Massenbach-Letter. NEWS 09.6.17

Massenbach-Letter. News

  • A Big Surprise in the Battle for Raqqa – The offensive, launched June 6, could indicate a new understanding between Moscow and Washington.
  • Carnegie Moscow Center: Macron’s Grand Gesture Toward Russia Might Just Pay Off
  • Bring back alive: from Dagestan to ISIL* to return the son
  • Pater Peter Balleis SJ im Nordirak – Investition in neues Denken ist notwendig
  • WSJ: Europe Reckons With Its Depleted Armies
  • EU, China Summit Ends With No Climate Statement
  • What the Paris Agreement Doesn’t Say About US Power
  • WSJ: Gas Shipments Are On The RiseLong Promised, the Global Market for Natural Gas Has Finally Arrived. -Liquefied gas, new infrastructure and revamped contracts have changed the calculus for consumers, countries and companies.
  • Nick Butler / FT: Life in the post-Opec era

Massenbach*EU, China Summit Ends With No Climate Statement

Disputes over trade force the two to abandon a planned statement on their commitment to Paris accord

Updated June 2, 2017 4:58 p.m. ET

China and the European Union abandoned a plan to jointly declare their commitment to the Paris climate accord one day after President Donald Trump withdrew the U.S. from the global agreement.

The plan to issue a joint declaration from a Brussels summit on Friday was derailed by EU-China trade disputes—a reminder of the challenges of embracing China’s efforts to carry the torch for globalist policies opposed by Mr. Trump.

Mr. Trump’s rejection of the Paris accord gave China and the EU new common ground, each faced with fresh tensions with the U.S. Chinese Premier Li Keqiang said at the summit that his country’s partnership with the EU “is useful to counter the uncertainties in the world.”

Following months of doubt about whether Mr. Trump would sustain his predecessor President Barack Obama’s commitment to the Paris accord, EU and Chinese officials had drafted the statement proclaiming their “highest political commitment” to the Paris accord and vowing cooperation.

China, the world’s largest emitter of greenhouse gasses, has said it would uphold its end of the Paris deal with or without a U.S. commitment. China is investing in clean-energy technologies—even as it maintains state investment in polluting heavy industry.

The Brussels summit had been planned to focus on trade and foreign-policy issues but was overshadowed by Mr. Trump’s decision on Thursday, which drew criticism from many nations committed to the Paris accord. European Council President Donald Tusk said both sides agreed the U.S. decision was “a big mistake.”

Mr. Trump has given China other openings to exert greater global influence. In January, he withdrew the U.S. from the 12-nation Trans-Pacific Partnership that sought to deepen trade ties between the U.S. and China’s neighbors, but excluded China itself. That left China in a position to depict itself as a free-trade champion and rally support for its own regional trade accord.

Chinese President Xi Jinping in January delivered a speech at the World Economic Forum in Davos, Switzerland, in which he essentially laid claim to China’s role as world leader on free trade.

However, in climate talks, a divide has persisted for years between developed nations and developing nations. The U.S. and Europe pushed the biggest developing nations, led by China and India, to accept some form of restraint on their emissions. Those nations have pushed back by arguing that much of the burden must be shouldered by wealthy nations, which over time have produced the bulk of emissions.

The Paris accord produced an uneasy truce between the two camps: Developing nations would work to limit their emissions, while wealthy nations would mobilize financing to help developing nations shift to renewable energy and build infrastructure to protect themselves from the effects of climate change.

Negotiations, however, are continuing over how to implement the accord.

Financial support by developed nations to poorer countries of up to $100 billion annually by 2020 was a major element of the Paris accord, and it remains unclear how the pact’s champions will fill the gap after a U.S. withdrawal.

Major supporters of the climate deal like the EU and China are reviewing and will discuss the issue, European Commissioner for Climate Action and Energy Miguel Arias Canete said Friday after meeting with his Chinese counterpart in Brussels.

“It is possible that this creates the push to get better financing on climate change,” an EU official said of Mr. Trump’s decision. “Discussions started in Marrakesh in November, when Mr. Trump was elected and it became clear that he was not going to pursue the climate agreement.”

“This fight around the division between developing and developed countries hasn’t been put to rest,” said a European diplomat involved in the talks.

In one dispute, wealthy nations are seeking strong transparency rules, to ensure that China and other developing nations report their emissions properly.

“It would definitely have been better with the U.S. at the table,” the European diplomat said, “because the Chinese and many other developing countries are not at the same place about what type of transparency regime should be in place because of the Paris agreement.”

While Friday’s trade differences were unrelated to climate issues, they highlight the tensions China has sparked in another sphere depending on global rules, by deploying what Europe and the U.S. have called unfair trade practices.

The European Commission president on Friday warned Mr. Li that failure to tackle these issues could fuel populist movements in the region that oppose globalization and free trade.

China has said it is the EU and the U.S. that are breaching World Trade Organization rules by slapping large duties on some cheap Chinese steel exports.

https://www.wsj.com/articles/eu-china-summit-ends-with-no-agreement-on-trade-1496418386?mod=nwsrl_africa_news

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

Bring back alive: from Dagestan to ISIL* to return the son

Kazim Nurmagomedov, a resident of the small village of Karata, Akhvakh District of Dagestan, is one of the few persons, who has independently managed to return his son from the territory of the ʺIslamic Stateʺ (IS, orthe ISIL (Islamic State ofIraq and the Levant), has been recognized bythe court asaterrorist organization and banned in Russia). To convince his son Marat to return home, one short meeting with his father was enough; however, to organize the return it took two long years of endless trips, searches for channels and unsuccessful attempts…

During this period, both Marat’s father and mother visited the territory of Syria. The process of saving the young man from the ISIL was accompanied for the Nurmagomedov family by illegal border crossings, secret travels, fraudulent intermediaries, a Syrian prison and a ʺfalseʺ execution… After Marat had managed toget out alive from the territory ofthe ʺIslamic Stateʺ, his father, who saved his son from death, had tostand upfor another son: Shamil, who financially helped toliberate Marat, was accused of financing terrorism…

During this period, both Marat’s father and mother visited the territory of Syria. The process of saving the young man from the ISIL was accompanied for the Nurmagomedov family by illegal border crossings, secret travels, fraudulent intermediaries, a Syrian prison and a ʺfalseʺ execution… After Marat had managed toget out alive from the territory ofthe ʺIslamic Stateʺ, his father, who saved his son from death, had tostand upfor another son: Shamil, who financially helped to liberate Marat, was accused of financing terrorism… (for more see att.)

http://www.eng.kavkaz-uzel.eu/articles/How_to_return_to_Dagestan_from_ISIS

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founded by George Friedman. A Big Surprise in the Battle for Raqqa

June 6, 2017 The offensive, launched June 6, could indicate a new understanding between Moscow and Washington.

