Massenbach-Letter. NEWS 15.12.17

Massenbach-Letter. News – Make Water not War –

  • China’s Belt & Road Initiative (B&RI), also known as One-Belt-One-Road (OBOR)
  • George Friedman (GPF): What is Bitcoin?
  • EU-Japan Strategic Partnership Agreement

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

  • Will Donbass Live to See the UN Peacekeepers?
  • The Middle East and a New Round of Escalation of the War in Yemen
  • African Union-European Union Summit: The Security – Development Nexus in a New Way

Massenbach*Konrad-Adenauer-Foundation:Make Water not War

9. Dez. 2017 Wie Israel, die Palästinensischen Gebiete und Jordanien durch Wasser-Energie-Kooperation zueinander finden könnten …

Jordanien nutzt seine 330 Sonnentage und die dünne Besiedlung großer Flächen des Landes zur Produktion von Solar-Energie. Diese wiederum exportiert das Land nach Palästina und Israel für den Betrieb von Meerwasser-Entsalzungsanlagen, denn „wir können so viel Wasser entsalzen, wie wir wollen“, betont Oded Fixler vom israelischen Ministerium für regionale Kooperation. Das aus dem Meer gewonnene Wasser kann dann wiederum nach Jordanien fließen.

Auch die Küste von Gaza könnte sich künftig als Investitionsort für Entsalzungsanlagen anbieten. Die Zeit ist reif, denn „die Kosten sind gewaltig gesunken“ … Die Vorteile für die Menschen in den drei Ländern lägen den Machern der Studie zufolge klar auf der Hand: Das Projekt könnte der Region Energie-und Wassersicherheit für die nächsten Jahrzehnte bieten. Zusätzlich könnte Jordanien sein BIP um drei bis fünf Prozent steigern …

Israel könnte durch den Import der Solarenergie seine Klimaziele erreichen und die Palästinensischen Gebiete würden ihre Abhängigkeit von Israel bei den Wasser- und Energieressourcen reduzieren. Bislang ist die Autonomiebehörde nahezu allein auf Energielieferungen aus Israel angewiesen; maximal fünf Prozent stammten aus Ägypten und Jordanien.

Doch was vielleicht viel schwerer wiegt: Die Zusammenarbeit könnte im Nahen Osten „die Spielregeln verändern“ … Natürlich beinhalte das Vorhaben ein unternehmerisches Risiko, doch das sei „marginal“ … „Untätig sein birgt ein viel schlimmeres Risiko“ …9


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

  • Will Donbass Live to See the UN Peacekeepers?
  • The Middle East and a New Round of Escalation of the War in Yemen
  • African Union-European Union Summit: The Security – Development Nexus in a New Way


Policy= res publica

Freudenberg-Pilster* What Is Bitcoin?

By George Friedman

Dec. 11, 2017 To know how it will affect the economy, we need to be able to define it

Bitcoin has transformed from an idea that some treated with great enthusiasm to an asset of strikingly growing value. It is digital currency, of which there are many others, and its price has soared in recent weeks. I will admit to not understanding what bitcoins are in principle, to the extent that I have not even been able to define my own questions. But now that I have developed some basic level of understanding, my core question is this: Is bitcoin a currency designed to facilitate commerce, or is it a commodity that has intrinsic value, which rises and falls according to supply and demand?

  • A currency can be treated as a commodity, being bought and sold to take advantage of fluctuations in its value relative to other currencies and assets. But its primary purpose is to facilitate exchange within and between societies. The alternative exchange mechanism is bartering, in which the price of a pair of shoes is defined relative to myriad other unique items, from corn to books and beyond. The problem with this is that without a common currency that provides a common and understandable valuation of each item, the process of trade, from investment to purchasing food, slows with major consequences for the economy.
  • Alternatively, a currency arises with an exchange value separate from its use value. One example is gold, whose use value is somewhat limited, while its exchange value has been much higher, providing a stable basis for commerce.

Relative stability in the price of the currency is essential. If it fluctuates wildly and consistently, then it becomes a less efficient pricing mechanism for exchange. Prices always swing up and down, but their fluctuation cannot be so great that buyers and sellers hesitate to set prices for goods and services denominated in that currency, as the currency is no longer a reliable store of value. Currencies have on occasion plunged in value, causing economic paralysis and political chaos. They rarely soar in value overnight.

