Russia has adopted an updated version of its military doctrine, which reflects the emergence of new threats against its national security. NATO military buildup and American Prompt Global Strike concept are listed among them.
The new doctrine was approved on Friday by President Vladimir Putin. Its core remains unchanged from the previous version. The Russian military remains a defensive tool which the country pledges to use only as a last resort.
Also unchanged are the principles of the use of nuclear weapons which Russia adheres to. Their primary goal is to deter potential enemies from attacking Russia, but it would use them to protect itself from a military attack – either nuclear or conventional – threatening its existence.
The new sections of the doctrine outline the threat Russia sees in NATO’s expansion and military buildup and the fact that the alliance is taking upon itself “global functions realized with violation of international law.”
The doctrine lists among major foreign military threats “the creation and deployment of global strategic anti-ballistic missile systems that undermine the established global stability and balance of power in nuclear missile capabilities, the implementation of the ‘prompt strike’ concept, intent to deploy weapons in space and deployment of strategic conventional precision weapons.”
Another new point in the doctrine is that one of the Russian military’s goals is to protect national interests in the Arctic region.
The document also points to the threat of destabilization of countries bordering Russia or its allies and deployment of foreign troops in such nations as a threat to national security.
Domestically, Russia faces threats of “actions aimed at violent change of the Russian constitutional order, destabilization of the political and social environment, disorganization of the functioning of governmental bodies, crucial civilian and military facilities and informational infrastructure of Russia,” the doctrine says.
Moscow sees international cooperation with countries sharing its effort to increase security, particularly members of BRICS, the OSCE, the Shanghai Cooperation Organization and others as the key to preventing military conflicts, the doctrine states.
Traditional threats that Russia must deal with mentioned in the doctrine include extremism and terrorism, proliferation of weapons of mass destruction and rocket technology and actions of foreign intelligence services.
The document notes that modern threats are increasingly drifting from a military nature to informational, and states that the likelihood of anyone launching a fully-fledged war against Russia is decreasing.
At the end of June, 2014, a New York Second District Judge ruled in favour of a hedge fund, NML Capital, and against the Republic of Argentina. The issue at stake was if a hedge fund that bought debt paper three years after a debt restructuring, had or not the right to collect on the same terms as the rest of creditors. The ruling was, yes it has. The problem is that in the original debt restructuring creditors received new instruments with a strong haircut that made the payback possible for Argentina, while the old instruments do not have any debt reduction. In this way, the profitability of the hedge funds in buying, in 2008, those old unwanted instruments of a debt rescheduled in 2005, and unpaid since 2001, will be of 1,600%. The way the hedge fund works is through buying, at a very heavy discount, the debt paper that was not included in the rescheduling, and then suing the Argentine Government for full payment of capital plus all the interest due. Interest comes free when debt paper is under impaired value credit category. Elliott Associates, major shareholder of NML Ltd., has made a reputation for cornering Governments in times of need and getting away with it. Panama was the first one, Congo, Peru, Argentina amongst others. Their argument is that these lawsuits discipline the debtors.
The international relevance of this sort of activity is that it brings to the fore the nature and presence of US law and rulings in international finance. Most US dollar-denominated debt is issued under US law and subject to the Southern district courts of New York City, those near Wall Street. This means that if Botswana borrows from Uganda in US dollars, it is almost certain those contracts will be written under NY law. The ramifications of this are that any legal action between those two countries will be subject to New York law, with the implication that New York law becomes world law and is applied worldwide, becoming a mechanism of coercion. The enforcement of payment in the ruling is executed through bank account or asset embargoes. For example, in 2012 the Argentine frigate Libertad was seized in a port in Ghana under orders from the New York judge. She was released after some months under a ruling from the UN International Tribunal for the Law of the Sea because she holds diplomatic immunity.
The last ruling includes non-dollar denominated instruments signed under British and other laws, with the argument that the payment due to one creditor is equally due to all. Ecuador, a debtor that defaulted and bought its debt at a 70% discount in 2008 decided in May 2014 to buy back 80% of the held out debt plus interest and got it over with. The huge return on investment for unpaid bondholders was less of a problem for Ecuador than the likelihood of having its accounts frozen after the new loans were disbursed, given it is a dollar denominated economy.
Vulture funds are hedge funds specialised in buying debt paper from problem debtors who have solved or are in the process of solving a default problem. They jump over their prey, the struggling country, purchase his debt instruments not included in the final debt restructuring arrangement at a small percentage of face value and sue the country for full payment including interest. If the country is undergoing duress, the fund is perfectly happy to subject her citizen’s to more hardship in exchange for a huge profit. This is possible because debt papers before 2001 did not have collective action clauses (CAC) yet, which means that if most creditors agreed to a debt workout solution, this included only those who joined voluntarily. With a CAC, if a large portion of the creditors are in favour of a workout, all instruments are included.
The lack of CAC was made evident when Elliott sued Peru in the 1990s and won the case in 2000. Peru had undergone the longest sovereign default in history, from 1984 to 1994, and came out with a debt restructuring that included a sharp haircut and new Brady bonds. Only four instruments were left at Swiss Bank Corp., the Peruvian manager of the Brady deal, belonging to Banco Popular, a bankrupt bank closed in 1992. These four instruments were sold by Swiss Bank, the agent for Peru’s debt, to Elliott not to Peru, after the Brady deal had been signed in what appeared to be a breach of contract on Swiss bank’s side. Elliott then sued Peru and apparently got a helping hand from a Peruvian lawyer who happened to be an official at the Ministry of Finance in 1994. There was much information passed in 1994 from the Ministry of Finance to the creditors leading to the trial of Finance Minister Camet, responsible for this operation. He died in 2013 serving prison term at home for this and other cases.
Elliott sued Peru for 100% of capital. It had paid 5% of the face price of the papers. On top it sued it for unpaid interest since 1984. The profitability on the Peruvian operation was 1,600%. Peru’s case was made using the Champerty Doctrine that says that no debt purchased with the sole purpose of harming a debtor should be taken into account by the US judiciary. Investors who become creditors through the purchase of debt instruments at a time when the debtor is undergoing hardship should not be taken into legal consideration. Nevertheless, the New York judge ruled against Peru. Amongst the group of investors was a former US ambassador to Peru. It remains unclear if the former ambassador was there on his own right or as a representative of the US State Department. The Peruvian Government lost the case and the appeal and as a result all Society for Worldwide Interbank Financial Telecommunication (SWIFT) dollar transactions were blocked. After that, Elliott sued Peru in the Belgian courts that ruled in favour of Elliott and prevented the use of Brussels based Euroclear. It then proceeded to use Clearstream in Luxembourg, but knowing this would also be blocked. The argument of the Belgian Court was pari passu, all creditors should be treated equally.