There are reports that Syrian Kurdish forces are attacking Raqqa, the capital of the Islamic State. This was expected. What was not expected are reports that Syrian government forces are preparing to attack the city as well.

Reports from the Syrian Observatory for Human Rights and Al-Masdar News said the Syrian army has crossed into Raqqa province and is garrisoned roughly 50 miles from the city. But according to an unconfirmed report by Lebanese Al Mayadeen TV, the army has actually reached the city itself.

The assaults, nearly simultaneous, cannot be coincidence. The Syrian government and the Kurds are either cooperating to defeat IS or are competing to see who can defeat it first. Since the government of Bashar Assad would surely know about a Kurdish offensive, and since a competition to retake Raqqa would be dangerous for all parties, cooperation is the likely explanation.


Members of the U.S.-backed Syrian Democratic Forces stand in the village of Hazima on the northern outskirts of the Islamic State’s Syrian bastion of Raqa on June 6, 2017.

What’s particularly significant is the patronage of the groups involved. Assad is a client of Russia. The Kurds are a client of the United States. The Russians and Americans have not been all that cooperative in Syria, and indeed a few hours ago this kind of joint mission would have been nearly unthinkable. If they are in fact in this together, it would indicate a new understanding between Moscow and Washington.

That this offensive comes a day after Saudi Arabia’s diplomatic row with Qatar – Riyadh led a six-nation effort to cut ties with the government in Doha for its alleged support of terrorism – is startling. If it’s true that the Syrian government and the Kurds are cooperating, then it will be the second indication in two days that a realignment of the Middle East is underway.

The offensive is in its early stages, of course, and any cooperation that may have existed at the outset could dissolve at a moment’s notice. But right now, it’s important. Once we know more, so will our readers.

https://geopoliticalfutures.com/big-surprise-battle-raqqa/

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Pater Peter Balleis SJ im Nordirak.

Investition in neues Denken ist notwendig

Im Nordirak gibt es nicht nur zerstörte Landstriche, sondern auch Projekte, die Hoffnung machen: "Wir müssen in neues Denken investieren", sagt der deutsche Jesuitenpater Peter Balleis SJ. Die ARD stellte jetzt "Jesuit Worldwide Learning" vor: Bildung als Vorwärtsstrategie, um die Herausforderungen unserer Zeit anzugehen.

http://www.daserste.de/information/politik-weltgeschehen/mittagsmagazin/videos/christen-im-nordirak-100.html

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Policy= res publica

Freudenberg-Pilster* Carnegie Moscow Center:Macron’s Grand Gesture Toward Russia Might Just Pay Off

By inviting Putin to Versailles, Macron threw his hat in the ring for the role of a new geopolitical leader in Europe. He made this decision in the context of not just bilateral relations but also France’s relations with the West and the EU. Macron is trying to demonstrate his ability to confront the bad guys, draw red lines, and differentiate between pragmatic objectives and overarching values.

France’s new president, Emmanuel Macron, hosted his Russian counterpart Vladimir Putin at the Palace of Versailles on May 29, 2017. The interaction was both supremely tense and incredibly productive. Perhaps no one has ever been so brutal in Putin’s presence in chastising the Russian media for spreading disinformation. At the same time, no Western leader has moved forward quite so far in bilateral relations despite a policy of containment.

By inviting Putin to Versailles, the French president threw his hat in the ring for the role of a new geopolitical leader in Western Europe. He made this decision in the context of not just bilateral relations but also France’s relations with the West at large and the European Union in particular.

It was a working visit, but it excluded the possibility of official talks in the presidential office at the Elysée Palace. In this way, Macron demonstrated a desire to maintain a certain distance from his guest and the Russian leader’s policies. Judging by how the meeting went, it seems Macron will stand up for both principles and pragmatic interests. While standing next to Putin at a press conference, Macron slammed the Russian state-funded media outlets RT and Sputnik for conducting a coordinated information campaign against him ahead of the French election.

With this frank criticism, Macron showed his Western partners that he is willing and able to speak bluntly with the bad guys, draw red lines, dictate terms, and differentiate between pragmatic objectives and overarching values. The Russian president was less of a target and more of an instrument for Macron’s new foreign policy approach.

Russia, in turn, was happy to take the opportunity to show Washington, Berlin, London, and Brussels that the West can and should conduct dialogue with Russia, that sanctions should not preclude cooperation, and that the policy of containment is erroneous and futile.

The question of what the Russian regime wants from France is simple. Russia dreams of reviving the kind of relationship it had with former president Jacques Chirac (1995–2007): trade, mutual gains, backstage deals on geopolitical matters, avoidance of conflict, and pragmatic compromises.

On Ukraine, Putin would like Paris to increase pressure on Kiev with regard to the implementation of the Minsk agreements and to support Moscow’s claims that it is complying with its portion of obligations. On Syria, Putin wants France to join the anti-ISIS coalition headed by Russia—as a junior partner. Ideally, Putin would like to see sanctions gradually lifted, the Crimea crisis swept under the rug, and all institutions and platforms for bilateral cooperation rehabilitated.

Naturally, no one in Moscow actually expects the new French president to take all of those steps. But the meeting was a chance for Putin to join Macron in putting principles aside, for now, and focusing on pure pragmatism.

“I am confident that the fundamental interests of Russia and France are much more important than the current political environment,” said Putin at the press conference with Macron.