There are many who argue that the contemporary currencies, not backed by a fixed amount of gold, are not stores of value. But currencies are backed by the degree to which owning the currency enables you to enter the market of the nation that issues that currency and purchase goods and services at will. It is guaranteed by the fact that its price is sufficiently stable, moving by a few percentage points relative to other currencies, and by the fact that the U.S. dollar can be turned into any item in the American economy at will and transported out of the country. The dollar is the world’s reserve currency in part because the U.S. constitutes about a quarter of the world’s economy. The dollar therefore provides access to the largest market of goods and services that have use value, and therefore exchange value.

Bitcoin has not behaved anything like a currency. The recent surge in its value creates massive uncertainties. For example, should traders postpone sales of goods and services sold through bitcoin because they might receive a higher price for the same number of bitcoins tomorrow? Should buyers put off purchases to wait for the value of bitcoin to decline? Are bitcoins, like traditional currencies, divisible into smaller denominations to allow for variations in prices? These are questions that a healthy currency doesn’t pose to its users. There are fluctuations in value but ideally not to the point that all purchases become gambles.

Bitcoin has been behaving more like a commodity. Commodity values can surge – although usually not like this – and while commodities can be bartered, in general they are not used as currencies. If it is indeed a commodity, the next question to be asked is: What commodity is it? A commodity is an object with use value. That use value creates an exchange value, which is modified by market expectations. Bitcoin’s value is determined entirely by market expectations. The dollar’s value is stated relative to goods and to other currencies. Bitcoin’s value is defined only relative to the dollar. But the key is that bitcoin as a commodity has only an exchange value. It represents no underlying object with use value.

Obviously, any object can have value if others are willing to purchase it. Some purchases may be made in bitcoins, but given the hourly fluctuation in its value relative to the dollar, it might not be prudent. It is very difficult to use bitcoin as a currency, since the price of goods valued in bitcoin is currently rising dramatically. It is precisely that dramatic rise that holds open the possibility of a decline. Many seem to have made fortunes in bitcoin. They will soon start taking their profits, to be stored in dollars or real estate. And the problem with bitcoin, unlike real estate or tungsten, is that it has no intrinsic value beyond people’s confidence, and confidence is the most volatile of things.

Commodity markets are now preparing to trade in bitcoin futures. Brokers will allow bets on anything because they are bookies and take a cut of every transaction, whether the value of the thing being traded rises or falls. Brokers create markets, and the market they are creating is for a commodity that exists only as digital code. Its value, like that of the dollar, is its ability to use bitcoins to purchase things. That depends, in the U.S. at least, on the willingness of owners of things to accept bitcoins. And that depends on bitcoin’s stability.

It is neither fish nor fowl, and its advocates argue that that’s its virtue. I have trouble seeing the virtue, but it may be there. But both pricing it as a commodity when no commodity exists and trying to make it behave as a currency seem problematic. The problem is not that it is not issued by the government, nor that it is unregulated. The problem is that it is hard to see what it is.


Politics: From Vision to Action

Barandat*Water costs in Australia to double within 20 years

8 December 2017 Australians can expect to pay double for their water supply within 20 years unless there are big reforms, a report from Infrastructure Australia says. It says a lack of investment in ageing infrastructure, population growth in urban centres and climate change will play a part in pushing up prices … The independent statutory body has recommended privatisation of state-owned water utilities, regulatory reform and more efficient use of infrastructure to keep bills lower. However, privatisation would be unlikely to have public support and economists have shed doubt on whether it will result in lower bills … the report failed to discuss the partial privatisation of water utilities undertaken in South Australia, which had “generally unsatisfactory results” and that water privatisation in the UK, which the report held up as a successful model, had in fact been an expensive failure.

“Recent research suggests that water privatisation there has raised costs and that renationalisation is the best option.”



