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The Middle East's Sham Democracy

Egypt is one of Americas closest and most dependable allies in the Middle East. Yet its openness to political reform and dedication to democracy are anything but genuine.

Ever since Anwar Sadat was assassinated in 1981, the country has been ruled by a single strongman, buffeted by an expansive, brutal and loyal security service. Human rights violations, particularly against political opponents, are commonplace with thousands of protesters thrown into prison on the most frivolous of charges. 

Egypt’s army and police force is given an enormous amount of leeway and jurisdiction when it comes to arresting and detaining “criminals”. After Sadat’s killing, an “Emergency Law” was put into effect that provided the armed forces with unlimited power. Most public officials in the Egyptian Government are cronies that depend on handouts and other “goodies” from the regime itself. And as might be expected in any autocracy, civil society groups and political parties must first receive the state’s permission before competing in the electoral process.

Taking all of this into consideration, perhaps it isn’t surprising that Egyptian citizens have not at all been excited about their parliamentary elections Sunday. Many of the poor and most in the middle class brush the elections away as if they are a façade, or a tool used to boost the legitimacy of a unpopular regime.

In many ways, they are right. Human rights organizations and the small political parties that compete with the regime are under the heavy hand of the state during the entire process. The United States are even getting around to the same conclusion. The Obama Administration has expressed its frustrations and reservations to Hosni Mubarak on his lack of political reform, unfortunately to no avail. President George W. Bush was perhaps the most vocal in his criticism, which eventually paved the way for a semi-accountable parliamentary contest in 2005.

Yet whatever accomplishments were made back then, today’s Egypt is returning to its old ways. In fact, Mubarak’s security forces have been much more assertive this year in preempting challengers. Free media, ranging from text messaging, satellite television, independent newspapers and radio broadcasts, has been curtailed to such a degree that it’s difficult to believe Egypt was once considered the center of gravity in the Arab world. The Muslim Brotherhood, the main opposition bloc to Mubarak’s party, has witnessed over one thousand of its members rounded up in the streets and thrown into jail. In addition to the arrests, the weeks long crackdown has had a tremendous psychological impact on the entire Brotherhood organization. A group that is usually strong and unified is now coming apart at the seams, with some members questioning why the Brotherhood decided to take part in the elections at all.

Egypt has always been seen as an autocratic state. But this year’s repression is quite remarkable when compared to other cases. Speculation thus far has rested on the idea that the regime is simply trying to create a supportive environment for the next presidential election. Rumors are that the ailing Mubarak will soon give the reigns over to his son Gamal, a young and inexperienced politician who needs all the help he can get in solidifying control.

But the motive may be more black and white than that. In the last parliamentary election, the Muslim Brotherhood shocked the world by capturing 20 percent of the parliament. The Mubarak regime never experienced that type of defeat before. While the ruling party still won the election, the gains that were made by the Brotherhood were quite embarrassing for the regime. The poor showing by the dominant party was both a direct referendum on its ability to govern and a punch to the ego of the Egyptian Government. Mubarak doesn’t want this to happen again, and he will use all the power at his disposal to make sure this goal is met.

In the end, Mubarak’s supporters will win Sunday’s elections, but the results will do nothing to improve the regime’s credibility with the Egyptian people. If the United States speak up and denounce the results, Cairo will look exceedingly bad. But if Washington stays silent, as they are projected to do, the average Egyptians will once again be the real losers.

Original Article

Wild West in Streets of Cairo

In the absence of the police forces that were pulled from the streets of Cairo in the wake of civil unrest, citizens in the middle class districts of the Egyptian capital have taken matters into their own hands to protect their homes and stores from looters and rampage.

Even after thirty years of oppression, the Egyptian people are perfectly capable of fending for themselves. While policing should be undertaken by the state, because private law enforcement is arbitrary by definition, most people will act responsibly when they have to and invent private—as well as voluntary—security arrangements in the absence of official protection.

A textbook example is the American Wild West, which was not as wild as legend would have it. According to Terry L. Anderson and P.J. Hill, authors of “An American Experiment in Anarcho-capitalism,” published in the Journal of Libertarian Studies 3, 1 (1979), in the Old West, “private agencies provided the necessary basis for an orderly society in which property was protected and conflict were resolved.” In the absence of government, citizens regulated themselves. They associated to establish order in a given market and teamed up to defend their property against the inevitable bandits.

Land clubs were particularly effective in warding off squatters. “They established procedures for registration of land claims, as well as for protection of those claims against outsiders, and for adjudication of internal disputes that arose,” noted Bruce L. Benson in “Private Justice in America,” published in To Serve and Protect: Privatization and Community in Criminal Justice (New York 1998).

The reciprocal arrangements for protection would be maintained only if a member complied with the association’s rules and its court’s rulings. Anyone who refused would be ostracized. Boycott by a land club meant that an individual had no protection against aggression other than what he could provide himself.

No one was forced to join any club but the benefits were obvious. As Anderson and Hill concluded, “people on the frontier invented institutions that fit the resource constraints they faced.” No man had to act against his choice or conscious. There was no one around to force him.

In an industrialized and populous country as Egypt, as in the modern day United States, uniformed police are preferable to private law enforcement. But the news of ordinary Egyptians organizing to protect their neighborhoods against the scoundrels that seek to take advantage of a precarious situation should remind us that people everywhere can rule themselves.

Read this article at the Atlantic Sentinel

Kicking Greece Out of the Eurozone

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Conventional wisdom has it that Greece’s economic woes are worse because the country is part of the eurozone. Were it not for the euro, Greece would have had a monetary policy of its own and could have spend instead of cut its way out of recession. Right?

Economist Paul Krugman is particularly hostile to the euro, blaming the continent’s policy elite for supposedly “pushing” their countries into adopting a single currency well before they were “ready” for such an experiment. The inflexibility of the euro, according to Krugman, “not deficit spending, lies at the heart of the crisis.”

The euro may be “inflexible” on the surface, with northern politicians demanding that Greece and other heavily indebted southern economies enact deep budget cuts, but the European Central Bank has quietly maintained a fairly expansionary monetary policy with very generous lending programs for European banks.

Had Greece still a currency of its own, it’s highly unlikely that it could have maintained an even more expansionary monetary policy without incurring greater risk than is evident today. Unless the country tried to inflate its way out of debt, it would have faced the possibility of bankruptcy much sooner.

If Greece had been able to drive up inflation and thus make it easier for the state to make good on its debt obligations, the Greek people would have suffered the consequences. Austerity may be tough but hyperinflation is a lot tougher. Especially as it would almost inevitably have ended in sovereign default.

The reintroduction of a national currency wouldn’t avoid that. In fact, it would accelerate default as the original debt was contracted in euros and a new drachma would presumably have to be dramatically depreciated, meaning Greece’s debt burden grows.

A weak drachma could boost exports temporarily but superfluous regulations and red tape currently do far more to impede Greek exports than the value of the euro. Being part of the currency union actually makes it easier for the Greeks to trade within Europe.

