Massenbach-Letter. NEWS 18.05.18

Massenbach-Letter. News

  • The United States and the Holy See: An Enduring Vision for Peace and Freedom
  • Donald Trump – Der beste Außenpolitiker seit George Bush Senior?
  • FP: Regime Change for Dummies
  • Kingdom of Saudi Arabia: Wall Street Journal: ‘I Am the Mastermind’: Mohammed bin Salman’s Guide to Getting Rich

· Rising oil prices boost U.S. economy: Kemp – Reuters News

  • Chatham House: Russia’s New State Armament Programme:

Massenbach*The United States and the Holy See: An Enduring Vision for Peace and Freedom

President Ronald Reagan meets with Pope John Paul II in Fairbanks, Alaska on May 2, 1984.

By Callista L. Gingrich on May 14, 2018

Since taking up my post as United States Ambassador to the Holy See on December 22, 2017, I’ve often been asked to explain the benefits of maintaining an embassy to the Vatican. After all, the territory of the Holy See, the government of the Roman Catholic Church, occupies less than one quarter of a square mile. So why do we need an embassy?

The answer is rooted in history. When Pope John Paul II arrived in Poland on June 5, 1979, during his first official pilgrimage to his native land, he declared "There can be no just Europe without the independence of Poland marked on its map!”

President Reagan, inspired by the pontiff’s message that Eastern Europe would soon be free from Soviet dominance, requested a meeting with Pope John Paul II. When the two leaders met in Vatican City in 1982, President Reagan asked, “Your Holiness, when will that be?” When the Pope responded, “In our lifetime,” the President grabbed his hand and said, “Let’s work together.”

Following their meeting, President Reagan returned to the United States and instructed the State Department to work closely with the Vatican. “I want a full-fledged embassy,” he ordered. Two years later, in 1984, the United States Embassy to the Holy See was established.

The embassy’s mandate was to work hand-in-hand with the Holy See to counter the destructive and destabilizing behavior of the Soviet Union. We succeeded through the leadership of President Reagan and Pope John Paul II, and the resilience of the American people. Today we are faced with different challenges — equally great and perilous.

As Cardinal Theodore McCarrick, Archbishop Emeritus of Washington, D.C., noted, "President Reagan not only forged a strong personal relationship with His Holiness John Paul II, but also an important diplomatic synergy between the United States and the Holy See.”

That synergy endures to this day. The necessity of our partnership did not end with the fall of the Berlin Wall. It remains critical to U.S. national security priorities, from responding to humanitarian crises and safeguarding human rights to countering the aggressive behavior of states and preventing and mediating conflict.

And the reason is simple: The Vatican is a soft-power superpower. Its impact, under the leadership of Pope Francis, is real and respected around the world. The Church is engaged on every continent, advancing human rights and religious freedom, mediating conflict and preventing violence, inhibiting the spread of epidemics like HIV/AIDS and Ebola, and fighting terrorism. The Holy See also has the second largest diplomatic presence behind the United States – with 183 diplomatic partners.

The Vatican, through an unrivaled network of local contacts, plays an active role in countries where many governments have difficulty operating, from the Central African Republic and South Sudan to Syria.

Across much of Africa, the Catholic Church serves on the frontlines as the only viable institution in society. In the Democratic Republic of the Congo, the Catholic Church continues to play a critical role in supporting political dialogue and providing humanitarian relief. In the Central African Republic, the Holy See has been and remains a crucial mediating force, bringing opposing parties together and achieving results. Pope Francis’ visit in 2015, for example, brought Muslims and Christians together, helping to pave the way for a peaceful and democratic presidential election.

The Vatican’s unique ability to develop trust, work with local communities, and deliver messages is unlike any nation-state. And the Catholic Church is one of the world’s largest providers of education, healthcare, and humanitarian assistance. Its extensive network of relief workers and service providers has access and credibility in the world’s most troubled areas. America benefits from this enormous reach and soft-power influence.

In short, the United States Embassy to the Holy See serves as a global engagement post. We leverage the global impact and network of the Vatican – extending to more than 1.3 billion Catholics and millions of non-Catholics as well – to promote our common priorities in every region of the world.

The Vatican is also an important U.S. partner in fighting modern slavery, promoting democracy, and safeguarding human rights, particularly related to religious freedom.

For example, the United States and the Holy See share a commitment to combating the global evil of human trafficking. President Trump has pledged to bring the “full force and weight” of the U.S. government to this fight.

Pope Francis talks with Callista Gingrich, U.S. Ambassador to the Holy See, during a private meeting Dec. 22, 2017 at the Vatican. (Courtesy of U.S. Embassy to the Holy See)

Our two governments are likewise committed to protecting and promoting religious freedom in every part of the world. As indicated in the 2016 International Freedom Report, when this fundamental right is denied, “instability, human rights abuses, and violent extremism have a greater opportunity to take root.” Our embassy works closely with the Holy See to secure the future of not just Christian minorities but all religious minorities who are persecuted simply for professing their faith.

The Holy See’s vast global influence makes it a critical partner to address a wide range of issues. Working together with the Vatican, the United States Embassy to the Holy See will continue to promote peace, freedom, and human dignity throughout the world.

About the Author: Callista L. Gingrich serves as the United States Ambassador to the Holy See.