The Brexit-Belt and Road Axis: India for Neighbourhood First

November 2017 (24 Oct 2017) China’s Belt & Road Initiative (B&RI), also known as One-Belt-One-Road (OBOR), depends for its success on a tacit alliance with Britain and the financial acumen of the City of London. The London-Beijing axis has likely gathered momentum with Britain’s decision to quit the European Union (EU) in June 2016 and Prime Minister Theresa May’s triggering Article 50 of the Lisbon Treaty in March 2017, to begin the divorce process. With President Donald Trump prioritising economic revival (‘America First’), reluctant to bear the cost of European security (North Atlantic Treaty Organisation), and cancelling the US-led Trans-Pacific Partnership—a trade pact conceived to blunt Chinese domination—new economic and political alignments are taking shape globally. German Chancellor Angela Merkel has pointedly stated that Europe must chart a course independent of the United States and the United Kingdom. The Brexit negotiations and unexpected results of the June 2017 snap polls would take London closer to the Chinese yuan and Islamic finance … developments could deepen the mutual dependence between Beijing and London, as Beijing seeks professional services to raise finances for its ambitious B&RI projects and London seeks to deepen ties with rising economies like China and India. An unstated goal of the B&RI is internationalisation of the renminbi (Chinese yuan) as an international reserve currency, which China has craved since 2009, to reduce the international monetary system’s over-dependence on the US dollar. London set up the first renminbi offshore bond market outside Asia in 2012. In April 2016, the City of London secured rights from the Central Bank of China to develop the yuan market. The B&RI could make London the centre for renminbi-denominated bonds to support infrastructure projects … this Essay will mainly focus on the respective plans of China and India for connectivity and infrastructure development outside their borders … The B&RI will encompass over 60 per cent of the world population and over one-third of the global economic output, and will embrace Africa and South America. This will spread China’s strategic influence over the globe and help it to realise its quest for a Sino-centric unipolar Asia through the establishment of an empire of exclusive economic enclaves. Critics note that while China is adding all kinds of infrastructure projects under the Belt & Road banner, it has not yet arranged or contributed the funds … The activities of two China-based international financial institutions, the New Development Bank (NDB) or ‘BRICS Bank’, sponsored by BRICS governments to support infrastructure and development in member countries, and the 57-member Asian Infrastructure Investment Bank (AIIB), which aims to promote infrastructure-led development in Asia, could help in the spread of the renminbi … London offers access to a wide range of international investors and international financial institutions; meets international accounting and reporting standards, has credible credit ratings and transparency, and can handle complex project finance instruments. Several institutions in Europe, North America, the Middle East and the Asia-Pacific have chosen London as the base for renminbi-denominated bond issuances. Despite ‘Brexit’, London will remain a hub for foreign currency business and a market in which institutional investors and multinational firms will be comfortable raising funds … London needs to develop a secondary market and long-term yield curve for renminbi-denominated bonds, provide political risk insurance for countries partnering China on B&RI projects, and issue uniform standards for ‘green financing’. A secondary market would increase the number of bonds issued and provide trading and liquidity for long-term renminbi-denominated bonds. Barring Hong Kong, London is already the largest market for renminbi-denominated debt, and leads in offshore foreign exchange trading for renminbi … China has created several sovereign equity investment funds to provide equity investment for B&R projects, such as the Silk Road Fund … Beijing has already invested over $50 billion in countries in the OBOR zone since 2013; President Xi envisages trade volumes of $ 2.5 trillion within a decade, which has triggered interest from Europe’s languishing economies … China’s economic and diplomatic expansion through Asia includes nations and waterways that India regards as its natural sphere of influence … New Delhi has warned that countries joining the Silk Road plan would be saddled with an ‘unsustainable debt burden’ for the gigantic infrastructure projects being executed and funded by Chinese companies and banks … Xi Jinping … explained, aimed to ‘connect development strategies of different countries and complement each other’s advantages … China is willing to share its development experience with all the rest of the world, but we will not intervene in other nations’ internal affairs, export our social system and development model, nor force others to accept them’ … Russian President Vladimir Putin, who is interested in the China-Mongolia-Russia corridor and the development of Siberia and the Far East, presented Moscow’s vision for economic development in Eurasia and plans to build the shortest cost-effective and efficient transport routes through Russia for delivery of goods from the Atlantic to the Pacific. Moscow is keen to integrate the B&RI with Russia’s Eurasian Economic Union. The project involves infrastructure development (transport, railways, aviation, ports and airports) through joint efforts … The China-Pakistan Economic Corridor (CPEC) is the crown jewel of the B&RI … The detailed plan prepared by the China Development Bank promises ‘free and low interest loans to Pakistan’ once the corridor begins to yield income, but urges Pakistan’s federal and local governments to share financing through issue of sovereign guarantee bonds and budget outlays … Away from the limelight, India has been quietly working to create connectivity grids, including energy, and share technology in her neighbourhood … India is uneasy about China’s dogged pursuit of the OBOR, and the influence Beijing might wield through it … In the Indian Ocean region, India has started building infrastructure to enable Mauritius to emerge as a hub for petroleum storage and bunkering … Energy ties are being firmed up with Indonesia, a large source of hydrocarbons … Myanmar has energy sources, but under an old agreement, China takes nearly 80 per cent of its gas … India is trying to become involved in LPG storage and distribution in Myanmar … New Delhi has also firmed up energy ties with Sri Lanka and Bangladesh … Nepal receives adequate power from India … In a unique act of ‘stratospheric diplomacy’, the Indian Space Research Organisation (ISRO) successfully launched the South Asia Satellite, a geostationary communications and meteorology satellite (GSAT-9), that Prime Minister Narendra Modi gifted to countries of the South Asian Association for Regional Cooperation (SAARC) as part of his Neighbourhood First policyIndia and China are pursuing different paths to trade and energy connectivity and infrastructure development in their chosen spheres of influence. Some of these could run parallel to each other; some could intersect at some stage. The independently conceived Bangladesh-China-India-Myanmar Economic Corridor (BCIM-EC) that China later added to the Belt & Road Initiative is one such project. The next B&RI summit, slated for 2019, could indicate the actual pace and progress of the most ambitious project of the 21st century.


