeing more rapid liberalization and growth of the Mexican economy. Mexico, whose free trade pact with the U.S. produced a trade surplus of nearly $60 billion last year can afford to see an increase of U.S. imports – along with an accompanying investment and technology transfer for what has become its dormant oil industry. Hopefully, the Obama Administration will be pushing these developments ahead of its curious interest in the Cuban Communist dictatorship.
Jeffrey Goldberg has made a valiant effort in a lengthy [and often repetitious] article in The Atlantic [striving desperately to become high-brown] to present a comprehensive explanation of Pres. Obama’s foreign policy. Goldberg is both exhaustive and sympathetic, giving us extended references to intimacies with the President over many years – dating, as he tells us, to Obama’s days as an unknown Illinois state senator.
Goldberg fails, however, for one simple reason: he trifles with the facts as well as the interpretations.
Many of my readers will abandon us here, for what we will have to do is to burrow into the article. Nor can we do more than skim the surface of our differences with Goldberg’s misstatements and interpretations.
• “xxx Obama believes that the Manichaeanism, and eloquently rendered bellicosity, commonly associated with Churchill were justified by Hitler’s rise, and were at times defensible in the struggle against the Soviet Union.xxx” The New Oxford tells us “bellicosity:” means “Demonstrating aggression and willingness to fight”. Does that really describe a Churchill as leader of a lonely Britain holding out against the most criminal tyranny the world had ever seen? Or later against Communism which had taken tens of millions of lives of innocent citizens in Both the Soviet Union and China?
• “xxx Bush and Scowcroft removed Saddam Hussein’s army from Kuwait in 1991, and they deftly managed the disintegration of the Soviet Union xxx” That’s a very interesting if wholly bogus interpretation of the implosion of the Soviet Union in the face of a relatively passive foreign policy of Bush I and an even more passive policy advocated by Scowcroft.
• “xxx Obama would say privately that the first task of an American president in the post-Bush international arena was ‘Don’t do stupid shit.’ xxx” Goldberg repeatedly quotes this Obama axiom as a guideline to making foreign policy. Enough said.
• “xxx Four years earlier, the president believed, the Pentagon had ‘jammed’ him on a troop surge for Afghanistan. Now, on Syria, he was beginning to feel jammed again.xxx” Goldberg neglects to remind readers that at the same time Obama injected new troops into Afghanistan, he announced a deadline for withdrawal – hardly a great strategic concept.
• “xxx Within weeks, Kerry, working with his Russian counterpart, Sergey Lavrov, would engineer the removal of most of Syria’s chemical-weapons arsenal—a program whose existence Assad until then had refused to even acknowledge.xxx” The operative word is “most”; Assad has continued to use chemical weapons against his own people; only days ago there was another instance in Aleppo.
• “xxx A widely held sentiment inside the White House is that many of the most prominent foreign-policy think tanks in Washington are doing the bidding of their Arab and pro-Israel funders. I’ve heard one administration official refer to Massachusetts Avenue, the home of many of these think tanks, as “Arab-occupied territory xxx” One of Goldberg [or Obama’s] more curious statements given the fact that the more often heard accusation [obviously false given their vast differences] is that Washington think tanks are enthralled by Jews/Zionists/Israelis.
• “xxx Over the course of our conversations, I came to see Obama as a president who has grown steadily more fatalistic about the constraints on America’s ability to direct global events, even as he has, late in his presidency, accumulated a set of potentially historic foreign-policy achievements—controversial, provisional achievements, to be sure, but achievements nonetheless: the opening to Cuba, the Paris climate-change accord, the Trans-Pacific Partnership trade agreement, and, of course, the Iran nuclear deal. xxx” “xxx But achievements nevertheless xxx” Oh? The Cuban dictatorship remains in place having made no concessions, arresting new political dissidents even as the Obama-Castro agreement was announced. The Paris climate-change accord binds no one to anything, is based on scientific assumptions under fire, and does nothing to clear up the controversial claims of the Obama supporters that human activity is the critical issue. The Trans-Pacific Parntership trade pact is yet to be accepted in any of the constituent partners and is now under attack from both right [Trumpites] and left [Obama’s trade union supporters]. The Administration itself admits that the Iran nuclear “deal” is yet to be proved, that Tehran continues to pour billions [now augmented by the dropping of sanctions] into a worldwide state terrorist network, and is demonstrably proceeding with the development of intercontinental ballistic missiles.
We won’t bore our readers with additional examples. But the Goldberg presentation of what he ceremoniously calls The Obama Doctrine is a tissue of false information and prejudiced interpretation. There is no Obama Doctrine except a general withdrawal of American power in critical areas of the world with the traditionally anticipated results.
The time has come, and indeed, has long passed for a frank and open discussion of the growing confrontation between the Western democracies and the Moslem world.
Were there no other issue than the fact that there are some 1.3 billion world inhabitants who consider themselves Moslem, whatever their differences, the issue is moot. Now the combination of the continuing chaos in the Arab and Moslem world and the massive Moslem migration into the formerly non-Islamic societies requires it.
It perhaps goes without saying that the issues are complex and fraught.
Islam, despite its hundreds of millions of peaceful adherents, has never been a “religion of peace” as so many contemporary politicians espouse, including Pres. George W. Bush. From its very origins, Islam – a political as well as a religious movement – has confronted the Judeo-Christian West, more often than not relying on its sword to settle ensuing arguments It is equally false, as Pres. Barack Obama has repeatedly said, that Islam has played a great role in the development of the American ethic; indeed, the opposite is true when the first U.S. armed conflict abroad was a war against pirates espousing the Islamic cause on “The Barbary Coast” of North Africa.
In the current explosion of old arguments, Moslems are far more likely – given their inferior military and other effects of stable government – to seek other means than military to win arguments and concessions. In fact, the most powerful transnational organization in the Islamic world today is the Moslem Brotherhood whose origins lie in a strategy of using such Western institutions as representative government to gain influence, power. However, as the brief regime of Egypt’s Pres. Mohammed Morsi proved, the Brotherhood concept is “one man, one vote, one time”.
The cliché that Islam is an “Abrahamic” religion thereby sharing the concepts of Christianity and Judaism today toward the two other beliefs is false. Yes, Islam does borrow from the Jewish and Christian legends but it has never met the test and modifications of the Jews through 19th Century Haskalah [Enlightenment] and the Christian Reformation and the Counter-Reformations. Ironically, the highly influential 12th century Spanish Moslem philosopher Averroes [Ibn Rushd] contributed mightily to the origins of modern syncretic Christianity, but Islam lost the 12th century debate to the fundamentalists from which it has never recovered.
Toleration of all religions is a foundation of modern democratic society. In countries today where Moslems are in the majority, such tolerance is next to zero. Even Pakistan, with its enormous inheritance of British Indian law and pluralism, restricts Christian practice, and there is almost monthly violence – often deadly — against “nonbelievers”. The concept that, sharii, the great and ambiguous body of Islamic law, could have precedence over the American Constitution is unacceptable.
