China will reportedly finance the so-called ‘Peace Pipeline’ natural gas pipeline from Iran, home to the world’s second largest reserves, to energy-deprived Pakistan. The project was delayed due to US dissent.
The final deal is to be signed during the long-sought visit of Chinese President Xi Jinping to Islamabad in April, the Wall Street Journal reported on Thursday.
“We’re building it. The process has started,” Pakistani Petroleum Minister Shahid Khaqan Abbasi told the WSJ.
First proposed over 20 years ago, the 1045 mile (1682km) pipeline will transfer gas from Iran’s south to the Pakistani cities of Gwadar and Nawabshah. Karachi, the country’s biggest city of 27.3 million, will also be connected via local energy distribution systems already in place.
Iran has said the 560-mile portion that runs to the Pakistan border is already complete, which only leaves $2 billion needed to build the Pakistani stretch.
The project could cost up to $2 billion if a Liquefied Natural Gas port is constructed at Gwadar. Otherwise, the project to complete the Pakistani pipeline will cost between $1.5 billion to $1.8 billion, the WSJ said. Pakistan is in negotiations with China Petroleum Pipeline Bureau, a subsidiary of Chinese energy major China National Petroleum Corporation, to finance 85 percent of the project. Pakistan will pay the rest.
The original plan envisioned the pipeline continuing to India, but Delhi dropped out due to US pressure in 2009, Tehran claims. Pakistan, a country of 199 million people faces intermittent blackouts in major cities, and Iran is looking for a place to export its soon-to-not-be-banned gas.
Iran has 33.7 trillion cubic meters of gas reserves according to the June 2014 BP Statistical Review of World Energy. According to BP estimates, it has the world’s fourth-largest oil reserves at 157 billion barrels.
US-led sanctions against Iran over its nuclear program have stunted Iran’s oil and gas industry.
Iran’s oil exports have dropped from 2.5 million barrels a day in 2011 to about one million barrels in 2014, according to the US Energy Information Administration (EIA). In March, Iran produced 2.85 million barrels of oil per day, according to data from Bloomberg.
Despite attempts to portray the work of the “big three” as globally oriented, the rating agencies maintain a close link to the US financial institutions. The 2008 economic crisis sent their reputations reeling. Now the global market for making ratings needs to be de-monopolized and equipped with new, transparent tools for working with risk.
Currently, Fitch, Standard & Poor’s, and Moody’s enjoy almost complete legal immunity for their evaluations and are guaranteed high profits, regardless of the consequences. According to the French edition of Le Monde, between 2000 and 2007, Moody’s earnings quadrupled, thanks to CMBS, ABS, CDO, and other securities that had become the main source of the company’s financial gains, with a profitability margin of 52%. Unfortunately, accurate data on S&P and Fitch are not published, although it would be interesting to look at the accounting records of these organizations that insist on full transparency for everyone but themselves.
In any event, the US taxpayer makes up for any discrepancy between the rating and the reality – suffice it to recall the 2008 scandal over the ratings of “toxic” assets within the US banking system just before the collapse of Lehman Brothers.
The way it works
Rating agencies act as a “filter” regulating the movement of investment capital from developed markets into developing ones. The mechanism is simple – any rating assigned by the “Big Three” that is used by the head of a major investment fund affects the default risk. Actual business practice is often ignored. For example, the retirement accounts of America’s senior citizens can be invested into crazy foreign financial schemes, as long as their ratings are properly pitched. The rating system is designed so that cash from banks and investment funds passes only into the “right” hands under favorable terms. This creates a type of political road map for investors, which has little to do with the real macroeconomic indicators.
But this does not stop the experts from the “Big Three.” “Imagine a large group of people arguing strenuously with each other,” David Levey, a former managing director of Moody’s, told Foreign Affairs. “It could sometimes get to that. These were very exciting meetings and often there were substantial disagreements. In every case, the ultimate decision was made by majority vote.” But were any of the people involved in these debates elected? And on what basis did they wield such influence?
