Massenbach-Letter. NEWS 28.4.17

Massenbach-Letter. News

  • Turkey’s fate
  • Otto Brenner Stiftung: "Tarifkonflikte in den Medien"
  • Otto Brenner Stiftung: "Die Zukunft der Arbeit als öffentliches Thema"
  • Worldbank:A Bridge to Universal Education
  • WSJ: For Aramco Insiders, Prince’s $2 Trillion IPO Valuation Doesn’t Add Up

From our Russian News Desk. (The views expressed are the author‘s own.)

  • Critical Timing for Al-Shabaab’s Bid to Restore Influence in Somalia
  • Future for Advanced Research and Studies (FARAS): Sinophobia-Appearance vs Reality
  • Achievements of Détente Forgotten: INF Treaty Not Observed Anymore?
  • Hard Times for Multivectorism in Post-Soviet Space: Azerbaijan between Russia and the West
  • The EU-Russia Strategic Partnership was destined to fail from the start
Massenbach* Otto Brenner Stiftung: "Tarifkonflikte in den Medien" Warum erlangen manche Tarifauseinandersetzungen hohe öffentliche Aufmerksamkeit, während andere kaum mediale Beachtung finden? Wieso stehen manche Tarifkonflikte in einem günstigeren Licht, während andere eher Ablehnung erfahren? In der OBS-Studie werden neun Tarifkonflikte untersucht und jene Faktoren identifiziert, die über die Berichterstattung entscheiden. Die Untersuchung erlaubt den Tarifakteuren einen fundierten Blick aus der Vogelperspektive – auch auf Möglichkeiten und Grenzen ihrer Öffentlichkeitsarbeit.

§ Informationen und Reaktionen auf die Studie

§ Download der Studie [PDF]

§ Pressemitteilung der OBS "Studie der Otto Brenner Stiftung (OBS) analysiert ‚Tarifkonflikte in den Medien’" [PDF]


From our Russian News Desk. (The views expressed are the author‘s own.)

  • Critical Timing for Al-Shabaab’s Bid to Restore Influence in Somalia
  • Future for Advanced Research and Studies (FARAS): Sinophobia-Appearance vs Reality
  • Achievements of Détente Forgotten: INF Treaty Not Observed Anymore?
  • Hard Times for Multivectorism in Post-Soviet Space: Azerbaijan between Russia and the West
  • The EU-Russia Strategic Partnership was destined to fail from the start


Policy= res publica

Freudenberg-Pilster* Turkey’s fate

Mr. Erdogan’s objective is to establish a presidential system in Turkey, which he describes as similar to those in the United States and France. The checks and balances built into the proposed Turkish system are weaker than those in the French model, however, and considerably weaker than in the U.S.

Kemalism’s end

How did Turkey arrive at this situation? Present-day Turkey was founded by Mustafa Kemal Pasha (1881-1938), Ataturk, an army officer and a revolutionary, in 1923. He established the Republic of Turkey as a secular state based on European legal and administrative systems. The armed forces were given a strong position as guarantor of the constitution. The role of Islam was drastically reduced, its symbols banned from public places. The system of a strong, centralized state, one nation and one language, became known as Kemalism.

When the Justice and Development Party (AKP) of Mr. Erdogan came to power, the then-prime minister promoted accession to the European Union and free markets, while introducing economic reform that led to a period of successful development. He initiated a political opening toward the Kurds in Turkey and toward Islam, much to the dismay of the Kemalists. When, during accession negotiations, the EU demanded that Turkey reduce the political role of its army, Mr. Erdogan used the occasion to eliminate the military’s influence in politics. This opened the way for an Islamic movement led by Turkish preacher Fethullah Gulen to begin infiltrating the thus-far secular army.

Some years ago, when Mr. Erdogan realized that EU member states had been playing games and Turkey’s access to the European community was not in the cards, he changed course politically. The new doctrine was to make Turkey a strong regional power. The then-prime minister felt that implementation of this doctrine required the country’s leader to have a strong position.

The attempted coup in July 2016 gave President Erdogan an ideal pretext to neutralize most of the opposition and seize control of the media.

Looking ahead

The referendum is over. The voters have accepted, even if by a small margin, amendments to the constitution. The president has gained a powerful position, as he will appoint the government, which will be responsible directly to him. The function of prime minister is abolished. The president will appoint 12 out of the 15 members of the Constitutional Court.

Much will depend on how Mr. Erdogan exercises his new power. Will he rule to “make Turkey strong again," strengthening its economy and exercising prudently its role as a regional power? This is what he has promised and his followers are expecting.

