Massenbach-Letter. NEWS 23.6.17

Massenbach-Letter. News

  • Syria shows it’s time to take climate migration seriously
  • MODERNIZATION AMONG US PARTNERS – – The French Army at a Crossroads
  • Präsident Trump fordert Stärkung der Berufsausbildung
  • George Friedman:Shale Oil: Another Layer of US Power –
  • COLUMN-Saudi Arabia eases austerity just as oil prices decline: Kemp – Reuters News
  • Meine Empfehlung / my recommendation: TV.Berlin “Andruck”

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

  • The Impact of Tensions between the EU and Russia at the People-to-People Level
  • The Fifth Assault Corps. Back to Order in Syria?
  • Montenegro in the “Zone of Containment” for Russia
  • Second Qatar Crisis: Causes and Possible Solutions
  • Causes and Consequences of the Terrorist Attack on Kabul’s Diplomatic District
  • How Is Iran Capitalizing on the Recent Attacks in Tehran?
  • Tale of a Dagestani gay: amidst honour killing and recruitment to Syria

Massenbach*Syria shows it’s time to take climate migration seriously

June 1 2017 … Not many people know that extreme droughts and bad agricultural planning in Syria between 2006 and 2010 led to the collapse of the agricultural sector in the north-east of the country.

It forced 1.5 million unskilled farmers to migrate to the cities, and it is broadly seen as a contributing factor to the civil unrest. Six years since the conflict began, policymakers in the region and in the West urgently need to give the issue of climate-induced migration the attention it deserves …

Traditionally, the agricultural system in north-eastern Syria produces more than 65% of the country’s crop yield. The region is heavily dependent on rain: more than two-thirds of water for agriculture comes from a six-month rain period each year. The rest of the water comes from irrigation and groundwater. The variability of year-to-year rainfall adds to the importance of groundwater reserves …

During the presidency of Hafiz Assad (Bashar Assad’s father) from 1971 to 2000, the country increased its dependence on agricultural production and started to exploit land and water resources.

This led to depletion of the groundwater and made agricultural success even more reliant on weather conditions. When the country was hit by extreme drought in 2006, it had a huge impact on agriculture. The lack of rainfall and high temperatures caused the soil to dry out, and there was no groundwater to compensate this … the 2006 drought came relatively quickly after the 1998-2001 drought, from which the agricultural sector had only just recovered.

The 2006 drought also lasted longer than previous dry spells, causing the harvest to fail year-on-year … As market prices were heavily influenced by the drought, prices for livestock were low while prices for food and seed increased. This happened at a time when food subsidies for farmers were abolished due to a fall in Syria’s oil revenue and as part of Assad’s new liberal market policy.

In 2009, the United Nations Office for the Coordination of Human Affairs (OCHA) published a Syria Drought Response Plan, following remarks by the Syrian agriculture minister that the economic and social fallout from the drought was ‘beyond our capacity as a country to deal with’ … some 1.5 million Syrians from the north-eastern region migrated to Damascus, Aleppo and other urban areas … The new influx of people also placed a huge strain on urban water supplies, which added to existing political unrest …

In March 2015 climate scientist Colin Kelley published an article in which he compared models of greenhouse gas emissions from human interference with rising temperatures in the Fertile Crescent … what is more disturbing is that … this region will become drier in the future, as greenhouse gas concentrations continue

This terrifying prospect requires that the phenomenon of climate refugees is taken seriously. The Syrian case demonstrates how dangerous climate change can be when it affects vulnerable populations in countries that are not resilient to changing weather conditions and mass migration … The Syrian drought is one example of climate change as a threat multiplier … As temperatures continue to rise, more parts of the Middle East will become uninhabitable. More research is needed on the climatic drivers of civil unrest. But for now, it is crucial that countries most affected by climate change, as well as nations in the global North, take the phenomenon of climate refugees seriously and develop effective emergency plans for the migration of climate refugees.

http://europesworld.org/2017/06/01/syria-shows-its-time-to-take-climate-migration-seriously/#.WUKYx2ddCHs

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

  • The Impact of Tensions between the EU and Russia at the People-to-People Level
  • The Fifth Assault Corps. Back to Order in Syria?
  • Montenegro in the “Zone of Containment” for Russia
  • Second Qatar Crisis: Causes and Possible Solutions
  • Causes and Consequences of the Terrorist Attack on Kabul’s Diplomatic District
  • How Is Iran Capitalizing on the Recent Attacks in Tehran?
  • Tale of a Dagestani gay: amidst honour killing and recruitment to Syria

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Policy= res publica

Freudenberg-Pilster* Präsident Trump fordert Stärkung der Berufsausbildung

Posted on 16/06/2017 by Amerika Dienst

In einem Werk in Ludwigsfelde (Deutschland) baut ein Auszubildender eine Gasturbine zu Wartungszwecken auseinander. Präsident Trump bezeichnet das deutsche Ausbildungssystem als Musterbeispiel. (Foto: AP Images)

Im folgenden ShareAmerica-Beitrag vom 16. Juni 2017 von Christopher Connell nennt US-Präsident Trump das deutsche Ausbildungssystem vorbildlich.

Auf der ganzen Welt beneidet man uns um unser Hochschulsystem, das Studierenden Abschlüsse ermöglicht, die ihnen die Tür zu unzähligen beruflichen Laufbahnen öffnen. Aber ein Hochschulabschluss ist nicht der einzige Weg zu guter Arbeit. Vielmehr bedauern viele Arbeitgeber, nicht genügend qualifizierte Mitarbeiter für gut bezahlte Stellen in der Hochtechnologie zu finden, die keinen Hochschulabschluss erfordern.

Genau an dieser Stelle kommen Ausbildungsplätze ins Spiel. Präsident Trump hat eine neue Kampagne gestartet, die Industrie und Schulen ermutigen soll, mehr Ausbildungsprogramme zu schaffen, in denen die Auszubildenden einen Lohn erhalten, während sie in der Schule und am Arbeitsplatz diese Fertigkeiten lernen.

Bei einem Treffen mit Bundeskanzlerin Angela Merkel im Weißen Haus im März lobte Präsident Trump das deutsche duale Ausbildungssystem, das weithin als das beste der Welt angesehen wird, und nannte es als Grund für die niedrige Jugendarbeitslosigkeit in Deutschland.

„Das deutsche Berufsausbildungssystem hat sich bei der Ausbildung hochqualifizierter Arbeitnehmer bewährt“, so der Präsident im März. „Deutschland leistet hier Erstaunliches“, sagte Trump, während er führenden deutschen und amerikanischen Wirtschaftsvertretern dankte, die kurz zuvor erfolgreiche Ausbildungsprogramme in den Vereinigten Staaten ins Leben gerufen hatten.

Präsident Trump begleitet von Bildungsministerin Betsy DeVos (2.v.l.) und Arbeitsminister Alexander Acosta (2.v.r.) auf einem Rundgang durch eine Fabrik in Wisconsin. (Foto: AP Images)

„Die Vereinigten Staaten müssen die Fachkräfte, die die großartigsten Maschinen, Gebäude, Produkte, Innovationen und die beste Infrastruktur auf der Welt herstellen und warten, die unsere Lebensqualität verbessern, unsere Sicherheit gewährleisten und in der Lage sind, uns zu erstaunen und zu verwundern, nicht nur ausbilden, sondern auch würdigen“, sagte Präsident Trump am 13. Juni bei einem Rundgang durch eine Muster-Werkhalle des Waukesha County Technical College in Pewaukee (Wisconsin).

Auch andere Länder wie Australien, Österreich, Dänemark, Frankreich, die Schweiz, die Türkei und das Vereinigte Königreich bieten jungen Menschen Ausbildungsplätze, die zu guten Arbeitsplätzen führen. Laut dem Bildungsnewsletter Hechinger-Bericht absolvieren 70 Prozent der Jugendlichen in der Schweiz eine Ausbildung.

Das Global Apprenticeship Network — ein Zusammenschluss, zu dem Unternehmen wie IBM, Microsoft, UBS, Accenture, Telefonica und internationale Organisationen sowie Arbeits- und Unternehmensverbände gehören — verfügt über Zweigstellen in beinahe zwölf Ländern, darunter Argentinien, Kolumbien, Indonesien, Malawi und Tansania.

US-Arbeitsminister Alexander Acosta sagte am 12. Juni vor Journalisten, dass sich die Initiative der Regierung an alle Industriezweige und Berufsgruppen richte und einen Schwerpunkt auf öffentlich-private Partnerschaften zwischen Industrie und Bildungseinrichtungen lege.

Originaltext: President Trump pushes for more apprenticeships

https://blogs.usembassy.gov/amerikadienst/2017/06/16/staerkung-der-berufsausbildung/#more-12649

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

Barandat* The US Army War College Quarterly – Parameters 47, no. 1 (Spring 2017)

  • MODERNIZATION AMONG US PARTNERS –

– The French Army at a Crossroads –

Rémy Hémez

Major Rémy Hémez, French Army, is currently a military fellow at the Security Studies Center of the French Institute of International Relations.

ABSTRACT: The French Army strategy to protect the people from terrorism and to remain involved in international stabilization efforts comes at a cost. This article identifies steps to balance the complexities through technology and force structure.

Between 2010 and 2025, French Army equipment will have changed more than it did between 1970 and 2010. But, this shift is not limited to fielding matériel, the French Army is also undergoing a major reorganization—the Scorpion modernization program.

Since the Île-de-France attacks (January 7–9, 2015), the French Army’s overarching challenge has been to balance its interventions abroad, reassurance missions, and homeland security operations. Although a relatively stable equilibrium has been found, the model raises new questions regarding its long-term sustainability.

Choosing a priority between defending borders or projecting forces abroad has been a continuous struggle. Beginning with the French Revolutionary Wars (1792–99), France’s strategic culture has been predominantly defined by defending its northeastern border, which requires a large land force. This tendency was reinforced at the end of the Algerian War (1954–62), when colonial troops returned to France.

The proliferation of nuclear weapons in the early 1970s caused the French Army to join the West’s deterrence mission; however, despite the assigned priority to defend the homeland against a Soviet invasion, a small projection force maintained an expeditionary culture. This Cold War model defined by levée en masse (massive conscription) was applied until 1996, when the suspension of the practice was announced. Since then, strategic priorities have been inverted.

The French Army has turned toward its expeditionary force to create a more compact and better equipped army, one in which all units are capable of intervening abroad.1 This trend extended through 2013 with financial pressure causing a drastic reduction of the number of units and personnel.2 (for more see att.)

http://ssi.armywarcollege.edu/pubs/parameters/issues/Spring_2017/12_Hemez_FrenchArmyCrossroads.pdf

in: http://strategicstudiesinstitute.army.mil/pubs/parameters/

The US Army War College Quarterly – Parameters 47, no. 1 (Spring 2017) (UNCLASSIFIED)

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Middle East

COLUMN-Saudi Arabia eases austerity just as oil prices decline: Kemp – Reuters News

21-Jun-2017 15:12:23

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

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By John Kemp

LONDON, June 21 (Reuters) – Saudi Arabia’s decision to reverse some of last year’s austerity measures coincides with a renewed decline in oil prices and complicates the financial and economic outlook for the kingdom.

All allowances, bonuses and financial benefits for civil servants and military personnel cancelled, amended or suspended in September 2016 have been restored and backdated by a royal decree issued by King Salman ("Saudi Arabia slashes ministers‘ pay, cuts public sector bonuses", Reuters, Sept. 26, 2016).

The decision coincides with the alteration of the succession in favour of the king’s son Mohammad bin Salman and relieves the previous crown prince of all his posts.

The distribution of largesse to coincide with changes in the succession is common in monarchical systems to cement loyalty to the ruler and the chosen heir.

Saudi successions have normally been accompanied by generous financial packages for employees on the government payroll and distributions have also been made at other times of political stress.

The government has been gradually relaxing some austerity measures in recent months and signalling it would go further.

The decision to pair the change in succession with a relaxation of austerity is not surprising but there are questions about its affordability in the medium term.

AUSTERITY

Austerity measures were introduced by the government in response to the sharp drop in oil prices and revenues ().

Saudi Arabia’s earnings from petroleum exports shrank to $134 billion in 2016, from $322 billion in 2013, the last full year before oil prices slumped (“Annual Statistical Bulletin”, OPEC, 2017).

As spending outstripped income, the country’s foreign reserves were depleted by $116 billion in 2015 and another $81 billion in 2016, according to statistics from the Saudi Arabian Monetary Agency.

Saudi Arabia’s official foreign assets have fallen by a third to $500 billion at the end of April 2017, from a peak of $746 billion in August 2014 (“Monthly Statistical Bulletin”, SAMA, April 2017).

The combination of spending controls, increases in taxes and utility fees, and higher oil prices at the end of 2016 and in early 2017 narrowed the budget deficit and stemmed the depletion of reserves.

But austerity has provoked complaints from Saudi citizens and a broad slowdown in the private-sector economy, which relies heavily on government spending and oil revenues as the ultimate source of almost all activity.

According to a statement carried by the official Saudi Press Agency, the decision on Wednesday to reverse cuts for civil servants and military personnel was necessary to ensure a decent life for the kingdom’s citizens.

SUSTAINABILITY

Foreign reserves declined by $35 billion in the first four months of the year; the reversal of austerity coupled with lower oil prices means the decline could accelerate in the rest of 2017.

Saudi Arabia still has room to manoeuvre. The kingdom’s remaining reserves stand at $500 billion. It has little foreign debt. And the eventual sale of shares in state oil firm Aramco should raise additional funds.

But reserves are depleting at an unsustainable rate of $100 billion per year, plus or minus $20 billion ( and ).

Saudi Arabia maintains a fixed exchange rate to the U.S. dollar, which means the country probably needs to keep minimum reserves of $200-300 billion to preserve confidence or risk a run on the peg.

In the meantime, the country is bogged down in an expensive armed conflict in Yemen which appears to have reached a stalemate.

Military and political competition with Iran, the kingdom’s traditional enemy, is escalating, and Saudi Arabia has promised to buy billions of dollars of extra armaments from the United States.

The government has outlined ambitious plans to move the economy away from dependence on oil and public-sector jobs to non-oil industries and the private sector.

The decision to restore public-sector salaries and bonuses is inconsistent with the policy of encouraging a shift to private-sector employment.

PACING REFORMS

So far the economic transformation plan has been long on rhetoric and short on substance. Tough decisions on spending lie ahead and will test the government’s resolve.

The recent Article IV consultation between the Saudi government and the International Monetary Fund concluded the kingdom could afford to take longer to balance its budget (“IMF staff completes 2017 Article IV mission to Saudi Arabia”, IMF, May 17).

“The government is adapting its fiscal policy to lower oil prices. The aim of bringing about a large, sustained, and well-paced fiscal adjustment to achieve a balanced budget is appropriate,” the IMF said in May.

“The target of balancing the budget, however, does not need to be met in 2019 … given Saudi Arabia’s strong financial asset position and its low debt.”

“A more gradual fiscal consolidation to achieve budget balance a few years later would reduce the effects on growth in the near term while still preserving fiscal buffers to help manage future risks.”

But given the government’s swift turnaround on austerity, it remains unclear how it will close the persistent budget and current account deficits.

If something cannot go on forever, it will stop, noted the late Herbert Stein, chief economic adviser to then-U.S. president Richard Nixon.

The kingdom has comfortable financial reserves but they cannot deplete forever.

(Editing by Dale Hudson)

John Kemp

Senior Market Analyst

Reuters

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*Massenbach’s Recommendation*

founded by George Friedman. – Shale Oil: Another Layer of US Power –

Summary

There’s scarcely a reason to point out how geopolitically important energy is. Energy, particularly oil, is a source of geopolitical power. Every country needs it, but only some countries have the resources to procure it themselves. Some countries have enough of it that they can profit from its export, and others have so much that they rely on it almost exclusively to fuel their economies.

Saudi Arabia and Russia are two such countries. They spend a lot of money on social services, and they can afford to do so as long as oil revenue keeps flowing in. In times of prosperity, they can, through OPEC, bully other countries into doing their bidding and even dictate the direction of markets. But when oil prices are low, as they are now, they simply don’t have as much money to pacify their populations or exert influence abroad. Pressure on their governments builds.

Simple supply and demand helps to explain why prices are low. When prices bottomed out a few years ago, most oil producers, including Saudi Arabia and Russia, were expected to cut production to normalize prices. Instead, they kept production high to increase their market share, thinking (incorrectly) that they would capitalize when prices rebounded. But perhaps a more important reason supply is so high, despite recent efforts by OPEC and Russia to cut production, is that the United States has exceeded expectations on how much oil it could bring to market. With the continued use of hydraulic fracturing and other related technologies, the United States is now believed to have more recoverable oil reserves than any other country in the world, and it is reaping the benefits of its newfound status.

Geopolitical Futures doesn’t forecast commodity prices, so we make no attempt to do so here. But the following report will outline a trend that has emerged over the past several years, one that will maintain downward pressure on prices and thus alter the global geopolitical landscape: affordable shale oil drilling in the United States.