In 2011, this question was answered by William Harrington, a former senior president at Moody’s (a voice in the wilderness, indeed). “This salient conflict of interest permeates all levels of employment, from entry-level analyst to the chairman and chief executive officer of Moody’s corporation,” Harrington said in a filing to the US financial regulator, the Securities and Exchange Commission (SEC).
The myth that the rating agencies are a “global” business.
With a single stroke of a pen, highly rated players are given a significant competitive advantage based on their proximity to the source of investment. To ensure political control over developing markets, the analyses of all three ratings agencies always include assessment criteria that affect the overall result. At Moody’s, for example, those criteria are called “institutional strength” or “susceptibility to event risk.”
At their own risk and peril, agency analysts evaluate the stability of the institutions of a sovereign player, on the basis of some kind of “global” paradigm of historical development. Not one of the agencies is entirely forthcoming about its methodology for assigning ratings. And this is hardly surprising – how else to explain high ratings to the press, given sovereign bankruptcies, in, for example, Iceland?
The idea of global development, as part of a neoliberal world order, arose only recently (in the late 1980s) and is, like many ideological concepts, a political tool. The agencies, however, use this idea in all their documents, all the while professing objectivity. To evaluate developing markets, regardless of the local conditions, the “universal” IMF criteria are used, such as the degree of privatization and liberalization of the national economy. The crises in Latin America offer clear evidence of what happens when a government is prompted by the “ratings racket” to sell off its liquid assets during a period of financial instability.
For example, in February 2015, the rating agency Moody’s downgraded the credit rating of the Brazilian oil and gas company Petrobras from Baa2 to Ba2, and as a result the company plunged from “investment grade” to “speculative.” The influential Brazilian edition of Jornal do Brasil calls that decision “absurd and premeditated robbery” and asks – what is more significant, the three million barrels per day produced by Petrobras or the opinion of a group of anonymous Moody’s analysts who upheld Greece’s high rating until the bitter end.
The “good” and “bad” guys
It has long been noted that if a more or less sovereign government comes to power in a country that has been exhausted by the neoliberal economic programmes, the “Big Three’s” ratings begin to drop as if by magic. The most remarkable story in recent times has been seen in France. In 2012 the French market, one of the most highly developed in the EU, found itself on the rating agencies’ “bad guys” list, due to its “incorrect” tax policy and the government’s refusal to relegate its local culture to the mercies of the anonymous forces of the financial market.
According to the journalist Édouard Tétreau, (Le Monde) in his article “The United States of Europe vs. the dream of Standard & Poor’s,” ratings are manipulated in order to “Balkanize” Europe. To counter this, he prescribes the creation of real banks in Europe that can “send the brokers on Wall Street and the City of London packing.” During the assaults on the EU’s credit, Antonio Tajani, a former vice president of the European Commission, told El País that the rating agencies “work for the dollar.” In short, when it comes to evaluating the real economic indicators, old Europe is doing its best to distance itself from the ratings.
Among Europe’s “good guys,” the rating agencies list only the minuscule economies of the Baltic states of Lithuania, Latvia, and Estonia, which in 2014 received upgraded investment ratings from S&P for their progress in tax reform.
In the US, the “Big Three” are evidence of the miracles of lobbying. On January 12, 2003, the state of Georgia passed strong anti-fraud laws drafted by consumer advocates. Four days later, Standard & Poor’s announced that if Georgia passed anti-fraud penalties for corrupt mortgage brokers and lenders, packaging including such debts could not be given AAA ratings. S&P’s move meant Georgia lenders would have no access to the securitization money machine. It is interesting that this situation arose five years before the time bomb known as the subprime crisis went off.
Is there an alternative?
The rating market is in dire need of de-monopolization. “We can’t have private companies, whose primary goal is maximizing profit, behaving like sovereign judges passing down opinions that are binding for disinterested third parties,” believes Thomas Straubhaar, the director of the Hamburg Institute of International Economics. The BRICS countries are solidly united with Europe in the search for alternatives to the “Big Three.”