Adapting Russia’s armed forces to today’s challenges will require sustained investment in modernization efforts and military R&D
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Chatham House
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The Russia and Eurasia Programme is delighted to announce the publication of a new research paper:
Russia’s New State Armament Programme:
Implications for the Russian Armed Forces and Military Capabilities to 2027

by Richard Connolly and Mathieu Boulègue

s.gif The newly approved state armament programme (GPV 2027) will form the basis of Russia’s defence procurement and military priorities until 2027. Over the next decade, the Ministry of Defence will be allocated the vast majority of around R19 trillion ($306 billion) for the procurement of military equipment, its modernization and repair, and research and development (R&D). However, as inflation has eroded the value of the rouble since 2011, the new programme is less ambitious than its predecessor in real terms.
s.gif GPV 2027 is likely to focus on force mobility and deployability, military logistics, and strengthening command-and-control (C2) systems. Additional emphasis is likely to be placed on the standardization and optimization of existing systems. GPV 2027 will guide defence procurement and the modernization of the armed forces. The modernization of Russia’s strategic nuclear triad is expected to remain a priority. The ground forces can expect a larger share of funding than before. Meanwhile, the country’s Aerospace Forces (VKS) will probably concentrate on filling existing gaps in procurement, as well as on boosting power-projection capabilities and force mobility. Air defence systems, and the honing of deterrence and anti-access capabilities, will probably keep playing an important part in military planning.
s.gif Key external factors affecting the implementation of GPV 2027 will include ‘lessons learned’ from operational combat experience in Ukraine and Syria since 2014, as well as negative impacts of targeted international sanctions on Russia’s defence sector and from the breakdown of military cooperation with Ukraine since 2014. Internal factors will include the struggle to modernize military equipment, the need to increase the effort around military R&D, and the existence of long-term, unresolved issues relating to the internal workings of the defence industry.
s.gif By 2027, the Russian armed forces are likely to be considerably better equipped than they are today. Nevertheless, one should not overstate the pace of probable modernization. While some progress may be made in the development of new-generation equipment, the armed forces will probably still rely on a mix of legacy hardware and modernized Soviet systems alongside new designs. Providing Russia with 21st-century military capabilities and adapting its armed forces to today’s challenges will require sustained investment in modernization efforts and military R&D.
Dr Richard Connolly is an associate fellow with the Russia and Eurasia Programme at Chatham House. He is a senior lecturer in political economy and co-director of the Centre for Russian, European and Eurasian Studies at the University of Birmingham. His research and teaching are principally concerned with the political economy of Russia.

Mathieu Boulègue is a research fellow with the Russia and Eurasia Programme at Chatham House. Before joining Chatham House, he was a partner at the risk management and strategic research consultancy AESMA, where he worked as director of Eurasian affairs. In his research, Mathieu focuses particularly on Eurasian security and defence issues, as well as on Russia’s domestic and foreign policy.

Read the full research paper >


Policy= res publica

Freudenberg-Pilster* Donald Trump – Der beste Außenpolitiker seit George Bush Senior?

KOLUMNE: GRAUZONE am 12. Mai 2018

Außenpolitisch erreicht Donald Trump einen außenpolitischen Erfolg nach dem nächsten: die Aufkündigung des Atomabkommens mit dem Iran, das Gipfeltreffen mit Kim Jong-Un. Die Europäer sollten von diesem Verhalten lernen. Von Alexander Grau

Alexander Grau ist promovierter Philosoph und arbeitet als freier Kultur- und Wissenschaftsjournalist. Vor Kurzem erschien sein Buch „Hypermoral. Die neue Lust an der Empörung“ beim Claudius Verlag München.

Auch wenn es in Deutschland kaum einer laut sagt: Außenpolitisch macht Donald Trump alles richtig. Ob mit Plan, aus Überlegung, schlauem Kalkül oder purem Zufall, das sei einmal dahingestellt. Tatsache ist aber: Die Chance, dass Trump in die Geschichte als der außenpolitisch erfolgreichste Präsident seit George Bush Senior eingehen wird, ist überaus groß. Im Grunde ist er es schon jetzt. Erfolgreicher als der Multilateralist und Friedensengel Barack Obama ist er allemal. Aber das war auch nicht so schwer.

Trump hat Nordkorea unter Druck gesetzt. Pjöngjangs Abrüstungsofferten und das Zusammentreffen von Kim Jong-Un und Südkoreas Präsident Moon Jae In sind sein Verdienst. Auch die Freilassung der drei US-Amerikaner durch Nordkorea, die dort seit Jahren inhaftiert waren, ist ein direktes Ergebnis seiner Politik. Gleiches gilt für den am 12. Juni in Singapur anberaumten Gipfel zwischen ihm und Nordkoreas Diktator Jong-Un.

Ein neuer Ansatz ohne Scheinheiligkeiten

Derselben Linie folgte die Verlegung der US-amerikanische Botschaft nach Jerusalem. Wo hasenfüßige Europäer mal wieder einen Frieden gefährdet sahen, der ohnehin nicht existiert, signalisierte Trump, dass mit der als „Friedenprozess“ apostrophierte Farce Schluss sein muss. Es braucht einen grundlegend neuen Ansatz ohne Selbstbetrug und Scheinheiligkeiten. Denn zur Wahrheit gehört, dass der Iran seit Jahrzehnten an der Destabilisierung des Nahen Ostens arbeitet. Sein Endziel ist die Vernichtung Israels und die Konsolidierung des schiitischen Halbmonds, also eines Herrschaftsbereichs von der Mittelmeerküste über den Iran bis nach Bahrain.

Dazu dient unter anderem die Hisbollah im Libanon, die als Machtinstrument Teherans nach dem Ausbruch des Bürgerkriegs im Irak noch an Bedeutung gewonnen hat. Hinzu kommt, dass in Syrien, also an der israelischen Grenze, nunmehr Einheiten der iranischen Revolutionsgarden stationiert sind. Dass es so kam, ist kein Zufall, sondern basiert auf Überlegungen der Obama-Administration: Angesichts zerfallener Staaten und des damals erstarkten IS sollte der Iran als stabilisierende Regionalmacht etabliert werden. Man hat mithin den Bock zum Gärtner gemacht. Denn es ist Teheran, das aus genannten Gründen maßgeblich zur Destabilisierung beiträgt und droht einen Flächenbrand zu entzünden.