How, then, is the West to respond to these new demands of Moslems as individuals and sometimes as organized entities to participate in the power structures of the nation states created even in Afro-Asia by the European world?
The only response is that Moslems and their faith must meet the requirements of modern tolerant and pluralistic democracy in the same way as other religions and philosophies. The current tendency to accommodate Moslems and Islam through special courtesies is mistaken and can only lead to disaster. This is true not only in legal and political terms but also in the world of culture. When Simon & Schuster create a new imprint called Salaam Reads targeted to young Moslem adults, it is a misplaced effort. The publisher says it is to help integrate these new arrivals into our culture. But Simon & Schuster do not have Catholic, Jewish or Buddhist subsidiaries. And they are abandoning the essence of the American concept that the U.S. was created as a place that welcomes immigrants from all over the world precisely so they can have the freedom to believe what they wish live unbound by birth or class or government restriction – or incentive.
Nor can the great bulk of Moslems be excused from facing the cold fact that Islam, however falsely, is the foundation on which the contemporary world’s greatest threat to peace and security arises. They, above others, must be able to discuss openly and honestly why this is the case, and what concepts remain still unpurged from Islamic belief that give rise to these attacks on the civilized world.
Open covenants openly arrived at was not just a cliché which Woodrow Wilson hoped would be the foundation of the peace after World War I, but is as appropriately applied today to the problem of Islam and Islamic terrorism. Ignoring or obfuscating the problem of Islam in the 21st Century is as much a threat to world peace and stability as the acts of terror themselves.
Another chapter in the long and tortured history of Venezuela is being written.
But this time, given the new digital world of communication and interdependence, what happens there is not just a spectacle for occasional American Marine intervention to keep the peace. Not only are U.S. firms being clobbered in a hapless manipulation of currency by government now rapidly going toward chaos. [Goodyear Tire & Rubber reported a $646 million loss against fourth-quarter earnings, mostly the result of the collapse of the Venezuelan Bolivar.]
Most observers expect the Venezuelans will meet the $1.5 billion in debt payment due later this month But after that, the picture gets murky. With oil prices a third of what they were just a few months ago, and apparently to rock along the bottom for some time, the will await a worldwide economic upturn and increasing world consumption. All out Saudi pumping of its super low-cost Gulf reserves has made a dent in the new American shale technologies playing a big role in the lower world wide energy prices. But new technology there has mitigated the blow. And now Iranian [and additional Iraqi oil] is about to enter the market as Pres. Obama’s deal on nuclear weapons with Tehran lifts sanctions, especially for the Europeans and the Chinese.
A Venezuelan default on its $120 billion in government and state oil company loans from overseas investors during the past decade.would go a long way toward creating a new world financial crisis.
Meanwhile, Veneuela’s 32 millions are taking it on the chin. The latest is government trimming electricity to a 100 malls which have been sanctuaries for escaping the growing discomfort and violence in the tropical country. In this latest crisis to hit the country, El Nino has caused a drought and shortages from hydro plants. This, of course, is taking place in a county with some of the largest reserves of fossil fuels in the world, The fact is that Venezeuela has suffered brownouts for decades. One of the reasons is that electricity is virtually free in the country leading to incredible waste. Meanwhile, unlike other oil producers, in the good times Venezuela did not set up a rainy day fund and has now had to dig into its vurrency reserves.
The electricity crisis is only the latest in a bundle of incompetencies and ideological perversions inherited by the Maduro government from its predecessor, the charismatic Hugo Chavez. Chavez ran a regime o bread and circuses, destroying among other things the efficiency of its oil industry which he nationalized. Now the country’s economy after decades of mismanagement has been one of the worst hit worldwide by oil price fall, accounting 95 per cent of the country’s trade revenue. At the moment, Caracas has four exchange rates: three official ones and the black market which has been trading at some 1016 a dollar against official rates a quarter of less of that..
Before Chavez took the Caribbean country of 32 millions down the road toward state capitalism, it for many years after the second world war one of the richest in the region, with a vibrant economy buoyed by oil exports, much of this heavy oil to Texas refineries.
But were it to default in the months ahead, its debt failure would ripple through emerging-market economies, many of which borrowed heavily when commodity prices were soaring. China had provided Venezuela with a steady source of financing in exchange for oil but as its economy slows and it tries to staunch a hemorrhage of capital outflow, Beijing is reluctant to lend more.
Venezuela’s story, by and large, is being repeated in the oil-dependent countries scrambling for funding. Nigeria and Angola are already seeking help from international institutions to plug their deficits.
For the moment, the U.S. Treasury appears to be listening and cringing. But here too the world is waiting for an Obama initiative.
The Obama Administration is facing the ultimate exposure of the failure of its lauded strategy of “leading from behind”.
The phrase came into use when Washington stood back in 2011 while its European allies toppled the Mohammed Qadaffi regime in Libya. Qadaffi had abandoned his earlier pursuit of weapons of mass destruction and terrorism — including the bombing with the Syrians of Pan Am 103 over Scotland in 1988. But he was collapsing under the siege from Islamist terrorists. By 2014, the country was being torn apart between an Islamist-led administration in Tripoli and an internationally recognized government based in the eastern city of Tobruk.
Now Daesh [ISIS or ISIL] is threatening a Libyan takeover in the near chaos that has followed. Not only would the would-be caliphate acquire a critical North African staging area for migration to Europe, but it is already installed in Libya’s principal oil producing area. With the largest oil reserves and production in Africa – larger than both Nigeria and Algeria – growing control in Libya would enhance the self-proclaimed international revenues and leadership of the Islamic terrorists based in Syria and Iraq.
Local affiliates of the Islamic State last year grabbed the coastal city of Sirte, Mohammed Gadhafi’s hometown. And they have moved on to four other strong points, some closer to the critical oil fields. With warmer weather approaching, European governments – already overwhelmed with hundreds of thousands of Mideast migrants – fear Libya could become an even greater trampoline for an enlarged invasion of refugees and economic migrants from Black Africa.
There is virtual chaos among the country’s six million people with two power centers vying for control. Turkey and Qatar, with their strong ties to the Moslem Brotherhood, are supporting the Islamists in Tripoli on its Western border with troubled Tunisia. Egypt, which feels threatened directly by Libyan events on its western border, and the United Arab Emirates are backing the more secular regime in Tobruk in the east.
Daesh is operating from four different points in the country which would demand a sizeable allied operation.Sec. of State John Kerry has been trying with the help of Washington’s allies to put together an interim government which could call for international assistance. The U.S. already has a Special Operations team operating in the country and the British and Americans are operating drones overhead. British sources have already proposed a plan for a 10,000-man joint expeditionary force. Another drawn up by the Italians calls for a 6,000 invasion source to reestablish order. Both anticipate American leadership as well as transport which the allies do not have.