The problem hasn’t been that the euro is too much of a straightjacket for Greece. The problem is that the fiscal arrangements that were designed to maintain stability across the eurozone—the debt and deficit limits embedded in the Stability and Growth Pact—were unenforceable, allowing Greece, and other countries, to overspend for many years and amass lethal amounts of debt. Ejecting them from the eurozone wouldn’t solve their problems. It would expose European banks and pension funds to the risk of losing their investments in Greek government bonds.

Read this article at the Atlantic Sentinel

Exxon Moves on Kurdistan Deal Despite Baghdad Threat

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According to sources in the city, supermajor ExxonMobil is establishing a presence in Arbil, the capital of the Kurdistan Autonomous Region.

This is a major development because in November 2011, ExxonMobil signed an oil exploration deal with the Kurdistan Regional Government despite the fact that the different political factions in Iraq had not agreed on a law to distribute oil revenues between the provinces and the central government in Baghdad. The central government maintains that the KRG/ExxonMobil deal is illegal and threatened to nullify Exxon’s other contracts for oilfields in southern Iraq. Exxon announced that it would review the deal but appears to be going forward with implementing it.

ExxonMobil was the first supermajor to ink a contract with the KRG and rumors abound that other supermajors will finalize deals of their own soon. An industry source said that Total, ConocoPhillips, Chevron, Eni and Lukoil are all interested in working with the KRG. Kurdistan has an estimated forty-five billion barrels of proven reserves, compared to at least one hundred billion barrels of oil in southern Iraq. However, Kurdistan has proven to be a more attractive target for investors because its security situation and economy are markedly better than the rest of Iraq.

Analysis

ExxonMobil has moved forward with the KRG deal for several reasons. First and most importantly, it saw no credible threat that the Iraqi government would cancel its contracts in the southern oilfields as retaliation for an exploration deal with uncertain returns. The architects of the deal believed that because Baghdad is so dependent on oil revenues, threats to disrupt production in the south by severing ExxonMobil’s contracts there (in the largest oilfield in Iraq, no less) amounted to nothing more than bluffs. After witnessing oil minister Hussain Shahristani’s feeble response to the ExxonMobil deal, other oil companies are more likely to call this bluff as well by pursuing deals with Kurdistan.

Second, the American withdrawal has created substantial uncertainty in the security and regulatory environment of non-Kurdish Iraq and investment there will remain a risky prospect for some time. The dispute between Baghdad and the provinces cuts to the heart of the nature of the post-2011 Iraqi state and it has flared up in the wake of US withdrawal. Salah ad Din and Diyala provinces have formally requested autonomy from the central government, prompting a crackdown by Prime Minister Nouri al-Maliki’s security forces. Until these disputes are resolved and the character and powers of Iraq’s governing bodies are clarified, investors will rightly be hesistant to commit themselves to such a volatile region.

Finally, it is important to remember that this is just an oil exploration deal, not a production contract. Should oil be discovered in significant quantities, it is quite possible that Maliki’s government will not be so tolerant of ExxonMobil operating in Kurdistan without contributing revenues to Baghdad’s coffers.

The distribution of oil revenues is part of a larger ongoing conflict between Iraq’s provinces the central government in Baghdad. The dispute touches on a number of fundamental questions and factional insecurities about the nature of the Iraqi state itself. The Kurds, a stateless people who endured centuries of persecution from governments across the region, have been largely successful since 2003 in achieving their goals of sovereignty, security and economic prosperity with an eye toward eventual independence. Although Kurdistan’s accomplishments have not trickled down to the rest of Iraq, the KRG does provide an appealing model that other Iraqi provinces may seek to emulate.

Both Sunnis in the west and Shiites in the south have expressed interest in local self government with only nominal ties to Baghdad—in other words, Iraqi federalism. This is because Iraq’s national government has largely been deadlocked and unable to effectively distribute resources and services outside of Baghdad. Furthermore, there is great uncertainty as to whether the government will be representative, responsive and free of sectarian influence.

This trend toward federalism poses a problem for Baghdad because most of Iraq’s oil is located in Kurdistan and southern Iraq. If those regions were to become functionally independent without sharing oil revenues with Baghdad, the central government would collapse into bankruptcy (oil accounts for about 75 percent of GDP and 90 percent of government revenues). This basic impasse explains why a national oil law has been stalled since 2005.

Wikistrat Bottom Lines

Opportunities

Kurdistan increasingly looks like the silver lining within the cloud that is Iraq. Reuters describes the ongoing boom in Arbil: “Now the latest Porsches, Maseratis and Range Rovers jostle with the albeit largely new pickup trucks preferred by the masses on the still potholed roads. Five star hotels are swiftly springing up and Kurdish shoppers buy designer brands at swish shopping malls with an air of confidence in the future.” Investment opportunities in Kurdistan should be monitored and pursued particularly closely.

Risks

Iraq is a fragile state and its politicians are playing a particularly nasty game of hardball right now, accusing each other of running death squads and/or autocratic security forces. There are a number of endgames to the current situation, but none of them are particularly pretty. The outcome of the dispute between Prime Minister Maliki and his political rivals will shape the resolution or escalation of the conflict between the central government and the provinces.

Dependencies

The public reaction to Western oil companies will be decidedly mixed. In Baghdad, they may be seen as predatory, whereas in Kurdistan they are more likely to be viewed as partners. A particularly strong reaction one way or the other—for example, attacks on infrastructure/personnel or tax breaks/favorable incentives—could determine how vigorously future investment opportunities are pursued.

Read this article at the Atlantic Sentinel

Iran, Russia Obstructing Azerbaijani Gas Exports

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Iran and Russia are trying to hamper Azerbaijan’s gas exploitation in the Caspian Sea which would lessen the West’s energy dependence on these authoritarian regimes. Hoping to secure access to Azerbaijani and Turkmen gas, Europe and the United States are tempted to intervene.

EurasiaNet reports that diplomatic cables from the American embassy in Baku, revealed by the whistleblowers’ website WikiLeaks, show that Azerbaijani officials appealed to the United States for support against Russia’s attempts to frustrate the small nation’s energy policy.

A senior Azerbaijani official told American diplomats in 2009 that both Iran and Russia were trying to take advantage “of the current poor state of Azerbaijani-Turkish relations and stalled gas transit discussions to kill the prospects for transit of Azerbaijani and Turkmen gas to international markets.”

The strategic picture that [he] painted was grim: the strategic encirclement of Azerbaijani and Central Asian energy resources by Russia and Iran, assisted, wittingly or unwittingly, by Turkey.

Azerbaijani-Turkish relations, otherwise strong, in part because they share a nemesis in Armenia and an interest in gas exports, were upset in 2009 due to a price dispute that was settled in 2010.

In their communication with the American embassy, the Azerbaijanis pointed out that they had not the ability to mount a significant military response if either Iran or Russia menaced them overtly.

Their impotence in this regard was evident in November 2009 when Iran moved its new Alborz oil rig into waters that are disputed between Azerbaijan and Iran.

Bilateral relations took a turn for the worse in September of this year when Azerbaijani authorities put the leader of an openly pro-Iranian opposition party on trial for suspected anti-government activity. The Iranian army chief subsequently predicted that Azerbaijan’s president, Ilham Aliyev, “will face a grim future” if he continued his supposedly anti-Iranian policy.