And, certainly, the focus on pragmatism appeared to yield some preliminary results. Macron needs Russia’s cooperation to make progress in resolving the Syrian conflict. Few details are available now, but Paris has reportedly invited Moscow to set up a working group and take practical measures to establish cooperation in the fight against terrorism. Russia has not had such a platform on Syria with France or Germany; its key Western partner was the United States. Now it appears that Macron is trying to seize that baton from Washington.

The mission of the working group is to analyze the potential value of Russo-French cooperation on Syria and of the establishment of a new platform for dialogue. The corridor of opportunity seems quite narrow: Paris has not recognized the legitimacy of Syrian President Bashar al-Assad (which does not preclude negotiations with him); it has demanded the investigation of Assad’s war crimes; and it has condemned the April chemical weapons attack, unequivocally accusing the regime of carrying it out.

Moscow is trying to draw Paris into Russia’s Syria campaign on Russia’s terms. Macron said at the press conference that any chemical attacks by the regime would bring about a harsh response. However, he also spoke in favor of “preserving the Syrian state,” which has been Moscow’s key argument for a more flexible position on Assad and his fate. If France can come up with its own Syria project—and particularly if it can secure Germany’s support—then cooperation with Moscow could bring about a new round of geopolitical competition.

Following the meeting, Macron suggested reviving the “Normandy format” of talks on Ukraine—another sensitive issue on which Moscow and Paris currently have very different positions. France’s position, like much of the EU’s, has been that Russia is responsible for the conflict in eastern Ukraine and directly involved in combat in the Donbas, violating the sovereignty of an independent state.

In addition to these admittedly baby steps toward progress, Putin’s meeting with Macron brought two pieces of good news for Russia. First, Paris is abandoning the policy of containment with regard to Russia, which had included a freeze on institutions of strategic economic dialogue. The idea was also floated of establishing a Franco-Russian civic forum, a platform for cooperation between Russian and French people.

The second piece of good news was Macron’s public decision not to moralize on the most sensitive subject for Russia, human rights. “With regard to human rights issues, we have discussed this. Yes, we mentioned specific cases, but we will not publicly discuss these particular cases. I don’t think that would help achieve progress on these issues,” said the French president, choosing not to politicize the problem, including the burning topic of widely reported crimes against gay men in Chechnya. At the same time, Paris sent Moscow a signal of its disapproval. On the day of Putin’s visit, France granted political asylum for the first time to a victim of homophobic persecution in Chechnya.

The current relationship between Russia and France resembles early September 2016, when a compromise on Syria had finally been reached following very tense negotiations between the United States and Russia: a compromise that fell through just a few days later. Both Russia and the United States, full of political will and desire to reach a solution, once again fell victim to a profound mutual mistrust that has become more extreme over the past few years.

Likewise, the groundwork made between Russia and France appears very fragile. Will Macron be able to formulate a geopolitical proposal on behalf of Europe, or will it only represent France? How will it tie in with U.S. President Donald Trump’s chaotic and unpredictable behavior? How will restrained Berlin perceive Paris’s new pragmatic and ambitious course?

Precarious as it may be, however, the groundwork has been laid by the recent visit. Putin reciprocated, inviting Macron to Russia. The two countries’ diplomatic teams received the first sketches for future road maps, and preliminary large-scale and intensive preparations for the French president’s visit to Russia are likely underway. Unlike former U.S. president Barack Obama when progress between the United States and Russia fell through, Macron still has five years ahead of him, which could change the course of history.

http://carnegie.ru/commentary/?fa=71167&mkt_tok=eyJpIjoiTURkbVlUTTBNalpsTVdRNCIsInQiOiJaUWdHZ0RTTU9RcmY2Nnc1NVdhcWFpeFpcL0Z5Wk45SnlBZXo1a2ZPSENuR3hYWEFXWHVvK0YrY2x0d3FJK1VhcHIxV3gxQW03K3JHVXZYNWZSRDJSdURCeU9LUWQ1WFA3RFdaWFwvRURWaThUTnUrT3FvcVJHdHBDK2RXcm1QK0lRIn0%3D

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Barandat* WSJ: Europe Reckons With Its Depleted Armies

As European NATO members confront rampant materiel shortages, officials acknowledge Trump has a point in calling for more military spending

Soldiers in Germany’s Light Infantry Battalion 413 near the Baltic Sea coast complained last year that they didn’t have enough sniper rifles or antitank weapons or the right kind of vehicles. During exercises, they told a parliamentary ombudsman, their unit didn’t have the munitions to simulate battle. Instead, they were told to imagine the bangs.

Across Europe, similar shortfalls riddle land, sea, air and cyber forces following years of defense cutbacks.

U.S. President Donald Trump last month irked European leaders when he berated them at the North Atlantic Treaty Organization’s new headquarters for insufficient defense spending and what he called unpaid military bills.

Current and former European officials were quick to point out that NATO members don’t owe dues to the U.S., but they acknowledged Mr. Trump wasn’t wrong: Europe lacks the capabilities to defend itself.

A Leopard tank and Tiger helicopter of the German Armed Forces participating in military exercises in October near Bergen, Germany.

“Trump won’t have made many friends during his trip to Brussels,” said Richard Shirreff, a retired British four-star general and a former senior NATO commander. “However, Trump is dead right that European nations do not spend enough on defense.”

When Belgium put hundreds of soldiers on street patrols in Brussels after the Paris terror attacks in November 2015, it had to request a thousand armor sets from the U.S. Army. Britain’s Royal Navy has 19 destroyers and frigates. In 1982, during the Falklands War, it had 55.

Fighting wars—and preventing them—doesn’t entail just bullets and bombs. Troops and heavy weapons must be moved to the front, requiring fleets of planes, helicopters and trucks. Arsenals must be ready to reload weapons, necessitating stockpiles of munitions. Armies must be ready to defend themselves and to counterattack, which requires specialized systems. In Europe, all are in short supply.

The U.S. has also cut back its troop strength, naval fleet and tank forces from their Cold War highs. But Europe’s offerings are far outmatched by America’s high-end military capabilities, including advanced fighter planes, armed drones, elite special-operation forces and aircraft carriers.