Introduction

Saudi Arabia and Russia are geopolitically important countries. What happens to Saudi Arabia affects the regional balance of the Middle East, and what happens to Russia affects Europe, East Asia and beyond. Their importance is due in no small part to their vast energy reserves, which are their primary source of government revenue. They create a high standard of living to which their populations are accustomed, pay state employees and give the government gravity on the global stage.

Since so much depends on energy, oil prices are more than just financially important. In Saudi Arabia, oil revenue has enabled the government to create patronage networks public and private alike. It has also enabled Riyadh to be the de facto leader of the Middle East. Without oil revenue, the government could not fund its Sunni Arab proxy groups in the battle for regional control, finance the war in Yemen or even maintain social stability.

The story is much the same in Russia. Financial reserves have dwindled. Russia is considering cutting defense spending in the coming years (something it rarely does) and is struggling to finance state pensions. Now that its Reserve Fund is being depleted, Moscow will have to switch over to its National Wealth Fund, which has a little over $70 billion but which is, for various reasons, much more difficult to tap into.

OPEC, which Saudi Arabia essentially leads, has so much recoverable oil that it has been able to more or less control oil prices by adjusting production levels, sometimes in concert with Russia. But that is no longer the case. By some estimates, the United States has surpassed Saudi Arabia in recoverable oil reserves as advancements in hydraulic fracturing and horizontal drilling have enabled producers to access areas previously not thought possible.

A Deep History

Hydraulic fracturing, more commonly referred to as fracking, is a process by which oil deposits found in shale rock formations are extracted. Shale oil, also called tight oil, is enmeshed in shale rock, which is located thousands of feet beneath the Earth’s surface and is generally less permeable than other rock types, making deposits more difficult to access – difficult, but not impossible. Once producers drill down far enough to reach the shale deposits, they inject a solution made mostly of water (hence hydraulic) at high speeds to break apart the rock (hence fracturing), creating fissures through which oil can flow. Included in the solution are certain chemicals that assist in the extraction process and a kind of sand that keeps the fissures open once the fracturing is complete. (The process can also be used for natural gas, and its effect on natural gas prices is similar, but for the purposes of this report we will focus on oil.)

Though fracking has become more of a household term in recent years, it’s hardly a new technology. It dates back to the mid-19th century, when a man named Col. Edward Roberts devised a way to lower an explosive device through a pipe in an oil well that had already been drilled. Some of the wells in which this technique was used were thereafter 1,000 percent more productive (that’s not a typo).

Roberts’ explosive device was eventually replaced by another explosive, nitroglycerine. Even though nitroglycerine was used as late as the 1990s, companies began to experiment with using more inert materials as early as the 1930s. In 1949, Halliburton became the first company to fracture a well with water.

(click to enlarge)

It was also in the 1990s that producers began to combine fracking with a separate process known as horizontal drilling, which allows a well to be drilled vertically, then, when the drill hits the desired sedimentary layer, it is turned to drill parallel to the layer. In 1991, a well was successfully horizontally drilled and fractured for the first time, and in 1998 the first profitable horizontally fractured well was completed. The supply of U.S. shale gas, and later shale oil, has increased ever since.

The United States has benefited from the shale revolution more than any other country. Not only does it have extensive shale formations, but most of its wells are located entirely within its territory, so producers don’t have to compete for jurisdiction or share their profits. (Brazil and Paraguay, for example, have overlapping oil interests that have sparked debate over ownership and sovereignty.) Still, the shale revolution is not exclusively American. Canada has some shale plays in operation, and from 2020 to 2040, Russia and Argentina are expected to tap into their shale oil reserves.

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In the meantime, the United States is likely to become a net energy exporter in 2017, according to some estimates from the U.S. Energy Information Administration. This is no small development; energy independence has been a strategic objective of Washington’s for some time. Shale oil has given it the means to achieve its goal.

Peculiar Economics

Energy independence, however, depends on the peculiar economics of the shale industry. Drilling for shale oil costs less per project than, say, deep-water drilling. There are two general types of costs: capital costs and operating costs. Capital costs are the investment required to drill and complete the well and build the facilities onsite to manage it. Operating costs are the ongoing costs after the well has been drilled. These are measured either in dollar per thousand cubic feet or in dollar per barrel.

The total well cost – the entire amount of investment required to set up a new well, including land, permits, drilling and completion – varies by location but runs consistently in the low millions of dollars. A report by the EIA estimated that the average completion cost per well is around $5 million to $9 million, depending on the location of the deposits. Some companies, however, are able to drill and complete wells much more cheaply; Chesapeake Energy was able to complete wells in the Mississippi Lime in northern Oklahoma for $2.8 million per well in 2015.

According to the EIA, drilling accounts for 30-40 percent of all capital costs. Completion costs, which include the actual fracking process, account for 55-70 percent. Facilities costs, which include erecting onsite buildings as well as road construction to transport oil away from the site, account for 7-8 percent of well costs.

The same EIA report analyzed well completion costs across a number of companies and locations and determined that average costs, in terms of dollar per barrel of oil equivalent – an approximation of energy released by burning one barrel of oil – declined 7-22 percent from 2014 to 2015 and 25-30 percent from 2012 to 2015.

Importantly, some wells are drilled but not completed when funds dry up or when oil prices dictate that the well is no longer economically viable for the time being. In this scenario, the oil driller has effectively used the low permeability of the sedimentary layer to store oil until it’s ready to frack the deposits.

Once the oil starts to flow, operating costs tend to vary. Gathering, processing and transporting can range from $2.25 to $5 per barrel for oil or higher, depending on how far it needs to be transported. Water disposal can range from $1 to $8 per barrel. Other general and administrative expenses range from $1 to $4 per barrel.

New drilling techniques can expedite the completion process and thus drive costs down further. Several years ago, a new well might have taken 3-4 weeks to drill. Now it can take as few as 7-10 days. Not only does this cut down on the overall costs of producing a barrel of oil, it also gives producers flexibility to respond to higher prices and to expand their operations. In fact, now that so many shale plays are known to produce, exploration is less risky, so companies are more willing to operate there.

Since capital and operating costs are so varied, there is no single break-even price for shale oil. But if we average wells by location, we can get a sense of which prices generate profit and which do not.

(click to enlarge)

Wood Mackenzie, an energy research and consulting firm, estimates that 60 percent of all crude reserves that are economically viable at $60 per barrel or less are located in U.S. shale reserves. This figure is different for every well, of course – some are unprofitable even at $46.88 – but it is notably lower than the break-even price just a few years ago, around $80-$100 per barrel.

(click to enlarge)

In fact, break-even prices are down at most shale locations. This is partly because of lower costs and partly because of higher yield enabled by newer technologies. And while total rig count has declined significantly, production has remained stable.

(click to enlarge)

What complicates things is that technological innovation raised some absolute costs of drilling even as it yielded more oil from wells. Consider fracking sand. Producers eventually figured out that if they injected the wells with a hydraulic solution that contained more sand than the previous solutions did, their wells yielded more oil. The solution was then adopted throughout the industry. This increased the demand and therefore the price for sand.

The price of labor has risen too. When oil prices declined from mid-2014 to early 2016, many shale sites were left uncompleted and their crews laid off. When prices rebounded to the $40-$50 range, as many as 400,000 workers returned to complete the wells. But since the demand for labor was widespread, companies were forced to offer more competitive wages to attract skilled personnel back to their sites.

And then there are the vendors who provide goods to drilling companies. When prices bottomed out in 2015, vendors sold their wares at low margins – the only way companies could afford them. If the price of oil rises in the next 1-3 years, vendors will raise their prices in kind, knowing that their customers can foot the bill. These short-term gains, however, will be modest at best. Some analysts believe the inflation rate of input costs could reach 10-20 percent.

Drilling companies also have to pay for the land on which they operate. Some of the richer shale territories such as the Permian Basin charge a high price because they are in such high demand. The Trump administration has pledged to make it easier for companies to drill for oil, and if that is the case, it’s reasonable to assume there may be more land available for shale exploration in the future.

Costly though these factors may be, they are ultimately short-term risks for energy companies. The industry would continue to innovate even if, all things equal, oil prices increased. In fact, wells have been pretty productive independently of price trends. Higher prices will keep the drillers drilling until oversupply drives prices down again.

No Reason Not To

And therein lie the geopolitical consequences of the shale revolution. In Russia and Saudi Arabia, it’s still much cheaper to drill for conventional oil than for shale oil. Each can produce a barrel for about $10-$15. With oil priced at $50, the government in Riyadh will make more money off a single barrel than a shale oil driller will for the foreseeable future. This explains why, even when prices fell so dramatically from 2014 to 2016, OPEC could afford to maintain high levels of production. Its members (and Russia) thought that if they kept prices low and captured market share, they could outlast U.S. shale producers who could, in theory, no longer afford to operate.

It was a sensible strategy at the time. The problem is it didn’t work. OPEC didn’t expect shale oil drillers to lower their costs as much as they did, nor did it anticipate how quickly they could complete unfinished projects. A shale oil driller in the United States, moreover, doesn’t need to be more profitable than Saudi Arabia to drill new wells; the driller just needs to fetch a sufficient return on invested capital. When prices are low, drillers simply forgo exploration and concentrate on the completed wells that produce enough oil to justify their existence.

(click to enlarge)

The number of drilled but incomplete wells has grown over the past few months. When oil prices reach the upper end of the $40-$60 per barrel range, these wells will begin to produce, bringing even more oil onto the market. This is a foreboding prospect for countries like Saudi Arabia and Russia that depend so heavily on hydrocarbons. Sure, they can produce oil more cheaply than their U.S. counterparts, but rampant government expenditures make their fiscal break-even point – the price at which their budget is not running a deficit – much higher. The International Monetary Fund estimates that oil will need to cost $78-$80 per barrel in the next two years for the government in Riyadh to break even on its fiscal budget. Russia’s break-even point is lower at $68 per barrel, but it’s still higher than current prices. Short of that, the two countries will have to run budget deficits – which deplete their fiscal reserves – to continue the social spending programs that earn them the support of their people.

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For Russia, that means cutting state pension plans on which more than 90 percent of its retirees depend. For Saudi Arabia, that means cutting benefits for state employees who have grown accustomed to a comfortable lifestyle. It is in both cases a recipe for social discontent – something both governments are keenly aware of.

U.S. shale producers, meanwhile, are now profitable at levels below the fiscal break-even points of Russia and Saudi Arabia. They have no reason not to drill more. So even if prices climb high enough for Riyadh and Moscow to break even, it is unlikely that they will stay there for long, since high prices encourage shale producers to drill more.

In light of this dynamic, the United States is uniquely positioned to be energy independent – or at least less dependent on oil imports – something it has wanted to be for decades. Contemporary U.S. power is built on two layers: its military might and its relative independence on exports at a time of stagnant global demand. Energy independence would give it a third layer, making it only more powerful. The agility of its oil sector to respond to market forces is simply more than Russia and Saudi Arabia can bring to bear.

Conclusion

OPEC’s strategy – gaining market share to put shale drillers out of business – has failed. Shale oil producers have proved capable of reducing their per barrel costs and competing on the global market at price points that would have been unimaginable just a few years ago. If OPEC (or Russia) raised prices by cutting production, they would make shale producers only more profitable. If they kept prices low by raising production, they would only spur more innovation by shale oil producers.

Geopolitics is rarely a zero-sum game. But in the case of shale oil, what’s good for the U.S. is bad for its rivals.

https://geopoliticalfutures.com/shale-oil-another-layer-us-power/

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Meine Empfehlung / my recommendation.

TV.Berlin “Andruck” –

Andruck

· TV.Berlin – Der Hauptstadtsender

· 363 Videos

Die wöchentliche tv.berlin-Presserunde beschäftigt sich mit aktuellen Ereignissen rund um unsere Hauptstadt. Unter der wechselnden Moderation von Agnes Fischer und Peter Brinkmann diskutieren bekannte Berliner Journalisten über unterschiedliche Problematiken in Berlin. Kritische Analysen und Meinungsverschiedenheiten zeichnen „Andruck" aus. Hier wird offen, ehrlich und kritisch über Geschehnisse in Politik, Wirtschaft und allgemeine Themen, die Berlin bewegen diskutiert

https://www.youtube.com/playlist?list=PL7Ort_YZGjC4PIIy52lEvOdjaK7Cvg_-y

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see our letter on: http://www.massenbach-world.de/41259.html

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

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UdovonMassenbachMailJoergBarandat

06-15-17 12_Hemez_FrenchArmyCrossroads.pdf

06-20-17 The Impact of Tensions between the EU and Russia at the People-to-People Level.docx

Massenbach-Letter. NEWS 16.6.17

Massenbach-Letter. News

  • President Donald J. Trump is dedicating this week to workforce development
  • UAW: Tell the U.S. Trade Representative NAFTA must prioritize working families
  • Capito: Natural gas hub should be ‚critical‘ infrastructure
  • Qatar – A Coalition of the Less-Than-Willing
  • This is the real story behind the economic crisis unfolding in Qatar
  • UK: When Currencies Fall, Export Growth Is Supposed to Follow—Until Now
  • Hajo Schumacher: Es war einmal … eine europäische Idee

Massenbach*President Donald J. Trump is dedicating this week to workforce development,

focusing on steps to make it easier for industries to design, certify, and scale apprenticeship programs.

President Donald J. Trump is dedicating this week to workforce development. Across the United States there exists a skills gap that must be addressed. Americans are unemployed and seeking employment, and companies are struggling to fill vacancies for positions that require varying levels of skill and training. President Trump’s Administration is committed to closing the skills gap and ensuring Americans are trained for the jobs available and the jobs of the future.

https://www.whitehouse.gov/1600daily?utm_source=email&utm_medium=email&utm_content=20170612_ADM_1600-Daily

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Tell the U.S. Trade Representative NAFTA must prioritize working families

Recently, the Trump administration notified Congress that it plans to renegotiate the North American Free Trade Agreement—better known as NAFTA—with powerful corporations and some in the president’s administration saying it simply needs to be “modernized.”

The U.S. Trade Representative’s office is accepting comments from the public until June 12. It’s important that working people speak up for ourselves now, the same as we did with the Trans-Pacific Partnership.

NAFTA—to put it bluntly—was terrible for working families in the United States, as well as our allies to the north and south, Canada and Mexico. The terrible deal triggered job losses, closed auto factories, depressed wages and more power for corporations across all three countries.

Millions of working people stood united to make sure that the Trans-Pacific Partnership didn’t pass once we saw that the agreement left working people out in the cold. We have fought hard for trade policy that works for working folks and now is not the time to let up.

The North American Free Trade Agreement—better known as NAFTA—triggered job losses, depressed wages and more power for corporations. The Trump administration notified Congress that it plans to “modernize” this horrible trade deal. It’s important we speak up now to make sure that working families are a priority in any renegotiated version of NAFTA.

Fill out the comment form on the right to tell the U.S. Trade Representative why working families must be prioritized in future trade deals. We provided talking points below for you to use in crafting your own statement.

· NAFTA has been a disaster for working people.

· Working people want a trade deal that works for everyone, not just corporations.

· Fixing NAFTA will take more than just “tweaks” or “modernization.”

· To make NAFTA work for working people, it must be transformed into an agreement that makes lives better for all in North America.

· NAFTA must raise wages, create high-quality jobs and invest in our people and infrastructure.

· NAFTA must remove its corporate privileges and focus instead on creating an inclusive, sustainable economy that puts people and the planet ahead of profits.

https://actionnetwork.org/petitions/tell-the-us-trade-representative-nafta-must-prioritize-working-families?source=direct_link&&link_id=1&can_id=2cdf26ee080bb89a5fe92c31f2caa537&email_referrer=take-action-tell-the-us-trade-representative-nafta-must-prioritize-working-families&email_subject=take-action-tell-the-us-trade-representative-nafta-must-prioritize-working-families

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Capito: Natural gas hub should be ‚critical‘ infrastructure

Sen. Shelley Moore Capito introduced a bill Monday night that would direct the secretaries of energy and commerce to designate a natural gas energy hub as "critical energy infrastructure."

The "critical" designation would speed up permitting of the proposed fossil fuel facility that the West Virginia Republican’s bill calls for.

The bill is part of a series of measures that her state’s delegation, and other lawmakers from Appalachian states, are supporting in the runup to an expected infrastructure bill.

"The Appalachian Energy and Manufacturing Infrastructure Revitalization Act of 2017 directs the Secretary of Energy and the Secretary of Commerce, in consultation with other relevant federal agencies, to designate an Appalachian regional energy hub as a ‚critical energy infrastructure‘ project, making it eligible for expedited federal permitting," the senator’s office said.

“This important infrastructure project would help create much-needed jobs for West Virginians and grow our state’s economy in meaningful ways," Capito said. "By reducing regulatory burdens, the Appalachian Energy and Manufacturing Infrastructure Revitalization Act will bring us one step closer to making the Appalachian energy hub a reality.”

Senator Capito is Chairman of the Subcommittee on Clean Air and Nuclear Safety.

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Policy= res publica

Freudenberg-Pilster* Es war einmal … eine europäische Idee

Von Hajo Schumacher

Das Brüsseler Märchen wird nicht gut ausgehen.

…Oder es findet sich ein Miteinander, das Bürden und Vorräte halbwegs fair verteilt.