It is also very important how the West, especially Europe, responds to this development in Turkey. The election’s narrow margin must not be used as a pretext to question the outcome, even if it does not make the internal situation easy for Mr. Erdogan. Turkey is an extremely important neighbor. Europe will have to accept the Turkish voters’ verdict.

The EU and the European governments have ample reasons to maintain good working relations with Ankara. They are in the interest of both sides. This gives President Erdogan an additional incentive not to abuse his authority.

It would be very bad politics for Europe to try to punish Turkey for what transpired last weekend. After all, Europe started this chain of events. It was the EU’s insistence on ending the Turkish army’s role as protector of the Kemalist system that finally made its overthrow possible. The unfair treatment that Turkey has received from the EU during the last 15 years has strongly contributed to Mr. Erdogan’s policy shift.,2192,c.html

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

Barandat* A Bridge to Universal Education

APR 20, 2017 … At the World Bank and the IMF’s upcoming annual spring meetings in Washington, DC, delegates will be reinforcing the case for international cooperation. In particular, we will be discussing the International Finance Facility for Education (IFFEd), a bold plan to ensure that, for the first time in history, all of the world’s 1.6 billion boys and girls – including refugees and displaced children in low- and middle-income countries – are in school and learning …

The quest for universal education is the civil-rights struggle of our age. After years of international neglect, 260 million children are not in school, and 400 million children are functionally illiterate. If current trends persist, by 2030, more than 800 million young people – half of the world’s youths – will leave school without the basic skills necessary for the modern labor market.

And, by 2050, higher education will be available for 80% of young people in Korea, Japan, and Taiwan, but for no more than 10% of young people in Sub-Saharan African countries.

The need for expanded investment in education is even more urgent for girls and young women. Putting girls in school is the most effective way to keep them free from exploitation, forced labor, trafficking, and child marriage … educated women bear an average of two children, the average for uneducated women is five … despite all of the good work being done by multilateral organizations … total education aid has fallen in recent years …

As a result, by 2030, a majority of school-age teenagers in certain countries could be out of school and on the streets … they will become ever more vulnerable to extremist groups that are counting on the West not to keep its promises …

Even in 2030, the world’s poorest countries will not be able to afford around half of their total education costs … we can increase the World Bank’s capacity to provide grants through its International Development Association. If we also divert a larger share of IDA contributions toward education, we can increase the education-aid funds available annually to the poorest countries from $1.6 billion (as of 2016) to more than $4 billion by 2020.

This up-front investment in education would extend the opportunity for a better life to more people than ever before. It would boost employment, slow population growth, and reduce infant and maternal mortality. And, as shown in the Learning Generation report, by 2050, GDP per capita in low-income countries would be 70% higher. Most important, it would provide hope to the millions of children who need it the most.
Gordon Brown, former Prime Minister … of the United Kingdom, is United Nations Special Envoy for Global Education …


Middle East

WSJ: For Aramco Insiders, Prince’s $2 Trillion IPO Valuation Doesn’t Add Up

Valuation discrepancy raises new challenges for a deal already fraught with complexity

Updated April 25, 2017 6:50 a.m. ET

RIYADH—Officials at Saudi Arabian Oil Co. have told their superiors there is a hitch in the plans to take the state-owned oil company public: It is likely worth at least $500 billion less than the government previously suggested.

The country’s deputy crown prince, who is leading a push to overhaul the economy, has pegged the value of the company known as Saudi Aramco at $2 trillion. But officials working on the deal have struggled to come up with a scenario under which Saudi Aramco is worth more than $1.5 trillion, according to people familiar with the matter, even after factoring in a recent tax cut and other tools the government has to make it more attractive investors.

By selling up to 5% of shares in an initial public offering targeted for next year, the government plans to raise billions of dollars that it can use to invest in other industries as part of a plan to reduce its heavy dependence on oil.

The valuation discrepancy raises new challenges for a deal that is already fraught with complexity and facing opposition within the ranks of the kingdom’s government bureaucracy, according to people familiar with the matter.

About two dozen employees have been working since last year to try and figure how to take Aramco public, and have been working with Western consultants to explore ways to restructure Aramco to maximize its value, say people familiar with the process.

According to internal documents reviewed by The Wall Street Journal, the team has determined several variables—or what some call “levers”—likely to affect the price investors will pay for shares of the world’s largest oil producer.

But no matter how they pull those levers, which include the price of oil and Saudi tax policy, Aramco’s projected value tops out at about $1.5 trillion, these people say.

The Saudi government last month said it is reducing Aramco’s tax rate to 50% from 85%, bringing its tax rate closer to the level of the world’s biggest oil companies such as Exxon Mobil and Royal Dutch Shell.