The diplomats’ plan for a united Libyan government to call for foreign intervention to boot out the Islamic state is moving slowly. The United Nations has failed for more than a year to get the two rival administrations and their allied militias into a unity. And there is growing concern that Daesh may consolidate its hold. Britain, Italy and France are urging the U.S. to intervene immediately even before a government is formed. The White House is reportedly concerned Islamist terrorist control of Libya would be catastrophic.
Libya, always a contested approach to southern Europe – as it was during the World War II between Gen. Erwin Rommel’s Nazi army and the Britain’s Desert Rats– is critical to any kind of regional stabilization.
Handling the crisis this time around is going to take direct American intervention at the head of the line, however much nostalgia there is now at 1600 Pennsylvania Avenue for Obama’s formula of the U.S. as a backseat driver.
The chaotic Middle East is taking on convolutions which bring it ever closer to a clash among the major powers.
- Despite his rapidly deteriorating economy, Russia’s Vladimir Putin is taking an increasingly aggressive role in supporting the Basher Al Assad Syrian regime and its Iranian partners. His efforts to strengthen the Damascus regime have kept it alive but show no signs of a significant victory against its opponents, some of whom represent jihadist goals with liaison to international Islamic terrorism.
- Israel’s security on its northern border is deteriorating as its traditional Lebanese enemy, Hezbollah – with a long record of terrorism against the U.S. – becomes increasingly embroiled as an Iranian ally in Syria. Hezbollah’s operations beyond the Middle East, especially in Latin America in league with local guerrillas and drug traffickers, are a growing challenge to American influence and stability there.
- A seemingly leaderless explosion of individual terrorist acts against Israeli civilian and military targets has assumed new significance with an attack by a U.S.-trained Palestinian Liberation Organization security official on Israeli military. The knifing attacks are generally by teenagers schooled by UN-supported Palestinian educational institutions where anti-Semitism is standard curriculum. They are an expression of the collapse of secular Palestinian leadership which is hanging on Israeli security support. The growing strength of the Muslim terrorists Hamas, again being rearmed by Iran, are now infiltrating the West Bank from Gaza.
- Saudi Arabians are persuaded of their abandonment by the Obama Administration in its pursuit of agreements with Tehran. In the face of an Iranian attempt at Mideast hegemony, Jeddah is lashing out militarily with the support of its traditional Arab allies in the Persian Gulf. But explosions of Sunni-Shia violence, including in the Saudi’s southeastern oilfields, and its see-saw battle in Yemen against Iranian-back rebels is inconclusive at best.
- Daesh [ISIS or ISIL] continues to recruit young Muslims, even in the West and the U. S. Those who remain in their homelands present the prospect of “lone wolf” terrorist massacres resembling the almost daily occurrences in the Mideast. Despite effective continued FBI surveillance and discovery of terrorist plots, it seems only a question of time until new episodes such as San Bernardino and Ft. Hood will erupt in the Homeland.
The Obama Administration’s strategic response to this growing catastrophe is an incremental injection of small special forces teams in the Mideast conflicts. Sec. of State John Kerry has carried on frenzied whirlwind diplomatic activity. [Are secretaries of state now being judged by how many flight miles they put in?] And he has persuaded all parties to attend a Syria peace conference. But no one believes in its success with parties – including the U.S. and the Russians — pursuing directly contradictory goals.
Not even the other Republican candidates for president appear prepared to adopt Jeb Bush’s formula for a massive all-out military effort to destroy Daesh as a threat to U.S. national security. Meanwhile,Yeltsin pretends to have a common enemy with Washington in the Daesh terrorists, but Russian initiatives in Syria have been largely limited to direct support of the al Assad regime. Israeli, and American interventions in pursuit of their own direct security – for example, transfer of Iranian weapons to Hezbollah in Syria by Iran – run the risk of confrontation despite intense communications to control the traffic. The continued violation of Turkish sovereignty by Russian fighter-bombers and Ankara’s past winking at jihadist communications through its territory pose a growing problem for NATO and Washington.
Despite its continued professions of loyalty to the U.S.-Israeli alliance, the Obama Administration moves closer to the growing antagonism and pro-Palestinian policies of the Europeans. Paris, for example, now threatens to recognize a non-existing Palestinian state if bilateral negotiations between the Israelis and the Palestinians do not go forward, an exceedingly unlikely phenomenon given the lack of a viable Palestinian negotiating partner.
The latest sign that the Obama Administration is moving away from Israel is its adopting the Europeans’ designation [and implied boycott] of Israeli manufactures from the Jewish Settlements on the West Bank which employ tens of thousands of Palestinian Arabs. Indeed, the “Palestine” cause has united old European anti-Semites with the traditional left for the creation of a Palestinian state which would be a direct threat to Israeli security.
Whether this turmoil will await a new approach, at least one generally anticipated, by a new U.S. president in another year before some unintended action ignites a larger explosion, remains problematical.
The Shale Revolution continues to wreak havoc as revolutions are wont to do.
The abundance of U.S. natural gas, in many ways a more satisfactory fossil fuel than either coal or oil because of its lesser emissions, has dynamited the whole worldwide energy market. Whether or not the Obama Administration wants it, the export of oil and gas is going to be a function of the new energy picture with the growing economic pressure to sell off our low priced gas to a world market which hasn’t yet taken advantage of the new mining technologies.
Along with the flagging economies of Europe, and now China, and subsequent lower demand, energy prices are under attack everywhere. The stock markets, long dependent on high energy costs and their very profitable producers, are lurching under the torpedoing of the old price structures. Fuel economies, sometimes at the insistence of government fiat as in the American automobile industry, are also finally having their effect and slowing growing energy demand.
In the long run, there is every reason to hope and believe that lower energy prices will be an enormous fillip for the U.S. and the world economies. But, as Maynard Milord Keyes once quipped, in the long run, we will all be dead. Projections of energy demand and supply have in the past been notoriously wrong. And they may be again. But for the moment, what looks likely for several years if a continuing low price for energy. The U.S. which has always prospered on low energy costs, as compared with Europe, is likely to benefit from this new situation.
Geopolitical developments overseas, for the moment at least, seem to be bolstering this new abundance of energy. Iraq’s fabulous oil and gas reserves are coming back onstream after so many years of war and destruction. Pres. Obama’s “deal” with Iran is likely to see sanctions against its sales of oil lifted with new entries to the market.
Most important has been the effort of our friends the Saudis to regain their role as the marginal producer and dictator of the international market pricing. They have opened all the valves and are producing and marketing at record levels. The intent, without doubt, was to hammer the American shale gas and oil producers with their higher costs than those on the Persian Gulf. But while there have been some difficulties and cutbacks for the U.S. producers, the shale oil entrepreneurs have been adept at coming up with new technological fixes which have in the main maintained their role in this new struggle for prices and markets.