Womit wir bei Europa wären. "Das Schicksal in die eigene Hand nehmen", hat die Kanzlerin gesagt, womit eine historisch einmalige Weltlage sehr dezent umschrieben wäre. Erstmals seit ihrem Bestehen steht die EU allein im Wald, wo Hexenhäuser das geringste Risiko bedeuten. Überall lauern Hyänen, Dämonen, Monstren.

Frei nach Heinrich August Winkler kann ein globaler Kraftraum EU nur als "normatives Projekt" funktionieren, gebaut auf Regeln, Gesetzen, Pflichten. Und da geht’s los: Füreinander in den Krieg ziehen? Soziale Grundsicherung für alle? Verbindliche Grundrechte, Pressefreiheit zum Beispiel? Und natürlich Steuergerechtigkeit. Die eben zu Wasser gelassene "Mein Schiff 6" versteuert ihre Gewinne im EU-Staat Malta, legal zu 0,05 Prozent. Da läuft was fundamental schief, wie auch bei der läppischen Symbolsteuer für den US-Konzern Apple.

Wenn die EU-Kommission nun ein "Reflexionspapier" zur Währungsunion vorlegt, argwöhnt der ganze Kontinent, zu Recht. Die Brüssel-EU, ein Lobbypfuhl mit angeschlossenem Funktionärsbetrieb, ist kein Modell für die Zukunft. Nicht glaubwürdig, zu langsam, eine selbstherrliche, abgekoppelte Elite – Brüssel hatte alle Chancen, geblieben ist Populistenfutter.

In seiner historisch einmaligen Einsamkeit braucht Europa einen Neustart mit einer Koalition der Ernsthaften, die mehr wollen als Schlupflöcher. Das normativ Wertvolle aus Brüssel retten, dann Neustart ohne gigantischen Bremsapparat. Wer allein durch den Wald irrt, braucht Gefährten, die Anstand und Vertrauen mitbringen. Es bleiben nicht 28. Aber die richtigen.

http://www.abendblatt.de/nachrichten/article210789205/Es-war-einmal-eine-europaeische-Idee.html

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Barandat* This is the real story behind the economic crisis unfolding in Qatar

Only Shakespeare’s plays could come close to describing such treachery – the comedies, that is

Robert Fisk

The Qatar crisis proves two things: the continued infantilisation of the Arab states, and the total collapse of the Sunni Muslim unity supposedly created by Donald Trump’s preposterous attendance at the Saudi summit two weeks ago.

After promising to fight to the death against Shia Iranian “terror,” Saudi Arabia and its closest chums have now ganged up on one of the wealthiest of their neighbours, Qatar, for being a fountainhead of “terror”. Only Shakespeare’s plays could come close to describing such treachery. Shakespeare’s comedies, of course.

For, truly, there is something vastly fantastical about this charade. Qatar’s citizens have certainly contributed to Isis. But so have Saudi Arabia’s citizens.

Read more

No Qataris flew the 9/11 planes into New York and Washington. All but four of the 19 killers were Saudi. Bin Laden was not a Qatari. He was a Saudi.

But Bin Laden favoured Qatar’s al-Jazeera channel with his personal broadcasts, and it was al-Jazeera who tried to give spurious morality to the al-Qaeda/Jabhat al-Nusrah desperadoes of Syria by allowing their leader hours of free airtime to explain what a moderate, peace-loving group they all were.

First, let’s just get rid of the hysterically funny bits of this story. I see that Yemen is breaking air links with Qatar. Quite a shock for the poor Qatari Emir, Sheikh Tamim bin Hamad al-Thani, since Yemen – under constant bombardment by his former Saudi and Emirati chums – doesn’t have a single serviceable airliner left with which to create, let alone break, an air link.

The Maldives have also broken relations with Qatar. To be sure, this has nothing to do with the recent promise of a Saudi five-year loan facility of $300m to the Maldives, the proposal of a Saudi property company to invest $100m in a family resort in the Maldives and a promise by Saudi Islamic scholars to spend $100,000 on 10 “world class” mosques in the Maldives.

And let us not mention the rather large number of Isis and other Islamist cultists who arrived to fight for Isis in Iraq and Syria from – well, the Maldives.

Now the Qatari Emir hasn’t enough troops to defend his little country should the Saudis decide to request that he ask their army to enter Qatar to restore stability – as the Saudis persuaded the King of Bahrain to do back in 2011. But Sheikh Tamim no doubt hopes that the massive US military air base in Qatar will deter such Saudi generosity.

When I asked his father, Sheikh Hamad (later uncharitably deposed by Tamim) why he didn’t kick the Americans out of Qatar, he replied: “Because if I did, my Arab brothers would invade me.”

Like father, like son, I suppose. God Bless America.

All this started – so we are supposed to believe – with an alleged hacking of the Qatar News Agency, which produced some uncomplimentary but distressingly truthful remarks by Qatar’s Emir about the need to maintain a relationship with Iran.

Qatar denied the veracity of the story. The Saudis decided it was true and broadcast the contents on their own normally staid (and immensely boring) state television network. The upstart Emir, so went the message, had gone too far this time. The Saudis decided policy in the Gulf, not miniscule Qatar. Wasn’t that what Donald Trump’s visit proved?

But the Saudis had other problems to worry about. Kuwait, far from cutting relations with Qatar, is now acting as a peacemaker between Qatar and the Saudis and Emiratis. The emirate of Dubai is quite close to Iran, has tens of thousands of Iranian expatriates, and is hardly following Abu Dhabi’s example of anti-Qatari wrath.

Oman was even staging joint naval manoeuvres with Iran a couple of months ago. Pakistan long ago declined to send its army to help the Saudis in Yemen, because the Saudis asked for only Sunni and no Shia soldiers; the Pakistani army was understandably outraged to realise that Saudi Arabia was trying to sectarianise its military personnel.

Pakistan’s former army commander, General Raheel Sharif, is rumoured to be on the brink of resigning as head of the Saudi-sponsored Muslim alliance to fight “terror”.

President-Field Marshal al-Sissi of Egypt has been roaring against Qatar for its support of the Egyptian Muslim Brotherhood – and Qatar does indeed support the now-banned group which Sissi falsely claims is part of Isis – but significantly Egypt, though the recipient of Saudi millions, also does not intend to supply its own troops to bolster the Saudis in its catastrophic Yemen war.

Besides, Sissi needs his Egyptian soldiers at home to fight off Isis attacks and maintain, along with Israel, the siege of the Palestinian Gaza Strip.

But if we look a bit further down the road, it’s not difficult to see what really worries the Saudis. Qatar also maintains quiet links with the Assad regime. It helped secure the release of Syrian Christian nuns in Jabhat al-Nusrah hands and has helped release Lebanese soldiers from Isis hands in western Syria. When the nuns emerged from captivity, they thanked both Bashar al-Assad and Qatar.

And there are growing suspicions in the Gulf that Qatar has much larger ambitions: to fund the rebuilding of post-war Syria. Even if Assad remained as president, Syria’s debt to Qatar would place the nation under Qatari economic control.

Read more

And this would give tiny Qatar two golden rewards. It would give it a land empire to match its al-Jazeera media empire. And it would extend its largesse to the Syrian territories, which many oil companies would like to use as a pipeline route from the Gulf to Europe via Turkey, or via tankers from the Syrian port of Lattakia.

For Europeans, such a route would reduce the chances of Russian oil blackmail, and make sea-going oil routes less vulnerable if vessels did not have to move through the Gulf of Hormuz.

So rich pickings for Qatar – or for Saudi Arabia, of course, if the assumptions about US power of the two emirs, Hamad and Tamim, prove worthless. A Saudi military force in Qatar would allow Riyadh to gobble up all the liquid gas in the emirate.

But surely the peace-loving “anti-terror” Saudis – let’s forget the head-chopping for a moment – would never contemplate such a fate for an Arab brother.

So let’s hope that for the moment, the routes of Qatar Airways are the only parts of the Qatari body politics to get chopped off.

http://www.independent.co.uk/voices/qatar-crisis-economy-diplomatic-links-torn-middle-east-russia-hacking-real-story-robert-fisk-a7778616.html

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Middle East

founded by George Friedman

A Coalition of the Less-Than-Willing

By George Friedman.

June 14, 2017. The U.S. convinced Arab governments to work together against jihadism. Now it needs to focus them.

It’s been almost 16 years since the United States responded to 9/11 by going to war in Afghanistan, and 14 years since the United States invaded Iraq. Neither war has been successful, and there is no reason to believe that either is going to succeed if it continues to be fought as it is. Indeed, it’s been some time since they’ve been fought with any expectation of success. They have been fought in large part because neither George W. Bush nor Barack Obama were prepared to admit failure. Domestic consequences in the U.S. would be grave, but there was also legitimate fear that abandoning the wars would result in the creation of radical Islamist states in the region and the toppling of governments that the U.S. regarded as, at best, preferable to the radicals.

The wars turned into a holding pattern whose primary purpose was to keep al-Qaida, the Taliban and, now, the Islamic State off balance, destroying their capabilities in some areas but ideally destroying the groups themselves. But this was wishful thinking. The U.S. did not have enough forces in either theater to eliminate groups like the Taliban and IS. And it was a mistake to believe the destruction of the groups would mean the destruction of the jihadist movement. Instead, it spawned new flag bearers for the movement. Further, the idea that these operations reduced the amount of terrorist activity was becoming dubious. There were no more attacks on the scale of 9/11, but there were several smaller attacks that went on despite the wars.

The Wrong Approach

The essential flaw was the way the U.S. had defined the problem. From the beginning, the Americans had focused on the organizations that carried out terrorist attacks and had sought to kill their members and thus destroy the organizations. This was a misunderstanding of the challenge. The organizations represented the tip of an extremely large spear. If the tip of the spear broke, it would just be replaced. No matter how many radical Islamist organizations were destroyed, a replacement would appear, made up of new members prepared to carry on the struggle.

The problem was not the organizations but the strain of Islam that gave rise to them. This strain was embedded in Muslim communities in Afghanistan and the Middle East. The only way to defeat the jihadist movement was to enter Muslim society and root it out. But this wasn’t viable for the U.S. military, which didn’t know how to distinguish those who wanted to follow jihadism and those who didn’t. Leaving aside that American soldiers rarely spoke the languages required, they weren’t generally Muslims and had no understanding of the culture.

U.S. strategy for the past 16 years has consisted of doing what America knew how to do, not what needed to be done – and done by those who truly understand the culture. Only the governments in the region can identify and destroy the jihadist movement. Without them, all that U.S. military operations will achieve is creating a succession of Islamist radical organizations.

From the beginning of the American engagement, governments in the Middle East have been ambivalent at best about radical Islamists. On the one hand, they declare their hostility toward organizations like al-Qaida. On the other hand, fully understanding that the movement was far more substantial than any one group, they hesitate or refuse to act against it. Partly this was because even among the citizens who were not jihadists, the jihadists were seen as admirable, dangerous (to others, not to them), or simply part of their community. The willingness of average citizens to cooperate with the government was limited.

So, too, was the governments’ willingness to risk destabilizing their societies in an attack on a deeply embedded segment of those societies. Sometimes the governments went through the motions. In some cases, segments of the government opposed or undermined any action. In others, parts of the government supported the jihadists, either to protect themselves from criticism or attack, or simply because they shared their point of view.

In short, the U.S strategy couldn’t work. If the jihadist movement drew from a social base that was part of the broader society, then attacks on the groups that arose from that base had little more than a temporary effect. The key had to be an attack by Middle Eastern nations on their own social structure. And it was the countries of the Middle East that had to compel their neighbors to take similarly aggressive action. This might not work, but without it there was no hope of the war succeeding.

A First Step

This is the context that I think the June 5 decision by a handful of Arab countries, led by Saudi Arabia and Egypt, to isolate Qatar must be viewed. Or, more precisely, the action against Qatar was part of an attempt at a strategic shift by Middle Eastern countries, forced by the United States. But the U.S. was asking for more than simply turning on Qatar.

What the U.S. has been asking for is the creation of a coalition in the Middle East. The purpose of this coalition is to make a united effort to eliminate the flow of money, fighters and other resources from each country to the Islamic State. This can’t possibly be achieved unless the governments of each country move to suppress the jihadist strand in their own countries and eliminate non-jihadist actors who, for various reasons, support them. If this were done, then the war, after these many years, might be winnable.

U.S. President Donald Trump (C) is welcomed by Saudi King Salman bin Abdulaziz al-Saud (3rd-R) upon arrival at King Khalid International Airport in Riyadh on May 20, 2017.

Qatar was presented as a particularly egregious example, but the point was that there be a coalition – a group of Arab countries acting in concert against supporters of the Islamic State. It was far easier to begin by creating a coalition to stop a foreign country, but the goal was not to deal with Qatar. That was a first step. The goal for the countries in the coalition was to deal with the jihadists in their own countries.

That the U.S. would want this is understandable. It is more interesting to speculate about why a group of countries as fractious as those in the Arab world would come together on this, after so many years of being asked to act and so many years of (mostly) deflecting the request. I would offer this possible explanation. First, given the strategy the U.S. is following, this war will never succeed. Second, the Trump administration, having invested less in the war than Bush or Obama had, made it clear that unless the Arabs formed an anti-jihadist coalition, the U.S. was not prepared to continue waging the war. And third, the Arabs, contemplating their region and their own positions in the absence of the U.S., agreed to a collective effort against Qatar, and also to effective action against the threats embedded in their societies.

The Arabs don’t want to see the U.S. leave at this point. The forces that have been released in the Middle East are too great for them to contain on their own. In due course, IS and its supporters would destroy the existing order. The Arabs’ ideal position is that the U.S. wage an inconclusive war that contains IS while respecting their inability to fight within their own countries against jihadists and their supporters. That is rational.

What the U.S. seems to have done is recognize that it cannot wage this war indefinitely and cannot give the Arab states the luxury of avoiding risk. If the U.S. is going to remain at war, the Arabs have to assume some risk, or face the greater risk of a region without American force. Qatar is the focus on which the coalition will be built. From there, the U.S. expectation is that it will expand to a total commitment by the Arab world to deal with jihadists.

But there’s still a problem. The Americans want the Arabs to sign up for the war. The Arabs want the war to be against Qatar. From the Arab point of view, an attack on jihadists in their societies is, for most, an attack on society itself. Taking on another Middle Eastern government is one thing, but targeting their own societies is too risky. The United States may threaten to leave, but it probably won’t. The Arabs will be content to cross that bridge when they come to it.

The Americans see three choices. They can continue the war indefinitely. They can continue to fight alongside a full-blooded Arab coalition. Or they can leave. There is no good time to throw in the towel, but at some point reality has to be faced. The first choice, therefore, is the most unlikely; staying with no hope of winning is insane. The second choice is nearly as implausible; trusting the Arab world to take the kind of risk the U.S. has asked it to take is unlikely to happen. Therefore, the third choice is the most likely.

I would interpret the Qatar situation as an attempt by the U.S. to avoid the third option. If the Arab states took the risks, the war might be won, and the U.S. could remain and even increase its force. The U.S. has made its demand, and for the moment, the Arabs have complied. But this is only the down payment, and unless the Arabs decide the chaos of the United States leaving the Middle East will be greater than the chaos of concerted effort against jihadism, the likelihood of the gambit working remains small.

https://geopoliticalfutures.com/coalition-less-willing/?utm_source=GPF+-+Newsletter&utm_campaign=3e756f6b93-Friedmans_Weekly_Paid_List&utm_medium=email&utm_term=0_72b76c0285-3e756f6b93-240043701

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*Massenbach’s Recommendation*

When Currencies Fall, Export Growth Is Supposed to Follow—Until Now

The U.K. economy is providing a live test of whether globalization has blunted the textbook effect of currency depreciation

Shipping containers on the docks in Corringham, east of London.

For decades, economics textbooks argued that suddenly weaker currencies are a boon to growth, because they make a country’s exports more competitive or profitable on the global stage, which in turn boosts domestic production and employment.

What if that theory no longer holds?

Economists and government officials are increasingly wondering if that effect is diminishing, especially among advanced Western economies with shrinking manufacturing capacity and supply chains increasingly interwoven with the rest of the world. The new idea is that much of the benefit from a falling currency is offset by the higher prices paid for components imported from overseas.

The U.K. is emerging as a test case for whether globalization has diminished the effect. Although its currency has been battered by the financial crisis, the Brexit vote to leave the European Union—which took place a year ago June 23—and the country’s fresh bout of political uncertainty, its exporting power hasn’t responded as textbooks might suggest.

Chemicals made at Chemoxy International Ltd.’s factory in Middlesbrough are worth about 20% more in the export market after last June’s fall in sterling, given the beefed-up value of the currencies used to buy those goods overseas. Higher costs for imported materials, however, all but erased that advantage.

“We have a huge interdependency on international markets,” says Chemoxy Chief Executive Ian Stark. The company exports more than 60% of its products and imports about 85% of its chemical raw materials. A weaker pound, he says, “isn’t revolutionary.”

British businesses ranging from car makers to food processors to lumber mills are discovering the same thing.