New, transnational rating agencies, such as the Universal Credit Rating Group (UCRG), will be an important milestone in the rating market. UCRG was created in 2012 as a partnership between the Chinese rating agency Dagong, Russia’s RusRating, and United States’ Egan-Jones. The fundamental principle behind the formation of new transnational actors must be the requirement that they are unbiased and unaffiliated with any state or corporate entity.
There is media confusion about what is going on in Yemen and the broader Middle East. Pundits are pointing out that the US is looking schizophrenic with policies that back opposite sides of the fight against al-Qaeda-style extremism in Iraq and in Yemen.
But it isn’t that hard to understand the divergent policies once you comprehend the underlying drivers of the fight brewing in the region.
No, it isn’t a battle between Shia and Sunni, Iranian and Arab or the much-ballyhooed Iran-Saudi stand-off. Yes, these narratives have played a part in defining ‘sides,’ but often only in the most simplistic fashion, to rally constituencies behind a policy objective. And they do often reflect some truth.
But the ‘sides’ demarcated for our consumption do not explain, for instance, why Oman or Algeria refuse to participate, why Turkey is where it is, why Russia, China and the BRICS are participants, why the US is so conflicted in its direction – and why, in a number of regional conflicts, Sunni, Shia, Islamist, secularist, liberal, conservative, Christian, Muslim, Arab and Iranian sometimes find themselves on the same side.
This is not just a regional fight – it is a global one with ramifications that go well beyond the Middle East. The region is quite simply the theatre where it is coming to a head. And Yemen, Syria and Iraq are merely the tinderboxes that may or may not set off the conflagration.
“The battle, at its very essence, in its lowest common denominator, is a war between a colonial past and a post-colonial future.”
For the sake of clarity, let’s call these two axes the Neo-Colonial Axis and the Post-Colonial Axis. The former seeks to maintain the status quo of the past century; the latter strives to shrug off old orders and carve out new, independent directions.
If you look at the regional chessboard, the Middle East is plump with governments and monarchies backed to the hilt by the United States, Britain and France. These are the West’s “proxies” and they have not advanced their countries in the least – neither in self-sufficiencies nor in genuine democratic or developmental milestones. Indebted to ‘Empire’s’ patronage, these states form the regional arm of the Neo-Colonial Axis.
On the other side of the Mideast’s geopolitical fault line, Iran has set the standard for the Post-Colonial Axis – often referred to as the ‘Resistance Axis.’ Based on the inherent anti-imperialist worldview of the 1979 Islamic revolution, and also as a result of US/UK-driven isolating sanctions and global politics, Tehran has bucked the system by creating an indigenous system of governance, advancing its developmental ambitions and crafting alliances that challenge the status quo.
Iran’s staunchest allies have typically included Syria, Hezbollah and a handful of Palestinian resistance groups. But today, in the aftermath of the Arab Spring counter-revolutions – and the sheer havoc these have created – other independent players have discovered commonalities with the Resistance Axis. In the region, these include Iraq, Algeria and Oman. While outside the Mideast, we have seen Russia, China and other non-aligned nations step in to challenge the Neo-Colonial order.
Neo-Colonial Axis hits an Arab Spring wall
Today, the Neo-Colonials simply can’t win. They lack two essential components to maintain their hegemony: economy and common objectives.
Nowhere is that more clear than in the Middle East, where numerous initiatives and coalitions have floundered shortly after inception.
Once Muammar Gaddafi was overthrown in Libya, all parties went their own way and the country fractured. In Egypt, a power struggle pitted Sunni against Sunni, highlighting the growing schism between two Gulf Cooperation Council (GCC) patrons Saudi Arabia and Qatar. In Syria, a heavyweight line-up of Turkey, Qatar, Saudi Arabia, France, the US and UK could not pull together a coherent regime-change plan or back the same horse.