Despite cutbacks in the Pentagon’s budget in recent years, U.S. military spending far exceeds Europe’s, and American conventional forces are generally better trained and equipped than their European counterparts. The U.S. defense budget, $680 billion by NATO calculations, dwarfs the alliance’s European members, which spend a total of $242 billion.

Europeans have tried for decades to more efficiently build military hardware and organize troops. That effort is littered with failures, delays and compromises. Today European allies spend roughly half as much as the U.S. on defense yet have less than one-sixth of its combat power, European officials acknowledge.

The U.S. has long chastised Europeans on their inadequate military. After the 2011 bombing campaign in Libya, U.S. Defense Secretary Robert Gates criticized allies for not having enough smart bombs to conduct the effort. NATO countries had to rely on U.S. targeting experts and refueling planes and even borrowed American munitions.

The real wake-up call, allied officials say, was Russia’s 2014 annexation of Crimea, followed by Moscow’s intervention in Syria. Both displayed new Russian tactics and weaponry. Suddenly long-ignored weapons of the Cold War became relevant again.

“The Russian ground forces have under way the biggest modernization program they have undertaken in the last 50 years,” said Christopher Foss, editor of Jane’s Armored Fighting Vehicles. “Their new vehicles are a step-change in capability on what NATO has got.”

For decades, NATO’s nuclear forces kept the peace, offsetting any imbalance in conventional forces. Russia wouldn’t risk annihilating the planet by invading a NATO country, the thinking went. But in view of the risks of nuclear war, the West would only consider pushing the button against an all-out attack. A a so-called hybrid scenario like Crimea, involving a handful of unidentified soldiers sneaking across a border to foment unrest, is impervious to nuclear deterrence.

U.S. President Donald Trump delivering a speech at last month’s NATO summit in Brussels as NATO Secretary-General Jens Stoltenberg looks on.

That is where conventional weapons fit in. The best way to prevent Moscow from stirring up trouble on NATO’s borders has been to ensure the world knew NATO had the firepower to win any kind of conflict, U.S. and allied officials say.

NATO’s challenges in achieving such deterrence today are exemplified in the decline in stocks of tanks.

During the Cold War, the Netherlands had 445 battle tanks. In 2015, the country put up for sale its last 60 tanks, along with its transport helicopters and many of its naval minesweepers. Instead, the Dutch sent soldiers to operate German tanks.

But Germany was also cutting tank numbers, from a Cold War peak of 2,125 Leopard 2 battle tanks to a force as of last fall of only 244, of which just over half were ready for action. The reduction has meant units sometimes have to borrow tanks from sister units for training with just hours’ notice, according to a parliamentary official.

A defense ministry spokeswoman said military units do sometimes need to borrow equipment from other units to carry out exercises—a problem, she said, that informed a recent government decision to invest more in such equipment.

The dearth extends beyond tanks. Last year, only around nine of Germany’s 48 NH-90 transport helicopters and 40 of its 123 Eurofighter jets were usable at any given time.

Hans-Peter Bartels, the German parliament’s armed forces commissioner who functions as a military ombudsman, said in his annual report this year that efforts to improve equipment and replenish munitions stores were taking too long. At Light Infantry Battalion 413 the battalion near the Baltic Sea, he said, materiel shortfalls led to “discontent and frustration” among the troops.

A German army spokeswoman declined to comment on whether the complaints reported to Mr. Bartels were accurate. She said the battalion currently has the equipment and munitions it needs to train properly and carry out its duties.

Stories of shortages abound in Europe. France recently sent only five tanks and 300 troops to a new NATO force in the Baltic states partly because French deployments in Africa, Syria and the streets of Paris have overtaxed its military, according to allied officials.

Britain’s storied Royal Navy is without a single aircraft carrier while it awaits the delivery of two carriers. When the HMS Queen Elizabeth sets sail in 2021, it may initially carry U.S. Marine Corps F-35B fighter planes while Britain builds up its own fleet. The U.K. has also placed its submarine-hunting crews with allies because it lacks planes and awaits new surveillance aircraft.

Britain and France—Europe’s biggest defense spenders—and Germany, its biggest economy, have all pledged to rebuild their militaries. In 2016, non-U.S. NATO military spending ticked up by $10 billion, an increase of 3.8% over 2015 outlays.

Officials say a first sign that Mr. Trump has had an impact may come later this month when NATO releases preliminary estimates for 2017 European defense budgets.

NATO’s goal that member countries spend 2% of economic output on defense is formulated as a loose target meant to be reached by 2024. But Washington increasingly treats it as a requirement. Days after the NATO meeting, Mr. Trump tweeted: “We have a MASSIVE trade deficit with Germany, plus they pay FAR LESS than they should on NATO & military. Very bad for U.S. This will change.”

German officials acknowledge their force has become hollow and vow to rebuild it—a decision they stress was made before Mr. Trump’s election. Chancellor Angela Merkel pushed through parliament a military budget increase of 8% for this year, to €37 billion ($42 billion). According to the German government, that represents 1.2% of the country’s gross domestic product. Ms. Merkel says she is committed to NATO’s 2% goal.

‘Better defense spending, not just more defense spending, is what is required’ —Douglas Barrie of the International Institute for Strategic Studies

German and U.S. critics say changes are too slow. The German defense ministry announced in 2015 it would rebuild its tank force, but the tanks haven’t arrived, to the frustration of U.S. military planners. The €760-million deal to refurbish 104 tanks was signed only last month. The two-year gap was due to the technical complexity of the refurbishment and procurement process, the German defense ministry spokeswoman said.

How money gets spent is another factor. “Better defense spending, not just more defense spending, is what is required,” said Douglas Barrie, a senior fellow at the London-based International Institute for Strategic Studies.

Transportation remains the most critical need, U.S. and NATO officials say. The U.S. has been urging allies to extend rail lines to training bases, since its transport trailers can’t legally carry tanks on European roads due to weight limits. The U.S. also wants Europeans to buy their own tank transporters.

Cargo planes and helicopters are also a big capability gap, officials say. If tensions with Russia flare on NATO’s borders, war plans call for reinforcements of front lines with NATO rapid-reaction forces. But deploying those forces quickly would likely depend on American equipment.

