Massenbach-Letter. NEWS 25.11.16

Massenbach-Letter. News ***14 Years***

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Udo von Massenbach – Baerbel Freudenberg-Pilster – Joerg Barandat

· Defense One: The Other Michael Flynn

· Donald Trump’s Circle (with applause by Israel)


· STRATFOR: China’s Economy: Living on Borrowed Time

· How to come into the EU & Russian Market – Serbia open to Chinese investments

· Middle East Zugzwang

· Kingdom of Saudi Arabia

Massenbach*The Saudis play with fire

By Nick Butler| Nov 2,2016

With less than 10 days to go until the next Opec meeting the gamesmanship goes on. Saudi Arabia has maintained its production at around 10.7m barrels a day while Iran has continued to increase output – opening three new fields which should together produce 220,000b/d. Iran’s public position is that it will continue to increase production from the 3.85mbd achieved in September to 4.2mbd, which it argues represents a fair share of the cartel’s total output.

Khalid A Al-Falih, Saudi energy minister

Neither party seems ready to blink and there is little sign that the promised deal to make a co-ordinated cut in production, which was just about reached at the last Opec gathering in September, will be delivered when the cartel meets again on November 30. The optimism from then has evaporated. Perhaps an agreement will be reached in the next few days but there is little evidence that it would do more than dent the current surplus of supply over demand. Unsurprisingly, prices are falling – down from $52 a barrel in mid-October to below $45 last week.

According to authoritative reports, the Saudi response to this stalemate has been to threaten a further increase in production to 11mbd or more. Riyadh’s “strategy” seems to have reverted to the view that other producers can be pressured into cutting their own production to give the Saudis a bigger market share. That starts with Iran but extends to the US. In the new world order after the US presidential election the approach looks risky at best and potentially an act of serious self-harm.

In the absence of a November agreement the price will keep falling. Stocks are very high and in its latest market report the International Energy Agency predicts “relentless supply growth” both in Opec – where production was up 240,000bd in September to a record of 33.6mbd – and non Opec, with producers trying to maximise revenue and new fields coming onstream in Brazil, Canada and Kazakhstan over the next few months. Demand is flat in the developed world and China appears to have stopped buying extra for its strategic reserve. The falling price will cause pain and further destabilise countries dependent on oil revenue from Nigeria to Venezuela. Any Saudi production increase can only make all this worse. The government in Riyadh may have concluded that their fellow Opec members will just have to take the pain. But when it comes to the US they should be more careful.

Many American producers of tight oil – that from shale rocks – are struggling financially. The situation varies across the US because costs and well productivity can diverge dramatically. In general, the sector has adjusted to working at $50. When the price rose to that level there were signs of American producers preparing to increase output. But they have not adjusted to a price of $40 or below, which is where we could be heading. Having staved off shut-downs and bankcruptcies for the last year, the time is coming when the bills just cannot be paid, and some companies will have to close their doors.

Isn’t that the market working, with competition forcing the weaker players out? Of course, but it is also true that the Saudi regime relies for its continued existence in power on US defence guarantees which involve extensive military and political support. The relationship has been strained under President Barack Obama but that will be nothing compared to what will happen if Saudi actions lead to the closure of significant parts of the US shale industry, with the associated loss of jobs and revenue. President-elect Donald Trump does not belong to the strand of Republican opinion led by former president George HW Bush that holds the Saudis in high regard. He seems perfectly capable of judging the relationship on its merits – defined in terms of US interests.

An unhappy US government could do many things in response to any threat to American jobs. It could start by publishing in full the findings of the congressional inquiry into the 9/11 attacks — including any involvement of Saudi Arabia — and intelligence on other conflicts in which American lives have been lost. Mr Trump could also withdraw backing for the Saudis in Yemen. And he could renegotiate or even remove some defence ­guarantees.

The Saudi lobby would say that arms sales to Saudi Arabia provide tens of thousands of jobs in America and the US will never jeopardise that. But that is simply wrong. Any Saudi government will need to buy US equipment. What Washington requires is a stable administration in Riyadh which includes a degree of order that can only be achieved if Saudi Arabia takes the lead in managing the oil market.

There are no easy options for the Saudis. Getting effective agreement across Opec to make cuts on the scale necessary to rebalance the market (which means not just a freeze but a sustained reduction in production) looks impossible. Making the necessary cut themselves would be hard because so much of their oil is wasted internally. Oil demand in the kingdom – almost 3.9m barrels a day last year according to the BP Statistical Review – continues to grow and this year Saudi, with 30m citizens, is likely to overtake the consumption of Japan’s 127m people. That means a cut of 2m barrels a day would leave the country exporting little more than 4.5mbd. It is beginning to look as if no one country can manage the oil market.

Accepting that reality would be a more realistic starting point for the Saudis than thinking their national interests are advanced by threatening the one country that has protected them for the last five decades.


From our Russian news desk:see attachment.

· Middle East Zugzwang

A statue destroyed by Islamic State militants is seen in the town of

Bashiqa, after it was recaptured from the Islamic State, east of
Mosul, Iraq November 10, 2016

Despite the fact that Mosul has not been recaptured from the Islamic State, and the announced attack on Syria’s Raqqa has lost some momentum, there is little doubt that the fate of radical Islamists in Syria and Iraq is sealed. This makes the issue of the two countries’ postwar state structure particularly important. Who will take responsibility for the future of the two key Middle Eastern nations? How will they do so? ( for more see att. “Middle East Zugzwang”)


NYT: How the Iranian-Saudi Proxy Struggle Tore Apart the Middle East

Behind much of the Middle East’s chaos — the wars in Syria and Yemen, the political upheaval in Iraq and Lebanon and Bahrain — there is another conflict.

Saudi Arabia and Iran are waging a struggle for dominance that has turned much of the Middle East into their battlefield. Rather than fighting directly, they wield and in that way worsen the region’s direst problems: dictatorship, militia violence and religious extremism.

The history of their rivalry tracks — and helps to explain — the Middle East’s disintegration, particularly the Sunni-Shiite sectarianism both powers have found useful to cultivate. It is a story in which the United States has been a supporting but constant player, most recently by backing the Saudi war in Yemen, which kills hundreds of civilians. These dynamics, scholars warn, point toward a future of civil wars, divided societies and unstable governments.