Baku doesn’t necessarily worry that Iran will make good on its threats but they are reflective of frustration in Tehran which is increasingly isolated in the region because of its nuclear weapons program and attempts at exporting the Iranian Revolution.

Azerbaijan, in fact, was once deemed the perfect target for Islamist propaganda but many decades of secular Soviet rule had undermined the religious sentiment in the country and the ayatollahs’ fanaticism never managed to take root there.

Azerbaijan is a largely homogenous nation with a 90 percent Muslim Shī'ah population. Across the southern border in Iran live nearly sixteen million Azerbaijanis who comprise 24 percent of the population there, the largest minority in the Islamic Republic.

An historic Azerbaijani ambition has been to unite the peoples of what it regards as “northern” and “southern Azerbaijan.” Iran is extremely wary of these hopes which could challenge Persian hegemony in the multiethnic theocracy.

After the United States invaded two of Iran’s neighbors in the last decade and declared it a member of an “axis of evil,” Syria, the country’s only ally in the Middle East, now faces a popular uprising that could well topple the Ba'athist regime there to leave Iran without any friends. Azerbaijan fears that Iran could lash out against it in an effort to dissuade Western intervention its own backyard.

Russian meddling has less to do with geostrategy and far more with direct energy interests. A main supplier of oil and natural gas to Europe, Azerbaijan’s independent export ambitions are a potential threat to Moscow.

The Russians tried to prevent the construction of the Baku-Tbilisi-Ceyhan pipeline which became operational in May 2006 and can transport up to fifty million tons of crude oil from the Caspian to Turkey per year.

The South Caucasus Pipeline, which also stretches through the territory of Azerbaijan, Georgia and Turkey, delivers gas from the Shah Deniz field to Europe. A foreign consortium including BP, Norway’s Statoil and Eni is developing one trillion cubic meters of gas reserves off Azerbaijan’s Caspian coast.

The Trans Caspian and Nabucco gas pipelines will both be additional competitors to Russia’s South Stream which is supposed to traverse the Black Sea. If Europe can come together heated by Azerbaijani and Turkmen gas, it will diminish the Kremlin’s ability to play divide and conquer in Central and Eastern Europe where transit countries fear a Russian resurgence and wonder whether Germany won’t put its own energy security before the common European interest.

Read this article at the Atlantic Sentinel

India Opens the Afghanistan Gambit

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While internally, India is caught up in civil unrest that could jeopardize the stability of its government, the country’s neighbors increasingly regard a powerful Indian presence in the region as in their own interest.

Afghan President Hamid Karzai’s state visit to India this month signaled a paradigm shift in Indo-Afghan relations. After nearly a decade of balancing relations with India and Pakistan, traditional rivals in South Asia, Kabul opted for a strategic partnership with New Delhi. The choice and its timing were largely inspired by the imminent withdrawal of American troops from Afghanistan.

The United States are planning to withdraw up to thirty thousand soldiers from Afghanistan by the autumn of next year. In December, the first ten thousand are expected home. After the winding down of the Afghan surge, a supportive military presence will remain in Afghanistan up to 2014. But what after that?

India has shown itself a partner for regional stability by investing $1.2 billion in development projects in Afghanistan and facilitating the necessary nation building in the wartorn country. India paid a price for its help. Diplomats and aid personnel were killed in Afghanistan in attacks for which New Delhi has held Pakistan’s spy agency responsible. Pakistani intelligence is known to entertain relations with Afghan insurgents and wary of an Indian presence on both of its borders.

Despite the unpredictability and violence, India maintained its presence because it has a stake in a stable, democratic Afghanistan, unlike Islamabad. Pakistan would rather have a divided country, ruled by Islamists, to achieve “strategic depth” there.

Other regional actors, including Central Asian states and Iran, as well as the United States want to keep the Taliban out of power. This convergence of interests has served India well. Its relationships with Iran and the United States are both stable if not improving. The question now is what role New Delhi sees for itself in a postwar Afghanistan? The answer may be found in its “Look West” policy which aims to improve cooperation with countries across West Asia. Afghanistan could be a launchpad from which to boost India’s diplomatic and commercial relations with the Central Asian republics.

So far, India’s “Look West” policy hasn’t been as coordinated and successful as its “Look East” policy because New Delhi is restrained from pursuing relations across Central Asia and the Middle East by Pakistan. Similarly, its relations with the United States, though positive, haven’t developed significantly because the Americans need Pakistan’s support in their War on Terror.

American-Pakistani relations are deteriorating however as Washington is growing tired of the Afghan campaign and as revelations about the intrigues of Pakistan’s spy agency stir anti-Pakistan sentiments in the United States.

As Pakistan’s influence is eroding, there is a chance for India to jump into the vacuum that is Afghanistan and facilitate a comprehensive reconstruction effort, one that is supported by the neighboring states that have most at stake in the country, including Iran, Russia, Tajikistan and Uzbekistan.

The longer term aim for India could be to deny other greater powers, notably China, a leadership position in Central Asia. Here, again, it finds itself at odds with Pakistan which is a Chinese client state.

The region north of Afghanistan will prove to be pivotal to the energy security of continental Asian powers soon. India can’t afford to slumber as usual but must design a strategy now.

Read this article at the Atlantic Sentinel

Montenegro to Join Russian South Stream Project

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An agreement has been made between Russia and Montenegro that will initiate a study to deteremine the feasibility of the South Stream gas pipeline supplying the latter with Russian natural gas by a pipeline that will cross under the Black Sea. With Podgorica first expressing interest in joining the project toward the end of 2011, this deal means that Montenegro joins Austria, Bulgaria, Croatia, Greece, Hungary, Serbia and Slovenia in having signed agreements with Russia for the construction of South Stream.

Analysis

Approximately 80 percent of Europe’s gas (or 110 billion cubic meter per year) was transported through Ukraine last year. Moscow’s repeated disputes with Kiev has led the Kremlin to seek alternatives. Its solution has been to diversify its European energy transport routes. One step was the recent rerouting of gas to the Nord Stream pipeline, transporting across the Baltic to Germany. Another alternative is to develop the South Stream pipeline, crossing the Black Sea.

Coupled with the recent agreement between Gazprom and the Turkish Pipeline Corporation, which permits the South Stream gas pipeline permission to cross under the Black Sea and through Turkish waters, Montenegro’s joining South Stream has added further momentum.

Montenegro is sometimes known as “Moscow on the sea.” Indeed, Moscow’s political influence in Podgorica and substantial investments have contributed to an economic boom and resulted in Montenegro receiving more foreign direct investment per capita than any other nation in Europe. South Stream further enhances Russia’s grip over Montenegro with little protest from either side due to their cultural affiliation. Nonetheless, for certain policy makers in Podgorica and among those who fear Moscow’s growing influence, cooperation over South Stream could lead to potential difficulties should Montenegro change course.

Wikistrat Bottom Lines

Opportunities

Serbia has a fence mending opportunity here with Montenegro as its only access to the project is via Serbia.