NATO Warship HMS Duncan docking in Belfast, Northern Ireland.

NATO says members are beginning to turn a corner. Later this month, the alliance will approve a new defense plan that boosts heavy equipment, like tanks, but also calls for additional surveillance planes, air refueling tankers and strategic airlift, according to a senior NATO official.

In the short term, the U.S. is filling the gap in European defenses. Last month, the U.S. announced plans for $4.8 billion in new military spending in Europe, an increase of $1.4 billion over last year.

In Germany, military spending has become an issue in September general elections. The main party challenging Ms. Merkel is casting her support for higher military spending as kowtowing to Mr. Trump, whom many German voters dislike.

Ms. Merkel’s chief electoral rival, Social Democrat Martin Schulz, said Thursday he would officially abandon the 2% goal if elected. “I don’t think this spiraling arms buildup makes sense,” he said.

At last month’s NATO summit where Mr. Trump lambasted Europeans, several leaders said they would publicly advocate higher military spending for the sake of their own national security, not American demands. But they also privately told Mr. Trump they agreed with him, according to diplomats.

“To an extent,” said Dutch Prime Minister Mark Rutte after the meeting, “he has a point.”

https://www.wsj.com/articles/europe-reckons-with-its-depleted-armies-1496444305?mod=nwsrl_africa_news

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Middle East

Nick Butler / FT: Life in the post-Opec era

The oil price is back where it was some months ago — with Brent crude struggling to stay above $50 a barrel. This is despite an extension of the Opec quota deal and the support of Russia. The fall in prices after the announcement of the nine-month extension on May 25 shows a lack of confidence in the cartel’s ability to reassert total control of the market. The open question is, what happens next?

First, let us dismiss one well-rehearsed conspiracy theory. The outcome is not a deliberate move by the Saudis to convince other Opec members to agree to a tighter quota regime driven by the fear that prices will slip still further.

The capacity of others to cut is very limited and the Iranians in particular are desperate to continue to increase production to rebuild their economy. Small cuts would easily be made irrelevant by production increases in the US or among other non-Opec member states. Only a major cut by the Saudis could make a real difference and there is no sign they are ready to sacrifice even more revenue to achieve that.

The reality is that the power of any group or single country to control the global market has been lost. There are too many other suppliers for the cartel to work. Welcome to the post-Opec era. What happens next will reflect the balance of supply (with its continued stock overhang) and demand across the world market.

In the short to medium term, oil supply looks strong and certainly stronger than demand. New fields are still coming onstream even in areas such as the North Sea and there is no obvious surge in demand. Low prices continue to give members of Opec and others incentives to keep production up to maximise revenue. The price fall over the last week is driven by scepticism that Iran, Nigeria, Libya and several others will abide by their quota limits for the next nine months.

Longer term, the analysis is more complicated. Some in the industry and parts of the financial market believe that the longer prices stay low, the sharper will be the correction. On this view, low prices discourage new investment and that means that new production will be limited. Meanwhile demand, especially from emerging economies such as India, will keep rising.

That is the conventional wisdom, well expressed in the International Energy Agency’s latest oil market outlook. But, like opinion polls, market outlooks carry a wide margin of error. In this case, key factors for both supply and demand suggest that the IEA’s forecast should be taken with a pinch of salt.

Clearly, the headline investment numbers in the oil industry have fallen in the last two years. Most of the majors have cut spending on exploration and new project development.

The headline numbers, however, disguise the underlying reality. Companies are cutting costs and simplifying operations for a lower price environment. They have done this before, after the sharp prices falls in 1986 and in the mid-90s. Cost discipline and ever-advancing technology are proving very effective. Those who expected the US shale industry or indeed North Sea oil to go out of business when prices fell from their peak of $115 three years ago have been proved wrong. Margins have been reduced but very few companies have gone out of business. US shale is now in most cases profitable at $50 a barrel, as is much of the North Sea.

The same approach is being taken to new developments. Certainly, projects have been postponed, feeding the view that future production will be limited. But in many cases the delay is designed to allow project managers to take 10, 20 or even 40 per cent out of costs. The fall in the total money invested reflects that and, rather than a sign of collapse, the numbers can be read as a measure of improved productivity.

If the supply forecasts could be too low the demand numbers certainly look too high. Was any of the increase in Chinese demand over the last three years driven by a desire to build stocks while prices were low? Will the Chinese economy grow over the next five years at 7 per cent a year (as claimed) or at something closer to the 2 per cent believed by many observers? Do China’s debt issues, which recently triggered a downgrading by Moody’s, not matter? Will electric vehicles begin to penetrate the market on a serious scale or will they remain no more than a lifestyle accessory for a tiny minority? And will the efficiency gains in the developed OECD world really amount to only 0.2mbd a year as the IEA predicts?

No one knows for sure, which is what makes the outlook so interesting. One thing does seem clear. The shape of the oil market and the trajectory of prices will be set by the answers to these and other questions about what will happen in the tight interplay of supply and demand. Oil will never be a “normal commodity” because so many crucial decisions involve politics. But its future will be determined in the open market not by a cartel of oil exporting countries meeting in a smoke-filled room in Vienna.

http://blogs.ft.com/nick-butler/2017/06/05/life-in-the-post-opec-era/

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*Massenbach’s Recommendation*

founded by George Friedman – What the Paris Agreement Doesn’t Say About US Power

June 7, 2017. Trump’s decision to pull out of the deal doesn’t indicate a waning U.S. presence in the world.

By Jacob L. Shapiro

U.S. President Donald Trump’s decision to withdraw from the Paris climate agreement is indicative of a problem that has hampered his presidency since he came to office. There are two factions within the administration that have mutually exclusive foreign policy goals. One, centered around chief strategist Steve Bannon, advocates “America First” strategies that align with Trump’s campaign promises. The other, centered around Secretary of Defense James Mattis, wants the U.S. to continue to work with the very international institutions the America First faction is trying to get out of. The result is an inconsistent American foreign policy that strains relations with allies and causes even greater friction with enemies.