NOV. 19, 2016 + By The New York Times

F. Gregory Gause III, an international relations scholar at Texas A & M University, struggled to name another region that had been torn apart in this way. Central Africa could be similar, he suggested, referring to the two decades of interrelated wars and genocides that, driven by meddling regional powers, killed five million. But in the Middle East, it is just getting started.

1979: A threatening revolution

Saudi Arabia, a young country pieced together only in the 1930s, has built its legitimacy on religion. By promoting its stewardship of the holy sites at Mecca and Medina, it could justify its royal family’s grip on power.

Iran’s revolution, in 1979, threatened that legitimacy. Iranians toppled their authoritarian government, installing Islamists who claimed to represent “a revolution for the entire Islamic world,” said Kenneth M. Pollack, a senior fellow at the Brookings Institution.

The revolutionaries encouraged all Muslims, especially Saudis, to overthrow their rulers as well.

But because Iran is mostly Shiite, they “had the greatest influence with, and tended to reach out to, Shia groups,” Dr. Pollack said.

Some Saudi Shiites, who make up about 10 percent of the population, protested in solidarity or even set up offices in Tehran — stoking Saudi fears of internal unrest and separatism.

This was the opening shot in the sectarianization of their rivalry, which would encompass the whole region.

“The Saudis have looked at Iran as a domestic threat from the get-go, from 1979,” Dr. Gause said. Seeing the threat as intolerable, they began looking for a way to strike back.

1980-88: The first proxy war

They found that way the next year, when Saddam Hussein’s Iraq invaded Iran, hoping to seize oil-rich territory.

Saudi Arabia, Dr. Pollack said, “backed the Iraqis to the hilt because they want the Iranian revolution stopped.”

The war, over eight years of trench warfare and chemical weapons attacks, killed perhaps a million people. It set a pattern of Iranian-Saudi struggle through proxies, and of sucking in the United States, whose policy is to maintain access to the vast oil and gas reserves that lie between the rivals.

The conflict’s toll exhausted Iran’s zeal for sowing revolution abroad, but gave it a new mission: to overturn the Saudi-led, American-backed regional order that Tehran saw as an existential threat.

That sense of insecurity would later drive Iran’s meddling abroad, said Marc Lynch, a political scientist at George Washington University, and perhaps its missile and nuclear programs.

1989-2002: Setting up a powder keg

The 1990s provided a pause in the regional rivalry, but also set up the conditions that would allow it to later explode in such force.

Saudi Arabia, wishing to contain Iran’s reach to the region’s minority Shiite populations, sought to harden Sunni-Shiite rifts. Government programs promoted “anti-Shia incitement in schools, Islamic universities, and the media,” Toby Matthiesen, an Oxford University scholar, wrote in a brief for the Carnegie Endowment.

These policies, Dr. Matthiesen warned, cultivated sectarian fears and sometimes violence that would later feed into the ideology of the Islamic State.

In 1990, Iraq invaded Kuwait, a Saudi ally. The United States, after expelling the Iraqis, established military bases in the region to defend its allies from Iraq. This further tilted the regional power balance against Iran, which saw the American forces as a threat.

Iraq’s humiliating defeat also spurred many of its citizens to rise up, particularly in poorer communities that happened to be Shiite Arab.

In response, Dr. Gause said, “Saddam’s regime became explicitly sectarian,” widening Sunni-Shiite divides to deter future uprisings. That allowed Iran, still worried about Iraq, to cultivate allies among Iraq’s increasingly disenfranchised Shiites, including militias that had risen up.

Though it was not obvious at the time, Iraq had become a powder keg, one that would ignite when its government was toppled a decade later.

2003-04: The Iraqi vacuum opens

The 2003 American-led invasion, by toppling an Iraqi government that had been hostile to both Saudi Arabia and Iran, upended the region’s power balance.

Iran, convinced that the United States and Saudi Arabia would install a pliant Iraqi government — and remembering the horrors they had inflicted on Iran in the 1980s — raced to fill the postwar vacuum. Its leverage with Shiite groups, which are Iraq’s largest demographic group, allowed it to influence Baghdad politics.

Iran also wielded Shiite militias to control Iraqi streets and undermine the American-led occupation. But sectarian violence took on its own inevitable momentum, hastening the country’s slide into civil war.

Saudi Arabia sought to match Iran’s reach but, after years of oppressing its own Shiite population, struggled to make inroads with those in Iraq.

“The problem for the Saudis is that their natural allies in Iraq,” Dr. Gause said, referring to Sunni groups that were increasingly turning to jihadism, “wanted to kill them.”

This was the first sign that Saudi Arabia’s strategy for containing Iran, by fostering sectarianism and aligning itself with the region’s Sunni majority, had backfired. As Sunni governments collapsed and Sunni militias turned to jihadism, Riyadh would be left with few reliable proxies.

As their competition in Iraq heated up, Saudi Arabia and Iran sought to counterbalance each other through another weak state: Lebanon.

2005-10: A new kind of proxy war

Lebanon provided the perfect opening: a frail democracy recovering from civil war, with parties and lingering militias primarily organized by religion.

Iran and Saudi Arabia exploited those dynamics, waging a new kind of proxy struggle “not on conventional military battlefields,” Dr. Gause said, but “within the domestic politics of weakened institutional structures.”

Iran, for instance, supported Hezbollah, the Shiite militia and political movement, which it had earlier cultivated to use against Israel. Riyadh, in turn, funneled money to political allies such as the Sunni prime minister, Rafik Hariri.

By competing along Lebanon’s religious lines, they helped drive the Lebanese government’s frequent breakdowns, as parties relied on foreign backers who wanted to oppose one another more than build a functioning state.

With Iran promoting Hezbollah as the nation’s defender and Saudi Arabia backing the Lebanese military, neither had a full mandate, and Lebanon struggled to maintain order.

As the foreign powers escalated their antagonism, Lebanon’s dysfunction spiraled into violence. In 2005, after Mr. Hariri called for the withdrawal of Iranian-backed Syrian troops, he was assassinated. (Hezbollah has long been suspected.)