*Massenbach’s Recommendation*

Fact Sheet: Kunming-Singapore High Speed Rail Network

December 7, 2017

Geopolitical Monitor

The Nanning-Singapore Economic Corridor, or China-Indochina Peninsula Economic Corridor (CICPEC), is one of the six major corridors envisioned by China’s One Belt One Road Initiative (OBOR). Its goal is to deepen economic links between ASEAN countries in Southeast Asia and China’s relatively underdeveloped southwest region (Yunnan, Guangxi). The plan hopes to do so by facilitating the construction of cross-border rail and road infrastructure projects, streamlining customs procedures, and harmonizing regulations whenever possible. It builds on the ASEAN-China Free Trade Area that came into effect in 2010. OBOR isn’t the only cooperation mechanism in the region; as a relative newcomer, it has slotted in with other initiatives such as the Greater Mekong Subregion Economic Cooperation Program and the ASEAN Economic Community of 2015 (an initiative aimed at fostering greater economic integration within ASEAN itself).

This fact sheet will focus on plans to link the region with high-speed rail. The idea is not a new one – European colonial powers dreamed of linking their holdings in the 18th century, and more recently the idea of a Pan-Asian Railway Network has been floated by ASEAN and China throughout the 1990s and 2000s.

Only now has the scheme become remotely possible, and even so there are still hurdles to be overcome. Some are economic: securing finance for new infrastructure projects and ensuring that new routes are profitable (along with the overriding question of who pays when they’re not); some are political: ASEAN members have various degrees of concern over ceding regional leadership to China; and some are merely technical: new rail lines must traverse vast tracts of land and navigate mountains, valleys, rivers, etc.

The Pan-Asia Railway Network has been envisioned as three possible routes, with China’s Kunming and Thailand’s Bangkok serving as two central hubs: an eastern route that runs through Vietnam and Cambodia; a western route that runs through Myanmar; and a central route that runs through Laos and Thailand before proceeding southward to Singapore via Malaysia. Of these three possible courses, it’s the central route that has seen the most substantial progress in recent years.


The EU and Japan are about to adopt two (potentially) ground-breaking agreements:an EU-Japan free trade agreement and the EU-Japan Strategic Partnership Agreement (SPA). The SPA, policymakers in both Brussels and Tokyo cheer, will be the ‘big bang’ of bilateral relations upgrading political and security ties from too passive to very active.

In the new issue of the Asia Policy Brief, Axel Berkofsky, Professor at the University of Pavia, Italy, and Senior Associate Research Fellow at the Milan-based Istituto per gli Studi di Politica Internazionale (ISPI), analyses the importance and potential outcomes of the SPA, which has been agreed “in principle” and which both sides hope to finalize by the end of the year. He argues that the adoption of the SPA would send a strong message that Europe and Japan are willing to uphold the universally established norms and values that are increasingly being challenged around the globe. (for more see attachment)



see our letter on:

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



12-12-17 Donbass_Yemen-African-European Summit.pdf

12-12-17 EU-Japan Strategic Partnership Agreement (SPA)_Bertelsmann_Asia_Policy_Brief_DA_2017_03_engl.pdf