Meanwhile, much propaganda and pure and simple idiocy dominates much of the talk about energy and its application. Electric cars, for example, may eventually become a reality because of new battery developments. But recharging the electric car off their baseboard plug – if that becomes the reality – is going to demand that more electricity be produced somewhere and by someone with some fuel. Coal which has until recently dominated the electrical generating plants, about 60% of the total energy consumption, is fading as more and more quick fix gas generators go into service and environmental constraints demand cutbacks in coal emissions. The pain in the old and often poverty-stricken coal mining areas is something the rest of the country is going to have to be attended [and be paid for].
But, returning to our original point, progress is rarely achieved without considerable pain – for some part or other of our society. And it is clear that is going to be case as the Shale Revolution with almost daily announcements of increased reserves is no exception. Government subsidies for wind and solar will continue to feed the trendy enviromentalists’ pressure on more innocent lawmakers. That, too, is a burden which the taxpayer appears inevitably going to bear.
“You and me we sweat and slave, but that old man energy just keeps rolling along”. Good news to sing about!
In one of that witches ’ brew that come out of the Congress and are called “compromise”, a bill seems to be working its way through the toils of the legislative process to end the four-decades-old ban on oil exports. In exchange, the Republicans and oil companies have agreed to put more money into the so-called green energy subsidies.
It’s not the best of solutions. But the possibility of shoving the growing gas and oil surpluses in the U.S. – a product of the Shale Revolution – on the world market argues well for the American economy. We hope it makes it.
The ban on exports – proving again when a law gets into place it is hard to dislodge even in the face of revolutionary changing conditions – dates back to the 70s. That’s when our growing imports were hit by the price-fixing Persian Gulf and others’ monopoly, the Organization of Petroleum Exporting Countries [OPEC]. But OPEC, despite recent huffing and puffing, has been dying on the vine, or rather swamped by the world energy glut.
The leading OPEC producers are now pumping violently, even though it is tearing the world energy price to shreds, in order to garner more market share. They obviously see the possibility of the Americans reentering the market, particularly in Western Europe. The Saudis, particularly, see their once catbird seat as the arbiter of world oil pricing dissolving in the American technology which has opened up enormous new possibilities in gas and oil in shale deposits worldwide once beyond the bit of the drills. [Don’t look now but that may also affect how the rest of the world views the Saudis’ sponsorship of reactionary Islamic religio-political movements.]
The U.S. production boom in Texas and the Dakotas and Montana, is cranking out more than one million barrels of crude a day. Current law does permit the export of half a million barrels a day from Alaska to Asian customers and exchanges with Canada. And as the largest consumer in the world, the U.S. even during an economic downturn is burning 19 million barrels a day according to the U.S. Energy Information Administration.
So far, at least, although the Saudis have oil that can be produced at a few cents a barrel, their gushers have not totally crippled the American shale producers. Good old American technological innovation continues to make leaps in shale productivity – and moderate world demand in a period of economic “malaise” – has so far saved a good part of the new industry.
Still, the glut causing low prices is keeping a lot of rigs from pumping full blast. Luckily for all concerned, the new crudes are mostly light, not the kind of heavy oil the huge Texas refineries were geared to handle from older U.S. fields and Caribbean imports but are welcomed by foreign refineries. The lifting of the export ban would produce an immediate spurt in jobs for the oil transportation systems and suppliers of their equipment needed for the new export capacity. The Aspen Institute says that means adding 630,000 new jobs and an additional $165 billion annually to the Gross Domestic Product for the next six years.
Hopefully, this deal is not going to get sidetracked as the Congress winds down for the holidays.
Not everyone is happy about the new developments, of course. Some investors in oil stocks are holding their heads. But we have always argued that cheap energy is the soul of American economic progress and development and that hasn’t changed, even if some of the players have. [Electricity producers are turning from coal to gas, or combinations of natural gas and coal gas – switches that probably are still in their infancy and too early to judge. But the gains in trimming emissions are already obvious.]
So bring on the oil – and gas [liquidifed natural gas] – exports!
American policymakers are having to deal with an increasingly mystifying China.
The giant culture that is less than a nation-state but far more than an amorphous one and half billion people is, perhaps inevitably, moving rapidly in different and conflicting directions. As always is the case in a world of jungled conflicts, the U.S. must hope for the best but prepare for the worst. And that worst could be an inevitable conflict over basic American international policy, not least, freedom of the seas.
The Chinese are continuing to build what can only be called military bases in a barrier across one of the most strategic commercial route in the world through the South China Sea. It may take years before the Chinese can project sufficient power from those reconstructed coral shoals to challenge the U.S. Navy. But the world moves faster and faster, and assurances that we are technologically meeting the threat of asymmetrical warfare in which the Chinese traditionally have excelled has to be periodically reexamined
China continues spending in her own terms vast resources on these bases and on the expansion of her military, particularly her seapower. That’s despite the fact that her economy has drifted – one could say inevitably – into slower rates of growth than the double-digit increases of the past three decades. The actual drop, always subject to speculation because of Beijing’s “create accounting”, is perhaps less important than the speed at which she is slacking off.
This has already impacted world commodity markets where China custom had caused high growth, and those countries – including Russia — which had been sucked into single product export patterns. Beijing’s galloping economic invasion of raw material producers, particularly in Africa, where infrastructure projects were sold as a “swap” for raw materials, are in trouble. That’s telling in such countries, such as Angola, with the energy price halving in no small measure because of the Shale Revolution in the U.S. American lower prices and a gas surplus has sent the oldtime oil price guardians such as Saudi Arabia, and now Iran, pumping as fast possible to maintain market share. But in Southeast Asia Beijing continues to push subsidized giant railroad and highway construction and damn the home finances.
These gambles have been matched by an unprecedented campaign against corruption by Pres. Xi Jinping in his effort to create a new personality political culture matching that of the fabled Mao Tse-tung. These campaigns in the past, while based on evidence in a totally corrupt society, actually are intended to eliminate opposition within the ruling one-party Communist state. More recently, Xi has gone further afield than just high Party officials, and named multi-billionaire Party-favored oligarchs. That seems inevitably another economic gamble given the slowing economy.
In fact, Xi – despite criticism within and without the Party that they were the greatest obstacle to economic progress – has enhanced the power of the government-owned huge behemoths with near monopolies. Whittling them down and their political hold on credit for a move toward the tiny private sector and most of all, increased consumption, was supposed to be the order of the day. But it is not happening.
The Obama Administration, for the most part, is tip-toeing around all these issues and the puzzles they present for American policy in Asia, and, indeed, in the world. Cutting back on the U.S. military at a time of aggressive Chinese rhetoric and movement is not exactly apt. Minor tinkering with currency manipulation and export subsidies, which will probably expand given the Chinese slowdown, is not an answer to the loss of American manufacturing, now interestingly enough also moving away from China toward more low-wage countries.
China policy has, of course, been a major battleground for American strategists for the past half century or more. But it is looming still larger and the next administration, whatever and whoever it is, had better come with some preparation.