Another political crisis, in 2008, culminated with Hezbollah overpowering Sunni militias to seize much of Beirut. Saudi Arabia requested United States air cover, according to a WikiLeaks cable, for a Pan-Arab force to retake the city. Though the intervention never materialized, the episode was a dress rehearsal for the turmoil that would soon come to the wider region.

2011-14: The implosion

When the Arab Spring toppled governments across the Middle East, many of them Saudi allies, Riyadh feared that Iran would again fill the vacuums. So it rushed to close them, at times with force. It promised billions in aid to Jordan, Yemen, Egypt and others, often urging those governments to crack down.

After pro-democracy protesters rose up in Bahrain, a Saudi ally whose Sunni king rules over a majority Shiite population, Saudi Arabia sent 1,200 troops.

In Egypt, Saudi Arabia tacitly supported a 2013 military takeover, seeing the military as a more reliable ally than the elected Islamist government it replaced. As Libya fell into civil war, it backed a hard-line general who was driving to consolidate control.

Though Iran has little influence in either country, Saudi Arabia’s fear of losing ground to Iran made it fight harder to retain influence wherever it could, analysts believe.

Syria, an Iranian ally, reversed the usual dynamic. Saudi Arabia and other oil-rich Sunni states steered money and arms to rebels, including Sunni Islamists. Iran intervened in turn, sending officers and later Hezbollah to fight on behalf of Syria’s government, whose leaders mostly follow a sect of Shiism.

Their interventions, civil war scholars say, helped lock Syria in the ever-worsening stalemate that has killed over 400,000.

2015-16: ‘What is wrong with you people?’

The United States has struggled to restore the region’s balance.

President Obama has urged Iran and Saudi Arabia “to find an effective way to share the neighborhood and institute some sort of cold peace,” he told The Atlantic.

But Dr. Lynch called this plan for “a self-regulating equilibrium” between the Mideast powers “far-fetched.”

The nuclear agreement with Iran, instead of calming Saudi nerves, hit on fears that “the United States wants to abandon them in order to ally with Iran,” Dr. Lynch said, calling the belief “crazy” but widespread.

Mr. Pollack said he often heard Sunni Arab leaders express this as a metaphor.

“They would say, ‘What is wrong with you people? You have this good, loving, loyal wife in us, and this crazy mistress in Iran. You don’t understand how bad she is for you, and yet you endlessly run off to her the moment that she winks at you,’” he recounted.

The White House looked for other ways to reassure Saudi leaders, facilitating arms sales and overlooking Saudi actions in Egypt and Bahrain.

Then came Yemen. A rebel group with loose ties to Iran ousted the Saudi-backed president, deepening Riyadh’s fears. Saudi Arabia launched a bombing campaign that inflicted horror on civilians but accomplished little else.

The assault receives heavy American support, though the United States has few interests in Yemen other than counterterrorism and sometimes criticizes the campaign. In exchange, Riyadh acquiesced to the Iran deal and began to follow Washington’s lead on Syria. But the underlying proxy war remained.

A future of ‘failed and failing’ states

Asked when the Iran-Saudi struggle might cool, Mr. Pollack said he doubted that it would: “Where we’re headed with the Middle East is the current trend extrapolated, with more failed and failing governments.”

In Yemen, this is already “reorganizing Yemeni society along sectarian lines and rearranging people’s relationships to one another on a non-nationalist basis,” Farea al-Muslimi, an analyst, wrote in a Carnegie Endowment paper, which cited similar trends across the region.

Continued crises will risk sucking in the United States again, Mr. Lynch said, adding that no American president was likely to persuade Saudi Arabia or Iran to stay out of regional conflicts that it saw as potentially existential threats.

President-elect Donald J. Trump will enter office having echoed Saudi Arabia’s view of the region.

Iran “took over Iraq,” he said at a rally in January. “They’re going to have Yemen. They’re going to have Syria. They’re going to have everything.”

Mentioning both the president-elect and Hillary Clinton, Dr. Gause said he doubted that any administration could reset the Middle East’s power struggles.

“I do not think that the fundamental problem of the region,” he said, “is something that either Mr. Trump or Mrs. Clinton could do that much about.” ************************************************************************************************************************

Policy= res publica

Freudenberg-Pilster* Donald Trump Picks Nikki Haley as Ambassador to U.N

South Carolina Gov. Haley is first woman selected for Donald Trump’s administration

President-elect Donald Trump has picked South Carolina Gov. Nikki Haley to serve as the U.S. ambassador to the United Nations, Mr. Trump’s transition team said Wednesday, marking Mr. Trump’s first selection of a woman to play a role in his administration.

Ms. Haley long held reservations about his candidacy during the GOP primary, and endorsed both Sens. Marco Rubio and Ted Cruz during the primary.

But both sides seemed to have warmed to each other after Mr. Trump won the Nov. 8 election. U.N. ambassador is a key post, advising the White House on foreign policy issues and representing the U.S. in discussions with other countries.

“Governor Haley has a proven track record of bringing people together regardless of background or party affiliation to move critical policies forward for the betterment of her state and our country,” Mr. Trump said in a statement. “She is also a proven deal maker, and we look to be making plenty of deals. She will be a great leader representing us on the world stage.”

Ms. Haley, 44, is a two-term governor who is perhaps best known for leading the push to remove the Confederate Flag from the State Capitol grounds in 2015 following a mass shooting at a church in Charleston.

In selecting Ms. Haley, Mr. Trump has picked someone who is well-known within the Republican Party but is less well-known for her views on key foreign policy issues.

One exception came in September 2015, when she signed a letter with 14 other GOP governors expressing opposition to the Iran nuclear deal reached by the White House and several other countries. Her views are less well-known on countries like North Korea and Russia, two nations that are often the focus of U.N. discussions.

“Our country faces enormous challenges here at home and internationally, and I am honored that the President-elect has asked me to join his team and serve the country we love as the next Ambassador to the United Nations,” Gov. Haley said in a statement.