The Argentine operation
NML associates, a subsidiary used by Elliott to do the Argentine operation, purchased 50 million dollars of debt paper that had not entered the restructuring scheme in 2005 and has sued for 1,500 million USD. The holders of those unrestructured papers sold them to NML in 2008 after the 2005 swap was arranged and before the 2010 swap was finalised. They then started the legal proceedings that have lasted six years until finally the judiciary ruled in favour of NML. The Argentine debt is held with creditors in many jurisdictions and not all are subject to US law, theoretically. Equally there are dollar and non-dollar denominated instruments and agent banks operating outside the US. The ruling however starts from a peculiar reading of the principle of pari passu, equal payments must be made to all creditors either if they restructured or if they did not, regardless of the law applied in their contract. The Trustee in charge of making the payments is Bank of New York who must abide by this ruling and comply with the law.
This ruling essentially takes away the incentive to restructure sovereign debts normally done on the basis of debt reductions. Worse, it places legal creditors who underwent the restructuring procedure on the same basis as highly speculative investors who operate on bad faith buying the debt after the swaps are finalised, in the spirit of Champerty. The gravest consequence is that a New York ruling is converted into a global ruling for any Argentine assets held by anyone anywhere. An explanation was given that the ruling is not meant to be a precedent which means the ruling was done as a specific punishment reminding the ruling of the Court of the Hague against Austria in 1931 when it decided it wanted to form a customs union with Germany. Then as now, if it is not a precedent, it is a punishment. The question is why.
Argentina’s position is that it is the right of a sovereign debtor to restructure its debt. It believes in the principle of non-intervention in foreign states and does not admit legal actions executed outside the natural range of the justice of the United States. In so doing it believes it is defending the property rights of the holders of Argentine bonds, especially those whose right is not governed by justice of the United States. But also of those who entered willingly and in good faith in the swap agreements of 2005 and 2010 and who this ruling has declared, for all purposes, invalid. Argentina is opening the fight by depositing the money at the Bank of New York so bondholders will collect. As the money belongs to the bondholders, they should be able to do so. This is the sense of a communique published in the international press in July, 2014, a week after the ruling was made public.
The vultures, being what they are, have a press campaign stating that Argentina does not want to pay any of its debt nor comply with US law. Argentina, on its side, has informed the clients it will pay through Euroclear which should protect them from the US international payment embargo, as book entry accounts in Euroclear enjoy unconditional immunity from attachment.
The international support given to Argentina is an expression of what is globally perceived as being an unjust ruling from a court that should not have extraterritorial functions over currencies and assets that are not US assets. The capture of a payment for Cuban cigars traded between Germany and Denmark under US law is an expression of the extraterritorial use of US law, which is unacceptable. If the international system is going to evolve it must go in the direction of international law and international courts and not in the direction of local law with a local court with global ramifications. This implies a new financial architecture which, following the lines of the BRICS in terms of financial reforms, could mean the creation of a clearing house and greater use of non-dollar means of payments in international transactions. The creation of an international financial law process in the United Nations sphere, similar to that being developed for international trade law (UNCITRAL), is vital. This should come together with the development of the concept of international tribunals for debt arbitration in order to obtain reasonable debt workouts of sovereign defaults following the principles of fair and transparent arbitration that should begin with a debt audit, keeping the Champerty principle in mind.
There are major flaws in the international financial architecture that allow the supreme court of the leading debtor country in the world to rule over the lives of millions of people in another land in an unjust, unfair and non-transparent manner. The ruling affects the position of other bondholders in non-dollar denominated instruments issued under other legal domains and opens the possibility of embargoes worldwide. It also opens up the possibility of disavowing the debt to international bondholders, following the same logic in reverse.
The practice of extorting money from troubled nations in favour of a minuscule group of investors who purchase debt paper after debt negotiations with the rightful creditors are finished, with the sole purpose of extorting an unfair profit from it, is sanctioned by US law. This is called the Champerty Doctrine. This sort of practice was outlawed in New York by Judiciary Law §489 http://codes.lp.findlaw.com/nycode/JUD/15/489#sthash.TroVCUs0.dpuf. The rulings from the New York courts, however, seem to favour the vultures and the application of the rulings worldwide has dire consequences on the debtor.
The lesson from the NML-Argentina case is that non-OECD countries in the future should not issue debt instruments in US dollars nor be subject to New York law and courts, given the risk expressed above. Given the world power structure change, BRICS should continue to develop a new international financial architecture. International trade should equally not be settled in US dollars and a new non-OECD international clearing house should be started to prevent harassments from dubious US rulings. International capital is not going to give up its power to extort wealth from distressed countries.
Newcastle and Fortaleza, 15 July, 2014.
– Oscar Ugarteche, Peruvian economist, is the Coordinador del Observatorio Económico de América Latina (OBELA), Instituto de Investigaciones Económicas de la UNAM, México – http://www.obela.org. Member of SNI/Conacyt and president of ALAI http://www.alainet.org
 “Ecuador Sells $2 Billion in to Bond Market,” Bloomberg, 17 June, 2014, at http://www.bloomberg.com/news/2014-06-17/ecuador-plans-bond-market-return-today-five-years-after-default.html
 “Argentina’s Woes don’t Chill Ecuador’s New York Bond Sales”, Bloomberg, June 24, 2014 at http://www.bloomberg.com/news/2014-06-24/argentina-s-chilling-effect-on-new-york-debunked-by-ecuador-sale.html
 Congreso del Perú. Comisión Investigadora de la Corrupción. Caso Elliott. Junio, 2003. Fallo judicial. http://www.congreso.gob.pe/historico/ciccor/anexos/CASO%20ELLIOT%20ASSOCIATES%20LLP%20TOMO%20II.pdf
 Rodrigo Olivares-Caminal, “The Pari Passu Interpretation in the Elliott Case. A Brilliant Strategy but an awful (mid long term) outcome”, Hoftsra Law Review, 2011, Vol. 40, pp. 39-63.
Conversations with various Argentine officials over the February to June 2014 period.
 “Don’t worry about an Elliott vs Argentina precedent”, January 11, 2013, http://blogs.reuters.com/felix-salmon/2013/01/11/dont-worry-about-an-elliott-vs-argentina-precedent/
 “US snubs out legal cigar transaction.” Copenhagen Post, February 27, 2012. http://cphpost.dk/news/us-snubs-out-legal-cigar-transaction.898.html
Mérida – Venezuela participated in the gathering of the BRICS emerging powers and Latin American regional blocs in Brazil this week, where new agreements were hailed as beginning the creation of a new global financial architecture.