Risks

Should South Stream become a reality, it would not only cement Russia’s role as sole energy supplier for Europe’s already heavily dependent nations on Russian gas; it would also help consolidate Russian political influence over Europe and the traditional transit states, resulting in ensuring Gazprom’s monopoly over Europe’s lucrative energy market for the foreseeable future.

Dependencies

South Stream appears to be a Russian reaction to the proposed rival, and EU-backed, Nabucco pipeline which is planned to transport natural gas from the Caspian region and Central Asia to Europe. The construction of South Stream, therefore, would not only put the future of Nabucco in doubt, and consequently ensure that Europe continues to source its gas from its traditional supplier but it would also reaffirm, if not strengthen, Russia’s geopolitical clout in the region.

However, considering that Nabucco’s future has been looking uncertain in recent months as investors have failed to identify a suitable gas reserve to supply the thirty-two billion cubic meter per year pipeline and justify its high construction costs and that relations with Kiev have improved (thanks to pro-Russian Viktor Yanukovych being elected president), the need for Russia to build South Stream, and thus outmaneuver its opponents in the regional battle to supply Europe’s energy market, may not materialize.

T. Michael Lutas and Lorenzo Nannetti contributed to this analysis.

Read this article at the Atlantic Sentinel

Sudan Confiscates Southern Oil, What Will China Do?

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Sudan’s government announced this weekend that it had confiscated petroleum exports from newly independent South Sudan as compensation for unpaid transit fees but it promised that it would not shut down a pipeline carrying the south’s oil.

The move is likely to exacerbate tension between the two Sudans and could force China, which is major Sudanese oil buyer, to adjust its policy of noninterference if it isn’t to lose access to the region’s oil reserves.

South Sudan declared independence last year after decades of conflict with the north. Despite a 2005 peace deal, many disputes remain unresolved. Among them, possession of oil reserves which are situated close to the border.

Land locked South Sudan has two thirds of the former unified Sudan’s oil output but needs access to northern export infrastructure to sell overseas. South Sudan pumps around 350,000 barrels per day, according to government data. The north needs the entirety of its oil production, some 115,000 barrels per day, to meet domestic demand. The two parties haven’t agreed on transit fees yet but resumed talks sponsored by the African Union on Tuesday.

In the meantime, Khartoum has confiscated southern oil as a form of payment for use of its pipeline and port facilities on the Red Sea.

Before the south seceded last year, Sudan sold more than 60 percent of its oil to China. 90 percent of it came from the south so the Chinese have to maintain stable relations with both governments if they are to continue buying Sudanese oil. The likelihood of renewed conflict over oil exports puts Chinese energy security at risk and could increase its dependence on another country that Western oil majors rather avoid—Iran.

Some 15 percent of Iranian oil exports is destined for China but the country’s petroleum industry is under pressure from international sanctions. European countries, which combined account for a similar share of Iranian exports, are expected to declare an embargo this month while Japan announced last week that it would support a boycott.

So China’s foreign policy of noninterference is challenged in two instances. Where it has thus far refused to meddle in the internal affairs of nations it does business with, especially in Africa, sudden disruptions in Sudan’s oil supply may tempt it to change that position.

With regard to Iran, China is under American pressure to reduce its oil buys. It may not have much sympathy for the Iranian regime but has to buy wherever it can. China imports more than a third of its oil and its oil consumption grows by 7.5 percent per year. It is estimated that China’s oil reserves amount to some eighteen billion barrels which makes them the fifteenth largest reserves in the world, behind countries like Kazakhstan, Libya, Mexico and Nigeria.

With Western companies dominating the market in most of Africa and Arab oil exploited exclusively by government monopolies, China has little choice but to turn to unstable countries like Sudan if is to continue to fuel its economic growth.

Read this article at the Atlantic Sentinel

Republicans' Halfhearted Pledge to America

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In a move reminiscent of the “Contract with America” which Republicans introduced six weeks before the 1994 midterm elections, the opposition this week offered a “Pledge to America”—a similar, if larger series of campaign promises, explicitly framed as an alternative to the Big Government policies of the ruling party.

The initiative, which is spearheaded by House Minority Leader John Boehner as well as Congressmen Eric Cantor of Virginia, Mike Pence of Indiana and Paul Ryan of Wisconsin, features some thirty proposals, including a government hiring freeze, caps on domestic spending accounts, the extension of Bush era tax cuts and a promise to “repeal and replace” the health care reform bill that was enacted by Congress in March.

The plan seems an effort on the part of a new generation of Republican leadership to give political meaning to the powerful wave of anti-government resentment that inspires the Tea Party movement. The “Pledge to America” document is constitutionally conservative and includes a notable provision which demands future bills to state explicitly from which article of the Constitution they derive legitimacy.

Minority Leader Boehner, who is likely to replace Nancy Pelosi as Speaker of the House this fall if Republicans indeed manage to secure a majority in that chamber, described the document as testimony to a “new governing agenda, built by listening to the people” on Thursday. It “offers plans to create jobs, cut spending, and put power where it belongs—in the hands of the people.”

The notion is hardly new but as Congressman Ryan likes to stress, the Pledge is not supposed to “reinvent” but to “reclaim” America. Social conservatives have been critical though, complaining that traditional values and positions on issues as abortion and gay marriage are largely absent from the document.

Aside from promises to rein in spending, repeal ObamaCare and reform the government sponsored mortgage entities Fannie Mae and Freddie Mac which were unmentioned in the financial reform bill hammered out by Democratic lawmakers in June, the document is vague on details. The future and sustainability of entitlement programs as Medicare, Medicaid and Social Security which, beside defense, constitute the largest expenditures of the Federal Government, are hardly addressed.

Ryan, whose “Roadmap for America’s Future” has been hailed by libertarians and fiscal conservatives as an extensive plan to solve America’s long term budget woes, does have fresh ideas. He would radically reform the federal tax system, largely privatize Social Security for Americans under the age of 55 and dismantle Medicare as it currently exists during a period of ten years to replace it with a voucher system. “Rather than depending on government for your retirement and health security, I propose to empower people to become much more self dependent for such things in life,” he explained last year.

The “Pledge to America” doesn’t contain similarly bold policy solutions. But that hasn’t stopped Democrats from scaremongering, threatening that Republicans would take away people’s health insurance and pensions in order to finance tax cuts for the rich.

White House spokesman Robert Gibbs characterized the document as “the same litany that got us into this mess—tax cuts for the rich that costs millions of dollars.” Speaker Pelosi’s office was all the more ferocious, alleging that “Republicans are pledging to ship jobs overseas; blow a $700 billion hole in the deficit to give tax cuts to millionaires and billionaires, turn Social Security from a guaranteed benefit into a guaranteed gamble, once again subject American families to the recklessness of Wall Street and take away patients’ rights.”

Read this article at the Atlantic Sentinel

Another Electoral Setback for Germany's Ruling Parties

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Germany’s ruling conservative and liberal parties suffered major defeats in regional elections this weekend. The loss is the latest in a series of setbacks for the country’s right wing governing parties.

Chancellor Angela Merkel’s christian democrats, the largest federal party, secured just 23 percent of the vote in northeast Mecklenburg-Vorpommern, down from 28.8 percent in 2006. The social democratic SPD surged from 30.2 to 35.7 percent while the opposition Greens also made gains.