That move would result in higher dividends for potential shareholders, and it brought Aramco’s internal value estimates to $1.3 trillion to $1.5 trillion from about half a trillion dollars, say people involved in the process.

Nat Kern, president of Washington-based consulting firm Foreign Reports, said he is skeptical of the higher valuation because investors tend to discount state-controlled companies—that is, they value them at a lower level than similar independent companies—because they’re subject to the sometimes unpredictable decisions of their majority owners.

Read More

· How Big is Aramco?

· Aramco IPO: The Biggest Fee Event in Wall Street History

· Oil Change: Affluent Saudi Arabia Goes to Work

For example, there is no way to be assured the tax rate will remain at 50%, said Mr. Kern, whose firm focuses on the Middle East and oil. “Most oil-producing countries are taking about 90% of crude sales” in taxes and other payments, he said.

Members of the internal Aramco IPO team took their figures to the company’s chairman, Khalid al-Falih, who is also Saudi Arabia’s energy minister, say people familiar with the matter.

One of those people said some of the Aramco team members are concerned because their calculations have consistently yielded lower numbers than the one the prince disclosed.

Saudi government officials say Aramco’s high reserves and low costs should make the company attractive to investors. “Our profitability is higher than others and the interest we have received so far is huge,” said one official who defended the $2 trillion number.

Some of the banks pitching for a role in the advising and underwriting of the deal have been given minimal information on the company’s financials, one person familiar with the pitching process said.

Bankers have offered company executives advice on how they might position the offering to investors to garner the highest valuation and how Aramco would compare with other oil and gas companies, this person said.

Yet even absent the specific financial information, this person said that it appeared highly unlikely that Aramco could achieve a valuation anywhere near $2 trillion unless it paid no taxes or royalties.

Since deputy crown prince Mohammed bin Salman announced the stock-offering plan and his $2 trillion estimate early last year, insiders and outsiders have questioned how he arrived at that number.

One Aramco official called the figure “unrealistic and mind blowing.”

A lower valuation means the IPO would fetch less money for the kingdom to invest under the Vision 2030 plan championed by the deputy crown prince.

Also, the remaining Aramco shares in Saudi hands would be less valuable than the prince forecasts, lowering the amount of money the kingdom could borrow against those shares to fund economic diversification.

Of course, regardless of where the company sells shares to the public in an IPO, its market cap or valuation will change as soon as it starts trading as investors make daily determinations of its current and future value.

Aramco produces nearly 10 million barrels of oil a day, more than twice the output of Exxon Mobil, which is valued at $337 billion. Aramco has among the world’s lowest production costs—Saudi oil tends to be cheap to pump—and says its reserves total about 260 billion barrels.

Questions about Aramco’s valuation surfaced earlier this year when a report for potential investors prepared by oil-industry consultant Wood Mackenzie Ltd. put Aramco’s value at around $400 billion, according to a client who attended a private Wood Mackenzie briefing. The estimate, based on the 85% tax rate, surfaced in other media.

That number was also close to an internal estimate Aramco’s IPO team came up with before the tax rate was reduced, say people familiar with the matter.

Now, some officials inside the company and in government have privately suggested reevaluating the listing, say people familiar with the matter, and perhaps reducing its size or delaying it.

So far, Prince Mohammed and his staff seem unlikely to do so, say people familiar with the matter. “This IPO will happen regardless of the valuation they may receive,” according to the government official who called the $2-trillion-dollar number “mind-blowing.”


WSJ: Saudi Arabia Reinstates Perks for State Employees as Finances Improve

King Salman also names one of his sons, Prince Khaled bin Salman, as new ambassador to the U.S.

Updated April 23, 2017 9:53 a.m. ET

DUBAI—Saudi Arabia’s King Salman has reinstated allowances and bonuses for state employees as its finances improve, a move aimed at boosting consumer confidence to support growth as the kingdom overhauls its oil-dependent economy.

In a spate of decrees issued late on Saturday, the king also appointed one of his sons, Prince Abdulaziz bin Salman, as the minister of state for energy, industry and mineral resources. Another of his sons, Prince Khaled bin Salman, was named ambassador to the U.S., according to the official Saudi Press Agency.

Those changes, along with several other appointments, come as the kingdom strives to achieve an ambitious economic-reform plan and improve ties with the U.S. under President Donald Trump after relations with the Obama administration chilled.

Saudi Arabia in September canceled bonus payments and curbed allowances for state employees, months after cutting the subsidies for fuel, electricity and water.

The Saudi middle class, long accustomed to generous public welfare support, is usually reluctant to gripe about economic hardships but many criticized in private the reduction in perks, especially as those cuts didn’t appear to affect the wealthy and as the kingdom spends billions abroad, for instance, in a costly and unpopular war in Yemen.