Several multilateral meetings were held in the city of Fortaleza, including the 6th BRICS (Brazil, Russia, India, China and South Africa) Summit, and meetings between China and the Union of South American Nations (UNASUR) and the Community of Latin American and Caribbean States (CELAC).
During the BRICS summit, the five emerging economies created a new development bank and a multilateral reserve fund, each of which will potentially hold US $100 billion of pooled capital. The reserve fund will be used to support members of the bloc against adverse economic conditions or external impacts.
The creation of the new institutions is partly motivated by dissatisfaction with the terms of the financial hegemony exercised by the U.S. and its European allies through the IMF and World Bank.
“The strength of our project has positive potential: we want the global [financial] system to be fairer and more equal,” said Brazilian president Dilma Roussef to media.
On Wednesday and Thursday China met with the UNASUR and CELAC blocs in order to explore strategies through which the Asian power could deepen its involvement in Latin America.
In the meeting with UNASUR countries it was discussed how BRICS and UNASUR could create more ties. After the meeting, Venezuelan president Nicolas Maduro reported that it had been proposed that the new BRICS Development Bank and UNASUR’s Bank of the South adopt a common strategy in the regional and global economies.
“The [new] financial institutions have the same objectives: the construction of a new financial architecture that benefits economic development in conditions of equity for our countries; where speculative financial capital is ended, where the looting of our economies is ended, and productive investment which creates employment and wealth is promoted,” he said to Telesur on Wednesday.
The Venezuelan president also argued that closer relations between BRICS and Latin America represented a “win win alliance” and “the birth of the multi-polar world”.
“In the past we were dominated powers, and now we are emerging countries and blocs,” he said.
The BRICS bloc has become a key trading partner for Venezuela. Commerce with the bloc increased by 72% from 2006 – 2013.
Meanwhile, agreements reached on Thursday between China and the CELAC bloc, which brings together all countries in the Americas apart from the U.S. and Canada, included the establishment of a $1 billion investment fund for infrastructure projects in Latin America, and a Chinese offer of scholarships for 6,000 Latin American students.
Other funds potentially worth $15 billion to support Latin American development were also discussed.
Latin America has become an important source of Chinese investment and exports, while South American powers have increasingly turned to China as a source of financing, technology transfer, and destination to export primary materials.
A top level delegation led by Chinese President Xi Jinping is currently touring the continent to further deepen China’s economic involvement in Latin America, with visits including Brazil, Argentina, and Venezuela, where Xi Jinping arrives today.
Venezuela also held several bilateral meetings in Fortaleza, including with China and Colombia.
The South American OPEC nation agreed to import a further 1,500 Chinese-made Yutong buses for the expansion of its public transport system. A Yutong factory is being built in Venezuela to begin domestic production of the vehicles, which will open next year.
The Venezuelan and Chinese central banks also reached an agreement to share information on statistical methodologies, monetary policy, and funding mechanisms. Both parties called the accord a “breakthrough” for enhancing economic ties.
Since 2001 the two countries have constructed what has been labeled as a “strategic alliance”. A high level bilateral session initiates in Caracas today with the arrival of Chinese president Xi Jinping.
Fortaleza, Brazil – After some tough rounds of negotiations, BRICS nations (Brazil, Russia, India, China and South Africa) have created not only a new $100 billion Development Bank, but also a $100 billion foreign currency reserves pool.
The announcement was made after a plenary meet of the five BRICS heads of state in Fortaleza on Tuesday.
Shanghai finally won the bid to host the Bank while India will get the presidency of the Bank for the first six years. The Bank will have a rotating chair. The Bank will also have a regional office in Johannesburg, South Africa. All the five countries will have equal shareholding in the BRICS Bank.
The five Finance Ministers will constitute the Bank’s board which will be chaired by Brazil.
The Bank will initially be involved in infrastructure projects in the BRICS nations.
The authorized, dedicated and paid in capital will amount to $100 billion, $50 billion and $10 billion respectively.
The idea of the BRICS Bank was proposed by India during the 2012 Summit in New Delhi.
BRICS have long alleged that the IMF and World Bank impose belt-tightening policies in exchange for loans while giving them little say in deciding terms. Total trade between the countries is $6.14 trillion, or nearly 17 percent of the world’s total. The last decade saw the BRICS combined GDP grow more than 300 per cent, while that of the developed word grew 60 per cent.
Apart from the new development Bank, the group of five leading emerging economies also created a Contingency Reserve Arrangement on Tuesday.
BRICS central banks will keep their reserves in gold and foreign currencies.
China will fund $41 billion, Brazil, India and Russia $18 billion each and South Africa with $5 billion. The funds will be provided according to a multiple. China’s multiple is 0.5, which means that if needed, the country will get half of $41 billion. The multiple is 2 for South Africa and 1 for the rest.
BRICS Finance ministers or central banks’ governors will form a governing body to manage the CRA while it will be presided over by the BRICS President.
The BRICS CRA will not be open to outsiders.
Meanwhile, at the Summit in Fortaleza, Russian President Vladimir Putin said BRICS must form an energy alliance.
“We propose the establishment of the Energy Association of BRICS. Under this ‘umbrella’, a Fuel Reserve Bank and BRICS Energy Policy Institute could be set up,” Putin said on Tuesday.
Russian President Vladimir Putin has endorsed a call by his Argentinean counterpart Cristina Fernandez de Kirchner to curb Western dominance in international politics.
Putin gave his support during a meeting with Kirchner in the Argentinean capital, Buenos Aires, on Saturday.
The Russian leader also said Moscow and Buenos Aires share a close view on international relations.
During the meeting, Kirchner emphasized that global institutions must be overhauled and made more multilateral, adding, “We firmly believe in multipolarity, in multilateralism, in a world where countries don’t have a double standard.”
In addition, the two leaders discussed military cooperation and oversaw their delegations signing a series of bilateral deals, including one on nuclear energy.
Putin’s visit to Argentina is part of his six-day tour of Latin America aimed at boosting trade and ties in the region, according to Russian state media.
The Russian leader’s trip will next take him to Brazil, where he is scheduled to attend the gathering of the economic alliance, BRICS (Brazil, Russia, India, China and South Africa), in Brazil on July 15 and 16.
Putin’s Latin American tour began on July 11 in Cuba, where he met with President Raul Castro and his brother, Fidel Castro. During his stay in the capital, Havana, Putin signed a law writing off 90 percent of Cuba’s USD 35-billion Soviet-era debt.