The Free Democrat Party, Merkel’s coalition partner in Berlin, didn’t make the election threshold. Die Linke won 18.4 percent of the vote. The far left is traditionally popular in former East Germany.

Many conservative Germans feel that they have shouldered their fair share of the burden of bailing out the rest of Europe. The chancellor’s involvement in the financial rescue operations of Greece, Ireland and Portugal seems at odds with the values of austerity and prudence she champions at home. Yet the largest opposition parties favor closer European integration than she does.

The right wing FDP is the only occasionally euroskeptic among major German political parties but its base has all but evaporated.

The social democrats and Green party previously won a narrow majority in the southern state of Baden-Württemberg, otherwise a conservative stronghold. Last February, the christian democrats were decimated in local elections in Hamburg where the SPD secured an outright majority—a novelty in coalition heavy German politics.

The liberals and conservatives also suffered losses in the western industrial state of North Rhine-Westphalia last year which robbed their coalition of its upper house majority. According to recent polls, the liberals would receive less than 5 percent of the vote nationwide—a dismal performance after their historic win in 2009 when they claimed 15 percent of the national vote.

The fate of Germany’s liberals reflects a changing European political constellation in which voters are increasingly wary of compromise and drawn to the extremes of the spectrum.

Among the liberal party’s voters, leftists have been disillusioned by their support for spending cuts and found an alternative in the progressive Green party while moderates are attracted to the right where they find conservatives who a “tougher on crime” and share their concerns about immigration from Muslim countries and Eastern Europe. There doesn’t seem to be much room for social liberalism in the middle anymore.

Although social democrats are Greens are coalition partners across German local governments, the SPD may not return to government after federal elections in 2013. All European labor parties are struggling to regain relevance. The unpopularity of Merkel’s conservatives should not be mistaken for a vindication of the opposition party’s economic policy. The SPD hasn’t yet managed to reinvent itself as a broad and centrist platform for reform. Young urban professionals prefer the more cosmopolitan Green party while the christian democrats continue to enjoy broad support among a largely rural and aging constituency.

Read this article at the Atlantic Sentinel

Three Dutch Marines Captured in Libya

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Three Dutch navy personnel were captured by Libyan forces loyal to embattled ruler Colonel Muammar al-Gaddafi on Sunday while trying to extract two European nationals from the North African country. The Netherlands’ defense ministry reported the incident on Thursday and said that “intensive diplomatic negotiations” were underway with Libyan authorities about the release of their men.

The crew were trying to evacuate a Dutch and European Union citizen from the city of Sirt, centered halfway between Tripoli and Benghazi on the Mediterranean coast. They deployed in a Lynx helicopter from the HNLMS Tromp which is anchored off the Libyan coast.

The Tromp, which was commissioned in 2003 and had been participating in anti-piracy operations off the Horn of Africa until last month, was underway to make port in February when anti-government protests erupted in Libya. The frigate was deployed to the Gulf of Sidra to potentially assist in the safe return of Dutch nationals.

Since civil unrest rocked Libya three weeks ago, rebel forces have claimed control of major cities in the eastern part of the country. Libya’s longtime ruler Colonel Gaddafi was able to cling to power by deploying heavy military force against demonstrators but his realm of control seemed limited to the capital of Tripoli by the time the Dutch mounted their rescue effort.

Libyan state television aired footage of the Dutch helicopter and members of its crew along with weapons they carried, noting that they did not have permission to enter Libyan airspace.

The Dutch defense ministry would not describe the captured aviators as “hostages.” Libya and the Netherlands are not in a state of war.

Prime Minister Mark Rutte said that news of the men’s capture had been kept quiet for several days to advance talks on their release. “Everything is being done to make sure the crew gets home,” he said.

With fellow EU member states, the Netherlands have enacted sanctions against the Gaddafi regime, including a weapons embargo and the freezing of financial assets abroad. The International Criminal Court, which is seated in The Hague, has warned Gaddafi and members of his family that they could face war crime charges if the state violence against protesters continues.

The two European nationals the Dutch crew was trying to extract from Libya were released by authorities and able to flee the country.

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White House Wants Business to Stop Complaining

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Politico reports that the Obama Administration is set to launch a coordinated campaign aimed at pushing back the perception taking hold in corporate America and on Wall Street that the president may be promoting an anti-business agenda.

After passing a health care reform bill that puts insurers at a disadvantage and is expected to cost business dearly; after threatening the high tech sector with antitrust investigations in spite of it being nearly the only profitable and certainly the only free market left in America; after using BP’s oil spill last April to impose an unlawful moratorium on deepwater drilling throughout the Gulf of Mexico and launch an attack on Big Oil altogether; and after hammering out a financial reform scheme that leaves the prime instigators of the recession, the semi-government entities Fannie Mae and Freddie Mac untouched at the cost of multibillion dollar tax hikes and regulation on the part of private banks, the White House is trying to assure businesses by saying—it could have been a lot worse.

Obama’s chief of staff Rahm Emanuel urged business leaders on Thursday not to recoil against the president but be grateful for his support on at least half a dozen counts: his advocacy of international free trade for instance. (That is, of course, disregarding the protectionist nationalization of automakers.) Billions in his stimulus package benefit business owners moreover, according to Emanuel, while financial reform will provide greater stability.

Just last month, Obama’s top advisor struck a rather different tone on ABC’s This Week where he blamed the opposition for continuing to promote lower taxes and deregulation. “They think that the government’s the problem,” he complained about the Republicans then as though it were a preposterous assertion.

The administration is similarly disappointed with businessmen who just don’t seem to realize how good government’s been to them. Politico notes that, “in the White House view, some business leaders listen only to Obama speeches being tough on BP or on the excesses of Wall Street and assume Obama is hostile to business across the board.” West Wing aides complain of them wining, as though the “sensible and comparatively modest ideas” the administration is pushing are something of an “intolerable burden.” They’re still making billions in profits after all, so what’s the problem?

The White House may like to pretend that Obama’s rhetoric is somehow divorced from reality but it was the president himself who, speaking to reporters at the G20 summit in Toronto, Canada two weeks ago, reminded listeners that he was simply doing what he said he’d do. Indeed, he urged people to “learn that lesson” about him for next year, he will “start presenting some very difficult choices to the country.” Rest assured though, businesses have nothing to fear!

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Cameron Committed to Entitlement Reform

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Since David Cameron became prime minister in May, his Liberal-Conservative Government has set to tackle Britain’s persistent fiscal woes in the face of mounting debt concerns in Europe and a public largely unprepared for the spending cuts that are ahead.

Just before May’s election, economic historian Niall Ferguson warned about the dire state of Britain’s public finances. “The trajectory of UK public debt over the next thirty years,” he said, “absent a major change of policy, will take it to a mind blowing 500 percent of GDP.”

Ferguson predicated that the current government would have “a ghastly task on their hands” to try to reform Britain’s expansive, and costly, welfare state. The country was more ready for Thatcherism in 1979, according to Ferguson, “yet it needs it more today than it did then.”