Ms. Haley’s appointment could clear the way for South Carolina Lt. Gov. Henry McMaster to become the state’s next leader. Mr. McMaster was one of Mr. Trump’s earliest endorsers, agreeing to back the candidate in January.

Ms. Haley’s appointment must be confirmed by the Senate.

Ms. Haley received support from Leonard Leo, executive vice president of the Federalist Society, a conservative lawyers network.

“Gov. Nikki Haley will bring the right principles and priorities to the job of U.N. Ambassador,” Mr. Leo said. “Having served as a governor, she will be able to spot instances where the U.N. is seeking to curb the sovereign interests of our country. She is committed to human dignity and will be able to push back on U.N. agendas that elevate abortion over the real human and civil rights atrocities that occur in dictatorships around the world.”

South Carolina Democratic Party Chairman Jaime Harrison congratulated Ms. Haley on the appointment, but said there were some risks.

“I must note with concern, however, that every single previous U.N. ambassador came to the job with previous foreign policy experience, which Gov. Haley lacks,” he said. “I hope the governor is a quick study because as one of the nation’s top diplomats, she will have the critical task of dealing in real time with virtually every international crisis that arises.”

South Carolina’s pro-Israel governor to be next US ambassador to UN
DEBKAfile November 23, 2016, 6:31 PM (GMT+02:00)

Nikki Haley, the governor of South Carolina, announced Wednesday that she has accepted an offer by President-elect Donald Trump to become US ambassador to the UN, NBC News reported on Wednesday. The 44-year-old Haley will succeed Samantha Power who has served in the post since 2013. Haley, a daughter of Indian Sikh immigrants who is the country’s youngest governor, had harshly criticized Trump’s positions during the election campaign. She called his comments on Muslims "an embarrassment for the Republican party," adding that "It’s un-American, it’s unconstitutional….We are not going to start making laws based on religion."
One of the main reasons for the selection of Haley was her enthusiastic support for Israel including her strong opposition to international steps against the country. During her tenure, South Carolina became the first US state to pass a law against boycotting Israel. Regarding Washington’s 2015 nuclear deal with Tehran, she said "We should make international agreements that were celebrated in Israel and protested in Iran, not the other way around."


Trump’s Inner Circle.

The people who have been named, proposed or confirmed as cabinet and other top White House officials for president-elect Donald Trump.

By WSJ Graphics

Published Nov.22, 2016 at 1:00 p.m. ET

U.S. Ambassador to the United Nations:

Nikki Haley named

Ms. Haley, 44, is a two-term South Carolina governor who is perhaps best known for leading the push to remove the Confederate Flag from the state capitol grounds in 2015 following a mass shooting at a church in Charleston. Ms. Haley is the first woman named to Mr. Trump’s cabinet.

Chief of Staff

Reince Preibus named

Mr. Preibus, 44, was named Mr. Trump’s chief of staff on Nov. 13 after serving as the chairman of the Republican National Committee for five years.

Chief Strategist

Steve Bannon named

Mr. Bannon, 64, is a former Naval officer and investment banker who is best known for serving as chairman for the conservative website Breitbart News. He joined Mr. Trump’s presidential campaign in August, serving as the campaign’s chief executive.

Attorney General

Jeff Sessions named

Mr. Sessions, 69, a four-term senator from Alabama, was the first Republican senator to endorse Mr. Trump. He was nominated for a federal judgeship by President Ronald Reagan in 1986, but wasn’t confirmed amid accusations of racist comments.

Central Intelligence Agency director

Mike Pompeo named

Mr. Pompeo, 52, is a West Point graduate and was first elected to the House of Representatives in 2010 as part of the tea-party movement. He is a member of the Energy and Commerce Committee and Intelligence Committee, and he was a member of the special committee investigating the 2012 attacks on the diplomatic compound in Benghazi, Libya.

Director of National Intelligence

Michael Rogers


Adm. Rogers, 57, has led the NSA and U.S. Cyber Command since 2014. He was brought in following a backlash to revelations in 2013 that the NSA was sweeping up bulk telephone records on millions of Americans. He has pursued public outreach efforts since then to soften the NSA’s image, though he still leads teams that conduct many classified surveillance, spying, and cyberwarfare operations.

National Security Adviser

Michael Flynn


Gen. Flynn, 57, is a retired general who served in top roles across the military, including as director of intelligence for the Joint Chiefs of Staff and intelligence adviser to Gen. Stanley McChrystal in Iraq and Afghanistan.

Secretary of State

Mitt Romney


Mr. Romney, 69, is former Massachusetts governor and 2012 Republican presidential nominee. He leveled attacks at Mr. Trump during the presidential campaign, including at one point calling the real-estate billionaire a “con man” and a “fraud.”

Rudy Giuliani


Mr. Giuliani, 72, is a former U.S. attorney who served as New York mayor from 1994 until the end of 2001. He ran for president in 2008 but didn’t advance past the GOP primaries. He is more well-known for his law enforcement and homeland security background than for his foreign-policy views.

John Bolton


Mr. Bolton, 68, served as the State Department’s counter-proliferation czar during President George W. Bush’s administration, during which he focused on the threats posed by Iranian and North Korean nuclear weapons proliferation. He later became Mr. Bush’s ambassador to the United Nations through a recess appointment. Democrats vowed to block his confirmation.

Treasury Secretary

Steven Mnuchin


Mr. Mnuchin, 53, is a former Goldman Sachs investment banker who has become a trusted adviser to Mr. Trump after serving as his campaign’s finance chairman.

Jeb Hensarling


Mr. Hensarling, 59, has been chairman of the House Financial Services Committee since 2013, where he has been a key advocate of overturning the Dodd-Frank financial-overhaul law. He is a close ally of House Speaker Paul Ryan (R., Wis.) and a protégé of former Texas Sen. Phil Gramm, an architect of financial deregulation in the 1990s.

Defense Secretary

James N. Mattis


The Marine general, 66, who had served as commander of U.S. Central Command and NATO’s supreme allied commander, retired in 2013. Before he could be confirmed, Congress would have to change the U.S. law that requires the defense secretary come from civilian life and that military officers be retired for seven years before being tapped to serve.