Following his visit to Cuba, Putin made a surprise visit to Nicaragua, where he held talks with President Daniel Ortega.
China is moving forward with a plan to create its own version of the World Bank, which will rival institutions that are under the sway of the US and the West. The bank will start with $100 billion in capital.
The Asian Infrastructure Investment Bank (AIIB) will extend China’s financial reach and compete not only with the World Bank, but also with the Asian Development Bank, which is heavily dominated by Japan. The $100 billion in capital is double that originally proposed, the Financial Times (FT) reported.
A member of the World Bank, China has less voting power than countries like the US, Japan, and the UK. It is in the ‘Category II’ voting bloc, giving it less of a voice. In the Asian Development Bank, China only holds a 5.5 percent share, compared to America’s 15.7 percent share and Japan’s 15.6 share.
At the International Monetary Fund, China pays a 4 percent quota, whereas the US pays nearly 18 percent, and therefore has more influence within the organization and where loans go.
“China feels it can’t get anything done in the World Bank or the IMF so it wants to set up its own World Bank that it can control itself,” the FT quoted a source close to discussions as saying.
To date, 22 countries have expressed interest in the project, including oil-rich Middle Eastern nations, the US, India, Europe, and even Japan, the FT reported.
“There is a lot of interest from across Asia but China is going to go ahead with this even if nobody else joins it,” the FT source said.
Funding for the Asian Infrastructure Investment Bank will mostly be sourced from the People’s Republic of China and be used to pay for infrastructure projects.
The bank’s first project will be a reincarnation of the ancient Silk Road, the vast network of trade routes between China and its regional neighbors. Another proposed project is a railway from Beijing to Baghdad.
The idea for the bank was first floated in October 2013, when China unveiled plans to create the bank. Then it was initially to be funded with $50 billion in capital.
Separately, the BRICS nations plan to have a $100 billion development bank ready by 2015.
Funds will be reserved for emerging market members who are often bypassed by institutions like the IMF and World Bank.
Bank preparations will likely be finalized at the 6th annual BRICS summit on July 14-16, when the five world leaders convene in Brazil.
The Consequences of Parasitical Capitalism
Ismael Hossein-zadeh has done a masterful job in explaining the causes of the 2007-08 financial collapse and in identifying what must be done in response. While there is a consensus that the main source of the 2008 financial collapse was the accumulation of too much toxic debt, there is little agreement on the factors that precipitated the buildup of all that unsustainable debt. Focusing on superficial descriptions or symptomatic factors such as deregulation, securitization, greed, and the like, mainstream economics falls way short of providing a satisfactory explanation for the collapse, or the ensuing long recession. Now comes a newly published book, Beyond Mainstream Explanations of the Financial Crisis: Parasitic Finance Capital, which skillfully fills this theoretical void as it provides an alternative explanation of the 2008 financial collapse, of the ensuing long recession and of the neo-liberal austerity responses to it. Instead of simply blaming the “irrational behavior” of market players, as neo-liberals do, or lax public supervision, as Keynesians do, the study focuses on the core dynamics of capitalist development that not only created the financial bubble, but also fostered the “irrational behavior” of market players and subverted public policy.
Hossein-zadeh sets out in Beyond Mainstream Explanations of the Financial Crisis to first demonstrate the origins of the crisis and the subsequent transfer of “tens of trillions” of dollars from the vast majority of society into the coffers of the financial speculators through the imposition of austerity cuts on the many for the benefit of the few; and secondly to examine potential societal responses to avoid the repetition of such crises in the future. To do this, he begins by examining the two most prominent explanations for the crisis: the neoliberal explanation, which claimed it was due to irrational market actors and/or intrusive government policies that interfered with the self-correcting market mechanism; and the Keynesian explanation, which explained the crisis as the result of excessive deregulation, “inappropriate” public policy and supply side strategies. The author skillfully exposes the weaknesses of both and offers a compelling and well grounded alternative explanation, as indicated in the book’s title.
The book is well written and is easily understood by those who may not have an extensive background in economic theory. At the same time, it provides keen insights that are essential to understanding the crisis for those who may be more experienced in the field. It is structured with the first five chapters devoted to understanding crises within advanced capitalism, particularly the role of finance capital in provoking them, while the final three chapters are dedicated to examining solutions. Moreover, the work is an essential heuristic tool for any and all who wish to show how and why advanced capitalist economies tend towards crisis and the role of finance capital as a catalyst of crisis. A more thorough examination of the work’s primary contributions follows below.
In Chapter one Hossein-zadeh explains that neoliberal conceptualizations suffer from a misplaced religious-like faith in the market mechanism that led the leading neoliberal/neoclassical economists to remain oblivious to the impending crash. Due to neoliberals’ blind faith in the income-expenditure (or supply-demand) circular flow model, their economic theory is impervious to the fact that contradictions can arise within the real sector itself as well as to the reality that contradictions can also arise between the financial and the real sector. This led the leading neoliberal/neoclassical economists like Ben Bernanke and the IMF financial gurus to predict continual expansion up through the very eve of the crisis, and later to offer mistaken remedies such as quantitative easing and more funds to the financial sector. The impact of these measures is that instead of preventing a new bubble from forming they put us well on the way to creating another one.
In chapter two Mr. Hossein-zadeh delves into the weaknesses of Keynesian explanations of the crisis, arguing that while they are not wrong to signal deregulation as part of the problem leading to this crisis, they naively believe that capitalism will allow itself to be regulated without pressure from the people, thereby ignoring the power relationship between capitalism and the state. Not surprisingly, Keynesians tend to be oblivious as to why their more sane-sounding prescriptions for increasing public demand (through the promotion of New Deal type economic programs) and curtailing the aggressive and irresponsible behavior of financial players through more regulation have not been followed. While their policy suggestions may prove effective under certain circumstances, Keynesians fail to see or acknowledge that profit can also be increased through more intense exploitation of workers, that is, through supply-side measures. Furthermore, while the New Deal reforms were beneficial for the extrication of the U.S. economy from the grips of the Great Depression, these were followed much more as a response to working-class pressure from below then as a deliberated response to the writings of Keynes. In addition, the long economic expansion that followed was also due to the specific global economic situation of vast amounts of capital destroyed in Europe leaving the U.S. without much competition for its exports.