Adam Posen, president of the Peterson Institute for International Economics, and a member of the Bank of England’s rate-setting monetary policy committee between 2009 and 2012, says the effects of currency moves on exports have faded over time. After the financial crisis in 2008, a big sterling depreciation didn’t result in the pickup in exports “we would have expected,” he says.

“You just don’t get as much bang for your pound as you used to,” said Mr. Posen.

Whether or how the relationship between a currency’s strength and economic growth still holds has ramifications for international politics. In the U.S., manufacturers have long complained about the impact of a strong dollar. President Donald Trump has accused Japan and China of keeping their currencies artificially low, hampering U.S. exports.

In 1992, the pound fell by around 11% between September and the end of that year after the U.K. crashed out of the European exchange rate mechanism—a precursor to the euro that required a stronger pound than the government could sustain. The U.K. economy then went on an export tear, which turned a trade deficit into a five-year surplus and jump-started a recovery.

The pound fell by nearly 25% against the currencies of its major trading partners between 2007 and 2010 and never recovered, sparking optimism in government that exports would rise. In 2012, then-U.K. Treasury chief George Osborne targeted an increase in exports to £1 trillion by 2020, from £499 billion that year. By the end of 2016, exports had risen to just £547 billion.

When the currency took another beating after the Brexit vote, the impact was similarly muted. Car maker Aston Martin, which exports 80% of its vehicles, helps show why. Before Brexit, when the pound traded at $1.50, sports cars sold in New York for $150,000 would bring home £100,000. With the pound now at $1.27, such sales bring an extra £18,000. But over half the car’s components must be bought from abroad, blunting the effect.

“During the past decade, a lot of auto suppliers have moved offshore,” says Aston Martin Chief Executive Andy Palmer. “In consequence, you don’t get the benefits.”

Ian Stark, CEO of Chemoxy International, at the company’s chemical manufacturing facility in Teesside, England.

In recent months, sterling has recovered from its post Brexit lows and is currently down 15% against the dollar and 13% against the euro. Analysts remain pessimistic about the currency as Britain heads for divorce from its largest trading partner, the European Union. The pound fell 1.7% on Friday after Prime Minister Theresa May’s ruling Conservative Party failed to secure enough seats in a snap general election to alone form a government.

Global economists are debating how much exchange rates affect trade for developed nations. Two recent papers, from the World Bank and the Organization for Economic Cooperation and Development, found movements in exchange rates had a declining impact on trade in several advanced economies.

The OECD paper said a plunge of sterling in 2008 and the yen’s decline against the dollar in 2012 had little impact on trade. The study said evidence suggested companies had become more embedded in global supply chains. Between 1995 and 2011, the import content of exports rose from 14.9% to 24.3% among OECD nations.

In May, the Bank for International Settlements published new mathematical models for estimating real effective exchange rates, one measure of the strength of a currency. It said without taking into account deep global supply chains, standard exchange-rate models “are increasingly becoming obsolete.”

Other economists have resisted the idea, including a team at the International Monetary Fund, which came to a different conclusion and found “little evidence of a weakening in the effects of exchange rates over time.”

In its analysis, the IMF suggests a significant currency depreciation—where currencies weaken by at least 13% in advanced economies, or 20% in emerging ones—results in a 10% rise in export volumes over five years.

The IMF had some caveats. The paper argues the impact of a weaker currency is strongest when the economy isn’t running at full capacity, for example following a recession. It also suggests that financial crises dent companies’ ability to take advantage of a depreciation, because of the lack of available credit.

“In general, however” the authors conclude, “the role of flexible exchange rates in facilitating the resolution of trade imbalances remains significant.”

Since Britain’s vote to leave the EU, consumers abroad have been buying more British products. In the six months through April, the most recent month for which the U.K.’s Office for National Statistics has published data, goods export volumes increased 3.1% from the year-earlier period. Over that same period, import volumes rose even more, by 4.9%.

“We are not yet seeing a notable narrowing of the [trade] deficit,” the Office for National Statistics noted in its latest report.

For some exporters such as Scotland’s whisky industry, the pound’s fall has been pure good news because most of what goes into a bottle of whisky is produced locally. The Scotch Whisky Association says exports increased 4% last year to over £4 billion.

A container ship is unloaded at a dock in Southampton, in southern England.

Most U.K. manufacturing industries, however, can no longer rely on domestic supply chains. In 2015, manufacturing represented 9.8% of the U.K.’s gross domestic product, down from 14.7% in 2000. In the U.S., by comparison, manufacturing represented 12.3% of the GDP in 2015, and 15.5% in 2000.

As U.K. manufacturing declined, service industries grew and now are responsible for 79% of GDP. Those industries are less sensitive to changes in exchange rates. In the services sector, the U.K. runs a trade surplus that grew to 5.4% of GDP at the end of last year. For London’s huge financial sector, sterling’s tumble has little benefit because business is often denominated in other currencies and demand for service industries tends to be less price sensitive.

Trade in goods, however, is an entirely different story. The U.K. deficit in that area has ballooned from 1.6% of GDP in 1995 to 6.4% last year. It has kept rising despite imports becoming more expensive and exports more competitive. This year’s goods deficit, through April, is £42.8 billion, excluding oil and particularly volatile items such as aircraft.

Some economists have long been sceptical of the idea that trade can be shifted by currency depreciation in the longer term. As a currency weakens, the price of imported goods rises, raising inflation. Also, they say, structural problems, such as weak productivity and competitiveness, are often causes of trade deficits, which depreciation cannot address and may even prevent a country from tackling.

“Don’t believe that Britain is going to depreciate itself out of its current account imbalances,” says Willem Buiter, chief economist at Citigroup Inc. and a former member of the Bank of England’s rate-setting committee.

To make matters worse, Britain, like other developed economies, has become so reliant on imports to stock its stores that a weaker pound has increased inflation, making life more expensive and curbing consumer spending.

Britain now imports more than 60% of its fish. The pound’s fall triggered a 15% overnight jump in prices for the crates of cod and haddock that Mike Woods buys from the docks of Grimsby, in northern England. That cost his food processing company, Albert Darnell Ltd., an additional £15,000 a week.

Fish merchants in Grimsby, England, say the price of imported fish jumped overnight when the U.K. currency fell.

Like other food manufacturers, Mr. Woods is passing on that increased cost to consumers. Fish and chips have become more expensive at the St. James Fish Restaurant in the center of Grimsby. “We get people complaining now,” says waitress Eve Barrow.

Retail prices of cars, shoes and potato chips all have risen. Last October, an increase in the price of Marmite, a sticky yeast spread beloved by the British, triggered front-page headlines. Economic growth in the U.K. slowed in the first quarter of the year, with higher prices hurting consumer spending.

While more expensive imports should present opportunities for British manufacturers and suppliers to step in, it will take time for industry to adjust.

Around 80% of the timber used in U.K. construction is imported, mainly from Scandinavia, according to the Timber Trade Federation. It isn’t easy for Britain’s construction industry, which is responsible for around 7% of GDP, to shift quickly to domestic suppliers.

Keith Ainslie of James Jones & Sons Ltd, the U.K.’s largest sawmill, says the company’s main plant in Lockerbie, Scotland, is already “working full tilt.” Processing more logs would mean building another sawmill, a roughly £60 million project that would take around three years to get up and running.

Nature also acts as a limit. “We’re constrained by the availability of trees,” says Mr. Ainslie. It takes 40 to 55 years to grow a crop of trees to maturity.

Still, some companies see the pound’s fall as an opportunity to expand. Mark Driver is setting up Rathfinny Wine Estate on England’s southeastern coast. The price of equipment he needs to import, such as wine presses and bottling machinery, has increased since Brexit.

Nevertheless, the former hedge-fund manager thinks the pound’s decline is good news. By 2025, he says, he aims to be producing around one million bottles of sparkling wine a year and sending half of that overseas.

A “weaker pound helps us,” he says. “Long term, I think it’s really positive.”

https://www.wsj.com/articles/when-currencies-fall-export-growth-is-supposed-to-followuntil-now-1497207236?mod=djemlogistics

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see our letter on: http://www.massenbach-world.de/41259.html

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

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UdovonMassenbachMailJoergBarandat

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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see our letter on: http://www.massenbach-world.de/41259.html

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

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UdovonMassenbachMailJoergBarandat

06-06-17 Bring back alive_ from Dagestan to ISIL to return the son.pdf

Massenbach-Letter. NEWS – alert 02.6.17 – Statement by President Trump on the Paris Climate Accord

Massenbach-Letter. News

Massenbach*

Statement by President Trump on the Paris Climate Accord

Rose Garden

June 01, 2017

THE PRESIDENT: Thank you very much. (Applause.) Thank you. I would like to begin by addressing the terrorist attack in Manila. We’re closely monitoring the situation, and I will continue to give updates if anything happens during this period of time. But it is really very sad as to what’s going on throughout the world with terror. Our thoughts and our prayers are with all of those affected.

Before we discuss the Paris Accord, I’d like to begin with an update on our tremendous — absolutely tremendous — economic progress since Election Day on November 8th. The economy is starting to come back, and very, very rapidly. We’ve added $3.3 trillion in stock market value to our economy, and more than a million private sector jobs.

I have just returned from a trip overseas where we concluded nearly $350 billion of military and economic development for the United States, creating hundreds of thousands of jobs. It was a very, very successful trip, believe me. (Applause.) Thank you. Thank you.

In my meetings at the G7, we have taken historic steps to demand fair and reciprocal trade that gives Americans a level playing field against other nations. We’re also working very hard for peace in the Middle East, and perhaps even peace between the Israelis and the Palestinians. Our attacks on terrorism are greatly stepped up — and you see that, you see it all over — from the previous administration, including getting many other countries to make major contributions to the fight against terror. Big, big contributions are being made by countries that weren’t doing so much in the form of contribution.

One by one, we are keeping the promises I made to the American people during my campaign for President –- whether it’s cutting job-killing regulations; appointing and confirming a tremendous Supreme Court justice; putting in place tough new ethics rules; achieving a record reduction in illegal immigration on our southern border; or bringing jobs, plants, and factories back into the United States at numbers which no one until this point thought even possible. And believe me, we’ve just begun. The fruits of our labor will be seen very shortly even more so.

On these issues and so many more, we’re following through on our commitments. And I don’t want anything to get in our way. I am fighting every day for the great people of this country. Therefore, in order to fulfill my solemn duty to protect America and its citizens, the United States will withdraw from the Paris Climate Accord — (applause) — thank you, thank you — but begin negotiations to reenter either the Paris Accord or a really entirely new transaction on terms that are fair to the United States, its businesses, its workers, its people, its taxpayers. So we’re getting out. But we will start to negotiate, and we will see if we can make a deal that’s fair. And if we can, that’s great. And if we can’t, that’s fine. (Applause.)

As President, I can put no other consideration before the wellbeing of American citizens. The Paris Climate Accord is simply the latest example of Washington entering into an agreement that disadvantages the United States to the exclusive benefit of other countries, leaving American workers — who I love — and taxpayers to absorb the cost in terms of lost jobs, lower wages, shuttered factories, and vastly diminished economic production.

Thus, as of today, the United States will cease all implementation of the non-binding Paris Accord and the draconian financial and economic burdens the agreement imposes on our country. This includes ending the implementation of the nationally determined contribution and, very importantly, the Green Climate Fund which is costing the United States a vast fortune.

Compliance with the terms of the Paris Accord and the onerous energy restrictions it has placed on the United States could cost America as much as 2.7 million lost jobs by 2025 according to the National Economic Research Associates. This includes 440,000 fewer manufacturing jobs — not what we need — believe me, this is not what we need — including automobile jobs, and the further decimation of vital American industries on which countless communities rely. They rely for so much, and we would be giving them so little.

According to this same study, by 2040, compliance with the commitments put into place by the previous administration would cut production for the following sectors: paper down 12 percent; cement down 23 percent; iron and steel down 38 percent; coal — and I happen to love the coal miners — down 86 percent; natural gas down 31 percent. The cost to the economy at this time would be close to $3 trillion in lost GDP and 6.5 million industrial jobs, while households would have $7,000 less income and, in many cases, much worse than that.

Not only does this deal subject our citizens to harsh economic restrictions, it fails to live up to our environmental ideals. As someone who cares deeply about the environment, which I do, I cannot in good conscience support a deal that punishes the United States — which is what it does -– the world’s leader in environmental protection, while imposing no meaningful obligations on the world’s leading polluters.

For example, under the agreement, China will be able to increase these emissions by a staggering number of years — 13. They can do whatever they want for 13 years. Not us. India makes its participation contingent on receiving billions and billions and billions of dollars in foreign aid from developed countries. There are many other examples. But the bottom line is that the Paris Accord is very unfair, at the highest level, to the United States.

Further, while the current agreement effectively blocks the development of clean coal in America — which it does, and the mines are starting to open up. We’re having a big opening in two weeks. Pennsylvania, Ohio, West Virginia, so many places. A big opening of a brand-new mine. It’s unheard of. For many, many years, that hasn’t happened. They asked me if I’d go. I’m going to try.

China will be allowed to build hundreds of additional coal plants. So we can’t build the plants, but they can, according to this agreement. India will be allowed to double its coal production by 2020. Think of it: India can double their coal production. We’re supposed to get rid of ours. Even Europe is allowed to continue construction of coal plants.

In short, the agreement doesn’t eliminate coal jobs, it just transfers those jobs out of America and the United States, and ships them to foreign countries.

This agreement is less about the climate and more about other countries gaining a financial advantage over the United States. The rest of the world applauded when we signed the Paris Agreement — they went wild; they were so happy — for the simple reason that it put our country, the United States of America, which we all love, at a very, very big economic disadvantage. A cynic would say the obvious reason for economic competitors and their wish to see us remain in the agreement is so that we continue to suffer this self-inflicted major economic wound. We would find it very hard to compete with other countries from other parts of the world.

We have among the most abundant energy reserves on the planet, sufficient to lift millions of America’s poorest workers out of poverty. Yet, under this agreement, we are effectively putting these reserves under lock and key, taking away the great wealth of our nation — it’s great wealth, it’s phenomenal wealth; not so long ago, we had no idea we had such wealth — and leaving millions and millions of families trapped in poverty and joblessness.

The agreement is a massive redistribution of United States wealth to other countries. At 1 percent growth, renewable sources of energy can meet some of our domestic demand, but at 3 or 4 percent growth, which I expect, we need all forms of available American energy, or our country — (applause) — will be at grave risk of brownouts and blackouts, our businesses will come to a halt in many cases, and the American family will suffer the consequences in the form of lost jobs and a very diminished quality of life.

Even if the Paris Agreement were implemented in full, with total compliance from all nations, it is estimated it would only produce a two-tenths of one degree — think of that; this much — Celsius reduction in global temperature by the year 2100. Tiny, tiny amount. In fact, 14 days of carbon emissions from China alone would wipe out the gains from America — and this is an incredible statistic — would totally wipe out the gains from America’s expected reductions in the year 2030, after we have had to spend billions and billions of dollars, lost jobs, closed factories, and suffered much higher energy costs for our businesses and for our homes.

As the Wall Street Journal wrote this morning: “The reality is that withdrawing is in America’s economic interest and won’t matter much to the climate.” The United States, under the Trump administration, will continue to be the cleanest and most environmentally friendly country on Earth. We’ll be the cleanest. We’re going to have the cleanest air. We’re going to have the cleanest water. We will be environmentally friendly, but we’re not going to put our businesses out of work and we’re not going to lose our jobs. We’re going to grow; we’re going to grow rapidly. (Applause.)

And I think you just read — it just came out minutes ago, the small business report — small businesses as of just now are booming, hiring people. One of the best reports they’ve seen in many years.

I’m willing to immediately work with Democratic leaders to either negotiate our way back into Paris, under the terms that are fair to the United States and its workers, or to negotiate a new deal that protects our country and its taxpayers. (Applause.)

So if the obstructionists want to get together with me, let’s make them non-obstructionists. We will all sit down, and we will get back into the deal. And we’ll make it good, and we won’t be closing up our factories, and we won’t be losing our jobs. And we’ll sit down with the Democrats and all of the people that represent either the Paris Accord or something that we can do that’s much better than the Paris Accord. And I think the people of our country will be thrilled, and I think then the people of the world will be thrilled. But until we do that, we’re out of the agreement.

I will work to ensure that America remains the world’s leader on environmental issues, but under a framework that is fair and where the burdens and responsibilities are equally shared among the many nations all around the world.

No responsible leader can put the workers — and the people — of their country at this debilitating and tremendous disadvantage. The fact that the Paris deal hamstrings the United States, while empowering some of the world’s top polluting countries, should dispel any doubt as to the real reason why foreign lobbyists wish to keep our magnificent country tied up and bound down by this agreement: It’s to give their country an economic edge over the United States. That’s not going to happen while I’m President. I’m sorry. (Applause.)

My job as President is to do everything within my power to give America a level playing field and to create the economic, regulatory and tax structures that make America the most prosperous and productive country on Earth, and with the highest standard of living and the highest standard of environmental protection.

Our tax bill is moving along in Congress, and I believe it’s doing very well. I think a lot of people will be very pleasantly surprised. The Republicans are working very, very hard. We’d love to have support from the Democrats, but we may have to go it alone. But it’s going very well.