Abkommen hat Iran gestärkt

Ein Eckpfeiler dieser kurzsichtigen Politik war das unsägliche Atomabkommen, das in Europa und insbesondere hierzulande als Friedensfetisch gilt. Nun hat Michael Wolffsohn hierzu schon das Wesentliche festgestellt. Daher nur noch einmal die Eckpunkte: Das Abkommen akzeptiert den Schwerwasserreaktor in Arak und damit die Möglichkeit der Urananreicherung. Lediglich sein Umbau wird in Aussicht gestellt. Die Infrastruktur des Nuklearprogramms blieb weitgehend erhalten. Von den circa 19.000 Gas-Zentrifugen konnte der Iran 6.104 zur Urananreicherung behalten. Das erscheint als gewaltige Reduktion, faktisch wurden aber nur ungenutzte Zentrifugen der ersten Generation abgebaut. Forschung an den Zentrifugen in Fordo ist nach wie vor erlaubt. Hinzu kommt, dass das zentrale Anliegen – die Herstellung hoch angereicherten Urans – dem Iran ohnehin nur bis 2030 untersagt ist. Damit relativierte das Abkommen die Resolution der Internationalen Atomenergiebehörde (IAEA) vom Februar 2006.

Kurz: Das Atomabkommen hat die Fähigkeit Irans zur Entwicklung von Atomwaffen kaum geschmälert. Langfristig schon mal gar nicht. Es hat Iran als Regionalmacht zurückgebracht ins Spiel und das Regime ökonomisch stabilisiert. Nicht ohne Grund warnten im März 2015 republikanische Senatoren die Regierung in Teheran, das Abkommen zu unterzeichnen – es werde die Amtszeit Obamas nicht überstehen. Trump hat daraus die Konsequenzen gezogen. Das Abkommen hätte nie unterzeichnet werden dürfen. Es ist nicht nur ein schlechter Deal, es ist gar kein Deal, zumindest wenn man darunter ein Abkommen zum wechselseitigen Nutzen versteht.

Trump ist erfolgreicher als Obama

Soweit die Situation. Doch in Europa ist man verliebt in eine Politik des Nichtstuns und hält das für höhere Diplomatie. Das gilt für die Spannungen innerhalb der EU, das gilt für die Migrationspolitik, das gilt für die Situation in Nahost und galt für Nordkorea. Der Volksmund hat für diesen Umgang mit Konflikten das Bild des Vogels Strauß gefunden, der seinen Kopf in den Sand steckt. Dabei ist der Strauß bekanntermaßen ein recht wehrhaftes Tier.

Donald Trump, so hat man den Eindruck, hat verstanden (oder spürt zumindest instinktiv), dass diese Politik des Wegduckens vor aggressiven Regimen und Auf-die-lange-Bank-Schiebens existentieller Konflikte erst die Probleme schafft, die sie verhindern will. Die Obama-Administration war für diese Art von Schneeflocken-Politik das abschreckende Beispiel. Dass Trump schon jetzt außenpolitisch mehr erreicht hat als sein Vorgänger in acht Jahren, könnte eine Lehre sein. Dass sie gehört wird, ist jedoch unwahrscheinlich.


Politics: From Vision to Action

Barandat* FP: Regime Change for Dummies

“No population likes taking orders from well-armed foreign occupiers, no matter how benevolent their original intentions might have been.”

A brief global history of a tactic that’s back in style: toppling other countries‘ governments.

Stephen M. Walt – May 14, 2018 –

Col. Muammar Gaddafi arrives at the United Nations General Assembly at U.N. headquarters Sept. 23, 2009 in New York City.

In my last column, I argued that U.S. President Donald Trump’s rash decision to violate the Iran nuclear deal was the first step in a new round of regime change in the Middle East. If his goal was stopping an Iranian bomb and preventing a regional arms race, the existing agreement was working just fine, and he should have been trying to make it permanent instead of gutting it. If his goal was stopping Iran’s “regional activities,” the smart strategy would have been to keep the country from going nuclear while working with others to bring Iran to heel through pressure and additional diplomacy.

Instead, Trump, National Security Advisor John Bolton, and Secretary of State Mike Pompeo are hoping that violating the Iran deal will let them re-impose sanctions on Iran. They hope this pressure will topple the Islamic Republic, or lead Iran’s own hard-liners to restart its nuclear enrichment program and provide a pretext for the preventive war that Bolton has long advocated.

More sensible strategists might have first considered whether this goal even makes sense. What does history teach us? Did previous efforts at regime change (by the United States and by others) produce the expected benefits, or did they end up making things worse? Does regime change produce real benefits at relatively low cost, or is the price tag usually much higher than expected, while the benefits tend to be disappointing?

The answers, in fact, are pretty obvious, as can be seen from the following brief history of regime change. (Spoiler alert: It’s almost always a very bad idea.)

The Iran coup, 1953: In the Middle East, the grandfather of post-World War II regime changes was Operation Ajax, the joint American and British effort to topple the democratically elected Iranian Prime Minister Mohammed Mossadegh in 1953 and restore the young Shah Mohammed Reza Pahlavi to the throne. The plot was a brilliant tactical success, and one could argue that the shah was a valuable ally to the United States until 1979. But the shah was something of a mixed bag as an ally (among other things, he began Iran’s nuclear weapons program), and the U.S. role in placing him on the throne and backing him is the main reasons that the Ayatollah Ruhollah Khomeini and his political descendants have been so hostile to the United States. The lesson: even short-to-medium-term success sometimes leads to much bigger problems later on.