Tom Cotton


Mr. Cotton, 39, grew up on an Arkansas farm. He is a Harvard Law School graduate and one-time Army captain who served combat tours in Iraq and Afghanistan. He worked at McKinsey & Co. and served one term in the House before being elected to the Senate from Arkansas in 2014.

Jim Talent


Mr. Talent, 60, served four terms in the House and one partial term in the Senate as a Republican from Missouri.

Stephen J. Hadley


Mr. Hadley, 69, is a former national-security adviser under President George W. Bush.

Commerce Secretary

Wilbur Ross


Mr. Ross, 78, is a top economic adviser to Mr. Trump. He is chairman and chief strategist of W.L. Ross & Co., a private-equity firm, and he has extensive experience in corporate restructurings.

Dan DiMicco


Mr. DiMicco is a former president and chief executive of steelmaker Nucor Corp. He has been sharply critical of U.S. trade policies, has been an influential voice on Mr. Trump’s policy team.

Ray Washburne


Mr. Washburne is a Dallas-based investor and former finance chairman of the Republican National Committee.

Interior Secretary

Mary Fallin


Ms. Fallin, 61, served two terms in the U.S. House and was the first woman to be elected governor of Oklahoma in 2010 and re-elected four years later.

Health and Human Services Secretary

Bobby Jindal


Mr. Jindal, 45, served two terms in the U.S. House and two terms as governor of Louisiana. He suspended his campaign for the Republican presidential nomination in late 2015.

Energy Secretary

Rick Perry


Mr. Perry, 66, was first elected Texas governor in 2000 and served 14 years in office. He sought the 2012 and 2016 Republican presidential nomination, but withdrew early in both campaigns.

Homeland Security Secretary

Michael McCaul


Rep. McCaul, 54, chairman of the House Homeland Security Committee, is serving his sixth term in the House representing a district in Texas.

U.S. Trade Representative

Bill Hagerty


Mr. Hagerty, head of private-equity investment firm Hagerty Peterson and Co., was the chief economic development officer for Tennessee Gov. Bill Haslam and worked on the White House staff of President George H.W. Bush.

Ben Carson hints he will accept Cabinet position in Trump administration

Ben Carson on Wednesday hinted that he would accept a position within President-elect Donald Trump s Cabinet.

Trump has said he is considering Carson to helm the Department of Housing and Urban Development, citing his former presidential rival’s experience growing up in the "inner city."

"After serious discussions with the Trump transition team, I feel that I can make a significant contribution particularly to making our inner cities great for everyone," Carson said on Facebook.

Trump to nominate Betsy DeVos for Education secretary

….DeVos is a vocal advocate of allowing parents to use school vouchers to seek alternative schools and other policies strongly opposed by teachers unions.

She is a billionaire GOP donor and she once served as head of the Michigan Republican Party. She is the current chairwoman of the American Federation for Children, an education advocacy group pushing school-choice-friendly policies…..

****************************************************************************************************************** Politics: From Vision to Action

Barandat* Other Michael Flynn

Donald Trump’s national security advisor sounded very different when he was running counterinsurgency campaigns in Kabul.

Who is Michael Flynn, Donald Trump’s new national security advisor? There is no single or simple answer. The Flynn you’ve probably heard of, the one who hitched his wagon to Trump for-President, seems intent on convincing the world that he harbors a smoldering animus against Islam. He is a man whose worldview the American Conservative has described as “warped.” But there once was a Flynn who resembles the current man barely, if at all.

We can find this earlier Flynn in the papers he wrote while serving as an intelligence officer and in the relationships he formed with special operators working the tough fight in Afghanistan. Through these lenses emerges an innovator who sought to update intelligence collection and dissemination practices to comport with modern technology; an intelligence professional who emphasized building local ties with—yes—Muslim leaders to undermine the insurgent cause; and a manager who pushed hard for big changes, alienating entrenched power brokers in the intelligence community.

In 2010, Flynn was the director of intelligence for joint international forces in Afghanistan, working for top war commander Gen. Stanley McChrystal. Together, they reshaped how operators acquired information and intelligence to target enemies, emerging with a process sometimes called F3EAD, for Find, Fix, Finish, Exploit, Analyze, and Disseminate.

“They are the folks that ‘industrialized’ the targeting process of F3EAD,” said Stuart Bradin, a retired Army colonel who worked with Flynn in Afghanistan.

Flynn distilled the new ideas in a 2010 white paper, “Fixing Intelligence”, coauthored for the Center for New American Security, or CNAS. Its thrust: share more intelligence with and among with more operators at the battalion and company level, and do it much faster.

“Currently, information this basic to a coordinating a successful counterinsurgency literally is inaccessible to the people who need it most. This failure not only jeopardizes an operation, but also exposes international efforts to ridicule for their ineptitude,” Flynn wrote.

In the paper, Flynn argued that the military should rely more on open-source and data and much less on classified and expensive intel.

He also lamented the tendency “to overemphasize detailed information about the enemy at the expense of the political, economic, and cultural environment that supports it.” Read that mean intelligence operators were spending too much time on tactical data about specific targets and not enough time talking to Afghans, learning about real life among the people, who in what tribe or village had influence, what was the cost of basic necessities? The IC was missing the ground truth in the broadest possible sense. “Anti-insurgent efforts are, in fact, a secondary task when compared to gaining and exploiting knowledge about the localized contexts of operation and the distinctions between the Taliban and the rest of the Afghan population,” Flynn said, sounding very much like McCrystal himself.

The paper was widely read within and even beyond the military intelligence community. One serving intelligence analyst who has completed multiple assignments in Afghanistan told Defense One that “‘Fixing Intelligence’ was a formative paper for me as an intel officer. I’ve passed it along to pretty much all my peers.” He added “I guess there’s a real discrepancy between LTG Flynn and LTG retired Flynn (much like we’re probably going to see a difference between Candidate Trump and President Trump… hopefully).”

It was serving Flynn who showed a hunger for nuanced understanding in this 2010 interview about the vital importance of making friends at the tribal level.