In the vacuum created by these competing agendas, highly-organized al-Qaeda-style extremists stepped in to create further divergence among old allies.
Western hegemons – the original colonials and imperialists – grew fatigued, alarmed, and sought a way out of the increasingly dangerous quagmire. To do so, they needed to strike a compromise with the one regional state that enjoyed the necessary stability and military prowess to lead the fight against extremism from within the region. That would be their old adversary, Iran.
But the West is geographically distant from the Mideast, and can take these losses to a certain extent. For regional hegemons, however, the retreat of their Western patrons was anathema. As we can see, Turkey, Saudi Arabia and Qatar have recently rushed to resolve their differences so they can continue to design the region’s direction in this Western vacuum.
These counter-revolutionary states, however, share grandiose visions of their own regional influence – each ultimately only keen to achieve their own primacy. And the continued ascendance of Iran has really grated: the Islamic Republic seems to have moved from strength to strength during this ‘Arab Spring,’ picking up new allies – regional and global – and consolidating its gains.
For Saudi Arabia, in particular, Iran’s incremental victories go beyond the pale. Riyadh has, after all, staked its regional leadership role on a sectarian and ethnic divide, representing Arab and Sunni stakeholders against “Iranian” and “Shiite” ones. Now suddenly, not only are the Americans, British and French dallying with the Iranians, but the GCC itself has been split down the center over the issue of ‘engagement vs. confrontation’ with the Islamic Republic.
Worse yet, the Saudi efforts to participate in the overthrow of Gaddafi, squash uprisings in Bahrain, control political outcomes in Yemen, destabilize Syria, divide Iraq and conquer Egypt seem to have come to naught.
In all instances, they have yet to see cemented, meaningful gains – and each quagmire threatens to unravel further and deplete ever more Saudi funds
Today, the Saudis find themselves surrounded by the sickly fruits of their various regional interventions. They have endured recent attacks by violent extremists on their Iraqi and Jordanian borders – many of these recipients of past Saudi funding – and now find themselves challenged on a third border, in Yemen, by a determined constituency that seeks to halt Saudi interventions.
Beyond that, Syria and Lebanon have slipped out of Riyadh’s grip, little Qatar seeks to usurp the traditional Saudi role in the Persian Gulf, Egypt dallies with Russia and China, and Pakistan and Turkey continue a meaningful engagement with Iran.
Meanwhile, the Iranians don’t have to do much of anything to raise the Saudi ire. Iran has stepped up its regional role largely because of the Saudi-led counter-revolution, and has cautiously thwarted Riyadh’s onslaughts where it could. It has buoyed allies – much like NATO or the GCC would in similar circumstances – but with considerably less aggression and while cleaving to the letter of international law.
The Saudis see Iranian hands everywhere in the region, but this is a fantasy at best. Iran has simply stepped into an opportunity when it arises, met the threats coming its way, and utilized all its available channels to blunt the Saudi advances in various military and political theaters.
Even the US intelligence community’s annual security assessment – a report card that regularly highlights the “Iranian threat” – concludes in 2015 that the Islamic Republic of Iran has “intentions to dampen sectarianism, build responsive partners, and deescalate tensions with Saudi Arabia.”
Yet all we hear these days blaring from Western and Arab media headlines is “Shia sectarianism, Iranian expansionism and Persian Empire.”
Tellingly, the American intelligence assessment launches its section on “terrorism” with the following: “Sunni violent extremists are gaining momentum and the number of Sunni violent extremist groups, members, and safe havens is greater than at any other point in history.”
And US officials admit: many of these Sunni extremists have been assisted and financed by none other than Washington allies Saudi Arabia, Turkey and Qatar.
The Yemeni theater – a final battleground?
A senior official within a Resistance Axis state tells me: “The biggest mistake the Saudis made is to attack Yemen. I didn’t think they were that stupid.”
In the past week, the Saudis have cobbled together yet another Neo-Colonial ‘coalition’ – this time to punish Yemenis for ousting their made-in-Riyadh transitional government and pushing into the southern city of Aden.