The Suez debacle: After the Egyptian government nationalized the Suez Canal Company in 1956 (a perfectly legal maneuver, by the way), the leaders of Britain, France, and Israel colluded in a harebrained scheme to topple Egyptian leader Gamal Abdel Nasser. Israel agreed to invade the Sinai Peninsula, providing the pretext for Britain and France to intervene to “protect the canal.” The attackers assumed that the defeat would puncture Nasser’s prestige and led to his ouster. The result was a humiliating failure: Although the Israeli assault went well, the scheme fooled precisely no one, and the United States and Soviet Union eventually forced Britain, France, and Israel to withdraw from the territories they had seized. Not only did Nasser not fall from power, but his defiance of the two former colonial powers and Israel also sent his prestige soaring. In the end, the Suez war mostly succeeded in demonstrating that Britain and France weren’t true great powers anymore.

Egypt’s Yemen adventure: Unfortunately for Egypt, Nasser’s prestige went to his head, and in the early 1960s he decided to intervene on the side of supposedly progressive forces in the Yemen Civil War. Egypt eventually sent more than 50,000 troops there, spent money it didn’t have, and ended up withdrawing five years later with nothing to show for it.

Ariel Sharon’s grand scheme: In 1982, Israel invaded Lebanon, ostensibly in retaliation for the attempted assassination of the Israeli ambassador in London but in fact as part of a grand scheme that then-Defense Minister Ariel Sharon had cooked up. In an attempt to rout the PLO and install a pro-Israel government in Lebanon, Israel’s troops invaded its neighbor, shot down a bunch of Syrian aircraft, and chased Yasser Arafat and the PLO all the way to Beirut. But the whole scheme soon unraveled, Israel ended up occupying Southern Lebanon until 2000, and the end result was the creation of Hezbollah. Well done, Arik!

Saddam Hussein vs. the world: Mired in debts following the Iran-Iraq War, in 1990 Iraqi President Saddam Hussein invaded Kuwait and tried to annex it. This blatant attempt to solve his many economic and internal problems failed completely, because an unlikely coalition of Western and Arab powers led by the United States quickly assembled to toss Iraq out of Kuwait, destroy much of its military power, and then dismantle his various weapons of mass destruction programs. Saddam managed to cling to power, but his effort at “regime change” in Kuwait was an abject failure.

Toppling the Taliban: When the Taliban regime in Afghanistan refused to deliver Osama bin Laden into U.S. custody after Sept. 11, the United States joined up with the Afghan Northern Alliance and intervened to drive the Taliban from power. Washington then helped coordinate the formation of a new Afghan government under Hamid Karzai. Guess what? That was more than 15 years and a trillion dollars ago, and today the United States is still mired in a war it can’t win and can’t seem to get out of. Turns out toppling governments is easy; creating new ones is really, really hard. And don’t forget that the Soviet Union had a similar experience when it tried to engineer regime change in Kabul and ended up in a protracted war it couldn’t win either.

The United States vs. Saddam Hussein, 2003: In the aftermath of 9/11, the George W. Bush administration embraced the neoconservative blueprint for “regional transformation” in the Middle East, beginning with the invasion of Iraq and the ouster of Saddam Hussein. President Bush and Vice President Dick Cheney fell for this cockamamie scheme; Israeli leaders such as Shimon Peres, Benjamin Netanyahu, and Ehud Barak helped sell the idea to the American people, and plenty of liberal hawks bought into the idea as well. With hindsight, however, the whole idea was positively delusional. The United States had little trouble defeating Saddam’s fourth-rate army, but the end result was a bitter insurgency, greatly expanded Iranian influence, and eventually, the emergence of the Islamic State. The war also cost the lives of more than 7,000 U.S. soldiers and contractors and left more than 50,000 wounded, and it cost the American taxpayer several trillion Neoconservative die-hards — including John Bolton — defend the decision to this day, but neither the price tag nor the result is what they confidently predicted back when they were leading the country to war.

Ousting Qaddafi: Libyan leader Muammar al-Qaddafi was a thorn in America’s side since he first seized power in 1969, but an extended multilateral sanctions campaign eventually persuaded him to give up Libya’s WMD programs, which were not far advanced. In exchange, the George W. Bush administration agreed to leave him in power and to refrain from regime change. When an anti-Qaddafi uprising began as part of the Arab Spring, however, President Barack Obama promptly reneged on Bush’s pledge and joined forces with Britain, France, Oman, and some other Arab countries to get rid of the pesky megalomaniac. The end result was not a new, prosperous, and tranquil Libya, however; instead, the country soon descended into anarchy, creating new opportunities for the Islamic State and allowing lot of unsecured weaponry to flow to other war zones.

“Assad must go” (or maybe not): As with Libya, outside powers could not resist trying to interfere in the uprising against Syrian dictator Bashar al-Assad. The Obama administration declared “Assad must go,” and Saudi Arabia, the United States, Turkey, and a number of other powers tried to aid the anti-Assad forces, despite fears that this might result in a jihadi takeover. Russian and Iranian intervention kept Assad in power, however, and the end result has been more than a half million dead and a continuing struggle for power that keeps threatening to escalate further.

I could toss in America’s failed efforts to manage political transitions in places such as Yemen or Somalia as well, but you get the point. And lest you think I’ve just cherry-picked the biggest disasters, more comprehensive studies of the full universe of “foreign-imposed regime changes” have shown that it rarely produces the beneficial outcomes that its advocates predict. Given this sorry track record, you’d think outside powers would understand that “regime change” is a Pandora’s box that is best left firmly closed.