The volatility of Middle East events notwithstanding, a new picture is emerging of alliances very different from those preceding the outbreak of the Arab Spring and the now five-year-old Syrian civil war.
That new reality is obscured by the Obama Administration, suspended in contradictory strategies of removing the American military option from the table while incrementally increasing U.S. special forces and bombing, adamantly calling for the ouster of Basher al Asaad in Damascus but negotiating for his participation in a “settlement”, and most of all, insisting on talking up an Israeli-Palestinian negotiation which has died.
There are growing signs that the relatively artificial national-states created by Britain and France in the Ottoman Empire breakup after World War II may be crashing.
Central to the new picture emerging is Saudi Arabia’s position. Western pressure and internal reformists are moving against the most egregious aspects of the regime, e.g., its long time allegiance to Wahhabism – an Islamic fundamentalism at the root of much of the current terrorism. Although the Saudis are flooding the world oil markets in an attempt to criiple their competitors, the Shale Revolution in the U.S. has deflated its once pivotal energy role. Saudi movement is occasioned by some internal reform elements, but more importantly the Obama Administration’s flirtation with Riyadh’s chief rival Iran. [Thet have just announced women will be permitted to vote, a revolution in a country which does not permit them to drive.] The Saudis themselves have been forced into direct talks with Tehran in an effort to short circuit Washington-Tehran deals. But at the same time, the Saudis are rallying Sunni allies in Syria against the growing influence – including direct military participation – of Iran. The nomination of a pro-Syrian president in Lebanon and the growing domination of the Iranian ally, the Shia Hezbollah, is a defeat for the Saudis.
Whether traditional family domination and loyalties can withstand this turmoil remains to be seen.
The Israeli-Arab conflict which has dominated Mideast politics may be dissolving in the face of the greater fear of an aggrandizing Iran. The recent announcement that Israel is opening a diplomatic mission in Abu Dhabi, although enmeshed in a number of subterfuges, is the most dramatic recent evidence of the growing new tacit alliances. Jerusalem and Cairo are in a tight security and military alliance against Hamas in Gaza, supported by Iran, and the remnants of the Moslem Brotherhood fighting a guerrilla movement against the al Ssisi regime. But virtual disintegration of the Palestinian Liberation Organization under aging Pres. Mohammed Abbas – under bitter attack from Hamas– means there is no negotiating party on the Palestinian side. The current wave of Palestinian violence –“lone wolf” episodes unorchestrated by any Palestinian organization if encouraged by Hamas – is being met stoically by an Israeli public. It has not slowed a growing French Jewish in-immigration occasioned by violent anti-Semitic episodes in France, Despite American and EU opposition [the latter in a trade offensive], Israel is consolidating its enclaves [”settlements”] in the West Bank and in East Jerusalem.
The Obama Administration’s response to these dramatic reversals in the region is an attempt to find a negotiated settlement to the Syrian Civil War. While Russia’s Pres. Vladimir Putin has nominally joined the effort, he has bid up his hand in the Syrian conflict in support of the al Basher regime which Washington still insists must go. How long Putin, with a collapsing economy facing Western sanctions over the Ukraine issue and a tumbling international oil price for its only export, can maintain the Syrian thrust remains to be seen. But the use of sea-born missiles this week was a dangerous escalation, not the least because some Russian missiles fired earlier from the Caspian earlier had fallen short in Iran
While references to World War III [by none other than Pope Francis himself] are exaggerated, the volatility of events suggests the possibility of miscalculations at any moment with even more escalating violence.
Events of the past few days have confirmed our suspicion that the war effort against the Islamic terrorists by the Obama Administration and its Western allies has been dawdling at best.
That the French were able to immediately identify an area where other terrorists were holed up after the bloody six-point massacre that presumably had come as a surprise indicate their intelligence was good but their policy implementation was limping.
That U.S. planes finally took on the fleet of oiltank trucks that have been moving petroleum for Daesh [ISI or ISIL] to black markets and funding their barbarism showed equally how irresolute has been our bombing campaign.
It is hard to imagine that either of these actions could not have been taken earlier with their devastating impact on the enemy. Yes, France had to strengthen its abilities to go after the enemy with emergency decrees, now to be followed up with legislation. But draconian French laws of arrest and prosecution, compared to those in the U.S., are well known and certainly could have been used earlier.
Satellite photo reconnaissance as well as drone activity must have shown The Pentagon for the more than a year that the war against Daesh has been underway, where and how oil was being moved to market – with the Turks, by the way, looking the other way as it passes through their territory Why was a strike against these trucking fleets not considered until now? And did the U.S. command prejudice its attack with leaflets alerting drivers, as we are told, to the coming attack?
All of this to say, had it not been self-evident before, that The Obama Administration has not been fighting a war against Daesh, but a reluctant sporting action.
Pres. Obama, indeed, is still insistent that he has a strategy, that it is a longterm one to “degrade and destroy” Daesh. But as Daesh now turns it emphasis to attacks outside the Middle East against targets in Europe and perhaps in America as well, that is not only not realistic but is a very dangerous approach to a growing problem of international security and a threat to the U.S.
The Western alliance has forgotten one old and simple fact of life. Nothing succeeds like success, and success for Daesh is the destruction of civilian life through terrorist activity. So long as they continue to make “progress” – that is, to continue to stage terrorist attacks or claim credit for them in the rest of the world from their sanctuary in Syria and Iraq – they will attract adherents. Obviously, and unfortunately, there are enough deranged and disoriented young men and women in the Islamic world to fill their ranks.
That fans at a Turkish soccer match booed and hissed and shouted “Alah Akbar!”, the cry of the jihadists, during a soccer game when a moment of silence for the French victims was called, is one more terrible indication of the tacit support for the terrorists among the Islamic populations. Various opinion polls too, as well as fragments of interviews by Belgian radio, have shown rationalizations for the terrorist if not sympathy among local Moslems there and in France, many of them born and reared in Europe.
The task before the U.S. and its allies is not only the elimination of Daesh and the end of its terrorist activities, but the speed with which the crippling disease among the Moslem populations around the world is dispatched. Daesh has already made tentative alliances with other terrorist groups in Libya, Central Africa and Indonesia. However, tenuous those alliances – and we have the spectacle of various jihadist groups fighting one another in the Syrian Civil War – permitting them to continue to function and spread their propaganda is an international menace which must be dealt with and as soon as possible.
While Vladimir Putin is busy challenging America’s role as leader of the free peoples, the Russian dictator is also refiguring his domestic scene in the Soviet image. In fact, one could make the argument that in many ways he has already accomplished that and to a degree even the old Soviets hands would have been envious. What Putin and his small band of supporters have done at home may in the long run be more important than his aggression against Ukraine, his support f the crumbling the al Bashar regime in Syria, and his feints at the Baltic states.