Much of the weakness of Keynesian economic theory, like all neoclassical economics, is their rejection of the category of value, and thus any real understanding as to the origin of social wealth and class dynamics. The general weaknesses of neoclassical economics are covered expertly in chapter 3. This chapter examines the weaknesses in the neoclassical understanding of the relationship between industrial and finance capital. The neoclassical position traditionally argues that the latter is limited by the real expansion of the former, and thus remains oblivious to the possibility of a crisis forming in the financial sector and spreading to the real ‘productive’ sector. To understand the real developments, Hossein-zadeh convincingly argues, we need to turn to Karl Marx’s Volume III and look at what he termed ‘fictitious capital’, when Marx examined how value tended to be siphoned from the sector in which it was produced to the unproductive sectors of the economy in pursuit of speculative investment.
Chapter 4 looks at the historical growth of finance capital (whose share of GDP in 2008 was more than double its share on the eve of the Great Depression in 1929), the growth of speculative activities (derivative markets, credit-default swaps) and the role of private control of the money supply. Each one of these phenomena is analyzed here in their social impacts and class/political dynamics. Here the author (p76) demonstrates that the speculative activity of finance capital accelerates “accumulation of fictitious capital through asset price inflation” (often with the help of public funds that simultaneously act as insurance protecting the speculators from the potential consequences of their socially deleterious behavior), creating a bubble that eventually bursts—with the public left paying the debt for the now-devalued assets.
This chapter also demonstrates that the bailouts for the speculators and austerity for the many, which further increased the already sharp economic inequality, were not an economic necessity but a reflection of the power of finance capital over the state and the monetary authority. To this end, Hossein-zadeh reflects on the immense tax-breaks for the wealthy, gargantuan military spending and lucrative contracts for weapons producers that created ‘public’ debt as a pretext to slash necessary social programs. The chapter demonstrates that we live under an economic system where losses are socialized and profits are privatized.
In Chapter 5, Hossein-zadeh reflects on Marx’s understanding of parasitic finance capital, its place within labor theory of value, and its contribution to a better understanding of the causes behind the present economic crisis. In Vol. III of Capital Marx outlined how the surplus value produced in the industrial and agricultural sectors ends up being divided between the merchant (or commercial capital), finance capital (money lending capital) and ground rent (Marx  1981). Hossein-zadeh points out that, according to Marx, fluctuations of finance capital could take place independent “of the movement of the actual capital it represents” (p86, quoted in Hossein-zadeh); and that as capitalism develops the movement of money (finance) capital becomes more and more independent of the movement of industrial capital. This is critical for his argument that crisis can hit the speculative financial sector at a moment when there is not a crisis within the real sector, but that through the tightening of credit and asset price deflation spread the crisis from the speculative to the productive sector.
The author further argues in this chapter that contemporary Marxists, unlike Hilferding and Lenin who expanded in the early 20th century on Marx’s work on finance capital, have largely abandoned systematic explorations into the workings of finance capital (generally viewing it as secondary to their conception of a Marxian theory of crisis), and focused primarily on the movements within the productive sector. It is not that Hossein-zadeh disagrees in principle with the contemporary Marxist scholars about the potential for crisis to arise within the circuit of productive capital; but that many of these Marxists have overlooked the fact that crisis can and does at times start within the financial sector and proceeds to spread to the real sector. Many contemporary Marxist theoreticians and economists seem to argue, in an inconsistent or self-contradicting fashion that “asset price inflation can boost demand and cause or magnify an expanding real cycle; but debt and/or asset price deflation cannot cause or aggravate a real-sector recession!” (p107).
In Chapter 6 the author explores the historical record of debt cancellations/write-downs, dating back to Bronze Age Mesopotamia (2400-1400 BCE) and running through the 5th and 4th centuries BCE. Here he examines the evidence that suggests that not only were debt cancellation and land restitution/reform common practices in this epoch, but that they often led to economic renewal. While there are moral and ethical arguments that can easily be made in favor of the biblical Jubilee and debt cancellation in general, Hossein-zadeh goes beyond these points to argue that the historical record offers clear evidence that an economic recovery would not occur so long as the vast majority of the population is saddled with overwhelming debt and interest payments. The author further argues that the decline of these socially-beneficial practices coincided with the rise of private property and the growth of power of landowning and rentier classes, and that these classes exerted influence over the state/religious authorities to deemphasize these central aspects to the Old Testament’s socio-economic reforms.
In Chapter 7 the author makes the case for public banking. Here he underscores once again the pernicious role of private banking in advancing the interests of the wealthy few in general and finance capital in particular at the expense of the many. He argues that while private banks “create financial bubbles during expansionary cycles and credit crunch during contradictory ones”, public banking “can provide steady, reliable financial resources as dictated by a nation’s industrial and/or commercial needs”(p129). Crucial here is the superior economic record held by the BRICS (Brazil, Russia, India, China and South Africa) countries in weathering the 2008 financial collapse and the ensuing economic crisis. Contrary to a situation in which the state becomes beholden to creditors, when banks are nationalized the state has additional resources with which to engage in essential public projects that both serve a social purpose and stimulate demand. While acknowledging that public banking by itself is insufficient to prevent the recurrence of all economic crises, Hossein-zadeh successfully makes the case that this is a necessary first step to avert crises that originate within the financial sector.
In the final chapter, the author soundly argues that there are no shortcuts to superseding capitalism by solely nationalizing the banking system; and that we must move beyond capitalism itself, or else we would be subjected to the throes of its logic. Here he examines the role of labor as one of the key players in confronting capital. Sadly, as he points out in this chapter, many unions have become caught up in business unionism and have tragically become vehicles for transmitting the dictates of capital to the workers (as opposed to vice-versa!), and have been unable (or unwilling) to resist the generalized assault on labor in the form of layoffs, wage cuts and outsourcing.
A central explanation for the debilitation of unions offered here lies in capital’s global reach and the globalization of production. Capital has free global movement and is organized on an international level and thus is able to play off workers in various countries against each other in a race to the bottom in terms of worker safety, salaries, benefits, labor laws and environmental protections. Labor must therefore organize internationally so as to be able to effectively resist a globalized capitalist system. A key element of this strategy lies in resisting all forms of chauvinisms, and reactionary nationalisms that have at times infected the labor movement and can lead to what Edna Bonacich (1972) referred to as a split-labor market.
Dr. Hossein-zadeh in this chapter also looks at the limitations of the Occupy movement, arguing that while their heart was in the right place, Occupy activists had condemned themselves to be ineffective as a long-term force for change by refusing to adopt an organizational structure or outline specific demands. The author thus points us back to the critical role of labor to play in this regard, but that it is essential that they organize and coordinate globally, otherwise capital will be able to outmaneuver workers’ resistance and subject labor to its logic. In the end, Hossein-zadeh remains hopeful based on the seeds of international labor organizing that labor will be able to meet this challenge in the future and serve as a primary catalyst for meaningful socio-economic transformation. In summary, I recommend this book without reservation, as a critical component of the library of those who are not just concerned with understanding the dynamics of finance capital and its role in facilitating economic crisis, but to all those who are genuinely interested in bringing about a more socially just and equitable society.