The reasons aren’t hard to understand.

First, toppling a foreign regime puts other regimes on notice, and they begin to take action to avoid a similar fate. It is not surprising that Iran and Syria both intervened to thwart U.S. efforts in Iraq, for example, because they knew they were next on the U.S. hit list if the Iraq adventure had succeeded. And it is equally unsurprising that North Korea sacrificed much to get nuclear weapons, or that Iran has seriously considered doing so, given that the United States has repeatedly called for their demise. The more the United States makes regime change a staple tool of its foreign policy, the more resistance it is likely to face.

Second,toppling a foreign government isn’t the end of the job — it’s when the hard work really starts. Removing an existing regime creates winners and losers, and the latter are usually willing to take up arms or do other unpleasant things to try to regain their former positions. Instead of a thriving and stable democracy, with political competition regulated by well-established and legitimate institutions and norms, the more likely result is a failed state and civil war.

Third, once installed in power, the new government is rarely the compliant tool that regime-changers expect. Hamid Karzai was hailed as the ideal leader for post-Taliban Afghanistan, but he proved to be a recalcitrant and uncooperative politician who refused to crack down on corruption or take the advice of the Americans on whom his government depended. Iraq’s post-Saddam leaders have hardly been reliable U.S. clients either, and some of them, such as former Prime Minister Nouri al-Maliki, were more sympathetic to Iran from the start. Even when you help bring someone to power, they have to govern with their own interests and political survival in mind, and that often means doing things that Americans won’t like. This is especially true in the Middle East, where the United States is broadly disliked (and not without reason).

Compounding this problem is ignorance: Foreign powers that intervene to topple a local government rarely know enough about the society they are entering to make smart decisions about the new order that must now be created. They won’t know which local leaders are reliable or honest, or have sufficient cultural understanding to devise institutions that will be seen as legitimate by the local population. No matter how bad things were before the old regime was toppled, the situation is likely to be even worse once the old order has collapsed. Regime-changers always claim they will be greeted as liberators, but the more likely outcome is a population that is quickly disillusioned and soon becomes resentful and violent.

Lastly, no population likes taking orders from well-armed foreign occupiers, no matter how benevolent their original intentions might have been, and heavy-handed measures to deal with pockets of resistance will ignite nationalist passions and generate new sources of opposition. That’s been the story nearly everywhere the United States has intervened in recent years, and the U.S. experience is far from unique.

The real puzzle, of course, is why the United States seems incapable of learning this rather obvious lesson. One reason it doesn’t learn is that it is the countries where it intervenes that bear most of the costs of its imperial follies, while the only Americans who die or are wounded are those who have volunteered for military service.

And because the United States now finances wars by borrowing, the economic costs will be paid by future generations, not by those who are making decisions today. Add to this mix the phalanx of well-funded, hawkish think tanks, letterhead organizations, lobbies, and campaign contributors that buy up politicians and provide Bolton and his ilk comfortable sinecures from which to operate, and you can begin to understand why a president who used to say the United States needed to get “out of the nation-building business” is now taking steps that will force it to do more of the same.


Middle East

Wall Street Journal: ‘I Am the Mastermind’: Mohammed bin Salman’s Guide to Getting Rich

The heir to the Saudi throne has used businesses connected to government to enrich himself and family members, including a mammoth deal involving Airbus

Justin Scheck and Justin Scheck – The Wall Street Journal

May 16, 2018 12:15 p.m. ET

Crown Prince Mohammed bin Salman in London on his first foreign tour as heir to the Saudi throne.

RIYADH—Prince Mohammed bin Salman was a teenager when he realized his father, Prince Salman bin Abdulaziz, was, by Saudi royal standards, a pauper.

While other sons of Saudi Arabia’s founder grew wealthy from government business, Salman, then the governor of this capital city, supported his family with handouts from his brother the king. Mohammed decided to change that, he later told associates.

Nearly two decades later, Salman is king, and Mohammed bin Salman, known as MBS, is the crown prince who says he wants to crack down on corruption and remake the Saudi economy along more modern lines. Prince Mohammed is also fantastically wealthy. In recent years, he has acquired one of the world’s largest yachts, a French palace and a $450 million Leonardo da Vinci painting that was later donated to the United Arab Emirates.

Trickle Down

A 2015 plane deal by Saudi Arabia’s state-controlled airline, Saudia, sent profits to a company owned by Turki bin Salman — son of the Saudi king and brother of crown prince, Mohammed bin Salman.

How the prince amassed his wealth exemplifies ways that the autocratic kingdom, essentially a family business, continues to intermingle commercial ventures and Saudi government connections to a degree far from Western norms. While it’s been long known the Saudi royal family keeps a share of the nation’s oil income, other business dealings involving the family’s dominant branch have been held more closely.

Among the connections: Prince Mohammed is managing director—and 20% owner—of a chemical producer that supplies large, state-controlled firms, Saudi corporate filings showed as recently as last year. A company majority-owned by two of the crown prince’s younger brothers was awarded a coveted broadband license from the government, Saudi records showed.

Additionally, in 2015, Prince Mohammed helped engineer a multibillion-dollar deal between European plane giant Airbus SE and Saudi Arabia’s state-owned Saudia Airlines, according to documents reviewed by The Wall Street Journal and interviews with more than a dozen people involved in the transaction. The deal is worth tens of millions of dollars to his family, the documents show.

A spokeswoman for the Saudi embassy in Washington declined to comment about Prince Mohammed’s business dealings.

An Airbus A320, part of the Saudi national airline’s fleet, departs Frankfurt in 2015.