There are, of course, important historical differences to Soviet times. There is no Communist Party with its monopoly of power and its tentacles throughout the world. But Putin has eliminated, in all but name, any organized political opposition to his one-man coterie of hangers-on, some his old colleagues in the secret police and others profiteers from Russia’s new state capitalism. That too, is a difference: Russia no longer pretends to an oligarchic Soviet economy.
In fact, with 40% of its economy now dependent on oil and gas exports to Europe, Putin’s No. 1 problem is Western sanctions and the dynamite that American shale gas and oil technology has thrown under world energy prices. Supplying one third of the European Union’s energy imports, Putin despite the fall in world energy prices and the sanctions slapped on some of his buddies as a riposte to his efforts to take over Ukraine and Byelorussia, is desperatelyl trying to hang on to those ties.Gasprom, the world’s largest gas distribution network, is trying to expand its Nordstrom line down through the Baltic Sea. A state-controlled company, having squeezed out competitors and grabbed stakes of foreign oil companies in new fields in Sakhalin in the Far East, it is trying to dominate European distribution networks as well..
But Putin’s reversion to and dependence on a government elite which leeches off the economy as did the so-called nomenclatura, the Soviet leadership and bureaucracy, is all too familiar. In fact, Gennady Gudkov claims “there are now five to six times more bureaucrats in a Russia with 140 million population than there were in the entire USSR with its 286 million residents.” Gudkov, himself, one of the vanishing band of Putin’s critics. is a businessman and former member of the Duma [parliament] who has seen his business wither as he has become a victim of Putin’s persecution
Furthermore, the bureaucracy led by the chief bureaucrat, Putin himself, is acquiring more and more power. Even claptrap trimmings of the Soviet system have been abandoned – such as the largely fraudulent elections for regional governors. Even the billionaires who profit from their relationship within this highly personalized rule are vulnerable and can be – as several have in the recent past – fallen into disfavor and purgatory if not exile or jail.
Putin’s rule resembles, more than anything else, the style of a banana republic, with little or no hint of ideology. He does try – and gets cooperation – from the Russian Orthodox Church just as the tsarist regime did for centuries. But he continues to cultivate old Communist talisman, including the reenshrinement of Feliz Dzerzhinsky, the archleader of Soviet internal repression. It was Putin, after all, who said that the fall of the Soviet Union was the greatest catastrophe of the 20th century.
What characterizes Putin’s strategy, however, is the old role of a bully on the international stage. It was inevitable that U.S. policy, which under former Secretary of State Hillary Clinton, tried to find a “reset” button for American-Russian relations would fail. Reinstituting Moscow’s former glory is Putin’s only strategy to retain what is, alas!, his vast popularity at home and that requires an American enemy. Washington has no options in this situation: it must maintain a quiet, non-bellicose opposition to the Russian leader. Just as with the Soviet Union, the economic soft underbelly of the Putin regime is extremely vulnerable. Nothing would make more sense now than to reverse the Obama Administration’s policy and permit market forces to export American gas, and perhaps even oil, now in overabundance, to continue the disintegration of Russian markets and Europe’s dependence on that supply.
China’s shaky economy
The Shanghai stock market is dipping again.
Three weeks ago, it fell by nearly a third in total value wiping out some $3 trillion. The cavalry arrived with Communist Party leaders throwing everything they had to stop the hemorrhaging.
But like so many other parts of the Chinese economy, the names are the same but the function of the Shanghai market is not what stock markets are to economies in the West and Japan. Like the rest of the miraculous development of the last two decades, the stock market has been built from top down. So rather than represent the accumulation of capital from private investors for the growth of companies, it really represents an indirect function of government credit – with a large group of gamblers [90 million or more than the membership of the Communist Party] along for the ride.
When some smart operators decided they knew how to manipulate the market, they tripped what would otherwise have been the crash earlier. Beijing’s Communist rulers dived in to shore it up. They had no choice because the market had become a showpiece whatever its real nature, and with growth dropping rapidly in the overall economy, its dive for propaganda purposes couldn’t be tolerated.
The rescue operation was extensive and intensive: Beijing pulled one-third of the stocks off the market. The central bank went into the market to buy. A state pension put funds into equities for the first time. Beijing told investors holding more than 50% of a company they couldn’t sell for six months. Brokerage firms were underpinned by the government banks to hold stock inventories off the market.
For a while that looked like it would save the day, although no one was sure what would happen when any of these “props” were removed. No one seems to know exactly why less than a month later, again, the market plunged knocking the pins out from under the rally the government had been able to create. Perhaps it was information leaked from government sources that the withdrawal of the extraordinary supports was under way.
One further consideration all along was what is left for the government to do if the slump continues. There’s been general agreement the present setup cannot continue indefinitely
Again, the significance of this new collapse may be less its economic effects than its political implications. If it proves true, as now seems the case, that the government cannot even by pulling out all stops, “save” the stock market, what, one may well ask, is the government going to be able to do to stop the general slowdown? That’s’ now the case. Furthermore, the speed of the decrease in total economic activity as represented by the gross domestic product [GDP] has been seen by some observers as less significant the rapid rate at which it has fallen. .
Dropping from the record double digit figures of the last two decades, the GDP rate of growth officially dropped to 7% in the first quarter. Some observers, using the government’s statistics which are more than a little suspect, believe the GDP dropped even more. When the government came up with the surprising figure of a 7.6 growth in the second quarter, it was called “unexpected” by some and a downright lie by others.
. Although at least one major investment counseling firms in the West has warned its clients to “China-proof” their portfolios, the majority of observers are still clinging to the notion that the Communist government has all the tools necessary to prevent “a hard landing” for the economy. Again, that’s despite the evidence already presented in the case of the Shanghai market, even though it occupies a less important role than would be assigned it by superficial observers making comparisons to New York, London, Frankfurt and Tokyo.
But the slowing of the Chinese economy and its demand for raw materials has already had an effect on the worldwide commodities market, contributing in part to the fall in oil and gas prices as well. One suspects that some of the more optimistic talk about the China markets is wishful thinking as much as anything else. The cutback in growth has already taken its toll of some speculators – in copper, for example – and has had an effect on such major raw materials exporters as Australia.
Unfortunately, the world cannot be “China-proof”. And some of the more optimistic souls in the Obama Administration had better be thinking hard about what happens if the Chinese economy continues to sour.
In that simplistic jargon characterizing Pres. Barack Hussein Obama’s worldwide “transformation” of U.S. foreign policy, the chief argument for his Cuban shift has been “[T]hese 50 years have shown that isolation has not worked.”
In the facts of history, in this as in so many other instances, Obama is wrong.
The fact is that U.S. policy toward Cuba, with its ups and downs, has been generally successful.
First, of course, the outcome of the Cuban Missiles Crisis of October 1962 prevented the Soviet Union from obtaining an advanced offensive weapons base just off the U.S. southern coast. The confrontation was a turning point in the Cold War. Moscow’s victorious march through control of Central and Eastern Europe and its threat to Western Europe began to be reversed when JFK backed off Nikita Khrushchev’s gamble.