“We really are reaching out to a much wider array of academia, via cultural experts, social experts, archeologists, anthropologists, people that frankly, traditionally, we wouldn’t reach out to. By bringing those subject matter experts in, we see the battlefield in a much different light,” he told NPR. “We’re trying to understand, what are the factors that the people of Afghanistan are willing to sacrifice their lives, time, talent and resources to achieve…. We don’t have as good a grasp of that as we should.”

When Flynn became director of the Defense Intelligence Agency in 2012, he placed a huge emphasis on open-source intelligence and rapid computational analysis to analyze it, something he discussed with Defense One at DIA headquarters in 2014.

“Just over a decade ago, when I was a senior intelligence officer, I spent most of my time in the world of ‘ints’ — signals intelligence imagery, human intelligence — and used just a little bit of open-source information to enrich the assessments that we made. Fast forward to 2014 and the explosion of the information environment in just the last few years alone. Open-source now is a place I spend most of my time. The open world of information provides us most of what we need and the ‘ints’ of old, they enrich the assessments that we’re able to make from open-source information,” he said.

One of the people that Flynn asked to help make sense of the new landscape of open-source intelligence was Ian McCulloh, a computer scientist at Johns Hopkins University. McCulloh, who worked with Flynn to trace foreign fighter networks in Iraq using large data sets, said the DIA director’s only mistake was trying to bring too much change too quickly.

“Intel was constructed in age of information scarcity. And we’re now in age of information superabundance. Flynn got that,” McCulloh said. “He wanted to leverage technology. He understood you had to have context from the lowest level up to the data scientist.”

This new greater emphasis on open-source data aided by computational analysis discomfited older, less technically astute intelligence professionals at DIA and in the broader intelligence community, McCulloh said.

“What that does is it largely disqualifies a lot of old intel guys in favor of people who have more technical skills. That was not happy for them. They wanted to wait him out. Screw him over,” he said. “Anybody who would say that he’s crazy or wrong, that’s an intel person who should be fired.”

More recently, a different Flynn has emerged, and the contrast to the first Flynn is significant and confusing. How could it be that someone who spent so much time emphasizing the importance of local network building, understanding the nuanced difference between life in Kandahar and Kabul, has since come to paint all of Islam as worthy of fear?


Middle East

WSJ: Why Saudi Arabia’s Oil Giant Aims to Be Big in Chemicals, Too

Aramco’s plans to vastly expand its petrochemical operations are part of the kingdom’s effort to remake its economy as oil’s future clouds

GELEEN, Netherlands—Saudi Arabian Oil Co. has been the world’s single largest crude producer for decades. It wants to be a lot more than that now, as a new petrochemical complex shows.

Among the Dutch corn fields here is a tangle of pipes, vats and catalyzers that the company uses in its Arlanxeo plant to transform what was oil into synthetic rubber for products ranging from auto-engine hoses to plastic wine corks.

Aramco, as it is commonly known, until recently focused on pumping great quantities of oil and, like the Standard Oil companies of John D. Rockefeller, processing it through its refineries. Aramco now aims to vastly expand its petrochemical operations, turning itself into a modern integrated energy company along the lines of Exxon Mobil Corp.

Thousands of miles away, near the Saudi Arabian city of Al Jubail on the Persian Gulf, an army of workers is finishing the $20 billion Sadara petrochemical complex, an Aramco joint venture with Dow Chemical Co. Sadara will use ethane refined by Aramco nearby to make a petrochemical called butadiene to ship world-wide to facilities, likely including its Dutch plant.

Aramco’s Shifting Flow

Saudi Arabian Oil Co., the world’s largest crude producer for decades, is expanding into petrochemicals to become an integrated energy company.

Saudi Arabia oil production.Saudi government takes control of its domestic oil industry by purchasing a 25% stake in Aramco, which it increases to 60% in 1974.

Aramco, one of the world’s most powerful and secretive companies, is undergoing an unprecedented makeover, as the oil-price rout hurts its revenue and uncertainty clouds the future of fossil-fuel demand.

Its transformation is intertwined with a long-term plan to diversify the Saudi economy. That plan, led by a powerful deputy crown prince who wants his nation to grow beyond being a petrostate, is accelerating the Aramco shift in ways now becoming clear. By positioning the company to generate more domestic jobs and non-oil revenue, Aramco aims to help provide the funding needed to carry out the prince’s vision.

Aramco’s strategic goal is to create a global network of refining and petrochemical plants that let Saudi Arabia turn its biggest asset into hundreds of higher-value products crucial to modern life, from chewing gum to auto parts.

To extract capital from oil still in the ground, Aramco plans

another ambitious gambit: an initial public offering in 2018 that may become history’s biggest. Aramco says it has 261.6 billion barrels of oil left to pump, roughly 20 times as much as Exxon Mobil.

Slumping oil prices and a ballooning budget deficit have drained the coffers of Saudi Arabia, the world’s top crude oil exporter. The traditionally conservative nation is now opening up to foreign markets and investors. WSJ’s Sarah Kent explains why.

“Aramco’s capabilities will be fully unleashed,” Saudi oil minister and Aramco Chairman Khalid al-Falih said in a briefing with several reporters this year. “The company will be able to go global in multiple ways.”

Aramco declined to answer detailed questions, referring instead to speeches such as one by Aramco Chief Executive Amin Nasser in September. He signaled why the company was interested in a growing petrochemical industry. He said the Gulf region was home to only 2.5% of global petrochemical revenue and less than 1% of the industry’s jobs.

“Considering the Gulf’s endowment of oil and gas, as well as our geographic proximity to major markets in Europe and Asia,” he said, “both those figures should be much, much higher.”

New jobs, revenue

Aramco’s moves position it for a future when crude demand may peak and when owning reserves won’t be as attractive. Even if electric-vehicle adoption and alternative-fuel use soar, cutting global thirst for fuel, demand for petrochemicals is likely to remain strong. By developing more chemical manufacturing of its own, Aramco could attract jobs and revenue to the kingdom, which recently issued $17.5 billion in bonds to shore up its finances.

Aramco’s reinvention as a public company invested in producing gasoline, diesel and specialty chemicals could mean abdicating Saudi Arabia’s traditional role as de facto head of the Organization of the Petroleum Exporting Countries. Historically, the kingdom, through Aramco, has opened the spigot when prices rise too high and restricted supply when they fall too far. To do this, Aramco has kept unused spare production capacity, which shareholders would frown on, say some oil-industry consultants.