The story of the Airbus deal suggests this mixing of business and government remains a staple of the Saudi economy, despite the crown prince’s highly publicized crackdown on many other royals who the prince said abused their power to get rich. Indeed, Airbus decided to go into business with the king’s family despite its reservations over the blurry distinction between private and public financial interests, according to people familiar with the matter.

An Airbus spokesman declined to comment, saying the company had a policy of not discussing any of its business dealings that could potentially be under investigation by law enforcement agencies.

The modern Saudi state was created in 1932 when Abdulaziz ibn Saud united two regions of the Arabian peninsula and became the first king. American geologists would soon discover oil in the desert, providing a gusher of cash to fund a lavish lifestyle for the royal family.

Many of Abdulaziz’s sons—he had dozens—and grandsons started companies to take on no-bid government contracts or otherwise profit from their political power.

Those practices continued after King Abdulaziz died in 1953 and the crown passed to a succession of his sons. One prince held the country’s only express-mail license, via a joint venture with DHL, the shipping company now owned by Deutsche Post AG , which became an oft-repeated example of how the royal family steered business toward itself. A DHL spokeswoman declined to comment.

Prince Salman didn’t focus so much on gathering wealth, say people close to the family. While his brothers built fortunes, Salman gathered power. He spent 48 years as Riyadh’s governor, overseeing the city’s expansion from a dusty desert enclave to a petrodollar-fueled metropolis of modern skyscrapers and wide boulevards.

Prince Salman prioritized education for his sons—one of Prince Mohammed’s half-brothers became an astronaut and another an Oxford-trained professor, Prince Mohammed has said in recent years.

It was around 2000 when the teenage prince had what he would years later call a shocking realization: His father wasn’t rich.

Salman subsisted on money from his brother, then-King Fahd, Prince Mohammed has told people. He lived a hand-to-mouth existence—if a lavish one—spending the cash on family expenses, rather than saving or investing.

The concerned prince, seeking more financial independence, scraped together about $100,000 to invest in Saudi stocks, he has said.

Eclectic Empire

Saudi Crown Prince Mohammed bin Salman and his brothers have broad business holdings. Some examples from 2017 Saudi corporate filings.:

Middle East Environment Protection Co.

Operates landfill and recycling operations in Saudi Arabia.

Watan Industrial Investment Company Ltd.

Sells industrial chemicals in Saudi Arabia. Its clients include Saudi Arabia’s state-owned oil company.

Manga Productions Co.

Affiliated with Crown Prince Mohammed bin Salman’s foundation. The company develops cartoons, video games and comic books.

Tharawat Holding Co.

Has stakes in banking, real estate and other industries.

Tharawat Seas

Invests in farming fish and shrimp for domestic and export markets.

Ansaq Medical Company

Through subsidiaries, Tharawat owned Ansaq, which made a deal with a New Orleans hospital system to bring Saudis to the U.S. for organ transplants.

Source: Saudi government filings compiled by Diligencia

Prince Mohammed kept trading through college and law school. Through the early 2010s, as his father moved up the royal ranks, he was appointed to a series of government positions. During that time Prince Mohammed made billions of Saudi riyals—hundreds of millions of dollars—on the Saudi stock market, he has told several people interviewed by the Journal.

Prince Mohammed also branched into business. Saudi corporate records as of 2017 show he owns stakes in at least five real-estate development companies, as well as a recycling firm. He is also 20% owner of Watan Industrial Investment Co. Ltd., a chemical producer that supplies state-controlled firms including Aramco, the government’s oil company, the documents show.

A company called Tharawat has emerged as a key player in the business activities of Prince Mohammed’s family. According to Saudi corporate filings, one of his younger brothers, Turki bin Salman, owned 99% of the investment firm as of May 2017, while another brother, Naif, owned the remaining 1%. Prince Turki has since bought his brother’s stake, according to Ammer al Selham, Tharawat’s CEO.

In practice, Prince Mohammed controls and benefits from Tharawat’s business, say several people familiar with their dealings, including two who have discussed the firm with him. Mr. Selham disputed that, saying: “At no time was HRH Prince Mohammed bin Salman a shareholder or a beneficiary of the company.”

Tharawat and a subsidiary own the majority of a tech firm called Jawraa that was awarded a coveted broadband license from the Saudi government in 2014, Saudi records show. The license allowed it to become one of three companies operating new mobile-phone networks in the country.

Tharawat has had interests in fish farms, real estate, tech services, agricultural-commodity trading and restaurants. It owns an office park in Riyadh.

An investment vehicle Tharawat owns, Nasaq Holding, says on its website that it is investing in construction to take advantage of “the government’s tenth development plan including investments worth $358.2 billion in real estate.” Saudi corporate filings show that Tharawat owned a company that partnered with Ochsner Health System in New Orleans to bring Saudis to the U.S. for organ transplants.

The kingdom’s struggling flagship air carrier, Saudia Airlines, provided Tharawat with another lucrative opportunity.

In 2014, at the advice of Western “transformation” experts, the money-losing airline reached a tentative deal with Airbus to revitalize its aging fleet. The arrangement would have provided Saudia with dozens of jets financed by the Saudi government’s Public Investment Fund, or PIF, says a person involved in the talks. By agreeing up front to take 50 planes, Saudia would get a major discount.

As it turned out, Prince Mohammed’s family was at that very moment eyeing its own investment in airplanes. Investors in the Middle East had been looking for alternatives to the saturated real-estate market, and airlines were looking to lighten their balance sheets by leasing jets rather than buying them outright.