Secondly, the Soviet Union’s Cold War effort, using the Castros’ regime, to infiltrate and create other Communist states in Latin America was beaten back – in Costa Rica, Haiti, Nicaragua, Panama, Bolivia, Dominican Republic, Colombia. Indeed almost every Latin American government at one time or another was a target, if unsuccessfully.
That is not to say, of course, that American policy toward Habana was a string of unbroken successes, or that, in fact, it was always clear-headed.
It was, after all, American support for the Castros which brought down the Batista dictatorship in 1959 and installed the Communists. With the help of the American media, Washington was lulled into the trap that Fidel Castro was a reformer and not a Soviet model for his new regime.
Indeed, the settlement with Khrushchev of the Missiles Crisis resulted in a U.S. commitment to end its active efforts to bring regime change in Habana, whether through aid to such abortive military adventures as the ill-fated Bay of Pigs Cuban émigrés invasion or plots directed against eliminating the Castros themselves. But the continued presence of the Castro regime posed a constant threat to American interests – as far away as Africa, where the Soviets employed Cuban forces in Angola to install a Marxist regime [still in power]. That was despite Ronald Reagan’s elimination in 1983 of the Caribbean stepping stone of a Cuban-supported regime on the Caribbean island of Grenada.
First Soviet and later Chinese intelligence and subversion operations as well as listening posts in Cuba, before the digital revolution and new long-range communications, provided a continuing important base of operations by Washington potential enemies.
But by 1970, a combination of U.S. pressure [and, ironically, opposition from the more orthodox Communists not only in Moscow but among the other Latin American parties] forced Castro to withdraw his more active support for the overthrow of other regimes.
Left behind was an impoverished island – Cuba had among the highest standards of living in Latin America when Castro came to power – and a corrupt and oppressive regime, a potential source of instability and intrigue. More recently Habana’s transfer of its allegiance from Moscow to Caracas is the result of the emergence of an anti-American regime in Venezuela. But the growing economic difficulties of the Caracas regime, despite the largest proven oil reserves in the world, have put a kibosh on its aid to the Castros, the lifeblood of the regime.
In effect, the Obama Administration has now thrown a lifeline to the increasingly endangered Habana dictatorship. Not only is Obama at least temporarily saving a collapsing tyranny, he has done so without demanding that in return Raul Castro make concessions to the U.S. and the Cuban people. Instead, it has reinforced its nefarious activities: for example, new political persecutions were initiated at the very moment Obama was making his overtures to the Castros. Cuba still remains a sanctuary for fugitive American criminals. Only this month Castros’ thugs brutally attacked peacefully demonstrating anti-Castro activists at the Summit of the Americas in Panama.
Obama’s announcement he is considering removing Cuba from the list of sponsors of state terrorism will strengthen Habana’s relations with leftwing totalitarians throughout the Hemisphere.
However limited the real possibilities for economic development given the present state of the Cuban economy and the regime’s continuing restrictions on private initiative, just the hope of investment and trade – including tourism – from the U.S. is seen as rescuing the regime.
That, indeed, will be the end of what has been, whatever its inadequacies, American policy for half a century, a successful strategy to isolate a threatening totalitarian regime in the Hemisphere. And it comes at the very moment when there was every prospect that the regime might implode, a victim of its own contradictions, leading to a new democratic Cuba.
A most peculiar crisis is developing for the Chinese economy – and, indeed, for the regime — while the world’s attention is riveted on the chaos and terror in the Mideast and Russian aggression in Ukraine.
Not the smallest element is the clever manipulation by Beijing’s strategists of the world’s hopes for continued remarkable Chinese growth as a last call instrument to bail out a dawdling world economy.
That misapprehension of China’s economic capacities may well forestall, again, at least for a time, an inevitable coming to grips with basic problems of it vast society under the Communist Party monopoly. But there is growing evidence that China’s financial problems have reached a crescendo that Beijing can no longer manage.
In that marvelous game of speculation on one of the world’s oldest cultures, I have always joked that the Chinese have two “extra” genes to others’ DNA: one is an inordinate capacity for hospitality, and the other for unlimited risk at gambling. Both are in full flower at the moment.
In effect this has led to foreign Old China Hands increasingly coming around to a pessimistic view of the outcome of events that some of us have held for years. The spectacular growth of China with the release of the unique energy of its people with the collapse of Maoism was nevertheless jerry built. Some of us have argued that it inevitably would crack – although as so many times in similar historical situations, what would be the final straw and when it will happen was unpredictable. As a result, I have had to suffer my friends continued scorn with “Yeah-yeah-yeah! you have been saying that for years” — and I have. But there is no doubt now that that moment of decision is rapidly coming closer.
Still, a continuing element in the Chinese equation is the rush of its trading partners to either help camouflage the actual situation, or, indeed, scurry to its aid. That is the case now with their acceptance of a proposal by China for a multibillions-dollar multinational bank to be directed by Beijing, ostensibly lending for Asian infrastructure. It would rival the Bank for International Reconstruction [the World Bank] and its financial sister the International Monetary Fund.
The World Bank, after a more rapid than anticipated completion of the post-World War II European reconstruction for which it originally was created, almost accidentally turned under U.S. direction to financing longer-term infrastructure projects in the undeveloped world, And then, having met much of that challenge, under Robert S. McNamara it again turned to social welfare projects. There is a substantial argument that in a world of incredibly sophisticated international lending enhanced by the digital revolution, its mission is long since over.
Now Beijing comes along, proposing that it head a copycat international banking operation, which would fund infrastructure. But Beijing running a multinational financial operation for “good works” is hardly parallel to that task undertaken by the U.S. and its allies in the post-World War II world.
The Chinese are notorious for corruption in their international lending as in all their economic transactions – and ignoring such ephemeral but important concepts such as environmental concerns and credit safeguards. But at the moment Beijing faces a series of collapsing overextended binational international lending problems. Tens of billions in loans, many of them swap credits against a now deteriorating energy market, include Angola, Venezuela, Nigeria and Brazil. They will now have to be refinanced, although how is far from clear.
In the face of Beijing’s growing overseas debt, foreign banks have begun demanding collateral even for loans to its highly favored huge state corporations, apparently preparing for a rise in defaults in the world’s second-largest economy. This is all overhung with an economy growing at its slowest pace since its dramatic opening to foreign capital and technology, and with an unknown downward trend which Beijing is desperately trying to disguise.
If the Chinese were successful with their new venture calling for a new international infrastructure bank under their direction, it would be an operation in reality to refund Beijing’s failing overseas lending and another attempt to boost its highly subsidized exports, already wrenching the world economy out of shape but faced with rapidly rising costs and intense competition from other low wage producers. That there are willing partners in this situation for such an obvious strategy among its trading partners goes back to the continued wishful thinking about the Chinese economy.