Opposing Factions

The America First faction believes that participating in international institutions and agreements weakens U.S. power. Members of this faction want the U.S. to withdraw from the Paris Agreement, get tougher on trade with China, renegotiate NAFTA, and insist that NATO and other American allies pay their fair share of defense costs. If the U.S. decides cutting carbon dioxide emissions is in its interest, then it should do so, but cutting emissions only because a multilateral agreement obligates it to is a slippery slope and could infringe on U.S. sovereignty. Withdrawing from the Paris Agreement is a major symbolic victory for this faction.


Dozens of Connecticut residents converge along a bridge at a vigil and rally for the environment and against President Donald

Trump’s recent decision to withdraw the United States from the Paris climate accord on June 4, 2017, in Westport, Connecticut.

But it was a major disappointment for the second faction, which promotes international agreements and cooperation. One of the more prominent members of this group is the defense secretary, who has supported NATO and has focused his strategy to combat the Islamic State on a 68-member coalition assembled by the State Department. In a speech just last week, Mattis emphasized the role of international institutions such as the United Nations, the Association of Southeast Asian Nations and the International Monetary Fund in promoting prosperity in Asia and protecting countries from Chinese ambitions.

These are mutually exclusive worldviews, and they generate mutually exclusive foreign policies. On the one hand, Trump is pulling the U.S. out of the Paris Agreement. On the other hand, his secretary of defense and secretary of state are relying on multilateral institutions to pursue U.S. strategic interests. Neither faction appears strong enough to defeat the other. The result is inconsistency in American strategy and confusion among allies and enemies. In some cases, this undermines U.S. power abroad, and in other cases it creates an opportunity for countries like China to make the U.S. appear weak and self-absorbed.

What the Critics Are Missing

The media and Trump’s political opposition have focused on certain aspects of his decision, arguing that it will diminish the United States’ global leadership position. In focusing on these points, the critics have missed the bigger picture of U.S. power in the world.

First, the U.S. has always distrusted international institutions, but this has not destroyed U.S. power in the world. The U.S. has at times advocated their necessity, but it always made sure to preserve U.S. sovereignty, even at the expense of the efficacy of these institutions. The U.N. has been rendered powerless many times by the veto power of the Security Council’s permanent members. Its weakness is, in part, by American design.

Withdrawing from the Paris Agreement is, moreover, not unprecedented; many international treaties have failed to get through the American political system. For example, the U.S. Senate rejected the Treaty of Versailles, which established the League of Nations. Bill Clinton signed the Rome Statute in 2000, committing to join the International Court of Justice, but failed to get it ratified by Congress. The Paris Agreement’s predecessor, the 1997 Kyoto Protocol, was another agreement Clinton signed but couldn’t get ratified. George W. Bush announced his unwillingness to implement Kyoto just a year into his presidency. In each of these cases, the decision to withdraw from an international agreement was met with much criticism from people claiming it meant the U.S. had lost its standing as a global power. Each time, it wasn’t true.

Second, the Paris Agreement is unenforceable as written. The countries that have ratified the deal have agreed at the broadest level to cut carbon dioxide emissions. The quotas for these cuts, however, are to be decided country by country, and nowhere in the agreement is the issue of enforcement raised. There is no guarantee that the ratifying countries will cut emissions to the levels promised in the agreement, and there is no accountability for any country that decides to cheat. The best way to judge the efficacy of an international agreement is to look at the consequences for a signatory that fails to live up to it. By this standard, the Paris Agreement is a toothless initiative.

Last year’s OPEC agreement to cut oil production and boost oil prices is a prime example of why enforcement is a huge problem for such agreements. OPEC and non-OPEC oil exporters, including Russia, have every interest in keeping oil prices high, which is why they agreed to cut production. But despite their shared interest in abiding by this deal, Russia has fudged its numbers, claiming to have met its obligation when, in reality, it raised crude production in January and March 2017 compared with the previous year. This is a much smaller group of countries with a far more tangible goal (increasing oil prices) – and even they can’t stick to the terms of their agreement. The Paris deal apparently includes an unwritten suspension of the laws of human nature that allows it to avoid the prisoner’s dilemma inherent in the agreement’s framework.

The harshest critics of Trump’s decision to pull out of the Paris Agreement believe climate change is destroying the planet. That is a serious issue, but if meaningfully cutting carbon dioxide emissions is the goal, this deal is not going to achieve it.

Third, withdrawing from the Paris deal does not preclude the U.S. from cutting emissions if it so chooses. The previous administration pledged a 26-28 percent cut in greenhouse gas emissions from 2005 levels by 2025, and there’s no reason the U.S. can’t still meet that target. If major U.S. companies support emission cuts, they can reorganize their businesses to achieve them. If individual U.S. states want to cut emissions, they can implement measures to do so. And if a majority of the American population wants to reduce emissions, they can elect representatives who support such reductions. Other countries will cut emissions if it is in their interest to do so, and the same is true of the U.S.; a piece of paper printed in Paris doesn’t change that reality.

Fourth, President Barack Obama bypassed the Senate to enter the agreement in the first place. The legality of this action is questionable at best, but it certainly violated the spirit of the Paris Agreement itself, which stipulates that it must be approved by states, not heads of states. The agreement’s supporters in the U.S. also point out that even major energy corporations like Chevron and BP support the deal. The irony that environmentalists and liberal internationalists are taking their lead on climate change from a company like BP is lost on them.

Fifth, some have argued that withdrawing from the Paris Agreement cedes the future of the world order to China. This notion coincides with Beijing’s other supposed successes: It is working on the hugely ambitious One Belt, One Road initiative, constructing islands in the South China Sea and building aircraft carriers, and it will soon have a middle class exceeding the population of the United States. Withdrawing from the Paris Agreement is just the cherry on top – now, China will also become the world leader on climate change (even though it won’t be cutting its emissions until 2030, if it lives up to this pledge at all).

But this perception is not accurate. China is not on its way to challenging U.S. global supremacy, and the above examples indicate why. It’s not clear how China is going to fund One Belt, One Road. The U.S. has 11 aircraft carriers; the Chinese have two. China may have a burgeoning middle class, but it also had more people living on less than $3.10 a day in 2010 than there were people in the United States. The U.S. has become somewhat inept at communicating its position, but its power relative to other countries remains overwhelming.