Tharawat in 2014 acquired a 54% stake in Quantum Investment Bank, a Dubai-based company with scant history of deal making, corporate documents show. Prince Turki, Mohammed’s younger brother, became Quantum’s chairman. Quantum executives didn’t respond to requests for comment, and the bank later took down its website.

Executives from Quantum and another small bank formed a company called International Airfinance Corp., or IAFC, to enter the jet-leasing business.

IAFC became the manager of a fund called ALIF, structured to follow Muslim strictures against paying interest. Airbus agreed to invest $100 million in ALIF if the fund bought only Airbus planes. On June 23, 2014, Airbus and IAFC held a “signing ceremony” in London to announce the new fund, hosted by Prince Turki bin Salman, International Airfinance said in a press release. The fund was aiming to raise $5 billion in equity and debt, deal documents show.

Then, in January of 2015, King Abdullah died and the original Saudia-Airbus plane deal stalled.

Soon after Salman took the throne, Saudi officials told Airbus they had a new plan, say people familiar with the deal: Rather than selling the jets to the Saudi government, Airbus would sell them to ALIF—the fund connected to the bin Salman family—which would in turn rent the planes to Saudia.

Saudi Arabia’s Prince Mohammed bin Salman and then-French President François Hollande stand in the background at a June 2015 ceremony ratifying a deal by Airbus to sell 50 planes intended for lease to the Saudi national airline.

People involved in the process say Saudia didn’t solicit competitive bids from leasing companies, and rebuffed the advances of companies seeking to offer competitive rates before choosing ALIF to do the deal.

In response to questions about the deal, Saudia Vice President Abdulrahman Altayeb said in an email that “the aircraft acquisition transaction was in accordance with Saudia’s internal procedures, which included a review of the lease price to ensure its competitiveness against the market benchmark, as well as aircraft delivery schedule being in line with Saudia’s requirements related to its fleet plan.”

At the time of the deal, some Airbus executives had reservations. Airbus faced investigations into potential corruption overseas by Western law enforcement, including a probe by the U.K.’s Serious Fraud Office into possible bribery by an Airbus subsidiary in Saudi Arabia, and didn’t want further problems. “When I saw Turki was taking over, it kind of brought cold water on all our excitement about the fund,” says a person involved.

Ultimately, this person said, Airbus relented. It was one of the biggest plane deals of the year. Plus, a person involved with the discussions said, Airbus officials decided “we don’t want to prevent the son of the king doing business.”

Others with a stake in the deal were thrilled by the involvement of a Saudi prince. “We took it as a good thing that there were people with deep pockets and political connections that we thought would make this transaction happen,” says one of those people, who says he considered the princes’ involvement “a good risk mitigator” for investors.

The future Saudi king, Crown Prince Salman bin Abdulaziz, left, spoke with his son Prince Mohammed in 2012

Some Saudi officials were left scratching their heads. Within the government and airline, says one official, “everyone thought it makes more sense for the PIF to finance that deal,” since buying 50 planes at once would net Saudia a huge discount. Under the lease deal, Saudia wouldn’t get the benefit of that discount.

Deal documents the Journal reviewed and interviews with people involved in the deal detail a convoluted chain of transactions that ends up benefiting Tharawat, the bin Salman company. As one government official put it, “at the end it went to Tharawat, who got others to finance it, and made huge profits without risking any of their money.”

The chain begins with Quantum, the bank Tharawat co-owns, and where Turki bin Salman was appointed chairman. Quantum arranged funding from investors and banks for buying planes, receiving a payment for each equity investment and tranche of debt raised, people familiar with the arrangement say. The ALIF fund raised about $4 billion as of 2017, according to IAFC’s website.

ALIF used the money to buy Airbus planes at a big discount—more than 60% off the list price, say people familiar with the deal. By leasing the planes to Saudia at about market-rate, rather than passing on the discount, ALIF targeted 15% returns. That’s higher than the normal 7% to 9% returns for a fund handling such long-term leases to an airline like Saudia, says Paul Lyons of U.K. aviation-business consultancy IBA Group Ltd.

IAFC, which manages ALIF, has a potentially big upside itself: It stands to get a big chunk of the deal’s profit, even though it doesn’t have any equity in the fund. Deal documents show IAFC gets 35% of profits above 7% return on investment, and 50% of profits above 10%. “That is very high,” says Aldo Giovannitti, who previously researched aviation investments for the World Bank. He says a standard rate would be 10% to 20%.

Mr. Selham, the Tharawat CEO, said neither Quantum nor Turki bin Salman is a shareholder of IAFC, which is registered in the Cayman Islands and doesn’t disclose its ownership.

However, IAFC’s operations are intermingled with the bank’s. Quantum’s chief executive is also managing partner of IAFC, and IAFC and Quantum share staff, according to statements by Quantum and IAFC and people familiar with the companies.

A person involved in structuring the deal defended the fund’s high projected returns, and said the lease rate shouldn’t be compared with other airplane-leasing deals. There are few comparable arrangements, this person said, since it involved many planes and an Islamic-finance component that could result in an airline paying higher lease rates.

Prince Mohammed finalized the deal during a 2015 visit to France, says a Saudi official with knowledge of the transaction. Not long after, at a gathering in a Saudi palace, the crown prince took credit for the transaction, according to a person who was present.

“I am the mastermind behind this deal,” the prince said, explaining how it showed his success in balancing state financial interests with his family’s.


*Massenbach’s Recommendation*

The Reagan Democrats are no longer Democrats. Will they ever be again?


Rising oil prices boost U.S. economy: Kemp – Reuters News

The size and suddenness of this shift is one reason why the rise of shale production in the United States qualifies as a genuine energy revolution.