Isaac Christiansen is a Ph.D Student in the Sociology Department at Iowa State University.
Bonacich, Edna. 1972. “A Theory of Ethnic Antagonism: The Split-Labor Market” American Sociological Review, 37:5 547-559.
Marx Karl.  1981. Capital Vol. III Penguin Books in Association with New Left Review. London WI.
This Wednesday evening there is to be a “Public Information Session and Discussion” (pdf) about TISA: the Trade in Services Agreement. If, like me, you’ve never heard of this, you might think it’s a new initiative. But it turns out that it’s been under way for more than a year: the previous USTR, Ron Kirk, informed Congress about it back in January 2013 (pdf). Aside from the occasional laconic press release from the USTR, a page put together by the Australian government, and a rather poorly-publicized consultation by the European Commission last year, there has been almost no public information about this agreement. A cynic might even think they were trying to keep it quiet.
Perhaps the best introduction to TISA comes from the Public Services International (PSI) organization, a global trade union federation representing 20 million people working in public services in 150 countries. Last year, it released a naturally skeptical brief on the proposed agreement (pdf):
At the beginning of 2012, about 20 WTO members (the EU counted as one) calling themselves “The Really Good Friends of Services” (RGF) launched secret unofficial talks towards drafting a treaty that would further liberalize trade and investment in services, and expand “regulatory disciplines” on all services sectors, including many public services. The “disciplines,” or treaty rules, would provide all foreign providers access to domestic markets at “no less favorable” conditions as domestic suppliers and would restrict governments’ ability to regulate, purchase and provide services. This would essentially change the regulation of many public and privatized or commercial services from serving the public interest to serving the profit interests of private, foreign corporations.
The Australian government’s TISA page fills in some details:
The TiSA negotiations will cover all services sectors. In addition to improved market access commitments, the negotiations also provide an opportunity to develop new disciplines (or trade rules) in areas where there has been significant developments since the WTO Uruguay Round negotiations. There negotiations will cover financial services; ICT services (including telecommunications and e-commerce); professional services; maritime transport services; air transport services, competitive delivery services; energy services; temporary entry of business persons; government procurement; and new rules on domestic regulation to ensure regulatory settings do not operate as a barrier to trade in services.
If that sounds familiar, it’s because very similar language is used to describe TAFTA/TTIP, which aims to liberalize trade and investment, to provide foreign investors with access to domestic markets on the same terms as local suppliers, to limit a government’s ability to regulate there by removing “non-tariff barriers” — described above as “regulatory settings” — and to use corporate sovereignty provisions to enforce investors’ rights.
Those similarities suggest TISA is part of a larger plan that includes not just TAFTA/TTIP, but TPP too, and which aims to cement the dominance of the US and EU in world trade against a background of Asia’s growing power. Indeed, it’s striking how membership of TISA coincides almost exactly with that of TTIP added to TPP:
The 23 TiSA parties currently comprise: Australia, Canada, Chile, Chinese Taipei, Colombia, Costa Rica, European Union (representing its 28 Member States), Hong Kong, Iceland, Israel, Japan, Liechtenstein, Mexico, New Zealand, Norway, Pakistan, Panama, Paraguay, Peru, Republic of Korea, Switzerland,, Turkey and the United States.
Once more, the rising economies of the BRICS nations — Brazil, Russia, India, China, South Africa — are all absent, and the clear intent, as with TTIP and TPP, is to impose the West’s terms on them. That’s explicitly recognized by one of the chief proponents of TISA, the European Services Forum:
the possible future agreement would for the time being fall short of the participation of some of the leading emerging economies, notably Brazil, China, India and the ASEAN countries. It is not desirable that all those countries would reap the benefits of the possible future agreement without in turn having to contribute to it and to be bound by its rules.
The Australian government’s page reveals that there have already been five rounds of negotiations — all held behind closed doors, of course, just as with TTIP and TPP. The Public Information Session taking place in Geneva this week seems to mark the start of a new phase in those negotiations, at least allowing some token transparency. Perhaps this has been provoked by the growing public anger over the secrecy surrounding TPP and TAFTA/TTIP, and fears that the longer TISA was kept out of the limelight, the worse the reaction would be when people found out about it.It seems appropriate, then, that the unexpected unveiling of this new global agreement should be greeted not only by an updated and more in-depth critique from the PSI — “TISA versus Public Services” — but also the first anti-TISA day of protest. Somehow, I don’t think it will be the last.
The BRICS countries (Brazil, Russia, India, China and South Africa) have made significant progress in setting up structures that would serve as an alternative to the International Monetary Fund and the World Bank, which are dominated by the U.S. and the EU. A currency reserve pool, as a replacement for the IMF, and a BRICS development bank, as a replacement for the World Bank, will begin operating as soon as in 2015, Russian Ambassador at Large Vadim Lukov has said.
Brazil has already drafted a charter for the BRICS Development Bank, while Russia is drawing up intergovernmental agreements on setting the bank up, he added.
In addition, the BRICS countries have already agreed on the amount of authorized capital for the new institutions: $100 billion each. “Talks are under way on the distribution of the initial capital of $50 billion between the partners and on the location for the headquarters of the bank. Each of the BRICS countries has expressed a considerable interest in having the headquarters on its territory,” Lukov said.
It is expected that contributions to the currency reserve pool will be as follows: China, $41 billion; Brazil, India, and Russia, $18 billion each; and South Africa, $5 billion. The amount of the contributions reflects the size of the countries’ economies.
By way of comparison, the IMF reserves, which are set by the Special Drawing Rights (SDR), currently stand at 238.4 billion euros, or $369.52 billion dollars. In terms of amounts, the BRICS currency reserve pool is, of course, inferior to the IMF. However, $100 billion should be quite sufficient for five countries, whereas the IMF comprises 188 countries – which may require financial assistance at any time.
BRICS Development Bank
The BRICS countries are setting up a Development Bank as an alternative to the World Bank in order to grant loans for projects that are beneficial not for the U.S. or the EU, but for developing countries.
The purpose of the bank is to primarily finance external rather than internal projects. The founding countries believe that they are quite capable of developing their own projects themselves. For instance, Russia has a National Wealth Fund for this purpose.