Part of the country may not like the prospect of the state retreating, if only in part, from the public sphere, but that has not deterred Cameron so far. “We’re going to have to change the culture of government and stand up to some powerful vested interests,” he announced in The Observer last week. “[F]act is that this country wants and needs a power shift.”

Before the Conservatives came to power in coalition with the centrist Liberal Democrats, Britain’s budget deficit amounted to 12 percent of GDP, or £163 billion. The national debt had reached a record high of £857 billion.

During the preceding thirteen years of Labour rule, health care and education spending more than doubled while tax rates remained almost unchanged. More than 20 percent of the country’s workforce is now employed by the government. Almost 30 percent of public spending is devoured by an enormously complicated and complex welfare regime which still leaves many in financial despair. Nearly four of Britain’s twenty million households have no one who earns a wage.

Cameron believes that this pervasiveness of the British state in people’s lives has deprived them of any sense of personal responsibility. He intends to empower individuals as well as neighborhoods with what he calls the “Big Society” initiative. “We believe that when people are given the freedom to take responsibility, they start achieving things on their own and they’re possessed with a new dynamism,” he explained.

Immediately after their election, the Conservatives did launch their civil society program in order to “take power away from politicians and give it to people,” in the prime minister’s own words. Proposals include an annual “Big Society Day” that is supposed to inspire volunteering and the creation of a “Big Society Bank” that will provide finance for neighborhood groups, charities and social enterprises. A radical reshaping of local planning is also underway which will grant people a greater stake in determining the future of their own communities.

On the national level, the new government is decentralizing health care and education and preparing the overhaul of the whole welfare system. As soon as he took office, the prime minister had Parliament approve billions in emergency spending cuts while his Chancellor of the Exchequer, George Osborne, has promised to “balance the books” by 2016. All departments, except health care and foreign aid, must prepare to cut their spending levels by 25 percent in the next four years. By the end of their term, Cameron and Osborne would reduce public spending to 39 percent of the national income compared to 47 percent when they took office four months ago.

In the process, some 600,000 public sector workers risk losing their jobs. Labor unions are already gearing up for a fight, announcing strikes and coordinated waves of civil disobedience. But Cameron marches on, preaching austerity and urging people to take back control of their own lives instead of relying on a government dole. “I promise you,” he wrote, “we will see this through.”

Read this article at the Atlantic Sentinel

US Government Considers Gas Export Restrictions

The Wall Street Journal reports that the Federal Government in the United States “will soon weigh in on a fight between companies that want to export some of America’s fast growing supply of natural gas and big manufacturers that oppose the exports because they rely on cheap domestic gas.”

As a result of expanded domestic gas production, prices in the United States are low compared to prices in other nations so producers like ConocoPhillips want to export. Manufacturers like Dow Chemical are opposed to it because if gas is exported, domestic supply will shrink and prices will rise.

That’s all good but why is the government involving itself in this fight? If private gas producers want to sell their product overseas rather than at home, that’s their right and prerogative. Of course, that would mean manufacturers had to spend more on energy so they’re complaining, lobbying with legislators to put America first, the hell with the free market economy!

It gets worse. There wouldn’t be a general ban on gas exports. Rather companies could apply for a license to export which, one imagines, the big energy companies could afford to purchase or peddle for whereas smaller producers are left in the cold, forced to sell their product far below the price they could get for it abroad.

But certainly, the problem is that there isn’t enough regulation in the energy sector!

Read this article at the Atlantic Sentinel

Fire Bad Teachers

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One of the most objectionable qualities of a government monopoly on education is its protection of teachers which makes it well-nigh impossible to fire them.

In a free market, workers that don’t function lose their job. The risk of being fired ensures that people do their job well. In a system so infested with regulation, lobbyists and union rules as is the case in the United States, however, teachers can easily stay in front of a classroom for many years, regardless of their performance.

On his Fox Business show last February 18, John Stossel complained about the situation, stating that it is part of the reason why education is so expensive in the United States while test scores remain low. “When your job and salary is pretty much guaranteed,” he said, “why work harder?”

The many steps that schools have to go through in order to fire a teacher are so extensive that many principles don’t bother. “Sometimes they just transfer the worst teachers to other schools,” said Stossel. Administrators call it “the dance of the lemons” or “passing the trash.” Funny—“except it could be your kid who has that teacher.”

Evan Thomas and Pat Wingert of Newsweek agree and they report that, “In most states, after two or three years, teachers are given lifetime tenure,” courtesy of the unions. “In no other socially significant profession are the workers so insulated from accountability.”

Consequently, “teaching in public schools has not always attracted the best and the brightest.” Most schoolteachers are recruited from the bottom third of college-bound high school students. With public schools often the only option available to low-income families, children with the greatest interest in social advancement are stuck with the least inspiring of teachers. “Over time, inner-city schools, in particular, succumbed to a defeatist mindset.”

School superintendents and unions have been blaming everyone but themselves in recent decades. First, it was the parents, or the absence of parents, that accounted for students’ poor test scores. Next, society “with all its distractions and pathologies” got the blame. Finally, the kids themselves were the problem. Regardless of academic performance, the thinking went, public schools had to keep going through the motions to promote social equality and hope the students graduated. Except that just sixty percent of African Americans and Hispanics finish high school.

Teaching isn’t easy but students deserve the best education available to them. Allowing teachers to stay in their job when they don’t succeed at it is quite probably the single greatest problem with American education today.

Read this article at the Atlantic Sentinel

Obama's Bad Cop

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Former rivals Barack Obama and Hillary Clinton may have gotten off to a rocky start when the former accepted the position of secretary of state but, so writes Michael Hirsch for Newsweek this week, Clinton has emerged in recent months as Obama’s bad cop.

“Clinton is now influencing policy more than she ever has,” notes Hirsch, “especially in close partnership with Defense Secretary Robert Gates.” The two were critical in persuading the president to add 30,000 troops to the mission in Afghanistan while on Iran, both secretaries have long pushed for sanctions instead of Obama’s “all-carrots-and-no-sticks offer of engagement.” After admitting in January that his overture to the Arab world failed to deliver much result, the president agreed to a new strategy that appears aimed at isolating Iran with Clinton warning that the regime is moving toward military dictatorship. Indeed, the secretary is supposed to be in favor of taking an ever tougher stance yet she hasn’t managed to get rising powers as Brazil, China and India on board for further action.

Increasingly, the president is relying on Clinton to “hammer Iran,” writes Hirsch and her “greater hawkishness is beginning to show up in policy.” Besides opting for a more assertive course toward Iran, Clinton has been the one to harangue Israeli Prime Minister Benjamin Netanyahu over his defiance of US demands for a settlement freeze and although supportive of the administration’s effort to “restart” relations with Russia, she didn’t shrink from criticizing Moscow for aiding Iran in its quest for nuclear power.

Clinton is properly modest, dismissing the suggestion that the president and she have adopted a formel good cop, bad cop routine. “With every tough message that I deliver, it is embedded in a much broader context,” she declared. “It’s not, ‘You’re with us or against us.’ It is, 'We have a lot of business to do.’?”

This might seem reminiscent of Obama’s transformational rhetoric during the earlier days of his administration but in truth, the more pragmatic, “let’s-make-a-deal approach favored by Clinton has come to prevail.”