15-May-2018 15:22:01

John Kemp is a Reuters market analyst. The views expressed are his own

  • Chart:

By John Kemp

LONDON, May 15 (Reuters) – U.S. net petroleum imports have fallen to the lowest level in more than half a century as a result of the shale revolution, which is profoundly changing the impact higher oil prices have on the economy.

Since the 1860s, the United States has been the world’s largest producer and consumer of oil, which means it has a complicated relationship with oil prices.

Rising oil prices benefit some businesses and workers at the expense of others, and the same has been true about a sharp price fall.

Until after World War Two, the country was a net exporter to the rest of the world, the first era of U.S. energy dominance.

But from the late 1940s and especially the 1950s, the United States turned into an increasingly major oil importer.

Since then, the principal effect of a rise in oil prices has been to transfer income from consumers and businesses in the United States to oil-producing countries in Latin America, the Middle East and Africa.

Rising prices have put pressure on the U.S. balance of payments and the dollar’s value, contributing to an occasionally negative relationship between the price of oil and the exchange rate.

But as net imports have declined in the last decade, the picture has changed again, and the main transfers of income are now occurring within the United States rather than with the rest of th

e world.

The impact of oil prices on the U.S. trade deficit and the exchange rate is becoming much less significant than before.

Instead, rising prices are transferring income from net consuming states such as California, Florida, New York and Illinois to net producing states including Texas, Oklahoma, New Mexico and North Dakota.

Rising prices are also transferring income from households, motorists, the transportation sector, manufacturers and retailers to the oil industry and its supply chain.

In the broadest sense, rising oil prices tend to depress spending by consumers while enhancing investment by the oil industry (“How rising oil prices will affect the United States”, Barron’s, May 11).

In the short term, rising oil prices have provided a significant boost to the economic expansion as the positive impact on investment has outweighed the negative impact on consumer spending.

But that positive scenario may not last if oil prices continue to rise over the next two years.


Domestic crude production has more than doubled from an average of 5 million barrels per day (bpd) in 2008 to 10.3 million bpd in February 2018.

Government policies have also cut import dependence by requiring increases in vehicle fuel economy and mandating the addition of ethanol and biodiesel to the fuel supply.

Domestic consumption of petroleum products peaked at 20.8 million bpd in 2005 and was averaging 19.9 million bpd in 2017.

The result has been a transformation in U.S. petroleum trade, with the country becoming an increasingly important exporter of refined products, such as diesel, and more recently crude oil.

The size and suddenness of this shift is one reason why the rise of shale production in the United States qualifies as a genuine energy revolution.

Net imports of crude oil and petroleum products peaked at more than 12.5 million bpd in 2005, according to the U.S. Energy Information Administration.

By 2017, net imports had fallen to 3.7 million bpd and they continued to shrink in the first three months of 2018 (

The United States remains an important net importer of crude (roughly 6 million bpd in recent months) but has become an important net exporter of refined products (3 million bpd).

The balance of payments is now much more insulated from the impact of changing oil prices than during the 2008 oil shock.

Between January and March 2018, the U.S. trade deficit with the rest of the world worsened by almost $23 billion compared with a year earlier.

The non-petroleum components of the deficit worsened by $26 billion but the petroleum deficit actually improved by almost $4 billion (“International Trade in Goods and Services”, Census Bureau, May 2018).


The rise in U.S. oil production has encouraged some policymakers to speak about achieving energy independence or even a second era of energy dominance.

The reality is more complicated. Increased domestic energy production is clearly beneficial for the economy.

But sharp increases or reductions in oil prices can still have profound distributional effects within the United States.

Since capital and labour do not move without friction between industries and states, sudden income redistribution can still have an adverse impact on the overall performance of the economy.

The oil slump between 2014 and 2016 deepened the overall slowdown in business investment and contributed to a soft patch in overall economic growth, which initially overshadowed the gains for consumers.

The rise in prices since 2016 is now contributing to an acceleration of business investment and activity in the oil and gas sector and all along the supply chain, helping boost the overall economic expansion.

Mining, which includes oil and gas production, was the fastest-growing sector of the U.S. economy in 2017 ("Gross domestic product by industry: fourth quarter and annual 2017", Bureau of Economic Analysis, April 2018).

Rising oil prices are one reason the economies of some major oil-producing states outperformed the rest of the country towards the end of 2017.

Texas was the fastest-growing state economy in the country in the final three months of 2017 (“Gross domestic product by state: fourth quarter and annual 2017”, Bureau of Economic Analysis, May 2018).

But beyond a certain point, rising oil prices will start to weigh on investment and spending by the non-oil sector and households, retarding overall growth.

Moreover, the United States remains embedded in a dense web of international trading relationships with petroleum producing and consuming countries.

Higher oil prices tend to improve the opportunities for U.S. exports and outward investment in petroleum-exporting countries in the Middle East and other regions.

But they also tend to curb export growth to petroleum-importing countries, notably China, India, Japan and in Europe, which include some of the country’s most important trading partners.

Related columns:

Trouble looms for developing countries as commodity revenues collapse, Reuters, Sept. 30, 2016

U.S. economy slows sharply as oil and gas slump deepens, Reuters, Feb. 1, 2016

Oil shock is hurting U.S. economy, Reuters, Jan. 19, 2016

Commodity slump intensifies risks to emerging markets, Reuters, Oct. 8, 2015

Falling oil investment will hit U.S. economy, Reuters, Jan. 21, 2015

(Editing by Dale Hudson)- John Kemp – Senior Market Analyst – Reuters



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05-16-18 ‚I Am the Mastermind’_ Mohammed bin Salman’s Guide to Getting Rich – WSJ.pdf

05-10-2018 russia-state-armament-programme-connolly-boulegue-final-chatham house.pdf