The Bigger Picture

The media has made the case that the U.S. has abdicated its global responsibilities by leaving the Paris Agreement. This view acknowledges one aspect of American foreign policy while missing several others. The U.S. is the primary country in the world gearing up to deal with a North Korean regime that seems bent on developing nuclear weapons at any cost. The U.S. is leading the fight against the Islamic State. American soldiers are deployed in Eastern Europe to hold the line against potential Russian aggression. The specter of a U.S. recession is casting a heavy shadow on many of the world’s largest economies, because when the U.S. sneezes, the rest of the world catches a cold. The U.S. has chosen not to participate in an international agreement of limited importance, but that doesn’t mean that the U.S. has withdrawn from the world.

U.S. power is not waning; it’s maturing. One man’s isolationism is another man’s self-reliance. Maturation, however, is not a linear process. The battle raging within the Trump administration is a microcosm of an old argument that has been reanimated across the country between those who want to focus on domestic issues and those who want the U.S. to be a global leader.

What makes this different from previous iterations of this argument is that isolationism is not a viable way for the U.S. to conduct its foreign policy in the long term. The U.S. is the only global power in the world, and other countries look to it for leadership. They praise the U.S. when the U.S. lives up to their ideas about what it should be, and they castigate the U.S. when it disappoints them. Often this has very little to do with the U.S. and everything to do with what those other countries think about themselves.

In this case, though, the world sees the U.S. as it is: in a state of confusion. The U.S. insists that national interests are and ought to be the organizing principle of global politics, while simultaneously insisting that multilateral institutions are needed to help combat global threats to the liberal world order it helped build after World War II. The U.S. is trying to figure out how to be a global power. Withdrawing from the Paris Agreement will be consigned to the dustbin of similar moves in U.S. history. But the unpredictability of U.S. foreign policy has the power to reshape geopolitics, and it will do so for years to come. That is a marker of just how powerful the U.S. is. Its self-doubt is not contained by the oceans.

https://geopoliticalfutures.com/paris-agreement-doesnt-say-us-power/?utm_source=GPF+-+Newsletter&utm_campaign=eafb1c1c30-RSS_Reality_Check&utm_medium=email&utm_term=0_72b76c0285-eafb1c1c30-240043701

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WSJ: Gas Shipments Are On The Rise

Long Promised, the Global Market for Natural Gas Has Finally Arrived.

Liquefied gas, new infrastructure and revamped contracts have changed the calculus for consumers, countries and companies.

June 6, 2017 11:03 a.m. ET

A tanker holding liquefied natural gas for export at a Cheniere Energy terminal on the U.S. Gulf Coast in 2016.

One day in March, the Rioja Knutsen tanker, filled with liquefied natural gas, was traveling from the U.S. to Portugal. Suddenly, Mexico’s power company lobbed in a higher bid for its cargo. At the Bahamas, the ship abruptly made a starboard turn and headed south.

How natural gas is bought and sold in the world’s scattered regional markets for the fuel is changing rapidly. Ships such as the Rioja Knutsen are stitching those regions together and a single global market is emerging.

This is already how nearly every other hydrocarbon, from crude oil to obscure petrochemicals, is sold. As gas joins the club, the effects will ripple through energy prices, company profits, the environment and geopolitics.

Behind the evolution is improving technology for moving gas as a liquid, which means it can go to many more places rather than simply where a pipeline runs. In addition, a glut of gas has producers working to develop new consumers all over the world. The result is growing flexibility in once-rigid gas contracts and a convergence in prices long dictated by local factors such as weather.

Going Global

The seaborne trade in liquefied natural gas has grown significantly in recent years. LNG import volumes in million metric tons, by country:

Going Global

The seaborne trade in liquefied natural gas has grown significantly in recent years. LNG import volumes in millions of metric tons, by country:

Source: IHS Markit

The share of gas moving by sea reached 40% of total trades in 2015, and the International Energy Agency forecasts that seaborne gas will account for a bigger share of trading than pipelines by 2040.

Thirty-nine countries now import LNG, up from 17 a decade ago, according to data and analytics firm IHS Markit. Several more, among them Uruguay, Bahrain and Bangladesh, are expected to lift the total to 46 in the next couple of years.

In one sign of how gas is going global, the U.S. and China are working on a trade deal that could send vast quantities of gas pumped in Texas and Pennsylvania to factories in Shanghai and Guangdong. Improved access for U.S. exporters to China’s giant energy markets could boost overall global shipments.

The changes are contributing to rapidly narrowing price differences from place to place. In 2012, Asia spot prices for LNG were $5.74 per million British thermal units higher than natural-gas prices in Europe, according to S&P Global Platts. This year so far, the difference has averaged less than $1, something analysts expect to continue.

Created with Highcharts 5.0.10Coming TogetherMore LNG trade has contributed to a convergence in global gas pricing.THE WALL STREET JOURNALSource: S&P Global PlattsNote: NYMEX Henry Hub is a gas trading hub in Louisiana; JKM (Japan Korea Marker), a Platts price assessment of LNG deliveredin North Asia; TTF (Title Transfer Facility), a European natural gas trading hub in the Netherlands; and NBP (National BalancingPoint), the gas trading hub in the U.K.

Created with Highcharts 5.0.10.per million BTUsNYMEX Henry HubJKMTTFNBP2013’14’15’16’170.02.55.07.510.012.515.017.520.0$22.5NYMEX Henry HubxMarch 3, 2014x$4.492 per millionBTUs

Worries by U.S. political leaders that gas exports would drive domestic prices significantly higher haven’t been borne out, at least so far, as Energy Department studies show only marginal effects. The U.S. appears to be exporting its low gas prices rather than importing higher ones from the rest of the world.

As LNG import terminals open in more locations, gas pricing and trading mechanisms are developing as well. Some investors are increasingly using the gas price at a pipeline intersection in Louisiana, called the Henry Hub, as a global benchmark.