The Paris Agreement handicaps the United States economy in order to win praise from the very foreign capitals and global activists that have long sought to gain wealth at our country’s expense. They don’t put America first. I do, and I always will. (Applause.)

The same nations asking us to stay in the agreement are the countries that have collectively cost America trillions of dollars through tough trade practices and, in many cases, lax contributions to our critical military alliance. You see what’s happening. It’s pretty obvious to those that want to keep an open mind.

At what point does America get demeaned? At what point do they start laughing at us as a country? We want fair treatment for its citizens, and we want fair treatment for our taxpayers. We don’t want other leaders and other countries laughing at us anymore. And they won’t be. They won’t be.

I was elected to represent the citizens of Pittsburgh, not Paris. (Applause.) I promised I would exit or renegotiate any deal which fails to serve America’s interests. Many trade deals will soon be under renegotiation. Very rarely do we have a deal that works for this country, but they’ll soon be under renegotiation. The process has begun from day one. But now we’re down to business.

Beyond the severe energy restrictions inflicted by the Paris Accord, it includes yet another scheme to redistribute wealth out of the United States through the so-called Green Climate Fund — nice name — which calls for developed countries to send $100 billion to developing countries all on top of America’s existing and massive foreign aid payments. So we’re going to be paying billions and billions and billions of dollars, and we’re already way ahead of anybody else. Many of the other countries haven’t spent anything, and many of them will never pay one dime.

The Green Fund would likely obligate the United States to commit potentially tens of billions of dollars of which the United States has already handed over $1 billion — nobody else is even close; most of them haven’t even paid anything — including funds raided out of America’s budget for the war against terrorism. That’s where they came. Believe me, they didn’t come from me. They came just before I came into office. Not good. And not good the way they took the money.

In 2015, the United Nation’s departing top climate officials reportedly described the $100 billion per year as “peanuts,” and stated that "the $100 billion is the tail that wags the dog." In 2015, the Green Climate Fund’s executive director reportedly stated that estimated funding needed would increase to $450 billion per year after 2020. And nobody even knows where the money is going to. Nobody has been able to say, where is it going to?

Of course, the world’s top polluters have no affirmative obligations under the Green Fund, which we terminated. America is $20 trillion in debt. Cash-strapped cities cannot hire enough police officers or fix vital infrastructure. Millions of our citizens are out of work. And yet, under the Paris Accord, billions of dollars that ought to be invested right here in America will be sent to the very countries that have taken our factories and our jobs away from us. So think of that.

There are serious legal and constitutional issues as well. Foreign leaders in Europe, Asia, and across the world should not have more to say with respect to the U.S. economy than our own citizens and their elected representatives. Thus, our withdrawal from the agreement represents a reassertion of America’s sovereignty. (Applause.) Our Constitution is unique among all the nations of the world, and it is my highest obligation and greatest honor to protect it. And I will.

Staying in the agreement could also pose serious obstacles for the United States as we begin the process of unlocking the restrictions on America’s abundant energy reserves, which we have started very strongly. It would once have been unthinkable that an international agreement could prevent the United States from conducting its own domestic economic affairs, but this is the new reality we face if we do not leave the agreement or if we do not negotiate a far better deal.

The risks grow as historically these agreements only tend to become more and more ambitious over time. In other words, the Paris framework is a starting point — as bad as it is — not an end point. And exiting the agreement protects the United States from future intrusions on the United States‘ sovereignty and massive future legal liability. Believe me, we have massive legal liability if we stay in.

As President, I have one obligation, and that obligation is to the American people. The Paris Accord would undermine our economy, hamstring our workers, weaken our sovereignty, impose unacceptable legal risks, and put us at a permanent disadvantage to the other countries of the world. It is time to exit the Paris Accord — (applause) — and time to pursue a new deal that protects the environment, our companies, our citizens, and our country.

It is time to put Youngstown, Ohio, Detroit, Michigan, and Pittsburgh, Pennsylvania — along with many, many other locations within our great country — before Paris, France. It is time to make America great again. (Applause.) Thank you. Thank you. Thank you very much.

Thank you very much. Very important. I’d like to ask Scott Pruitt, who most of you know and respect, as I do, just to say a few words.

Scott, please. (Applause.)

ADMINISTRATOR PRUITT: Thank you, Mr. President. Your decision today to exit the Paris Accord reflects your unflinching commitment to put America first.

And by exiting, you’re fulfilling yet one more campaign promise to the American people. Please know that I am thankful for your fortitude, your courage, and your steadfastness as you serve and lead our country.

America finally has a leader who answers only to the people — not to the special interests who have had their way for way too long. In everything you do, Mr. President, you’re fighting for the forgotten men and women across this country. You’re a champion for the hardworking citizens all across this land who just want a government that listens to them and represents their interest.

You have promised to put America First in all that you do, and you’ve done that in any number of ways — from trade, to national security, to protecting our border, to rightsizing Washington, D.C. And today you’ve put America first with regard to international agreements and the environment.

This is an historic restoration of American economic independence — one that will benefit the working class, the working poor, and working people of all stripes. With this action, you have declared that the people are rulers of this country once again. And it should be noted that we as a nation do it better than anyone in the world in striking the balance between growing our economy, growing jobs while also being a good steward of our environment.

We owe no apologies to other nations for our environmental stewardship. After all, before the Paris Accord was ever signed, America had reduced its CO2 footprint to levels from the early 1990s. In fact, between the years 2000 and 2014, the United States reduced its carbon emissions by 18-plus percent. And this was accomplished not through government mandate, but accomplished through innovation and technology of the American private sector.

For that reason, Mr. President, you have corrected a view that was paramount in Paris that somehow the United States should penalize its own economy, be apologetic, lead with our chin, while the rest of world does little. Other nations talk a good game; we lead with action — not words. (Applause.)

Our efforts, Mr. President, as you know, should be on exporting our technology, our innovation to nations who seek to reduce their CO2 footprint to learn from us. That should be our focus versus agreeing to unachievable targets that harm our economy and the American people.

Mr. President, it takes courage, it takes commitment to say no to the plaudits of men while doing what’s right by the American people. You have that courage, and the American people can take comfort because you have their backs.

Thank you, Mr. President.

https://www.whitehouse.gov/the-press-office/2017/06/01/statement-president-trump-paris-climate-accord

http://www.agbc-berlin.de/content/white-house-statement-president-trump-paris-climate-accord

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see our letter on: http://www.massenbach-world.de/41259.html

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

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UdovonMassenbachMailJoergBarandat

Massenbach-Letter. NEWS 02.6.17

Massenbach-Letter. News

  • WSJ: China’s CIC in Advanced Talks to Buy European Warehouse Company From Blackstone –
  • Sovereign-wealth fund’s $13.49 billion deal for Logicor would underscore strength of the industrial property sector
  • World Awaits Trump Decision on U.S. Future in Paris Accord
  • WSJ: Rural America Is the New ‘Inner City’
  • Friedman: Different Visions for Europe
  • Newt Gingrich: “The president just made a titanic foreign policy shift. The media missed it.”

Massenbach*World Awaits Trump Decision on U.S. Future in Paris Accord

WASHINGTON — Momentous arguments inside the West Wing over the future of the Paris climate accord became a messy public spectacle on Wednesday, with some aides saying that President Trump had decided to abandon the landmark global warming agreement while others insisted that no decision had been made.

Three administration officials with direct knowledge of the intense White House debate said early Wednesday morning that Mr. Trump was expected to withdraw the United States from the 2015 climate change accord that committed nearly every nation to take action to curb the warming of the planet.

In addition, three other officials said later Wednesday that they expected him to withdraw from the agreement, though they said that decision could still change. Hours later, Mr. Trump said on Twitter that he had made his decision and would announce it in the Rose Garden at 3 p.m. Thursday.

The White House’s legislative affairs office has suggested another route: Sending the Paris agreement to the Senate for ratification as a treaty. Since it would require an impossible two-thirds vote, that alternative would also lead to withdrawal.

https://www.nytimes.com/2017/05/31/climate/trump-quits-paris-climate-accord.html?emc=edit_cn_20170601&nl=first-draft&nlid=42724716&te=1

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From our Russian News Desk.

http://www.ostexperte.de/russlands-aussenhandel-seit-2014-teil-1/?utm_source=Kontakte+Ostexperte.de-Newsletter&utm_campaign=6ba17d0264-EMAIL_CAMPAIGN_2017_05_30&utm_medium=email&utm_term=0_f45f6f7dc8-6ba17d0264-151019553

http://www.ostexperte.de/russlands-aussenhandel-seit-2014-teil-2/?utm_source=Kontakte+Ostexperte.de-Newsletter&utm_campaign=6ba17d0264-EMAIL_CAMPAIGN_2017_05_30&utm_medium=email&utm_term=0_f45f6f7dc8-6ba17d0264-151019553

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Carnegie: U.S. Policy Toward the South Caucasus: Take Three

Be realistic about energy potential.

The significance of Caspian Sea energy resources for the region in the past has created unrealistic expectations, which are important to keep in check.

U.S. Policy Toward the South Caucasus: Take Three

EUGENE RUMER, RICHARD SOKOLSKY, PAUL STRONSKI

The United States has important but not vital interests in the South Caucasus, which include preserving regional stability; preventing the resumption of frozen conflicts; and supporting democratic change and better governance as well as the international integration of Armenia, Azerbaijan, and Georgia. Recent events—the breakdown of the post–Cold War European security order, changing global energy markets, instability to the region’s south, a new U.S. administration, and the European Union’s (EU) internal challenges—call for sustained U.S. engagement to advance those interests.
Read Online
U.S. Engagement in the South Caucasus
  • Over the past twenty-five years, U.S. involvement in the South Caucasus has helped produce important positive changes in the region, particularly in Georgia. However, some U.S.-supported initiatives proved too ambitious because they underestimated the challenges facing the South Caucasus states and lacked adequate resources.
  • U.S. policy will continue to face limited resources and challenging conditions in the region. Washington should stay engaged to help the South Caucasus states tackle their internal challenges. But U.S. policy in the region cannot change its environment, and will have to contend with Russia’s dominant position and its opposition to U.S. engagement there.
  • The United States cannot retreat from the South Caucasus. But success will depend on a careful balancing of U.S. commitments and resources, as well as a clear appreciation of the limits on U.S. capacity to promote transformational change.
A Long-Term U.S. Approach
A more sustainable policy toward the region should be based on five guiding principles:

Prioritize conflict prevention. Keeping any one of the region’s frozen conflicts from escalating into hostilities should remain the top priority for U.S. policy toward the South Caucasus.

Proceed cautiously in promoting U.S. values. The United States should support democratic change; however, a single regional approach is unlikely to be effective given the different trajectories of the South Caucasus states. Tailored, country-specific approaches to achieve incremental progress offer the best prospect for success.

Keep expectations modest. The United States is at a serious geopolitical disadvantage in the region vis-à-vis Russia. Washington should not promise support to counterbalance Moscow that it cannot deliver. This is especially the case with Georgia and its aspirations for NATO membership.

Make room for the EU. Economic development, rule of law, and other domestic reforms should remain priorities for U.S. engagement, but Washington should coordinate its efforts with the EU.

Be realistic about energy potential. The significance of Caspian Sea energy resources for the region in the past has created unrealistic expectations, which are important to keep in check.

Continue reading
About the Authors
Eugene Rumer, a former national intelligence officer for Russia and Eurasia at the U.S. National Intelligence Council, is a senior fellow and the director of Carnegie’s Russia and Eurasia Program.

Richard Sokolsky is a nonresident senior fellow in Carnegie’s Russia and Eurasia Program. Prior to joining Carnegie, Sokolsky was a member of the Secretary of State’s Policy Planning Office.

Paul Stronski is a senior fellow in Carnegie’s Russia and Eurasia Program, where his research focuses on the relationship between Russia and neighboring countries in Central Asia and the South Caucasus.

http://carnegieendowment.org/2017/05/31/u.s.-policy-toward-south-caucasus-take-three-pub-70122?mkt_tok=eyJpIjoiT1RFMk1qWTROMkV4WVRWaiIsInQiOiJaeWVEZXd3cllycEUwbmIxRzk2am9WNjlXbmhLdGlJVmxCc0dxZkVsNWpFK3VQMDNEZWNrZ2dNeFNwSEdLRFZHOUFZc1RMY0VvMjNQeHVJYzA2NFZNTUJRUURnOVBzSlRDbnpXeGJidDErMWtoT1lId1E3ektDTnRWd2xFY053dSJ9

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Policy= res publica

Freudenberg-Pilster* Rural America Is the New ‘Inner City’

A Wall Street Journal analysis shows that since the 1990s, sparsely populated counties have replaced large cities as America’s most troubled areas by key measures of socioeconomic well-being—a decline that’s accelerating

….In November’s presidential election, rural districts voted overwhelmingly for Donald Trump, who pledged to revive forgotten towns by scaling back regulations, trade agreements and illegal immigration and encouraging manufacturing companies to hire more American workers. A promised $1 trillion infrastructure bill could give a boost to many rural communities.

Lawmakers from both parties concede they overlooked escalating small-town problems for years. “When you have a state like Florida, you campaign in the urban areas,” said former Florida Republican Sen. Mel Martinez. He recalls being surprised when he learned in the mid-2000s that rural areas, not cities, were the center of an emerging methamphetamine epidemic.

During the Bush administration, lawmakers were preoccupied with two wars, securing the homeland after the Sept. 11 terrorist attacks and rebuilding New Orleans after Hurricane Katrina. Barack Obama’s administration tried to lift rural areas by pushing expanded broadband access, but found that service providers were reluctant to enter sparsely populated towns, said former Agriculture Secretary Tom Vilsack.

Since the collapse of the housing market, real-estate appreciation in nonmetropolitan areas has lagged behind cities, eroding the primary source of wealth and savings for many families.

“We didn’t really have much of a transformation strategy for places where the world was changing,” Mr. Vilsack said…..

https://www.wsj.com/articles/rural-america-is-the-new-inner-city-1495817008#_=_

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

Barandat* Different Visions for Europe

by George Friedman.

Following U.S. President Donald Trump’s visit to Europe, German Chancellor Angela Merkel said Europe could no longer rely on others, by which she clearly meant that Europe could no longer rely on the United States. The statement undoubtedly arose in part from her personal friction with Trump. Part of it had to do with politics: Trump is unpopular in Germany, and the German public, particularly the left, has had doubts about the German-American relationship. The country has federal elections in September, and Merkel is under pressure. Her statement generated support from segments of the population that don’t normally support her. But underneath personality and politics, there is a geopolitical reality that has been in place since 1991 and is now emerging fully into view. This reality is that Europe is fractured and, as a whole, its interests have diverged from those of the United States.

Beneath his unusual demeanor during the trip, Trump was representing a view – a rational view – that is increasingly common in the United States. This view holds that NATO was created as a coalition of countries with identical interests: preventing the Soviet Union from invading and occupying Western Europe. NATO was successful because its purpose was clear, there was a deep consensus, and although the U.S. carried much of the burden of defense, other European countries, particularly Germany, carried a share of that burden proportionate to their ability – and would bear the brunt of a Soviet invasion. The alliance made sense.

The alliance persisted after the fall of the Soviet Union and expanded to include the countries that had been Soviet satellites. The political purpose of expansion – helping to integrate new countries into the West – was understandable, but without an obvious adversary, NATO as a primarily military alliance no longer made sense. The laser precision of the bloc’s Cold War mission was replaced by a vague mission and an uncertain vision.

The U.S.-NATO Divide

In the meantime, 9/11 launched the United States into a series of wars in the Middle East. Whether they were wise is immaterial at this point; they were the primary military focus of the United States. But though the Americans’ invocation of Article 5 (the principle of collective defense) committed NATO to the war in Afghanistan, how much individual members contributed was up to them. And in Iraq, where Article 5 was not invoked, many NATO members chose not to participate at all. Germany played no part in Iraq, and in Afghanistan, it deployed a relatively small force with tight restrictions on combat operations.

The Americans understood the technicalities. They also understood that NATO was no longer very relevant to the problems the United States was facing. Bilateral relations took precedent over relations with NATO. The U.S. moved closer to the United Kingdom and smaller countries, particularly in Eastern Europe, that were prepared to commit what they could to the wars in the Middle East. It became increasingly difficult for the Americans to think of Europe as a whole: It didn’t behave as a whole, and the Euro-American alliance didn’t extend beyond NATO’s mission – a mission that appeared to have expired.

The mission was somewhat revived by the Russo-Georgian war in 2008, and even more in 2014 with the uprising in Ukraine. The Russians appeared to be growing more aggressive. However unlikely a Russian invasion was, NATO was committed by treaty to defend the Baltics, Poland, Slovakia, Hungary, Romania and Bulgaria. It had to have forces on hand to deter or repel Russian action.

U.S. President Donald Trump (R) and German Chancellor Angela Merkel arrive for a photo during the Summit of the Heads of State and of Government of the G-7, the group of most industrialized economies, plus the European Union, on May 26, 2017, at the ancient Greek theater in Taormina, Sicily. MIGUEL MEDINA/AFP/Getty Images

The problem was that NATO couldn’t deploy enough force for the mission – the mission for which it was founded. Even the wealthiest members, like Germany, lacked a force that could protect Europe’s eastern frontier. This left the United States in a position where, if NATO were called on to defend a member, it would be the prime mover, as it had been since the alliance’s founding. Many in Europe argued that the danger was low, but those nearer to the front line – the Balts, the Poles and the Romanians – didn’t share their confidence and had a reasonable expectation for NATO to function as designed.