It isn’t clear how much of the change will come to pass at Aramco or in the Saudi economy. The government relies on oil for the vast majority of its revenue and has for decades talked about needing to diversify, without much change.

Richard Mallinson at Energy Aspects, a London global-energy-market consultant, says he thinks the diversification plan “will fall a long way short of the lofty ambitions” and “is just too much of a jump from where they are today.”

The strategy of directly owning more petrochemical plants to create outlets for crude and refined products has long been pursued by large firms such as Exxon Mobil and Royal Dutch Shell PLC. “Aramco is the powerhouse in the area of oil. They want to get bigger in chemistry,” says Matthias Zachert, chairman of Aramco’s German joint-venture partner Lanxess AG. “But you don’t create a leading chemical company overnight.”

Several advisers involved in the IPO planning say the transformation will be so complex it could go beyond 2018. The 5% stake targeted for the IPO is so large—Aramco has been valued at $2 trillion to $3 trillion—that finding a deep enough pool of investors may require Aramco to float the stock on several stock exchanges and to face multiple sets financial-disclosure rules, they say. It is a special challenge for bankers, they say, because the company and the kingdom are so deeply intertwined in ways that aren’t public


A prince’s role

The company has said it will begin disclosing financial statements in 2017. Its operations are shrouded in secrecy and wouldn’t meet governance requirements of most exchanges, such as board diversity. Its board includes no women and few outsiders.

King Salman bin Abdulaziz has already shaken up the kingdom’s ruling elite by empowering his son, Deputy Crown Prince Mohammed Bin Salman. Prince Mohammed is moving ahead with a plan drawn up by McKinsey & Co. consultants to wean the country off its oil dependence. In May, he proposed the IPO and the transfer of proceeds to a sovereign-wealth fund that will invest in other sectors.

By taking on the transformation, the 31-year-old Prince Mohammed is challenging the established order in ways that could prove difficult to implement, say people close to the current establishment. Even giving shareholders partial control over Saudi Arabia’s oil reserves would be tough because taking control of those assets was a defining moment for the kingdom.

The prince is working with Mr. Falih, Aramco’s chairman, and a tight circle of advisers to map out the future of Aramco and the Saudi economy, say people familiar with the discussions. They are making many decisions surrounding Aramco with little input from the company’s bureaucracy, these people say.

Members of the company’s board learned of the IPO plans from media reports, rather than from Mr. Falih or Mr. Nasser, Aramco’s CEO, one Aramco official says. “In some occasions even the chief executive is not fully aware of the latest update,” the official says of Mr. Nasser. Aramco didn’t make Mr. Nasser, Mr. Falih or other executives available for interviews. A spokesman for the prince declined to comment.

Aramco owns directly or through joint ventures plants capable of processing 5.4 million barrels a day in markets that are its biggest crude customers: the U.S., South Korea, Japan, China and Saudi Arabia.

Making Aramco’s integrated model more lucrative, its operating costs for extracting oil remain among the world’s lowest—perhaps $6 a barrel, compared with an average of $10 in Texas’ Permian Basin, according to oil consultant Wood Mackenzie.

“The idea of control of the end market is very important to them,” says Anas Alhajji, an independent energy economist in Dallas. “This is their outlet to the market.”

That philosophy led Aramco earlier this year to break up a strategic partnership: Motiva, its two-decade-old joint venture with Shell. A key asset was a Port Arthur, Texas, refinery, North America’s largest.

Motiva had begun buying American crude oil, which was competing with Saudi oil, say people familiar with the Motiva relationship.

Shell spokesman Ray Fisher says ending such a long venture with numerous assets and liabilities is “a very complex process, involving various adjustments and changes along the way before final agreements can be reached.”

The breakup will let Aramco cement its U.S. foothold. From Port Arthur, it could ship gasoline, jet fuel and diesel to military bases in Virginia, airports in the Washington, D.C., area and service stations in New York.

The split will free Aramco from certain limits imposed by the Motiva deal, allowing it to expand, for instance, on the West Coast. The Saudi company has looked at buying a large refinery along the Gulf Coast or a stake in a refinery, say people familiar with the company.

Aramco is negotiating with the Malaysian national oil company, Petronas, to work together on a $21 billion refining-and-petrochemicals project near Singapore, The Wall Street Journal reported in October. The project would operate as a joint venture and serve as another major Asian beachhead for Saudi oil.

Aramco owns a stake in the giant Fujian Refining & Petrochemical complex, supplying oil that is turned into gasoline and plastics for China.

Aramco’s roots

Aramco has its roots in Texaco and Standard Oil of California, which formed a partnership that found enormous oil deposits on the Arabian Peninsula. In the early 1970s, the kingdom bought a stake in Aramco and by the 1980s had acquired it all.

In 1991, Aramco began looking overseas when it bought a stake in a South Korean refiner. In terms that Aramco would repeat, it agreed to supply the refinery with crude for two decades. Over the years, it bought and built more refineries.

Still, Aramco remained a company almost entirely focused on producing crude. The first inklings of a new strategy emerged in 2011 when Aramco and Dow Chemical agreed to create Sadara, among the world’s largest petrochemical complexes.

After signing the deal, Mr. Falih, then Aramco’s CEO, explained his vision. Aramco, he said, will “become the world’s leading integrated energy company by the year 2020.”

Saudi Arabian crude sales faced new pressures starting in about 2012 as Nigeria and Angola, forced out of the U.S. market by a flood of shale oil, began competing with Aramco in Asia. Demand was stagnating, and countries were moving to limit fossil-fuel use.

Soon after oil prices began falling in 2014, Mr. Zachert, chairman of Lanxess, the chemical firm, suggested a European deal with Aramco. “They saw the strong strategic rationale,” he says. “The transaction was completed in record time.”

Aramco paid $1.2 billion to Lanxess to cleave off half the German company and create a partnership, Arlanxeo, 50%-owned by Aramco and based in a Netherlands industrial park dubbed Chemelot.