The main Saudi adversaries are the Houthis, a group of northern, rural highlanders who have amassed a popular base throughout the north and other parts of Yemen over the course of ten years and six wars.
The Saudis (and the US) identify the Houthis as ‘Shiites’ and ‘Iranian-backed’ in order to galvanize their own bases in the region. But Iran has had little to do with the Houthis since their emergence as a political force in Yemen. And WikiLeaks showed us that US officials know this too. A 2009 cable from the US Embassy in Riyadh notes that Yemen’s former Saudi-backed President Ali Abdullah Saleh provided “false or exaggerated information on Iranian assistance to the Houthis in order to enlist direct Saudi involvement and regionalize the conflict.”
And allegations that Iran arms the Houthis also fall flat. Another secret cable makes clear: “Contrary to ROYG (Republic of Yemen Government) claims that Iran is arming the Houthis, most local political analysts report that the Houthis obtain their weapons from the Yemeni black market and even from the ROYG military itself.”
Saleh was deposed in 2011 as a result of Arab Spring pressures, and in a twist worthy of the complicated Middle East, the wily former president now appears to be backing his former adversaries, the Houthis, against his old patrons, the Saudis.
The Houthis are adherents of the Muslim Zaydi sect – which falls somewhere between Sunnism and Shiism, and is followed by around 40 percent of Yemenis. Saleh, who fought the Houthis in half a dozen wars, is also a Zaydi – evidence that Yemen’s internal strife is anything but sectarian.
In fact, it could be argued that the Houthi – or Ansarallah movement – are a central constituency of Yemen’s ‘Arab Spring.’ Their demands since 2003 have, after all, largely been about ending disenfranchisement, gaining economic, political and religious rights, eliminating corruption, railing against the twin evils of America and Israel (a popular Post-Colonial Arab sentiment), and becoming stakeholders in the state.
To ensure the balance continued in their favor during the Arab Spring, the Neo-Colonial Axis installed a puppet transitional leader upon Saleh’s departure – an unelected president whose term ran out a year ago.
Then a few months ago, the Houthis – allegedly with the support of Saleh and his tens of thousands of followers – ousted their rivals in the puppet regime and took over the Yemeni capital, Sana’a. When the Saudis threatened retaliation, the Houthis pushed further southward… which brings us to the war front amassing against Yemen today.
This is not a battle the Saudis and their Neo-Colonial Axis can win. Airstrikes alone cannot turn this war, and it is unlikely that Riyadh and its coalition partners can expect troops on the ground to be any more successful – if they are even deployed.
The Houthis have learned over the past decade to fight both conventional and guerilla wars. This relatively small band of highlanders managed in 2009 to push 30 kilometers into Saudi territory and take over several dozen Saudi towns. When coalition-partner Egypt last fought a war with ground troops in Yemen, it became Gamal Abdel Nasser’s ‘Vietnam’ and nearly bankrupted the state.
Even majority-Sunni Pakistan, a traditional pipeline for staffing GCC armies, seems wary about this conflict. It too is fighting elsewhere on the same side as the Houthis, Iranians, Syrians, Iraqis – against violent Sunni extremists inside its borders and from their bases in neighboring Afghanistan. No amount of Saudi money will quench the anger of militant-weary Pakistanis if their government commits to this Yemeni fight – against the very groups (Houthis) that are battling al-Qaeda in the Arabian Peninsula (AQAP).
And, yes, it is ironic that the United States is now providing assistance and intelligence for the Saudi-led coalition – against the Houthis, who are fighting al-Qaeda.
But as mentioned earlier, this is not Washington’s neighborhood, and it does not approach this fight with the same goals of its close ally, Saudi Arabia.
The Resistance Axis official explains:
“The Americans see all outcomes as good: If the Houthis win, they will help get rid of al-Qaeda in Yemen. If the Saudis win, well, these are still the US’s allies. And if both sides enter a protracted war, that is “not a problem either,” referring to the ever-present US interest of selling weapons in conflict zones.