“Loans from the Development Bank will be aimed not so much at the BRICS countries as for investment in infrastructure projects in other countries, say, in Africa,” says Ilya Prilepsky, a member of the Economic Expert Group. “For example, it would be in BRICS’ interest to give a loan to an African country for a hydropower development program, where BRICS countries could supply their equipment or act as the main contractor.”
If the loan is provided by the IMF, the equipment will be supplied by western countries that control its operations.
The creation of the BRICS Development Bank has a political significance too, since it allows its member states to promote their interests abroad. “It is a political move that can highlight the strengthening positions of countries whose opinion is frequently ignored by their developed American and European colleagues. The stronger this union and its positions on the world arena are, the easier it will be for its members to protect their own interests,” points out Natalya Samoilova, head of research at the investment company Golden Hills-Kapital AM.
Having said that, the creation of alternative associations by no means indicates that the BRICS countries will necessarily quit the World Bank or the IMF, at least not initially, says Ilya Prilepsky.
Currency reserve pool
In addition, the BRICS currency reserve pool is a form of insurance, a cushion of sorts, in the event a BRICS country faces financial problems or a budget deficit. In Soviet times it would have been called “a mutual benefit society”, says Nikita Kulikov, deputy director of the consulting company HEADS. Some countries in the pool will act as a safety net for the other countries in the pool.
The need for such protection has become evident this year, when developing countries’ currencies, including the Russian ruble, have been falling.
The currency reserve pool will assist a member country with resolving problems with its balance of payments by making up a shortfall in foreign currency.
Assistance can be given when there is a sharp devaluation of the national currency or massive capital flight due to a softer monetary policy by the U.S. Federal Reserve System, or when there are internal problems, or a crisis, in the banking system. If banks have borrowed a lot of foreign currency cash and are unable to repay the debt, then the currency reserve pool will be able to honor those external obligations.
This structure should become a worthy alternative to the IMF, which has traditionally provided support to economies that find themselves in a budgetary emergency.
“A large part of the fund goes toward saving the euro and the national currencies of developed countries. Given that governance of the IMF is in the hands of western powers, there is little hope for assistance from the IMF in case of an emergency. That is why the currency reserve pool would come in very handy,” says ambassador Lukov.
The currency reserve pool will also help the BRICS countries to gradually establish cooperation without the use of the dollar, points out Natalya Samoilova. This, however, will take time. For the time being, it has been decided to replenish the authorized capital of the Development Bank and the Currency Reserve Pool with U.S. dollars. Thus the U.S. currency system is getting an additional boost. However, it cannot be ruled out that very soon (given the threat of U.S. and EU economic sanctions against Russia) the dollar may be replaced by the ruble and other national currencies of the BRICS counties.
The group of five major emerging national economies known as the BRICS has rejected the Western sanctions against Russia and the “hostile language” being directed at the country over the crisis in Ukraine.
“The escalation of hostile language, sanctions and counter-sanctions, and force does not contribute to a sustainable and peaceful solution, according to international law, including the principles and purposes of the United Nations Charter,” foreign ministers of the BRICS countries – Brazil, Russia, India, China and South Africa – said in a statement issued on Monday.
The group agreed that the challenges that exist within the regions of the BRICS countries must be addressed within the framework of the United Nations.
“BRICS countries agreed that the challenges that exist within the regions of the BRICS countries must be addressed within the fold of the United Nations in a calm and level-headed manner,” the statement added.
The White House said earlier on Monday that US President Barack Obama and the leaders of Britain, Canada, France, Germany, Italy and Japan decided to end Russia’s role in the G8 over the crisis in Ukraine and the status of Crimea.
Meanwhile, the G7 group of top economic powers has snubbed a planned meeting that Russian President Vladimir Putin was due to host in the Black Sea resort city of Sochi in June.
The G7 said they would hold a meeting in Brussels without Russia instead of the wider G8 summit, and threatened tougher sanctions against Russia.
Russia brushed off the Western threat to expel it from the G8 on the same day. The Autonomous Republic of Crimea declared independence from Ukraine on March 17 and formally applied to become part of Russia following a referendum a day earlier, in which nearly 97 percent of the participants voted in favor of the move.
On March 21, Putin signed into law the documents officially making Crimea part of the Russian territory. Putin said the move was carried out based on the international law.
I imagine myself walking down to the Beirut train station, boarding the 4pm bullet train that will steam off toward Damascus, heading across the great plains to the east to Baghdad. In a day we’ll be in Iran and then at Mashad there is a choice: one could go south through Pakistan to Delhi, or one would take the longer journey to Beijing via Samarkand. This would be the Great Asian Express that links one end of the massive continent to the other.
But it is impossible. War in Syria stops the train before it has even begun. Instability in Iraq intimates that the tracks would be blown up before they can be laid down. Iran is far more stable, which is why it has begun to build a train line that would link Turkey to Turkmenistan through northern Iran. Afghanistan, Pakistan and India are unable to create a modus vivendi that would welcome such a train, or indeed an oil and gas pipeline that might run parallel to it, bringing Iranian fuel to the consumers of the subcontinent. Central Asia oscillates between long periods of calm and bursts of dangerous violence.
A train itinerary such as the one I described sounds like a dream history – impossible even. But it is not so out of our time. The Trans-Asian Railway comes out from the 1960s, a historical artefact, a project of the UN Economic and Social Commission for Asia and the Pacific that was finally brought to the stage of an inter-governmental memorandum of understanding in 2006. This Iron Silk Road is to run from Singapore to Istanbul. The project has no timetable. Parts of it are already present, and parts of it are in the maddening future. But some of it will form part of the China-Iran rail link which is expected to go into production within a decade, and will form part of the Istanbul to Tehran route that is also already in production. Not so far that regional future.
Regionalism rests on the mantle of geography. Attempts to isolate a country for ideological reasons do not always work. The West, since 2003 at least, has attempted to isolate Iran but it cannot do so – Afghanistan, under US occupation, buys half its oil from Iran. It cannot do otherwise. Any other source would be ridiculously overpriced. The US embargo of Iran had to be violated despite the fact that it was US money in Afghan hands that was buying the Iranian oil.
Pressure from the US and the desire of the Indian political and economic elites for a close link with the US befuddled India’s Iran policy between 2003 and 2013. India is the second largest importer, after China, of Iranian oil. In the halls of the Non-Aligned Movement, India is a country that is greatly respected.