To this point, the Americans were disappointed but understood that many European NATO members provided the force they wanted to provide to the wars they chose. But 2014 raised the specter of a European war, and what the U.S. saw was many of its NATO allies, particularly Germany, offering ample advice and playing a role in diplomacy but lacking, by choice, the force to carry out their NATO obligation relative to the size of their economies.

It was then that the divide between the U.S. and NATO became a domestic political problem in the United States. The foreign policy technocrats in Washington accepted as a given that the European commitment to NATO would not evolve to reflect the economic equality between the continents. The rising nationalist segment of the American populace opposed fixed institutionalized relationships, particularly those that did little to meet the needs of the U.S. and that involved unequal burden sharing.

It was this group that Trump represented while he was in Brussels. Merkel’s response to him – essentially saying Europe should take care of itself – would shock the foreign policy technocrats, but the nationalists regarded it as simply the logical conclusion of Germany’s behavior. They welcome Europe’s commitment to self-reliance, and they will continue their military relationship with the United Kingdom, Eastern Europe and other countries of interest. If the Germans want to abandon NATO, the nationalists are pleased to see it happen.

Lessons of the Past

Germany’s view is that the United States is carelessly threatening the global balance and, far more important, the European balance. Germany went through two catastrophic wars in the past century, was divided in two with both halves occupied (albeit one half more benignly by the United States), and faced the possibility of being the battlefield for a disastrous war. Germany’s primary strategic interest is avoiding a repeat of the past century. In looking at the foundations of that century, it was Germany’s excessive reliance on military force that led it into wars it couldn’t win.

The NATO of the Cold War was something the Germans had to live with to recover from the material and moral catastrophe of World War II. But 1991 opened a new era for Germany in which it wished to avoid being drawn into a conflict that its geography dictated would be disastrous. Germany exists on the North European Plain, a difficult area to defend except at the river lines that run north-south. Whenever the Germans moved to the west or east, they discovered short-term victories, but in the long term they were ground into the dust, constantly in retreat until their collapse. Germany experienced this most emphatically in Russia.

It has no intention of being drawn into such a conflict again, and it does not see Russia as a strategic threat. In Germany’s view, the conflict in Ukraine could not spread beyond Ukraine because Russia’s military power is limited, and Russia doesn’t want a war anyway. Germany intervened diplomatically in Ukraine in 2014, but the Germans believed a new attempt at containment from the Baltics to Romania would not deter war and could even increase its likelihood by encouraging Russia to respond.

For Germany, a strategy of containment requiring the pre-emptive deployment of substantial forces would drain its economy and achieve nothing. Moreover, if the United States and a coalition of the willing decided on a containment policy outside the framework of NATO, Germany, at the rear of the line, would inevitably be drawn in. For Berlin, the measure of commitment to European security is not the willingness to deploy military force but the maintenance of a full appreciation of the balance of forces. In its view, the U.S. and Europe are not rationally evaluating Russian power, and it is Germany’s responsibility to act as a brake on the United States.

Behind this is another reality. Germany is a massive exporter and needs the EU for a free market for sales, a common currency that benefits it, and a system of regulations that protects its industry. Above all else, it must protect the European Union. The EU is already under terrific stress, with Brexit, political tensions between Brussels and Poland and Hungary, and the emergence of a general anti-EU faction. Marine Le Pen’s defeat in the French elections has not ended that problem.

Increased military tension that involves Eastern Europe but is looked at skeptically by countries farther west opens the door to another dimension of European fragmentation. U.S. deployments in Eastern Europe have the potential to increase the centrifugal forces that are already edging toward being out of control. Demanding increased spending from NATO at a time of economic stagnation may seem reasonable to the Americans, but it underestimates Europe’s fragility while simultaneously drawing Eastern Europe into its orbit and further fragmenting the EU.

From Germany’s point of view, the U.S. has been too powerful for Germany to influence, and until now Germany had been too weak to resist. Germany sees the U.S. wars in the Middle East as examples of America’s excessive power. The U.S. has for 15 years waged a war, even in the face of failure, that towers over anything the Europeans can field for any length of time.

Germany is a weak and scarred country living in a difficult place. The Americans tend to see war as a viable option where Germany cannot. The demand that Germany and Europe increase their spending on defense is really, in Merkel’s eyes, an attempt to draw Germany into the American mode of thought, of never seeing problems as insoluble and never hesitating to seek military solutions – only to find that the problem remains.

For Merkel, Trump is American geopolitics personified. He is enormously powerful and unreasonably confident, and he demands that an alliance of equals serve the American interest as its first responsibility. When she said that Europe must not depend on anyone, what she was saying is that Europe must stick together and not be drawn into the American understanding of the world.

This was bound to happen, Trump or not. America and Germany have utterly different imperatives and experiences. One has known only triumph and relatively minor defeats, the other has been devastated over and over by its own actions. The U.S. is far more powerful and geographically secure than Germany ever was. It is involved in wars and doesn’t understand an alliance that expects U.S. force when its allies need it but can’t offer the same in return. The Americans and Germans are no longer even participating in the same discussion.

The American view and the German view of Europe are incompatible. The future of Europe means far more to Germany than to the United States. The United States can increase fragmentation unintentionally, and this is why Germany has declared itself and Europe self-reliant. The problem is that the very idea of Europe as a political entity and not just a place is in crisis. It is necessary for Merkel to declare self-reliance, but right now, it’s unclear what the self of Europe is.

https://geopoliticalfutures.com/different-visions-europe/?utm_source=GPF+-+Newsletter&utm_campaign=2d3afb391c-Friedmans_Weekly_Paid_List&utm_medium=email&utm_term=0_72b76c0285-2d3afb391c-240043701

Comment by UvM: Why not replace “Germany” by “Merkel” ?

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Middle East

Newt Gingrich: “The president just made a titanic foreign policy shift. The media missed it.”

By Newt Gingrich

May 24, 2017

Newt Gingrich, a Republican from Georgia, was speaker of the House of Representatives from 1995 to 1999. He served as vice chair of the Trump transition team and is the author of the book “Understanding Trump,” which is scheduled to be released in June.

This newspaper’s legendary former publisher, Philip Graham, famously described journalism as the business of writing the “first rough draft of history.” This week, as President Trump gave a historic speech in Saudi Arabia before the leaders of more than 50 Muslim-majority nations, journalism’s first draft missed the history almost entirely.

While the media focused on the ephemeral questions — whether the president would use campaign rhetoric in a diplomatic setting, or how the trip would affect the Obama legacy — they largely missed the real drama of the moment: a titanic shift in U.S. foreign policy occurring right before their eyes.

Trump stood before an unprecedented gathering of leaders to do something far more significant than utter a single phrase or undermine his predecessor’s record. He was there to rally the Muslim world, in his words, “to meet history’s great test” — defeating the forces of terrorism and extremism. He did so in a way that no American president ever had before. While extending a hand of friendship to Muslim nations, he also issued them a clear challenge: to take the lead in solving the crisis that has engulfed their region and spread across the planet. “Drive out the terrorists and extremists,” he urged them, or consign your peoples to futures of misery and squalor.

To find a comparably dramatic moment in the history of U.S. foreign policy, we have to look all the way back to 1982. That June, 35 years ago next month, President Ronald Reagan stood in the Royal Gallery at the Palace of Westminster in London and called on the West to rally in defense of freedom and against communist aggression.

In that one speech, Reagan predicted the fall of communism and reinvigorated the Western alliance. “We see totalitarian forces in the world who seek subversion and conflict around the globe to further their barbarous assault on the human spirit,” Reagan said. “What, then, is our course? Must civilization perish in a hail of fiery atoms? Must freedom wither in a quiet, deadening accommodation with totalitarian evil?”

Reagan declared his speech a turning point in history — and it was. On Sunday, Trump, too, declared that his challenge would be a turning point, one way or another. And he posed to that assembly in Riyadh an equally dramatic choice. It was, he said, “a choice between two futures” — the path of civilization, or the path of evil and death.

“America is prepared to stand with you” in the fight against terrorism, Trump pledged. “But the nations of the Middle East cannot wait for American power to crush this enemy for them. The nations of the Middle East will have to decide what kind of future they want for themselves, for their countries, and for their children.”

Trump’s first trip overseas as president

The U.S. president started his journey in Saudi Arabia and moved on to Israel and Italy.

American president tried so clearly to unite the civilized world, including the nations of the Middle East and Africa, against the forces of terrorism. Never before has an American president issued so direct a challenge to those nations to do more in the fight. And never before has an American president so plainly put the ultimate responsibility for eradicating terrorism on the nations of the region. In doing so, Trump’s speech implicitly repudiated the approaches of his two immediate predecessors and promised instead what he characterized as a “principled realism,” based on a clear-eyed view of America’s interests, security and limits.

That this decisive shift in U.S. foreign policy occurred on a foreign trip within the first four months of the administration is all the more impressive. Reagan didn’t take his first international trip until well into his second year. And unlike President Barack Obama’s early speech to the Muslim world in 2009, Trump backed up his words with action.

The United States and Saudi Arabia signed a $110 billion arms deal, the largest in U.S. history, which will bolster the kingdom’s ability to contribute to counterterrorism operations across the region. This will reduce the burden on the U.S. military and send a clear message that this administration takes the threat of Iran seriously. The agreements also included a new commitment to crack down on terrorism financing in the Persian Gulf states, as well as hundreds of billions of dollars’ worth of Saudi investment in the United States.

Journalists and Washington bureaucrats, who are so deeply embedded in the establishment that they can’t see out of it, may see Trump’s call to action as a distracting sideshow from a status quo they can’t imagine changing. And yet this week, it already has. Foreign leaders and the American people alike can see in this trip the core of a new, reality-based foreign policy.

https://www.washingtonpost.com/opinions/the-president-just-made-a-titanic-foreign-policy-shift-the-media-missed-it/2017/05/24/405dfdda-3fcf-11e7-adba-394ee67a7582_story.html?utm_term=.f3ec5d4c1b75

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*Massenbach’s Recommendation*

WSJ: China’s CIC in Advanced Talks to Buy European Warehouse Company From Blackstone

Sovereign-wealth fund’s $13.49 billion deal for Logicor would underscore strength of the industrial property sector

China’s sovereign-wealth fund has started talks to purchase a European warehouse company from Blackstone Group LP for about $13.5 billion. Under the terms of the deal, which could be completed within days, China Investment Corp. will get over 630 warehouse properties, the WSJ’s Peter Grant reports. Warehouses and distribution centers have become one of the hottest classes of commercial property recently as demand grows from companies eager to be able to increase the speed of deliveries to consumers. Singapore’s Global Logistic Properties, for instance, made several large warehouse acquisitions over the last few years, and has now put itself up for sale. In an interview, CIC president Tu Guangshao said the fund is also considering investments in U.S. projects such as highways, rail lines and high-tech manufacturing plants.

( https://www.wsj.com/articles/chinas-cic-in-advanced-talks-to-buy-european-warehouse-company-from-blackstone-1496246060?mod=djemlogistics#_=_ )

About Logicor in Germany:

“…We have a substantial presence in Germany with ​nearly 2.3 million sqm of logistics warehouse space. As well as strong coverage across Germany we also have select assets in Austria’s logistics hubs close to Graz and Linz.

Our warehouse assets are located in some of the best logistics locations in Germany including the Rhine-Main region, Dusseldorf and Cologne in the Ruhr region, as well as Munich. We also have a strong presence in key logistics hubs including the inland ports of Duisburg and Nuremburg, along with Hamburg, the largest sea port in Germany and second busiest port in all of Europe….” ( https://www.logicor.eu/countries/germany )

China’s sovereign-wealth fund is in advanced talks to purchase a European warehouse company from Blackstone GroupLP in a €12 billion ($13.49 billion) deal that would underscore the strength of the industrial real-estate sector.

China Investment Corp. could complete the deal to buy Logicor from the private-equity giant within days, according to people familiar with the matter. Nothing has been signed and the deal could still fall apart, the people said.

Blackstone has been actively marketing Logicor this year while gearing up to sell the company in an initial public offering if it couldn’t get its price in a private deal. Other private bidders for Logicor included three Singapore institutions: Mapletree Investments, Temasek and GIC, Singapore’s sovereign-wealth fund, according to a person familiar with the matter.

The advanced talks with CIC were reported earlier by Estates Gazette, a real-estate trade publication.

Warehouses and distribution centers have become one of the hottest classes of commercial property recently thanks partly to the growth of online retail. Demand for industrial space has grown by a wide range of companies eager to be able to increase the speed of deliveries to consumers.

Blackstone made several early bets on the sector that have paid off. The firm began building a U.S. logistics property company named IndCor Properties in 2010. Four years later, Blackstone sold it to GIC for $8.1 billion.

In Europe, Blackstone began accumulating warehouses and distribution centers under the Logicor name in 2012. That company grew to operate more than 630 properties.

CIC, which was formed in 2007 as a way for China to diversify its foreign-exchange holdings, has been steadily increasing its appetite for foreign real estate and other businesses. The fund has more than $200 billion in foreign assets and, in the past, has relied heavily on outside asset managers, including Blackstone, to make many of its foreign investments.

Earlier this month, CIC opened a New York office, replacing what had been its only overseas representative office in Toronto. In an interview with The Wall Street Journal, CIC President Tu Guangshao said CIC is considering investments in U.S. projects such as highways, rail lines and high-tech manufacturing plants.

CIC often invests with a consortium of other investors. If it winds up buying Logicor, it would be a particularly large deal for the fund to do by itself.”

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May 28 2017: U.S. Senator Bob Corker. Chairman of the Senate Foreign Relations Committee:

Corker Statement on President Trump’s International Trip

CHATTANOOGA, Tenn. – U.S. Senator Bob Corker (R-Tenn.), chairman of the Senate Foreign Relations Committee, today released the following statement regard President Donald J. Trump’s international trip.

“I spoke with President Trump at length this morning and told him that I could not be more pleased with his first international trip,” said Corker. “The trip was executed to near perfection and it appears the president has made great progress on the broad range of objectives his team articulated to me when I met with senior White House and State Department officials during their preparations.”

“President Trump should be commended on the success of this trip, and I look forward to continuing our work together to address numbers of important issues,” continued Corker. “The challenges we face around the world are vast, but with a strategic focus on our long-term goals, I am confident we can reassert U.S. leadership, strengthen key alliances and improve security both at home and abroad.”

“I also continue to be encouraged by the level of engagement between this White House and Congress on foreign policy matters, and I commend Secretary of State Tillerson, National Security Advisor McMaster, Senior Advisor Kushner and Deputy National Security Advisor Powell for their work to make the trip a remarkable success,” concluded Corker.

At the request of the White House, Senator Corker hosted a meeting earlier this month during which National Security Advisor H.R. McMaster, Senior Advisor Jared Kushner and Deputy National Security Advisor Dina Powell provided information to and sought input from a number of senators regarding President Trump’s first international trip.

https://www.corker.senate.gov/public/index.cfm/news-list?ID=668B0964-B44D-4326-AAE3-3ABD9563FD58

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see our letter on: http://www.massenbach-world.de/41259.html

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

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UdovonMassenbachMailJoergBarandat

05-31-17 U.S. Policy Toward the South Caucasus_ Take Three – Carnegie Endowment for I.pdf

05-28-17 WSJ_Rural America Is the New ‘Inner City’ – WSJ.pdf

05-23-17 Russlands Außenhandel seit 2014, Teil 1_ Ölpreise auf d er „Achterbahn“.pdf

05-23-17 Russlands Außenhandel seit 2014, Teil 2_ Wareneinfuhr u nd Handelsbilanz.pdf

Massenbach-Letter. NEWS 26.5.17

Massenbach-Letter. News

  • The Future of the US Navy
  • Pope and Trump discuss peace, dialogue, support for immigrants
  • Syrien: Für Christen keine Alternative zum Assad-Regime
  • Guarding the Guards at the CIA
  • Dmitri Trenin: Moscow Carnegie Center: What Can Japan Offer Russia?
  • Carnegie Moscow Center:The Silk Road to Nowhere
  • Saudi-U.S. Ties Shift as Kingdom Turns to Trump for Investments
  • France’s Mistral amphibious carrier arrived in Japan

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

  • Russia–Japan Political Dialogue at the Highest Level: Opportunities and Perspectives
  • The Syrian Arab Army
  • Russia and the West: How to Deal with the Threat of Extremism
  • russia and europe in times of uncertainty
  • How Does Social Media Influence Elections?
  • The Demise of the Turkish Democratic Model
  • How Rouhani Won a Second Presidential Term

Massenbach*Pope and Trump discuss peace, dialogue, support for immigrants

(Vatican Radio) Pope Francis and U.S. President Donald Trump met in the Vatican on Wednesday, discussing issues of peace, interfaith dialogue and religious freedom, as well as the role of the American Church in education, healthcare and support for immigrants.