Despite a global ban, the United States has sold the Saudis $640 million worth of cluster bombs over the past two years, some of which have been used to carpet bomb parts of Yemen in the past few days. The cluster munitions were part of an overall $67 billion worth of arm deals with Saudi Arabia since the Arab uprisings kicked off in 2011.
The Iranians, meanwhile, are not doing much of anything, except insisting – like the Russians and others – that the bombardment of Yemen is criminal and that Yemenis need to solve their own problems via an internal dialogue.
And why should they make any moves? The Saudis are digging their own graves right now – and hastening the demise of the entire Neo-Colonial project in the Middle East, to boot.
“Tehran realizes that the fact that Riyadh had to bring together a major coalition to fight a group that is only on the outskirts of Iranian influence is a victory in itself,” says the US-based, conservative risk-analysis group, Stratfor.
Riyadh’s move to attack Yemen has just dragged the not-so-financially-flush Kingdom into yet another military quagmire, and this time directly, bypassing proxies altogether. Every airstrike in Yemen – and it is clear in the first few days that dozens of civilians, including children, have been killed – threatens to draw more adherents to the Houthi cause.
And every day that the Houthis are tied up in this battle, AQAP gets an opportunity to cement its hold elsewhere in the country. The net winner in this conflict is unlikely to be Saudi Arabia, but it may just be al-Qaeda – which is guaranteed to draw the Post-Colonial Axis into the strategically vital waterways surrounding Yemen.
The Arab League, under Saudi Arabia’s arm-twisting, just upped the ante by demanding that only a complete Houthi surrender (laying down weapons and withdrawing) would end the airstrikes. This ultimatum leaves very little room to jumpstart dialogue, and shows shocking disregard for the normal goals of military engagement, which try to leave ‘negotiation windows’ open.
It may be that the Saudis, who have rapidly lost influence and control in Syria, Iraq, Lebanon, Oman, and other states in the past few years, have decided to go to the wall in Yemen.
Or it may just be some posturing to create momentum and bolster bruised egos.
But conflict has a way of balancing itself out – as in Syria and Iraq – by drawing other, unforeseen elements into the fray. With all the conflicts raging in the Middle East and encroaching on their borders, the Post-Colonial Axis has been forced to take a stand. And they bring to the field something their adversaries lack: common objectives and efficiency.
This is possibly the first time in the modern Mideast we have seen this kind of efficiency from within. And I speak specifically of Iran and its allies, both regional and external. They cannot ignore the threats that emanate from conflict, any more than the west can ignore the jihadi genie that threatens from thousands of miles away. So this Post-Colonial Axis moves further into the region to protect itself, bringing with it lessons learned and laser-focused common goals.
The Neo-Colonials will hit a wall in Yemen, just as they have in Syria, Iraq and elsewhere. Their disparate objectives will ensure that. The main concern as we enter yet another storm in Yemen is whether a flailing Empire will turn ugly at the eleventh hour and launch a direct war against its actual adversary, the Post-Colonial Axis. The Saudis are a real wild card – as are the Israelis – and may try to light that fuse. When the threat is existential, anything goes.
Yes, a regional war is as much a possibility over Yemen as it was over Syria. But this battle lies on a direct border of Saudi Arabia – ground zero for both violent extremism and the most virulently sectarian and ethnocentric elements of the anti-Resistance crowd – and so promises to deliver yet another decisive geopolitical shift in the Mideast. From Yemen, as from any confrontation between the two global blocs, a new regional reality is likely to emerge: what the Americans might call “the birth pangs of a new Middle East.”
And Yemen may yet become the next Arab state to enter a Post-Colonial order.
Sharmine Narwani is a commentator and analyst of Middle East geopolitics. She tweets @snarwani
It was another difficult week for Israel.
In Britain, 700 artists, including many household names, pledged a cultural boycott of Israel, and a leader of the Board of Deputies, the representative body of UK Jews, quit, saying he could no longer abide by its ban on criticising Israel.