Beyond forging an intimate working relationship with Robert Gates, Clinton has also strengthened her bond with Vice President Joe Biden and with key Senate committee members in order to extract more funds for the State Department. Abroad she also maintains close personal ties with government leaders and officials while working to repair America’s previously shattered prestige. Regular town hall meetings—or “townterviews,” as she likes to call them—involving local citizens and media “have eased at least some of the anti-Americanism in Islamic countries.”

It would be too early to speak of a shared Clinton-Obama doctrine emerging as of yet in spite of the foreign policy goals that were pronounced by the president when he accepted the Nobel Peace Prize: nuclear disarmament, human rights, being the standard bearer of civilization, etc. Instead, much of the past year was spent “rebuilding the brand” and rebuilding political capital abroad. “And blaming George W. Bush for America’s dire situation, of course.” Now that that’s done, what will the new American strategy come to look like?

Read this article at the Atlantic Sentinel

European Southern Gas Corridor Shifts Focus

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The purpose of Europe’s Southern Gas Corridor was previously clear—to get Azerbaijani, Iraqi and Turkmen gas to Western Europe where demand is soaring and countries want to decrease their dependence on Russian gas imports. But increasingly, the energy security of southeastern Europe is a factor to be reckoned with.

European energy commissioner Günther Oettinger, addressing a gas forum in Brussels last week, hailed the prospective Trans Adriatic Pipeline which is supposed to deliver gas from the Greek-Turkish border to Italy. “TAP’s plan, in order to work, will however require that someone else proves trustworthy in delivering the Azerbaijani gas to the Greek-Turkish border,” he pointed out.

There are different contenders. The Nabucco pipeline, financed by a consortium of Central European and Turkish energy companies, is perhaps the most viable option for transporting gas from Turkey to Austria, across Bulgaria, Romania and Hungary.

The Trans Caspian Pipeline is supposed to circumvent Iran and Russia in delivering gas from Turkmenistan to Azerbaijan, enabling Europe to buy gas cheaply from the Caspian region where Total, in September, made a huge gas discovery. The state oil company of Azerbaijan reported at the time that the newly discovered field could contain up to 350 billion cubic meters of natural gas and forty-five million metric tons of gas condensate.

The Shah Deniz gas field, still the largest natural gas field off the coast of Azerbaijan, produces some seven billion cubic meters of natural gas per day and is estimated to contain the equivalent of three thousand million barrels of oil.

Nabucco would traverse southeastern Europe but the Commission is worried that the region could still be left in the cold. “Without a leader developing new infrastructure in the region, I’m afraid southeast Europe will not benefit from new gas coming to the region,” said Oettinger. He reminded his listeners of the infamous Russian-Ukrainian gas disputes of 2009. “Diversified gas supplies also will make gas a more attractive source of energy,” added Oettinger, encouraging countries to move away “from old and dirty installations for electricity generation or domestic heating.”

The commissioner promised that Brussels will help energy providers if they agreed to invest in southeastern European energy security. “We will do this through our continued focus on strict application of EU Internal Energy Market legislation in these countries and generous regulatory support.”

Existing intergovernmental agreements allow Azerbaijani gas to be delivered to Turkey’s borders with the European Union—i.e., Bulgaria and Greece. Azerbaijan now has to decide whether to go for the Nabucco route and focus on the core European market or do business with companies that deliver gas to southeastern Europe—which seems to be the preference of the European Commission—from whence it could be transported to other European countries through the internal market.

Read this article at the Atlantic Sentinel

Protectionism Makes Comeback As Recovery Stalls

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Almost three years after the bricks of Wall Street crumbled, projections for growth in 2012 are more pessimistic than ever, as noted by the recently published Global Economic Prospects 2012 of the World Bank.

The effects of Europe’s spiraling debt crisis are felt across the developed and the developing world, countering the perception that emerging economies could be the motor of a global recovery. The imminent change of leadership in many countries, including China, France, Mexico and the United States, will make the foreseeable future a highly unstable one. In the upcoming months there will be an increase in populist policies and rising fiscal deficits. Governments may pay more attention to their constituencies which have been suffering the ongoing negative economic panorama.

As a result, protectionism could gain weight in the upcoming months and while it may be vilified by conventional wisdom which rightfully points out the benefits of free trade, there is a “human face” which legitimizes it.

Supporters of protectionism tend to justify their demands through what they regard as the direct negative effects of trade with other countries. Some of these effects are caused by the “unfair” practices of governments as China’s. Others are due to the abundance of cheap labor in countries as Mexico.

Whatever the reason, according to protectionists unchecked trade liberalization causes unemployment and income inequality. America’s disturbing trade deficit with China is one of the favorite arguments of trade critics in the United States. These opinions have a considerable impact in various segments of the population. The 2008 financial crisis only helped enforce the notion that Americans industry ought to be protected from unfair competition overseas.

According to theory, trade liberalization benefits an economy by expanding its production capabilities and diversifying the goods it can consume. Trade dynamics promoted by international competition lead to a decrease in prices, benefiting consumers and producers alike.

It also expands the labor pool, thereby reducing costs. Trade leads to specialization. Every country has a comparative advantage in producing certain type of goods due to its factor endowment. An economy will specialize in the production of goods which uses intensively its relative abundant factor. Thus, Germany, which is relatively abundant in high skill labor, specializes in the production of high end goods (computers, pharmaceuticals, etc.), while Vietnam, which is relatively abundant in low skill labor, specializes in the production of basic goods (agricultural products, clothes).

Through specialization, countries are able to increase their respective national income because they produce what they are more efficient in producing and trade it to the world. But then, what happens to those industries in which a nation is inefficient? Herein lays the main dilemma of trade which can fuel protectionism—specialization leads to the disappearance of inefficient industries. Theoretically, this should not be a problem, since workers in these industries will gravitate to other industries which are succeeding. Reality is more complex.

Skill biased technological change has made it very difficult for job displacement to occur. All types of jobs have modified their requirements in line with technological chance. A laid off worker will struggle to find another job because he doesn’t have the required set of skills. Retraining could take years. The protectionists argue that this is exactly why the state must design and implement policies to offset those effects of liberalization.

It’s easy for Americans to blame the Chinese for their trade deficit, to propose to punish China by turning its currency manipulation into an illegal subsidy and disregard recommendations to change domestic consumption patterns which, in fact, makes American society the main actor responsible for their current situation.

A more effective way to enable economic growth than either raise or reduce trade tariffs may be the implementation of an industrial policy. This refers to measures introduced by governments to channel resources into sectors which they view as critical to future economic growth. It implies benefiting some by hurting others (the financial resources have to come from somewhere else). Consequently, industrial policy should only be deployed to counter market failures and externalities which prevent the industries in which a country has comparative advantage from naturally becoming as efficient as they should be.

The successful examples of Japan, South Korea and the Southeast Asian “tiger” economies encourage governments around the world to intervene in their industries through subsidies, tariffs, taxes, etc. so as to increase their profitability. The idea is to benefit those sectors that the state believes have a comparative advantage over those of other countries and create national champions

There are problems with this analysis. Japan and South Korea both had the overt support of the United States which, due to Cold War dynamics, prevented their experiments from failing. For their part, the tigers, except Hong Kong, had authoritarian governments that facilitated the implementation of policies and they, too, enjoyed American support.