The American leader spent half an hour in conversation with the Pope behind closed doors in the Apostolic Palace, before meeting with Vatican Secretary of State, Cardinal Pietro Parolin, and Archbishop Paul Gallagher, the Holy See’s Secretary for Relations with States or foreign minister.

Press office statement

A statement from the Vatican press office said during the course of the cordial encounter, the two men discussed the good bilateral relations that exist between the U.S. and the Holy See. They also spoke of their “common commitment in favour of life, religious liberty and freedom of conscience”.

The statement expressed the hope for a “serene cooperation between the State and the Catholic Church in the United States, which is committed to serving the population in the fields of health care, education and assistance to immigrants.

Dialogue and negotiations

It said the Pope and the President also exchanged views on international affairs and on the promotion of peace through political negotiations and interfaith dialogue, mentioning especially the situation in the Middle East and the protection of Christian communities.

Following the papal audience, Trump will meet with Vatican Secretary of State, Cardinal Pietro Parolin, together with Archbishop Paul Gallagher, the Holy See’s Secretary for Relations with States or foreign minister.

http://en.radiovaticana.va/news/2017/05/24/pope,_trump_discuss_peace,_dialogue,_support_for_immigrants/1314399

http://en.radiovaticana.va/news/2017/05/23/pope_and_us_president_vital_role_of_soft_power_diplomacy/1314287

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Syrien: Für Christen keine Alternative zum Assad-Regime

Die Christen in Syrien unterstützen das Regime von Präsident Bashar Assad allein aus dem Grund, weil sie keine Alternative haben. Das betont der Salzburger Ostkirchenexperte Dietmar Winkler. „Wenn Assad fällt, was passiert dann? Der Einfluss des fundamentalistischen Islam ist im Land bereits so stark, dass es für die Christen dann ganz düster aussehen würde“, so Winkler wörtlich in einem Interview in der aktuellen Ausgabe der Zeitschrift „Information Christlicher Orient“. Sogenannte „gemäßigte“ Rebellen gibt es laut Winkler in Syrien de facto nicht.

„Im Krieg gibt es keine Waisenknaben“, so Winkler. Kriegsverbrechen würden von allen Seiten begangen. Und wenn von mancher Seite das Assad-Regime als unschuldig dargestellt wird, stimme das natürlich auch nicht. Aber, so Winkler: „Die lokalen Bischöfe sagten und sagen mir immer wieder in Gesprächen: Was ist die Alternative für die Christen? Wer schützt die Christen, wenn nicht das Assad-Regime? Welche Perspektiven gibt es überhaupt?“

Natürlich sei das Assad-Regime eine Diktatur mit einer „gefürchteten und brutalen“ Geheimpolizei. Und trotzdem: „Vor dem Krieg war Syrien ein relativ stabiler Staat unter der Herrschaft des säkularen Baath-Regimes. Wer sich an den vorgegebenen politischen Rahmen hielt, konnte seine Religion frei leben.“ Das Verhältnis zwischen den Religionen – Sunniten, Alawiten, Christen oder Drusen – sei ein relativ gutes Nebeneinander und oft auch ein Miteinander gewesen.

Dazu komme die Beobachtung: „Dort, wo das Assad-Regime nach wie vor oder nun wieder an der Macht ist, so wie beispielsweise in Aleppo, dort ist die Lage wieder stabiler geworden.“ Nachdem die Assad-Truppen ganz Aleppo unter Kontrolle gebracht hatten, konnten die Christen dort wieder relativ sicher Ostern feiern. „Das war vorher so nicht der Fall. Und das ist auch der Blickpunkt der Christen“, so Winkler.

Christen sind nicht Kollaborateure, sondern Spielball

Dabei dürfe man aber auf keinen Fall sagen, dass die Christen mit dem Assad-Regime kollaborieren. Dafür seien sie auch eine viel zu kleine Minderheit. „Eigentlich sind sie seit vielen Jahrhunderten ein Spielball in Händen der jeweiligen Herrscher vor Ort. Und irgendwie mussten sie immer das Auskommen mit den Herrschenden suchen.“ Deshalb sei es auch nur allzu verständlich, dass Christen an der Gründung der säkularen Baath-Bewegung in Syrien in den 1940er und 1950er-Jahren beteiligt waren. Eine säkulare Politik, die weitgehend Religionsfreiheit einräumt, sei schließlich in einem muslimischen Umfeld die beste Variante für die Christen, zeigte sich Winkler überzeugt.

Das sei natürlich keine Freiheit bzw. Demokratie nach westlichem Muster, räumte der Ostkirchenexperte ein, Man müsse aber vorsichtig sein, westliche demokratische Vorstellungen auf Länder im Nahen Osten zu projizieren. Winkler: „Europa hat 500 Jahre Aufklärung und Reformation inklusive der damit verbundenen Religionskriege durchgemacht. Das Ergebnis dieser europäischen Entwicklung kann man nicht einem anderen Land und seiner Bevölkerung einfach von heute auf morgen überstülpen. Das funktioniert nicht.“ Die Schaffung eines demokratischen Bewusstseins in der Bevölkerung sei ein langer und schwieriger Prozess.

Kein Bürgerkrieg in Syrien

Die Frage, ob der Syrien-Krieg ein Bürgerkrieg sei, verneinte Winkler. Der Krieg sei von außen in das Land getragen worden. „Und es sind die vielen Mächte von außen, die ihre eigenen Interessen verfolgen: die Amerikaner, denen es um Öl geht, die Russen, die ihre Basis im Mittelmeerraum nicht verlieren wollen, der Iran, der seinen Einfluss zum Mittelmeer ausdehnen will; Saudi Arabien, das seine Art des sunnitischen Islam in Syrien und sich als Regionalmacht etablieren will, oder auch die Türkei, die vor allem auch gegen die Kurden operiert.“

Und von allen Seiten würden Waffen geliefert und werde der Krieg nach wie vor befeuert. Winkler: „Der Unterschied ist, dass wir es bei den Russen genau wissen, dass und wie sie Assad unterstützen. Bei den anderen internationalen Akteuren, militärischen Beratern, Spezialeinheiten und Rebellengruppen ist das nicht so deutlich zu erkennen.“ Deutlich sei aber, „dass der Waffennachschub von außen für alle Seiten nach wie vor funktioniert, sonst wäre der Krieg längst zu Ende.“ Ganz klar sei auch, „dass sich die christlichen Führer wieder und wieder für ein Ende der Gewalt und ein Ende der Interventionen von außen ausgesprochen haben“.

http://de.radiovaticana.va/news/2017/05/22/syrien_für_christen_keine_alternative_zum_assad-regime_/1313856

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

  • Russia–Japan Political Dialogue at the Highest Level: Opportunities and Perspectives
  • The Syrian Arab Army
  • Russia and the West: How to Deal with the Threat of Extremism
  • russia and europe in times of uncertainty
  • How Does Social Media Influence Elections?
  • The Demise of the Turkish Democratic Model
  • How Rouhani Won a Second Presidential Term

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Moscow Carnegie Center: What Can Japan Offer Russia?

By Dmitri Trenin

The window of opportunity for improving Russo-Japanese relations is still open, at least for now. Russia’s main objectives are to attract Japanese investment into its national economic development programs and to continue to diversify its policies in the Asia-Pacific and on the international stage, where Japan plays an important and increasingly independent role.

Japanese Prime Minister Shinzo Abe has made it clear that he wants to resolve his country’s long-standing territorial dispute with Russia over the Kuril Islands and to prevent an overly close alliance between Moscow and Beijing—and Russo-Japanese relations are heating up as a result.

In December, Putin visited Abe in the prime minister’s home prefecture of Yamaguchi. Three months later, the Russian and Japanese foreign and defense ministers met in Tokyo for the first time in almost four years. Then in April Abe visited Moscow, marking only the second time in almost fifteen years that a Japanese premier has made an official visit to Russia.

The Kremlin is not rebuking Japanese diplomatic advances, but it is being more cautious than its counterpart; Moscow wants to improve bilateral relations with Tokyo in other ways before entering into concrete negotiations on the Kuril Islands.

The problem is that Russo-Japanese relations cannot move far beyond where U.S.-Russian relations have been since the 2014 Ukraine crisis: Japan is a close ally of the United States and has been steadfast in complying with all of the G7’s decisions regarding sanctions on Russia.

More than one hundred days into his presidency, Donald Trump has not backed away from the sanctions regime against Russia that Barack Obama introduced. Meanwhile, the results of the French presidential election and the forecasts for the upcoming German parliamentary elections leave no doubt that the countries of the European Union will also maintain sanctions against Moscow. This significantly limits the potential payoff of Russia’s main objective in improving relations with Japan.

This article originally appeared in Russian in RBC.

Still, there are differences between Russia’s relationship with the United States and its relationship with Japan. If Russia is able to emerge from the current crisis and start down the road of economic development, technological cooperation with and investment from Japan will be invaluable for Russia—particularly for Siberia and the Far East.

The key issue is not Tokyo’s willingness to provide resources but rather Moscow’s willingness to embark on a policy of economic development. Although we should not overestimate Russia’s enthusiasm for change in the run-up to the 2018 presidential election or in the period that follows, sooner or later Russia will have to reform its economy and its system of state administration.

The latest rapprochement between Russia and Japan has lasted for almost a year, though Tokyo has changed its priorities recently. Whereas initially Japan emphasized the importance of economic development, its focus has now shifted to security issues.

Prime Minister Abe’s visit to Moscow took place against a background of heightened concerns about North Korea’s nuclear and missile programs. Accordingly, the possibility of a military conflict in Northeast Asia requires a deep, confidential, and candid dialogue between Moscow and Tokyo.

Russia does not hold much sway in North Korea right now, but it could advise Japan on approaches to stabilizing relations and reducing the risk of confrontation, as well as on sensitive points where applying pressure to North Korea would be counterproductive or dangerous. Such a discussion could be more constructive in establishing a new model of Russo-Japanese relations than usual discussions of the U.S. missile defense system in South Korea or the increased presence of Russian armed forces in the region.

In March, representatives of an association of former residents of the southern Kuril Islands visited Russia. Because the local population was evacuated to Japan in 1947, there are few living former residents left. However, their children still honor their ancestors who lived on the islands. Naturally, any solution to the Kuril Islands dispute will not only need to be ratified by the Russian and Japanese parliaments, but also accepted by those countries’ populations.

Thus, in the interests of intensifying relations with Japan, Russia has expressed a willingness to take steps to accommodate the wishes of the former residents of the islands and their descendants. Visa-free travel to the islands, the right to visit Japanese cemeteries, various opportunities for “nostalgia tourism,” and other interactions between Japanese and Russian citizens could create a new fabric of relations and bring the two nations closer together.

Russia and Japan are still early in their journey toward normalizing bilateral relations, and a broader and deeper relationship will take time to develop. However, delays in the process of normalization benefit neither Moscow nor Tokyo, meaning that both sides are looking for regular, tangible achievements sooner rather than later. With this in mind, concrete measures for expanding and strengthening bilateral contacts (whether between diplomats, generals, or representatives of civic associations) present an opportunity to improve Russo-Japanese relations without waiting for top-level decisions to be made.

The objectives of Japan’s “Russia strategy” are evident. Russia’s main objectives are to attract Japanese investment into its national economic development programs and to continue to diversify its policies in the Asia-Pacific and on the international stage, where Japan plays an important and increasingly independent role. The window of opportunity for improving Russo-Japanese relations is still open, at least for now.

http://carnegie.ru/commentary/?fa=69934&mkt_tok=eyJpIjoiTjJWbFpXWTNPR00zTlRZeCIsInQiOiJnWVdMRlwvYjlrY0JGWWNaVEpmSmVDcUdGTjE3TXBiWkhqdm94bGNsQTB1ZTJmNlZUdDc0eVZJZGtUVXdVZUtoUEhwbkozNmx1d0FcL2E1Sm5WbldCTGZJcEpoRGMrWGRBUkMrNzI5YmdWSVc1ZFdjbU4rdGsxT3VUdnlEYzErQnZXIn0%3D

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Policy= res publica

Freudenberg-Pilster* Guarding the Guards at the CIA

By George Friedman

Trusting an agency to tell the lies it must is a tough enough sell in a democracy.

By George Friedman

Over the weekend, The New York Times published a report detailing the discovery and systematic degradation of the U.S. espionage network in China from 2010 to 2012. The report cites 10 officials, former and current, who describe the penetration of the network and speculate on the reason for its failure. Some claim there was a Chinese mole in the CIA. Others claim that lines of communication between assets and the agency had been breached.

The timing of the report is as interesting as the content itself. CIA officials, after all, have already been accused of leaking information designed to weaken President Donald Trump. And now, not only have a handful of officials revealed a massive intelligence failure, but they have done so, apparently in concert, five years after it happened.

One explanation is that a faction in the CIA means to weaken the agency’s credibility by revealing the failure. (I have no evidence for this, but then again, evidence to substantiate charges is optional in Washington.) This would, in effect, undermine the credibility of those claiming to know about secret Russian plots. “You claim to know about them, but you are actually not very good at intelligence,” or so the argument would go.

A Tough Question

Human intelligence is a game of deception. The acquisition of government sources depends on duplicity, and the intelligence agency must lie to protect the source. It is an industry in which secrecy and dishonesty are moral imperatives. Take World War II, for example. The United States and Britain won World War II in large part because they had broken the German and Japanese codes. They knew what their enemies were planning and could counter it. In order for the breach to work, it had to be kept secret from the public. The secrets of the breach were revealed years after the war, but had the Germans and the Japanese caught wind of it sooner, they would have changed their codes, and the outcome of the war might’ve been different.

In the long run, the CIA can’t deceive the Chinese government without also deceiving, in some way, the American public. This leaves us with an obvious problem: Should we believe anything the CIA says?

It’s a tough question for a democracy to answer. Trust is built on the tacit agreement that the “bad things” an agency does are good for the country. If the public believes that that is no longer the case – if it believes the agency is acting out of self-interest and not national interest – then the agreement is broken. The intelligence agency is seen as an impediment of the right to national self-determination, a means for the ends of the few.

Trust is also built on competence, and so it is always reasonable to question the intelligence of the intelligence agency. When questioned, the CIA, which again traffics in deception, tends to say something along the lines of, “If you only knew what I know, you would respect me completely.” But the public has no way of knowing whether the CIA is keeping secret its successes or its failures.

Trusting an agency to tell the lies it must is a tough enough sell in a democracy – it’s partly the reason the United States didn’t even have an intelligence service before World War II – but it becomes even more difficult the moment the agency enters the political arena, which is where it finds itself now. In addition to determining if the agency is telling the truth, the public must also ascertain whether its involvement in politics is such that it has lost its ability to carry out its mission – namely, gathering foreign intelligence. The question then becomes: Has the CIA been captured by an American political faction, and if so, can it still be an effective intelligence agency?

A High Price

It’s possible that the CIA has information that the president is in some way colluding with a foreign power. That is vital information, if it exists. But it is information that should be passed to Congress, via the intelligence committees, because only Congress is endowed with the constitutional responsibility to act on such a matter. In releasing intelligence to the public, the CIA may be revealing sources and methods, and more important, it is assuming powers of the Constitution — which each member of the CIA is sworn to “preserve, protect and defend” — that the CIA doesn’t have.

Participating in political debates will, in turn, divide the CIA, since CIA employees are no more of one mind on the politics of the day than anyone else. So when 10 officials step forward to reveal the intelligence failures in China, as they did in the New York Times report, we need to consider why they chose to do it now. Was the timing merely coincidental? Was it an attempt to undermine a possible faction in the CIA that is leaking damaging information on the president? This is all speculation, of course, but that’s the point: Once the CIA enters domestic politics, it is subject to the same speculation as others in the arena.

This is why moral rectitude is important for an intelligence organization in a democracy. The secrecy and duplicity needed to be effective are obviously distasteful, and the fear that the intelligence agency is using its trade to interfere in domestic politics is always there. Intelligence must have a moral standing to elicit the trust that its lies and deception are in defense of the Constitution and not an attempt to impose the will of a faction on the country. Once that suspicion becomes widespread, the intelligence organization loses its moral standing, the importance of which is paramount for gathering foreign intelligence. Once an agency loses its moral standing, then things like the New York Times report about China will be seen not as an act of public accountability but as an act of manipulation.

Forgoing foreign intelligence is not an option. A global power must know what is happening around the globe. A democratic global power must tolerate the discontents of deception, the risks it poses for a democracy notwithstanding. It’s an important if imperfect balance, and it’s thrown off when an intelligence organization enters public discourse. The organization betrays its oath by using its foreign intelligence capability selectively in favor of one or another faction. This calls into question its very survival.

The China report is a reminder of the high price we pay for having the CIA, which is no stranger to entering U.S. politics. The officials who will not go on the record because they are not allowed to are simply sowing seeds of distrust that will at some point consume them and weaken the United States. If the people of the CIA are guardians, then who will guard them?

https://geopoliticalfutures.com/guarding-guards-cia-1/

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Barandat* Carnegie Moscow Center:The Silk Road to Nowhere

It will take years for Russia to increase trade with China. To do so, Russia will need to strengthen its institutions, overcome non-tariff barriers to the Chinese market, and enhance its reputation among Chinese investors.