Across the Atlantic, the student body of one of the most prestigious US universities, Stanford, voted to withdraw investments from companies implicated in Israel’s occupation, giving a significant boost to the growing international boycott (BDS) movement.
Meanwhile, a CNN poll found that two-thirds of Americans, and three-quarters of those under 50, believed the US foreign policy should be neutral between Israel and Palestine.
This drip-drip of bad news, as American and European popular opinion shifts against Israel, is gradually changing the west’s political culture and forcing Israel to rethink its historic alliances.
The deterioration in relations between Israel and the White House is now impossible to dismiss, as Israeli prime minister Benjamin Netanyahu and President Barack Obama lock horns, this time over negotiations with Iran.
The US was reported last week to be refusing to share with Israel sensitive information on the talks, fearful it will be misused. A senior Israeli official described it as like being evicted from the “deluxe guest suite” in Washington. “Astonishing doesn’t begin to describe it,” he said.
The fall-out is spreading to the US Congress, where for the first time Israel is becoming a partisan issue. A growing number of Democrats have declared they will boycott Netanyahu’s address to the Congress next month, when he is expected to try to undermine the Iran talks.
Things are more precarious still in Europe. Several leading parliaments have called on their governments to recognise Palestinian statehood, and France rocked Israel by backing just such a resolution recently in the UN Security Council.
Europe has also begun punishing Israel for its intransigence towards the Palestinians. It is labelling settlement products and is expected to start demanding compensation for its projects in the occupied territories the Israeli army destroys.
This month 63 members of the European Parliament went further, urging the European Union to suspend its “association agreement”, which allows Israel unrestricted trade and access to special funding.
None of this has gone unnoticed in Israel. A classified report by the foreign ministry leaked last month paints a dark future. It concludes that western support for the Palestinians will increase, the threat of European sanctions will grow, and the US might even refuse to “protect Israel with its veto” at the UN.
Israel is particularly concerned about the economic impact, given that Europe is its largest trading partner. Serious sanctions could ravage the economy.
One might assume that, faced with these drastic calculations, Israel would reconsider its obstructive approach to peace negotiations and Palestinian statehood. Not a bit of it.
Netanyahu’s officials blame the crisis with Washington on Obama, implying that they will wait out his presidency for better times to return.
As for Europe, Netanyahu blames the shift there on what he calls “Islamisation”, suggesting that Europe’s growing Muslim population is holding the region’s politicians to ransom. On this view, the price paid for the recent terror attacks in Paris and Copenhagen is Europe’s support for Israel.
Instead, Netanyahu has begun looking elsewhere for economic – and ultimately political – patrons.
In doing so, he is returning to an early Israeli tradition. The state’s founders were inspired by the collectivist ideals of the Soviet Union, not US individualism. And in return for attacking Egypt in 1956, Israel was secretly helped by Britain and France to build nuclear weapons over stiff US opposition.
In response to recent developments, Netanyahu announced last month that he was courting trade with China, India and Japan – comprising nearly 40 per cent of the planet’s population.
Last year, for the first time, Israel did more trade with these Asian giants than with the US. Much of it focused on the burgeoning arms market, with Israel supplying nearly $4 billion worth of weapons in 2013. A region once implacably hostile to Israel is throwing open its doors.
India, plagued by border tensions with Pakistan and China, is now Israel’s largest arms purchaser – and such trade is expected to expand further following the election last year of Narendra Modi, known for his anti-Muslim views.
He has lifted the veil off India’s growing defence cooperation with Israel, one reason why Moshe Yaalon last week became the first Israeli defence minister to make an official visit.
Ties between Israel and China are deepening rapidly too. Beijing has become Israel’s third largest trading partner, while Israel is China’s second biggest supplier of military technology after Russia.
Last month the two signed a three-year cooperation plan, with China keen to exploit – in addition to Israel’s military hardware – its innovations on solar energy, irrigation and desalination.