There are examples that demonstrate both successes and failures but, to be fair, the outcomes were contingent upon other variables which require closer analysis. China’s is the most recent case of an industrial policy, and, so far, it seems it has been successful.

This has caused alarm in the United States where China’s success is increasingly perceived as coming at the expense of American workers. The politicization of industrial policy that aims to “correct” market imbalances unfortunately often leads democratic governments to privilege certain interest groups, whether they’re corporations or unions, at the expense of their economy’s competitiveness as a whole. Perhaps, in this sense, China’s comparative advantage is its very authoritarianism?

Both supporters and detractors of protectionism tend to frame their arguments so as to cause the largest possible impact on public opinion. This is because protectionism has a “human face” embedded within it. For many sectors within society, protectionist policies are regarded as a solution to their grievances. With little regard for theory and the long term negative effects of poorly planned protectionist policies, they suffer from what political analysts call “shortsightedness.”

Governments should always bear in mind how to increase efficiency and productivity when intervening and implementing protectionist policies. Industrial policy demonstrates that this is very difficult and that many other variables are at play. By politicizing trade, protectionism becomes the vilified entity that economists so hate—short term solutions with long term negative consequences.

This article would not have been possible without the insights received when attending Georgetown University’s course imparted by Professor Theodore H. Moran, “Globalization: Challenge for Developed Countries.”

Read this article at the Atlantic Sentinel

Circumventing the Strait of Hormuz' Bottleneck

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As Iran has threatened to shut the Persian Gulf from international oil trade, it’s worth considering what alternatives there are to the Strait of Hormuz.

This narrow waterway, through which passes roughly 40 percent of the world’s seaborn oil transports along with large quantities of liquefied natural gas from Qatar, could be subject to a blockade if the Iranians follow up on their threats.

There are analysts who point out that Iran itself relies heavily on free shipping in the Gulf and will therefore not dare menace it. Oil and petrochemicals account for 85 percent of Iranian exports. China, with a 16 percent share, and India, with 13, are its main costumers. Japan and South Korea also import oil from Iran but have been under pressure from the United States to suspend their trade.

The United States Navy, which has some thirty ships patrolling the Persian Gulf and nearby waters, should be able to break an Iranian blockade but not before oil prices and insurance rates have skyrocketed worldwide.

Rather than trying to prevent ships from transiting the Strait of Hormuz altogether, Iran would more likely harass unfriendly oil tankers with diesel submarines and shore batteries and thus make it nigh impossible for the fourteen supertankers that traverse the strait on average every day to deliver their oil and gas transports to East Asia and the West.

There are a number of oil pipelines running across Saudi Arabia that are no longer in use but may be reactivated in the event of a prolonged naval skirmish in the Strait of Hormuz.

One runs from Basra in the south of Iraq to the port city of Yanbu’ al Bahr in western Saudi Arabia. This IPSA pipeline was deactivated after the Iraqi invasion of Kuwait in 1990. West of Riyadh, it runs parallel to a couple of oil and gas pipelines that cross the entire width of the Arabian peninsula.

Also mothballed is the Trans-Arabian Pipeline or Tapline which used to deliver oil from the Saudi fields across Jordan to Lebanon.

IPSA and Tapline could carry the equivalent of up to two million barrels of oil per day to ports on the Red Sea and Mediterranean coast. Additional oil could be pumped north via the Iraq-Turkey pipeline which terminates in the city of Ceyhan in the Levant but it isn’t linked up to the southern Iraqi oil fields.

According to the US Energy Information Administration, oil tankers transport roughly seventeen million barrels of oil through the Strait of Hormuz every day. Reactivation of the pipelines would thus compensate for little more than 10 percent of shipping capacity.

The United Arab Emirates are building another alternative and could soon start pumping the equivalent of two and half million barrels of oil per day via the Abu Dhabi Crude Oil Pipeline from the Habshan onshore oil and gas field to Fujairah outside the Straits and on the Gulf of Oman. That would more than double the alternative transport capacity but still leave the developed world deprived of some 75 percent of Gulf oil imports.

Read this article at the Atlantic Sentinel

Republican Chastises Obama's Latin America Policy

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Rick Santorum, a Republican Party presidential contender, accused Barack Obama of pursuing “a consistent policy of siding with the leftists, siding with the Marxists” in Latin America.

The former Pennsylvania senator, who appears to have little chance of securing the Republican nomination to challenge the incumbent in November’s election, participated in a televised debate sponsored by CNN in Jacksonville, Florida on Thursday night. Conservatives in the southeastern state vote in a primary on Tuesday to elect a presidential candidate.

Santorum referenced Colombia in particular which “is out there on the frontlines working with us against the narco-terrorists, standing up to Chávez in South America and what did we do?” he asked.

For domestic political purposes, the president of the United States sided with organized labor and the environmental groups and held Colombia out to dry for three years.

Colombia successfully crushed the drug and FARC insurgency with military and financial support from the United States.

A free trade agreement between the two countries, which the government in Bogotá ratified in 2007, was held up for nearly three years by the Obama Administration over union concerns about the safety of labor leaders in Latin America—even if the murder rate among union members has steeply declined in recent years. A unionized laborer in Colombia today is one sixth as likely to be a victim of homicide as a fellow citizen who does not belong to a trade union.

Colombia accounts for just 1 percent of America’s trade volume but 40 percent of Colombian exports are to the United States. A third of the products it imports are American.

The country sells mainly coal, coffee, cut flowers and petroleum. As the security situation has stabilized, the Colombian economy is performing strongly. 4.3 percent growth is expected this year.

Despite a long standing economic and military relationship with the United States, Colombia’s second largest trading partner is neighboring Venezuela where the president, Hugo Chávez, works to build an anti-American league in the region.

Bogotá suspects Venezuela of supporting the left wing revolutionaries of the FARC but seeks to normalize relations with the Chávez regime nonetheless. Conservatives in the United States blame President Obama’s three years of inaction on the Colombian free trade agreement for this apparent alienation. “We cannot do that to our friends in South America,” was how Santorum put it Thursday night.

He also rejected calls to normalize relations with Cuba which he described as “the heart of the cancer that is in Central and South America.” He alleged that the president intended to reward a behavior of thuggery. “This is the exact wrong message at the exact wrong time.”

Texas congressman Ron Paul, who advocates a noninterventionist foreign policy, challenged Santorum’s call for a more activist American presence across the Western Hemisphere. “You’re talking about force,” he said. “The Cold War is over. They’re not going to invade us.”

I don’t think the nations in South America and Central America necessarily want us to come down there and dictate what government they should have.

Rather he championed freer trade before pointing out that economic sanctions, well intended as he said they may be, “almost inevitably backfire and help the dictators and hurt the people.”

During the Cold War, the United States regularly intervened in the political affairs of Latin American nations to prevent leftist regimes from coming to power there. Santorum said he didn’t necessarily favor military intervention but suggested that an economic union should be erected across the Americas.

Read this article at the Atlantic Sentinel