On May 14–15, 28 heads of state, including Vladimir Putin, attended the Belt and Road Forum for International Cooperation in Beijing, an event that was supposed to showcase the success of Chinese leader Xi Jinping’s Silk Road revival.

It didn’t.

The joint declaration issued at the conclusion of the forum is rife with platitudes about supporting the common good and opposing evil that were included to assuage fears that China is using the initiative to drag other countries into its sphere of influence. Instead, Beijing came off as disingenuous.

Perhaps most importantly, the Belt and Road Initiative suffers from a lack of performance criteria. Although Xi Jinping did announce five broadly defined areas of cooperation in 2013, Beijing never set any concrete goals. Chinese planners simply shrug off questions about key performance indicators, saying that the Silk Road incorporates too many countries and involves too many variables over which Beijing has no control.

While China’s partners think this uncertainty is problematic, it’s seen as a good thing inside China, including by Xi Jinping himself. After all, the lack of performance criteria allows the government to declare anything a success.

Beijing isn’t doing anything new with the Belt and Road Initiative. Long before plans to revive the Silk Road were made public, Chinese companies built infrastructure in other countries, ran pipelines and fiber-optic networks across Eurasia, and handed out loans, while Beijing invested billions in enhancing its soft power. It’s not surprising, then, that many of China’s old projects, like the construction of Gwadar Port in Pakistan, which began in 2002, are touted as the Belt and Road’s flagship achievements.

Developing transcontinental routes between Europe and China is in fact the only new and large-scale vector of the Silk Road initiative that Xi Jinping has discussed. Beijing has numerous reasons for devoting resources to this effort, one of which is geopolitical: Chinese military officials want to create land routes for cargo shipments (primarily oil) to bypass the Strait of Malacca in light of the current tensions over the South China Sea.

Other factors are purely economic: EU-China trade volumes are incredibly high, totaling 1.5 billion euros per day. Labor costs are increasing in coastal provinces but still low inland, making it an attractive place for investment. China has been constructing infrastructure in these areas since 2000 as part of the government’s program to develop the country’s western regions.

What’s more, land shipments save time: they take twelve to sixteen days, as opposed to thirty days or more by sea. If China concentrated on working out its land routes to Europe, it would hardly find a faster route than through the Eurasian Customs Union (Russia, Kazakhstan, and Belarus).

Still, actual trade numbers have thus far failed to live up to expectations. For now, overland and maritime transit costs are about equal, but sea transit is expected to again be at least 1.5 times cheaper than land in the future. And at the end of the day, delivery time, which Chinese officials love to talk about when they advertise the Silk Road, is not as important to businesses as the cost of shipping.

In the past three years, projects facilitating transportation links between China and Europe have received much less Chinese investment than many analysts, including this one, expected. This is particularly true in the post-Soviet states. Beijing has thus far failed to act on the list of 40 potential transportation projects prepared by the Russian government and the Eurasian Economic Commission. The Chinese have also slowed down the construction of a high-speed railroad between Moscow and Kazan, insisting that the project be commercially viable, which is rather unlikely.

What changed? Why is China, which once generously invested heavily in dubious construction projects all over the world, calculating its risks more carefully now?

This change has to do with Beijing’s reassessment of bad debt levels in China’s financial system, which began to rise two years ago. The Chinese stock market crashed in the summer of 2015, reducing market capitalization by $4.5 trillion. China managed to avoid a serious financial crisis, but the authorities did launch a comprehensive audit of the country’s entire financial sector, including state banks and leading development institutions like the China Development Bank and the Export-Import Bank, which had been seen as important sources of financing for the Silk Road initiative.

At the same time, Beijing started cleaning up debt pyramids accumulated by local governments, which had reached almost $4 trillion by the end of 2014. Money was borrowed through nontransparent mechanisms used to finance money-losing and superfluous infrastructure projects, which created economic growth, jobs, upward mobility for government officials, and, of course, opportunities for graft. By the end of 2015, it had become clear to Chinese authorities that it would be extremely dangerous to continue down a similar path internationally.

The work of the Silk Road Fund (SRF), with its $40 billion in capital, clearly illustrates this policy change. Created in 2014, the fund was slated to become the main driver of investment in the Silk Road project, but has closed only six deals in the past three years. Instead, Beijing now uses the SRF as a political purse: it is not linked to the global financial system and can therefore finance politically controversial projects. In fact, the Chinese used the SRF to invest in Yamal SPG and Sibur, which are co-owned by the head of the Russia-China Business Council, Gennady Timchenko, a close friend of Putin’s who is on Western sanctions lists. These two politically motivated investments are arguably the only tangible results of Russia’s participation in the Belt and Road Initiative.

This doesn’t mean that Russia should shy away from attracting Chinese investment and increasing trade with China. In 2016, Chinese companies invested over $225 billion overseas, twice as much as in 2014. Just as before, most of this investment went to European, American, and Australian markets, while Russia received only 2 percent of the money. To compete for Chinese money and increase trade with China, Russia will need to improve its investment climate.

It will be particularly difficult to do so now, as Moscow picked all the low-hanging fruit following the annexation of Crimea in 2014. Russia now needs to strengthen its institutions and overcome non-tariff barriers on China’s market (and be ready for stiff competition once it gets there). Russia also needs to enhance its reputation among Chinese investors. It will take years of persistent work to accomplish this—work that is unlikely to bring swift victories or praise for government officials and businessmen. Still, it is the only realistic way forward.

The New Silk Road has led nowhere so far. The idea of a Great Eurasian Partnership (a union of the SCO, EAEU, ASEAN, and even the EU), which Vladimir Putin spoke about in Beijing, is no less futile. It would be a mistake to spend the government’s limited human resources on this pipe dream instead of directing them to specific small-scale projects for Russian and Chinese businesses.

This article originally appeared in Russian in Vedomosti.

http://carnegie.ru/commentary/?fa=70061&mkt_tok=eyJpIjoiTjJWbFpXWTNPR00zTlRZeCIsInQiOiJnWVdMRlwvYjlrY0JGWWNaVEpmSmVDcUdGTjE3TXBiWkhqdm94bGNsQTB1ZTJmNlZUdDc0eVZJZGtUVXdVZUtoUEhwbkozNmx1d0FcL2E1Sm5WbldCTGZJcEpoRGMrWGRBUkMrNzI5YmdWSVc1ZFdjbU4rdGsxT3VUdnlEYzErQnZXIn0%3D

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Middle East

Saudi-U.S. Ties Shift as Kingdom Turns to Trump for Investments

Just a few years back, the business relationship between the U.S. and Saudi Arabia was pretty simple: The Americans bought oil, and the Saudis spent much of what they earned on equipment to keep the crude flowing and on planes, tanks, and missiles to protect their borders.

With crude prices down by half over the past three years, U.S. domestic oil production up dramatically, and the kingdom embarking on unprecedented economic reforms — including the sale of a stake in its state-owned oil company — the leverage is shifting toward the Americans as the U.S. emerges as a rival energy exporter. The changing relationship will come into sharp focus this weekend, as American corporate titans visit Riyadh for an investment summit scheduled to coincide with Donald Trump’s first foreign trip as U.S. president.

“At this point, the Saudis need the U.S. more than the reverse,” said Philippe Dauba-Pantanacce, global geopolitical strategist at Standard Chartered Plc in the U.K. “They need foreign direct investment to transform the economy, and the U.S. doesn’t need oil anymore.”

For Trump, the visit could provide a welcome respite from the turmoil he has unleashed in Washington over his firing of FBI Director James Comey and the investigation into Russian meddling in the presidential campaign. Saudi King Salman bin Abdulaziz wants backing for a plan to reduce the role of the state and wean the economy off of oil — without stoking popular discontent.

The American executives will want deals. Some, like Jamie Dimon, chief executive officer of JPMorgan Chase & Co., and Morgan Stanley boss James Gorman, already have agreements to advise oil giant Saudi Aramco on its initial public offering, which may be the largest ever. JPMorgan and Citigroup Inc. helped arrange a $17.5 billion Saudi bond sale last year and a $9 billion Islamic bond issue in April. This weekend the banks will aim for more contracts as the Saudis prepare to sell other state assets.

Defense Sales

Boeing Co. CEO Dennis Muilenburg and Lockheed Martin Corp. head Marillyn Hewson will be looking to cement defense sales. Aramco could sign at least 10 deals with companies including General Electric Co. and oil field-service businesses Schlumberger Ltd. and Halliburton Co. to open manufacturing plants in the kingdom, people familiar with the plans say.

The U.S. executives are expected to meet the Saudi ministers of finance, energy, and commerce and the head of the kingdom’s sovereign wealth fund, according to a draft agenda for the conference, which was hastily arranged after the Trump visit was announced just two weeks ago. They’ll discuss privatizations, investment opportunities, and the role of the Saudi sovereign fund, then they’ll travel to the Royal Court to sign agreements totaling billions of dollars as Trump and King Salman look on.

“Though ties have historically been strong, nothing of this scale and depth has ever happened before,” said John Sfakianakis, a director at the Gulf Research Center in Riyadh. “The relationship with the U.S. is entering a new phase.”

Asia Tour

In March, King Salman returned from a tour of Asia with agreements potentially worth tens of billions of dollars, including $65 billion from China, $13 billion from Malaysia and Indonesia, and 43 potential projects with Japanese companies. Contracts unveiled this weekend could well eclipse those deals, Sfakianakis said.

The Saudis have been enthusiastic about Trump after a lukewarm relationship with Barack Obama. The kingdom claimed relations had reached a “historic turning point” in March when Trump met Deputy Crown Prince Mohammed bin Salman at the White House. After the meeting, Trump offered his support for a new U.S.-Saudi program in energy, industry, infrastructure and technology that could lead to more than $200 billion in investments over the next four years.

That’s not to say the Saudis, who have cash reserves topping $500 billion, are no longer looking for investment opportunities. The country’s Public Investment Fund is expected to announce plans to plow $40 billion into U.S. infrastructure, and it’s seeking partners in the defense industry to help develop domestic arms production.

The goal is to create jobs. The government’s reform plan has so far focused largely on trimming generous fuel and energy subsidies, and scrapping bloated infrastructure projects — moves that have helped slow economic growth from 10 percent in 2011 to just 0.4 percent this year, the International Monetary Fund predicts.

‘Not All About Austerity’

“A big part of Saudi Arabia’s message is that the reform program is not all about austerity,’’ said Monica Malik, chief economist at Abu Dhabi Commercial Bank PJSC. “They will be keen to show some concrete commitments from U.S. companies and that this is a two-way street.’’

Some analysts caution that while the executives may announce billions of dollars worth of agreements, many of those will have long been in the works. And some newer deals announced with great fanfare will simply be agreements to explore investment opportunities, which can later be quietly dropped with few repercussions, said Peter Salisbury, a fellow at Chatham House, an international affairs research group in London.

“I expect to see a flurry of exciting-sounding deals with some large figures attached,” Salisbury said. “When you dig into them, they will be largely pre-existing agreements or early agreements that may or may not actually translate into action.”

https://www.bloomberg.com/news/articles/2017-05-18/saudi-u-s-business-ties-shift-as-kingdom-seeks-investment

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*Massenbach’s Recommendation*

The Future of the US Navy

How big a naval force does the U.S. need? Increased competition between the U.S., China, and Russia are bringing this eversimmering debate to a boil. Several big think-tank studies have emerged in the past year to argue that today’s 275-warship fleet is insufficient, woefully insufficient, or dangerously insufficient. In May, Chief of Naval Operations, Adm. John Richardson, offered his own thoughts in a nine-page white paper: 355 ships is the right size — but the 2040 target is about two decades too late. America’s competitors are building navies that outstrip our own, he writes, and so it’s time to challenge all assumptions and start turning out better, more flexible ships and aircraft for far less money and time. We’ll lead off this ebook with a look at his vision.

France’s Mistral amphibious carrier arrived in Japan

France’s Mistral amphibious carrier has arrived in Japan to take part in Pacific drills, as tensions in the region relating to North Korea’s nuclear tests, American responses and Chinese maritime aspirations grow.

© AFP 2017/ GERARD JULIEN

Why France is Boosting Its Military Muscle in Pacific

The Mistral arrived at the Japanese naval base of Sasebo on Saturday. The carrier will take part in military drills next month to practice amphibious landings on an island near Guam, about 2,500 km south of the Japanese capital of Tokyo, according to various media reports.

The media first reported the idea to dispatch the Mistral to the Pacific almost s month ago, at the end of March. The French ship also has two British helicopters onboard.

The drill coincides with North Korea’s latest failed missile test, but officials say the drills had been planned for some time.

"We did not expect the start of our visit to coincide with a North Korean missile launch," French Ambassador to Japan Thierry Dana said on the Mistral’s bridge, according to RT.

"Cooperation between our four nations in upholding laws, peace and stability in the region will display our readiness to deal with North Korea," he added.

Both Japan and the United States are concerned about what they call China’s efforts to extend its influence beyond its coastal waters and the South China Sea. France, which also owns several islands in the Pacific, shares these concerns to some degree.

However, Chinese maritime aspirations have been overshadowed by North Korea’s repeated missile tests. US President Donald Trump ordered several US ships, including the USS Carl Vinson supercarrier, to move to demonstrate to North Korea the potential military consequences of its nuclear ambitions.

The Mistral is an amphibious carrier — a ship that carries amphibious armored vehicles for ground attack inside its hull. It can also carry helicopters and VTOL (vertical takeoff and landing) aircraft to support the littoral assault.

https://sputniknews.com/military/201704301053144881-french-mistral-carrier-pacific/

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A Russian comment:

Why France is Boosting Its Military Muscle in Pacific

In an interview with Sputnik, Russian military expert Vasily Kashin gave his thoughts on France’s plans to deploy its Mistral-class helicopter carrier to the area near the Tinian Island in the Pacific Ocean to join the war games which will involve the US, Japan and Britain.S/ Stephane Mahe

Earlier this week, media reports said that France’s Mistral-class assault ship is due to be deployed to the area near Tinian Island in the Pacific Ocean where the vessel is due to join the military exercises which will include Japanese and US personnel as well as two assault helicopters from Britain.

Commenting on the issue in an interview with Sputnik, Russian military expert Vasily Kashin specifically drew attention to the fact that the Mistral ship is expected to pass through the South China Sea while en route to Tinian Island.

He recalled that Paris recently made a number of statements about its plans to increase France’s presence in the region, including a desire to support the freedom of navigation in the South China Sea.

"It seems that we have another example of the EU-style behavior pattern, namely, persistent demonstration of one’s involvement in world problems through lively gesticulation, not backed by any real opportunities," Kashin pointed out.

He described the Mistral as the best vehicle that the European Union can currently send to the Pacific given that Britain, one of the two leading European naval powers apart from France, does not possess aircraft carriers.© REUTERS/ U.S. Navy/Handout

As for France, it has only one aircraft carrier, the Charles de Gaulle, which has been under repair since the end of its Middle East military mission in February 2017. The repair work is expected to last for at least a year and a half, according to Kashin.

He also recalled that the Mistral is designed for low-intensity conflicts and has negligible survivability; theoretically, it could be useful in a possible war in the Pacific only as a carrier of anti-submarine helicopters.

"But compared to the huge and superbly armed Japanese warships, including the Izumo-class helicopter destroyers, the Mistral’s value will be extremely low. It is not quite clear what exactly the Europeans wanted to ‚demonstrate‘ when deploying the Mistral to the drills," Kashin said.

He warned that "in a situation where France can face China as a potential enemy, the use of the Mistral may lead to a catastrophe because the ship is almost defenseless."

Focusing on why the EU is so interested in taking part in disputes and conflicts in the Pacific, Kashin mentioned at least two reasons.

"First and foremost, the EU wants to demonstrate its significance against the backdrop of the European foreign policy flops. Secondly, Brussels hopes that the EU adhering to the American policy of deterring China will have a positive impact overall on EU security cooperation with Washington," Kashin noted.

For these reasons, the EU is ready to spend significant sums related to its participation in military events on the other side of the world, something that comes amid the ongoing degradation of European military capabilities, including those of France and the UK, according to him.© AFP 2017/ PATRICK HERTZOG

He also said that after the end of the Cold War, Europe turned into a kind of dependent for the US in military respect.

While European defense capabilities are unable to ensure the EU’s own security, Europeans spend significant funds to increase their military presence in the Pacific in the hope that it will allow them to demand US services in return.

The US, for its part, demands that Europe should boost investment in the defense sector, hoping that it will help them free up US forces in Europe. The EU’s position draws obvious fatigue and irritation from Washington, according to Kashin.

"At the same time, Europe’s current military impotence means that during any possible aggravation of the situation in Eastern Europe, Americans will be forced to concentrate all forces in this region to the detriment of their commitments in other parts of the world," Kashin concluded.

https://sputniknews.com/world/201703241051931097-france-china-pacific-ocean-drills/

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see our letter on: http://www.massenbach-world.de/41259.html

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

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05-24-17 – Russia_Japan – Syria – Turkey – EU- Elections&Media.docx

05-24-17 Defense One- The Future of the US Navy.pdf