Trading in the New York Mercantile Exchange’s Henry Hub gas futures contract is becoming more global, said Peter Keavey, global head of energy at Nymex owner CME Group . In May, Standard & Poor’s and the Intercontinental Exchange launched the first futures contract based on LNG produced in the U.S.

Seaborne gas is reducing some countries’ historic dependence on pipelines that run through potentially unfriendly territory. Poland, for instance, opened its first import terminal a year ago, lessening its reliance on gas piped from Russia.

When global trade in LNG began in the 1960s, the cost of liquefying gas was so high it was a niche product, affordable only by developed countries such as Japan.

As the technology proved reliable, trade in LNG became more common, but contracts to deliver the fuel by ship were decadeslong and had ironclad destination clauses. Gas contracted for Tokyo couldn’t be rerouted to Seoul. Traders called gas tankers “pipelines at sea.”

Now, contracts are getting shorter and starting to allow gas to be diverted to where demand is greatest. Earlier this year, three large LNG buyers in Japan, China and South Korea agreed to work together to push sellers for more contract flexibility and fewer onerous restrictions.

The Armada LNG Mediterrana floating storage tanker entering a harbor in Malta in October 2016. Photo: DOMENIC AQUILINA/European Pressphoto Agency

At any given time, there are about 170 tankers filled with LNG on the world’s oceans, up from 150 a year ago, according to a tracker firm called ClipperData. Before long, traders will be able to “make a very quick phone call to get that gas to whatever market is in distress at that particular time,” said Charif Souki, chairman and founder of Tellurian Inc., which is seeking to export gas from the U.S. Gulf Coast.

At the heart of the changes is supply. Huge new discoveries in the U.S., Middle East, East Africa and Australia, along with recovery techniques such as fracking, have expanded the amount of gas available for export. Companies and countries are moving to develop new markets to where they can sell it all.

One pioneer is Houston-based Cheniere Energy Inc. Founded and led for years by Mr. Souki, Cheniere initially developed terminals to import gas along the U.S. Gulf Coast. When U.S. gas production soared in recent years, the company converted its facilities into export terminals. It has spent more than $19 billion on plants at Sabine Pass, La., and Corpus Christi, Texas, that cool gas to minus 260 degrees Fahrenheit, at which point it turns into liquid and can move by tanker.

The U.S. continues to import some gas via pipeline from Canada. By next year, Sabine Pass and other LNG terminals are expected to turn the U.S. into a net gas exporter.

In a quest for customers, Cheniere has invested in a Chilean project to build a power plant, LNG terminal, storage facility and pipeline. The company is willing to put in “early-stage capital, modest amounts of equity…to grow the LNG market,” said Anatol Feygin, chief commercial officer.

Oil titans Total SA and Royal Dutch Shell PLC also are offering to build facilities to burn gas. The two and their partners are building an import terminal and pipeline for an estimated $200 million in Ivory Coast, which will feed a power plant in the West African country’s economic hub of Abidjan.

Part of what persuades nations to invest in infrastructure to import and burn gas is a belief its price will stay low. There are no signs supply growth is slowing. Qatar, the longtime LNG leader, recently lifted a self-imposed moratorium on the development of its North Field, the single largest gas reservoir in the world. So far there is little indication Qatar’s diplomatic spat with Arab neighbors will affect the gas market.

The volume of LNG expected to be delivered this year, 294.1 million metric tons, is up 22% in three years. It is likely to rise 21% more by 2020, according to IHS data and forecasts.

“We are going into a period of oversupply, and prices will face downward pressure for some time,” said Gautam Sudhakar, an LNG analyst with IHS Markit.

Created with Highcharts 5.0.10Gas TradeA growing percentage of gas is beingmoved around by LNG in oceanvessels versus by pipeline.THE WALL STREET JOURNALSource: International Energy AgencyNote: 2040 is a projection.

Created with Highcharts 5.0.10LNGPipeline2000201520400%255075100

LNG faces competition even at low prices, because in some places it is cheaper to keep burning coal than to build gas facilities. In India, one of the world’s largest consumers of coal, it is renewables such as solar power, rather than natural gas, that may be mounting the strongest challenge. In nuclear power, Japan recently restarted some idled plants and China is building several new ones.

“LNG is going to have to fight for its place in the global energy mix,” said Keo Lukefahr, general manager of natural gas for the Americas arm of PetroChina International. “It has a narrow window to establish itself as a cost-competitive clean energy resource if it is going to realize its potential in the world’s energy supply.”

To take advantage of the window, producers are looking for new ways to finance gas-burning projects. Virginia-based AES Corp. is building a $1 billion project, including an import dock and gas-burning power plant, near the mouth of the Panama Canal, the recent widening of which has enhanced trading by letting larger tankers pass.

The project is aided by a $150 million loan from the World Bank’s International Finance Corp. It became involved both to provide Panama with needed power and because the plant will displace electricity from dirtier fuels such as diesel.

Helping make gas more accessible is a relatively new technology—floating LNG facilities.

Offshore plants can be built in about half the three years it takes to put up a land-based LNG import terminal. Their mobile nature also is an advantage in certain markets where an importer doesn’t have spotless credit. If it can’t pay, the terminal can weigh anchor and relocate.

The first floating terminal was christened in 2005. Today there are 25, according to the International Group of Liquefied Natural Gas Importers, a trade association. Excelerate Energy, a Houston company that developed this technology, is working on new floating terminals in Namibia, Bangladesh, Pakistan and elsewhere. The equipment to liquefy gas can also now be put on a large vessel that can be anchored offshore.

One sea creature owes its life to this new, interconnected gas market.

When the Rioja Knutsen tanker abandoned its Portugal destination to take advantage of an opportunity in Mexico, the Algerian energy company Sonatrach stepped into the breach, sending a tanker of LNG to Portugal.

That tanker, the Cheikh El Mokrani, returned to Algeria to fill up with a new cargo on April 9. As it idled off the coast, its crew spotted a small whale trapped in a fishing net. A sailor jumped in to untangle it. A video posted online showed the whale swimming free as the rest of the crew cheered.

https://www.wsj.com/articles/long-promised-the-global-market-for-natural-gas-has-finally-arrived-1496761392

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

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