Through a nuclear deal – as I detail in my new report on India’s Iran policy, the US was able to push India to vote against Iran twice at the International Atomic Energy Agency (IAEA) meetings in exchange for being brought out of the nuclear winter itself. As the sanctions regime on Iran tightened, India found it hard to buy oil from Iran and coldness between the countries set in as a result of India’s seeming eagerness to toe the US line. But beneath the surface of the IAEA votes and the statements against the buying of Iranian oil, linkages deepened – on oil buying certainly but also on the trade in pharmaceuticals and wheat as well as on the Indo-Iranian construction of a port in south-eastern Iran (at Chabahar). The sanctions regime had certainly throttled Iran, but it could not sunder fully the imperatives of regional trade.
On Sunday, November 24, the P5 (China, France, Russia, the United Kingdom and the United States) + 1 (Germany) signed a deal with Iran to end the siege on the latter. The P5+1 promised to ease the sanctions regime in exchange for Iran’s disavowal of a nuclear weapon.
India welcomed the deal, suggesting that it was along the grain not only of Indian policy but also of the BRICS declaration from 2013 (“We believe there is no alternative to a negotiated settlement to the Iranian nuclear issue. We recognize Iran’s right to peaceful use of nuclear energy consistent with its international obligations, and support resolution of the issues involved through political and diplomatic means and dialogue,” was the wording of the eThekwini Declaration).
India’s oil firms promised to hastily transfer arrears held in Indian banks for oil purchased during the previous years (now totalling $5.3 billion), and to increase orders for Iranian oil. The latter would be facilitated by the end to the pressure on insurance firms who then refused to underwrite oil tankers coming out of Iran.
India’s Foreign Secretary Sujatha Singh met with Iran’s Deputy Prime Minister Ebrahim Rahimpour on Monday, November 25, and agreed that there is “considerable untapped potential to develop economic cooperation between the two countries particularly in the area of energy and transit.” India and Iran have already been at work building the Chabahar port, and India is building a 900 km train track to link the port to the Hajigak region in Afghanistan. Dreams of oil and gas pipelines and train lines remained suspended over the gathering like a huge exclamation mark.
What these developments indicate is that the time of US primacy is now over and the time of multipolar regionalism is at hand. From 1991 to the present, the US had attempted to forge strong bilateral ties with its chosen allies and sought to knit those allies into a planetary security web of military bases and inter-operatable armed forces; this was the hub and spoke system that James Baker had written about in 1992. That system meant that regional ties had to be sacrificed for the close linkages to the United States. Latin America, through the Bolivarian dynamic, was the first region to exit from the US strategy and create its own regional architecture (for political, economic and social linkages). An over-extended US military presence in Asia and the collapse of the finance-led economic model in 2008 weakened the US considerably.
The example of Latin America gave confidence for the new India-Brazil-South Africa (IBSA) formation, the antecedent of the BRICS bloc. With the quiet emergence of the BRICS bloc in the context of a weaker West, it was inevitable that the siege of Iran would have to be lifted. China’s Foreign Minister Wang Li uncharacteristically told the Chinese media that his country played a crucial role in concluding the deal. Pressure from Russia and China on the European Union pushed them to bring a wayward France in line. No longer can an imperial foreign policy dominate international policy without challenge. That is the lesson of the Iranian deal.
Vijay Prashad is the Edward Said Chair at the American University of Beirut, Beirut, Lebanon. His most recent book is The Poorer Nations: A Possible History of the Global South.
- India will continue to engage Iran in economic activities (rediff.com)
- Post-deal with world powers, Iran briefs India on moving ahead (thehindu.com)
- PressTV: US extends Iran oil sanctions waivers (jhaines6.wordpress.com)
Brazil is urging a plan to introduce local data storage for Internet giants like Facebook and Google in order to keep the information they get from Brazilian users safe –as part of a complex of measures to oppose US spying.
The new law could impact Google, Facebook, Twitter and other Internet global companies that operate in Brazil, Latin America’s biggest country and one of the world’s largest telecommunications markets.
The country’s president, Dilma Rousseff, is urging lawmakers to vote as early as this week on the law, according to Reuters who have seen the draft of the legislation.
“The government can oblige Internet service companies … to install and use centers for the storage, management and dissemination of data within the national territory,” the draft of the document read.
Rousseff’s calls come after surveillance leaks by the US in Brazil that went as far as tracking the personal phone calls and e-mails of the President herself.
Last month, Brazilian President Dilma Rousseff canceled a scheduled meeting at the White House after leaked documents showed the NSA spied on her country’s state oil company.
“We are not regulating the way information flows, just requiring that data on Brazilians be stored in Brazil so it is subject to the jurisdiction of Brazilian courts,” Rousseff spokesman Thomas Traumann said. “This has nothing to do with global communications.”
However, the companies disagree saying that the legislation will increase costs of services, and damage the economic activity connected with information.
Last week a coalition of business groups representing dozens of Internet companies including Facebook, Google, Microsoft and eBay sent a letter to Brazilian lawmakers.
“In-country data storage requirements would detrimentally impact all economic activity that depends on data flows,” the letter read, Reuters reported.
Many also threatened the law will scare the companies, while others, nevertheless, were of the opinion that the companies would comply if faced with no other options.
This week, Brazil is expected to vote on a cyber-security bill to create a state system to protect the country’s citizens from spying.
When the news on the bill emerged two weeks ago, Brazilian President Dilma Rousseff tweeted the news, stressing the need for greater security “to prevent possible espionage.”
The latest legislation project comes against a backdrop of Brazil set to host a conference next April to debate ways to guard Internet privacy from espionage.
The meeting is to be held by ICAAN, the body that manages web domain names. It is thought to be neutral and includes governments, civil society and industry.
Meanwhile, BRICS companies are working to create a “new Internet”.
In particular, Brazil has been reported to be building a “BRICS cable” that will create an independent link between Brazil, South Africa, India, China and Russia, in order to bypass NSA cables and avoid spying.
The cable is set to go from the Brazilian town of Fortaleza to the Russian town of Vladivostok via Cape Town, Chennai and Shantou.
The length of the fiber-optic cable will be almost 35,000 kilometers, making it one of the most ambitious underwater telecom projects ever attempted.
Last week, most of the BRICS countries joined talks to hammer out a UN resolution that would condemn “indiscriminate” and “extra-territorial” surveillance, and ensure “independent oversight” of electronic monitoring.
Russian Foreign Minister Sergey Lavrov said that “contacts [between Moscow and Washington] never stop,” when asked if the latest publication of secret files leaked by the former National Security Agency (NSA) contractor would affect relations between Russia and the US.
Also, Lavrov made it clear that the situation surrounding Snowden is irrelevant to Russia.
“We have formulated our position on Snowden and have said everything,” he said.
- China echoes Brazil’s call for cyberspace guidelines (thebricspost.com)