The reversal of some recent measures taken to cut that state assistance suggests the monarchy was also sensitive to those complaints as it tries to change the decades-old social contract.


· King Appoints Son as New Envoy to Washington

· Mattis Seeks to Reassure U.S.’s Mideast Allies

King Salman cited an increase in revenue and a decline in the kingdom’s budget deficit as reasons for restoring the perks for state employees. The benefits had previously been canceled, amended or frozen as part of an austerity drive to cope with a sharp drop in oil income, which accounts for a major chunk of the government’s revenue. Crude prices are down by about half since the middle of 2014 though prices have stabilized in recent months after Saudi Arabia agreed with other major crude exporters to cut production.

The spending cuts were aimed at boosting state finances after the kingdom posted a record budget deficit of $98 billion in 2015 as income from oil sales fell. As those austerity measures took effect, the budget deficit shrunk last year to about $79 billion and Saudi Arabia expects to run a deficit of about $53 billion in 2017.

But the spending cuts have also weighed on the economy. The International Monetary Fund expects the kingdom’s economy to grow just 0.4% this year because of lower oil production and ongoing fiscal consolidation, after expanding by 1.4% in 2016 and 4.1% in the year before that.

The withdrawal of benefits hurt Saudi nationals, a majority of whom are employed by the state or related entities, with consumers becoming more conscious about their spending in recent months. Saudi inflation stood in negative territory for a third consecutive month in March because of sluggish consumer demand and a fall in food inflation on lower global food prices, analysts say.

The restoration of allowances and bonuses to state employees is expected to bolster consumer spending, which will help revive economic growth in the kingdom, analysts say. About two thirds of Saudi workers are employed by government-related entities.

King Salman also ordered the disbursal of an additional two months of salary to Saudi nationals involved in the front lines of the war in Yemen.

The moves were welcomed by regular Saudis and economists alike. The decision “is likely to boost overall consumption in the economy,” with higher disposable incomes expected to benefit the retail and food sectors, which were hit by cuts in allowances last year, said Mazen Al Sudairi, head of research at Riyadh-based Al Rajhi Capital.

Analysts at EFG Hermes said the shift may boost disposable incomes of nearly 3 million Saudis by up to $20 billion, or 3% of GDP.

Saudi Arabia last year unveiled an ambitious plan to reshape its oil-dependent economy, known as Saudi Vision 2030, under the leadership of King Salman’s young son, Deputy Crown Prince Mohammed bin Salman. He heads the government’s economic council that is overseeing the implementation of the overhaul.

It wasn’t immediately clear on how the resumption of perks to state employees would impact the kingdom’s budget, and its aim to balance its finances by 2020.

King Salman said he was reinstating the benefits on the recommendation of the economic council after the economic measures it implemented helped achieve its target of improving the state’s finances.

According to Al Rajhi Capital’s calculations, the government’s revenue target for 2017 accounts for oil at $50.3 a barrel, while prices averaged $52 a barrel in the first quarter. When the cut in perks was announced oil traded at below $45 a barrel, but prices are now expected to remain steady at around $50 or increase, Al Rajhi Capital said.

The reinstatement of allowances “is positive for the economy as it points to higher confidence that the government will be able to meet or better its fiscal targets,” the firm’s Mr. Sudairi said.


*Massenbach’s Recommendation*

Otto Brenner Stiftung: "Die Zukunft der Arbeit als öffentliches Thema" Die Studie verfolgt ein gesellschaftspolitisches Interesse: Welches Bild der „Arbeit der Zukunft“ wird von meinungsbildenden Medien gezeichnet?
Welche Hoffnungen und Ängste beherrschen die öffentliche Debatte? Welche inhaltlichen Aspekte spielen eine Rolle, welche Gesichtspunkte werden selten aufgegriffen? Der Untertitel der Studie diagnostiziert eine „Berichterstattung zwischen Mainstream und blinden Flecken“. Analysiert wurden sieben Tageszeitungen und vier Wochenblätter.

§ Informationen zur Studie

§ Download der Studie [PDF]

§ Pressemitteilung der OBS: "Zum Tag der Arbeit: Studie über die ‚Zukunft der Arbeit als öffentliches Thema’"



see our letter on:

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



04-25-17 Somalia – Al_Shabaab.docx

04-25-17 Future Center – Sinophobia_Appearance vs. Reality.pdf

04-25-17 INF – Azerbaijan – EU_Russia Strategic Partnership.docx

04-17 Otto-Brenner-Stiftung,Tarifkonflikte in den Medien.pdf

04-17 Otto Brenner Stiftung, Die Zukunft der Arbeit als ffentliches Thema.pdf

What Is Aramco_ –