The Obama Administration, increasingly notorious for its foreign policy gaffs, opposed the new Chinese bank. But its campaign of opposition to the participation of its allies has, for the moment at least, collapsed. The lure of the Chinese growth mirage has been just too powerful even for London, with its famous City expertise notwithstanding, not to succumb. And it remains to be seen whether such already hard-pressed economies such as Australia’s – ironically suffering from that precise downturn in commodities prices, its principal exports, brought on by the drop in speculation on Chinese continued high growth rates.
Underlying all these decisions is the incredible Chinese lack of transparency and outright counterfeiting of its statistics. There is no end to what we don’t really know about the Chinese economy, whether shadow-bank lending, local-government financing, intra-local-government borrowing, unfunded pension and health-care liabilities. household finances, etc. There is considerable doubt that even the most studious and independent economic observers in and out of the Chinese government know themselves.
What we do know is that in all these issue, debt has been rising at a phenomenal rate. That means, as Michael Pettis, a finance professor at Peking University, has warned: “The problem in China is not the stock of foreign debt but the commitment to a growth model that requires an unsustainable rise in debt simply to keep the engine running.”
Why is one of the world’s poorest countries [40% living in poverty, halfway down on list of countries in per capita GDP]] building capital-intensive nuclear power facilities?
Iran has the third largest oil and the second largest gas reserves in the world [without recourse to new shale gas potential]. 2006 oil production level was enough for 88 years if no new oil were found. But only in the last weeks a whole new huge reserve was located offshore in the Caspian Sea. Iran’s fossil fuel export potential is so great that were current sanctions ended suddenly, the world price of oil might well drop $10. That’s despite Tehran’s official rationale that nuclear plants for desalinization are necessary to halt diversion of oil and gas exports.
Why do the Tehran mullahs insist on construction of high cost nuclear power facilities when Iran produced 254 billion kWh gross in 2012 from fossil fuels and hydro, with consumption only 200 TWh?
Demand – before the sanctions — was growing at about 4% per year, according to the World Nuclear Association, London. But although Iran trades electricity with Afghanistan, Armenia, Azerbaijan, Iraq, Pakistan, Syria, Turkmenistan and Turkey, it had small net surplus. Tehran plans to boost generating capacity by 2022 would have produced additional substantial exports.
Why did Tehran keep details of its nuclear program secret after signing a safeguards agreement with the UN International Atomic Energy Agency  and other additional weapons of mass destruction limiting treaties since?
Iran’s experimental nuclear program was initiated by Mohammad Reza Pahlavi  under the U.S Atoms for Peace Program. But in November 2003 the United Nations International Atomic Energy Agency [IAEA] announced Tehran systematically had violated its internastional agreements over 22 years, concealing nuclear weapons capability. Iran confirmed the IAEA’s accusations but denied their importance.
Why has Iran violated its agreement with Russia for a fuel supply including the return of used fuel?
Adherence to the agreement would have removed any necessity for uranium enrichment which Tehran now admits after dissident Iranian expatriates revealed the details of a secret enrichment plant in 2002. Furthermore, some 20 countries have nuclear power facilities which do not depend on locally sourced enriched nuclear fuel.
Why is Iran enriching nuclear fuel at at least three plants with the IAEA in March 2015 questioning whether another undisclosed facility may also exist?
In about 2000 Iran started building a sophisticated enrichment plant, which it declared to IAEA only after it was identified in 2002 by exiled dissidents. A second and and third plans for uranium conversion are under international safeguards, though IAEA says its monitoring is limited.
Why has the subject of Iran’s role as the world’s No. 1 state sponsor of terrorism been excluded from present negotiations?
Diplomacy to end Iran’s nuclear arms program by the 5+1 [United States, Russia, China, France, United Kingdom and Germany] with Tehran began in the spring of 2003 with continual extensions deadlines. During that period, Tehran has successful extended it aid to the Syrian regime of Basher al-Assad that has killed some 200,000 of its own people, been suspect in the murder of an investigator in the two 992 bombings of Israeli diplomatic and Jewish 1community centers in Buenos Aires, set up a new Latin American infiltration and subversion center in Bolivia, armed and now rearms the Hamas terrorist in Gaza, attempted [but was thwarted by the Israelis killing a prominent Irnian general] to extend its puppet Lebanese Hezbollah to a new anti-Israeli installation on the Golan Heights, expanded a drug smuggling and intelligence network with sympathetic Venezuelan [and Cuban] officials throughout Latin America and in the U.S., among other worldwide subversion activities targeted against the U.S. and its allies.
In November 2014, the Institute for Science and International Security (ISIS) said, “In order to avoid a bad deal, the P5+1 must hold strong on achieving an agreement that limits Iran’s nuclear program to a reasonable civilian capability, significantly increases the timelines for breakout to nuclear weapons, and introduces enhanced verification that goes beyond the IAEA’s Additional Protocol. A sound deal will also require Iran to verifiably address the IAEA’s concerns about its past and possibly on-going work on nuclear weapons, which means Iran must address those concerns in a concrete manner before a deal is finalized or any relief of economic or financial sanctions occurs.”
The Obama Administration and its supporters have presented a dire dilemma: either accept an increasingly watered-down agreement now being negotiated which would ostensibly limit Tehran’s nuclear weapons program with [what can only be described as a highly suspect] monitoring, or go to military action to end or degrade Iran’s program with the possibility of an ensuing regional conflict in the chaotic Mideast.
This formulation ignores several counterarguments:
1] With the current dramatic drop in world fuel prices – likely to continue even in the notoriously unpredictable oil and regional gas markets because or rising production in Iraq and Libya [and by Iran’s own black-markets operations]. That forecast is despite local violence because of new entries of shale gas in the U.S. and abroad, Saudi Arabia’s current low price regime to retain share in a dwindling market, and increasing fuel economies in a depressed world economy.
2] Continued sanctions or elevated sanctions could well bring about a capitulation of the mullahs or regime change in Tehran. [The Obama Administration not only refused to publicly endorse Iran’s Green Revolution after stolen elections in 2009 but ignored demonstrators’ signs in English calling on Obama’s intervention. Instead the Obama Administration moved for negotiations which strengthened an endangered regime.] .
3] As Washington [in 2006] proved in its successful efforts against North Korea counterfeiting of dollars, threatened or actual sanctions against third parties by the U.S. can be enormously effective. [Chinese banks temporarily withdrew their support from North Korea in the face of American pressure until it ended its most flagrant counterfeiting and distribution of $100 bills.]
. 4] If military action were to be taken even against parts of the Iranian program, it does not have the capacity quickly to restore the weapons program since it does not have the domestic industrial backup which has produced the current level of activity. It has relied on imported machinery and technology. It would produce an extended period of a halt to nuclear [and perhaps missile] development, and would critically impact a regime with growing serious economic difficulties.
So, the ultimate question:
Why has the Obama Administration continually given ground in its negotiations with Tehran, now permitting not only continued enrichment, but in effect, reducing the “breakout” time for conversion of enriched fuel to weapons?