Three Aramco executives moved to Holland to help run a company with 20 factories in Latin America, North America, Europe and Asia. “They’re very interested in how we do things,” says Jan Paul de Vries, the Lanxess executive who heads the venture.

Arlanxeo’s synthetic-rubber facility is a neat fit for the Sadara project, which shipped its first chemicals in December. When fully running, Sadara will be able to supply feedstock to Arlanxeo. The plant is a key link between Aramco’s aspiration of building a petrochemical empire and the kingdom’s diversification plan.

One recent afternoon, workers wearing protective masks painted arrows on new roads near the complex’s edge. Beyond a chain-link fence, trucks lined a half-built road on a patch of desert that is part of a planned five-square-mile industrial park.

The goal is to attract manufacturers that would use Sadara’s chemical output while benefiting from the infrastructure. That would complete a circle, allowing Aramco to use its oil extraction, refining and processing chain to supply more Saudi-based manufacturing—one of eight sectors the economic-diversification plan targets for expansion.

Robert W. Jordan, U.S. ambassador to Saudi Arabia under President George W. Bush, says changes Aramco is making are preparing the country to depart from the past.

“Saudi Arabia may have enough oil for the oil age,” he says. “But the oil age may be ending.”


*Massenbach’s Recommendation*

Reuters: Iraq’s oil contracts make joining OPEC output cut more painful

Iraq would have to compensate international oil companies for limits placed on their production, according to industry sources and documents seen by Reuters, further reducing the prospect it will join any OPEC deal to curb the group’s output.

The compensation – stipulated in contracts – would compound the financial hit of losing much-needed revenue from crude sales, if the cash-strapped country were to yield to OPEC entreaties to curtail national production.

OPEC member Iraq pays developers a fixed dollar-denominated fee for every barrel of oil produced in the south of the country – home to its biggest reserves – under technical service contracts agreed between the international firms and the state-owned South Oil Company (SOC).

"Immediately after (an) SOC notice of … production curtailment, the parties shall agree … a mechanism to promptly fully compensate (the) contractor as soon as possible," according to an excerpt of the contract the ministry signed with BP in 2009 for the company to develop the 20-billion-barrel Rumaila field.

The compensation, according to the excerpt seen by Reuters, "may include, amongst other things, a revised field production schedule or an extension to the term or payment of all or part lost income to contractor".

Britain’s BP declined to comment.

The same clause also applies to other fields covered by the technical service contracts in the south, including fields being developed by Anglo-Dutch firm Shell, U.S. major Exxon Mobil and Italy’s Eni, according to industry sources.

A Shell spokeswoman said it did not comment on contracts. Exxon declined to comment and Eni did not immediately reply to a request for comment.

A senior oil official with SOC told Reuters the country would not have to worry about curtailment clauses because it had no plans to limit production.

"On the contrary, we’re encouraging the foreign companies to raise production as much as they can," said the official, who declined to be named as they are not authorized to speak publicly.


The Organization of the Petroleum Exporting Countries agreed in Algiers in late September to limit its collective output to 32.5-33 million barrels per day (bpd). The group’s production hit a record 33.64 million bpd in October.

Iraq has asked to be exempted from output curbs, arguing it is still trying to regain market share lost when sanctions were imposed in the 1990s during the Saddam Hussein era, and that it needs to keep up a costly battle against Islamic State.

"OPEC must submit to the fact that Iraq must stay away from any possible output cut deal because the country is in the middle of a tough war and every single dollar is needed to keep it standing on its feet," a senior government official close to Prime Minister Haider al-Abadi told Reuters.

Iraq put its output at 4.77 million bpd in October and said it would not go back to below 4.7 million bpd.

"Not for OPEC, not for anybody else," said Falah al-Amri, Iraq’s OPEC governor and head of the country’s state marketer SOMO.

There is, however, no certainty over how the discussions will play out at an OPEC meeting on Nov. 30.

As a consequence, the Iraqi oil ministry and oil companies will not be able to finalize their 2017 spending plans until after the meeting, to have enough clarity on what route Iraq will take on its near-term production ambitions, an industry source told Reuters.

Iraq has been making great efforts to ensure it pays its dues to oil firms promptly and oil minister Jabar Ali al-Luaibi has made boosting production in the country a priority.

"[Iraq] is one of the countries in the region that doesn’t have large foreign reserves, so will want to continue to maximize its revenue," said Jessica Brewer, Middle East upstream oil analyst at UK-based consultancy Wood Mackenzie.

She added that while most Middle Eastern OPEC members had all or most of their production operated by national oil companies, Iraq was one of the few that relied on international oil companies for the majority of its output.


STRATFOR: China’s Economy: Living on Borrowed Time

A looming debt crisis could make for a difficult year ahead for Chinese leaders. Sluggish construction growth and skyrocketing debt, coupled with sharp reductions in debt maturity periods, could cause corporate defaults and bankruptcies to spike next year. Although 2016 has brought stronger-than-expected growth to China’s property sector, it has largely been concentrated in the country’s wealthiest cities and has come at the expense of creating more available credit. (see more – att.)

-How to come into the EU & Russian Market –

Serbia open to Chinese investments

17 November 2016 19:42

Serbia is completely open to investments by Chinese companies, in line with the strategic partnership of our two countries and all that has been agreed with Chinese President Xi Jinping and PM Li Keqiang, Serbian President Tomislav Nikolic said Thursday.

"Chinese capital is welcome in Serbia and I am certain that, through joint work and implementing joint production projects, we will succeed in achieving everything we have planned and thereby also develop our economic cooperation significantly", said Nikolic at a meeting with a delegation of the Chinese company CRRC Zhuzhou Locomotive Co. LTD, led by Vice President Luo Chongfu, the presidential press office said.

Luo agreed with Nikolic’s idea of taking Serbian-Chinese projects – which have in the past mainly focused on infrastructure construction – to the next level – investment in production.



see our letter on:

*Herausgegeben von Udo von Massenbach, Bärbel Freudenberg-Pilster, Joerg Barandat*




11-23-16 China’s Economy_ Living on Borrowed Time _ Stratfor.pdf

11-23-16 Middle East Zugzwang.docx