Emmanuel Navon, an international relations expert at Tel Aviv University, claims that, despite its poor public image, Israel now enjoys a “global clout” unprecedented in its history.
Israel’s immediate goal is to future-proof itself economically against mounting popular pressure in Europe and the US to act in favour of the Palestinian cause.
But, longer term, Israel hopes to convert Chinese and Indian dependency on Israeli armaments – based on technology it tests and refines on a captive Palestinian population – into diplomatic cover. One day Israel may be relying on a Chinese veto at the UN, not a US one.
As of February 15, only a month and a half into 2015, there have been at least 136 individuals killed by police in the United States since the first of the year.
The frighteningly high number averages out to three killed per day, or someone killed every eight hours. While there is no government-run database, Killed By Police has taken it upon themselves to keep track, and are doing a fantastic job thus far.
Just to put things into perspective, let’s take a look at the rates at which police in other countries kill their citizens.
Let’s look at our immediate neighbors to the north, Canada. The total number of citizens killed by law enforcement officers in the year 2014, was 14; that is 78 times less people than the US.
If we look at the United Kingdom, 1 person was killed by police in 2014 and 0 in 2013. English police reportedly fired guns a total of three times in all of 2013, with zero reported fatalities.
From 2010 through 2014, there were four fatal police shootings in England, which has a population of about 52 million. By contrast, Albuquerque, N.M., with a population 1 percent the size of England’s, had 26 fatal police shootings in that same time period.
China, whose population is 4 and 1/2 times the size of the United States, recorded 12 killings by law enforcement officers in 2014.
Let that sink in. Law enforcement in the US killed 92 times more people than a country with nearly 1.4 billion people.
It doesn’t stop there.
From 2013-2014, German police killed absolutely no one.
In the entire history of Iceland police, they have only killed 1 person ever. After exhausting all non-lethal methods to detain an armed man barricaded in his house who actually shot 2 police officers, police were forced to take the 59-year-old man’s life. The country of Iceland grieved for weeks after having to resort to violence.
Unofficially, it seems that American police kill more than all of the first world nations’ police departments combined!
That’s not the only mind-blowing perspective either. So far this year all cop killers have been other cops. This year the police seem to be far more likely to die as a result of police brutality than at the hand of a violent suspect.
Just last week an officer responding to a domestic disturbance at a North Texas residence, shot and killed off-duty sheriff’s deputy Larry Hostetter, 41, shortly after midnight.
At the end of January, we also reported on a Yonkers police officer who shot a suicidal officer from another precinct, claiming he feared for his safety. We also reported on an undercover Albuquerque police officer who was shot by another officer during a drug bust over $60 worth of meth. The media called it a “tragic accident” while, in reality, it was another example of police shooting someone who poses no threat to them.
There was also John Ballard Gorman who was shot and killed by a fellow officer during a training exercise in Tunica, MS last month. The officer who shot Gorman failed to switch out his weapon for a training weapon and fired a real round into his fellow officer, killing him.
According to the Officer Down Memorial Page, the pro-police site that tracks every officer death, not a single police officer has been killed by a suspect so far this year.
Line of Duty Deaths: 14
Automobile accident: 5
Heart attack: 4
Struck by vehicle: 2
Vehicle pursuit: 1
9/11 related illness: 1
Gunfire (Accidental): 1
In fact, being a police officer isn’t even close to being in the top 10 most dangerous jobs in this country. According to the 2013 report by the Federal Bureau of Labor Statistics on work-related fatal injuries, “Police and sheriff’s patrol deputies” ranked as the 41st most dangerous occupation.
Also, according to an FBI report, Americans are less violent than ever; its the police who have been increasingly violent.
With job related danger so low, there is no excuse for the police to be so trigger happy, acting like they are Batman and every citizen is a violent villain hell bent on their death.
As Liberation News pointed out, a vast majority of those killed by the police in 2015 have again been young African Americans and Latinos. The two youngest were both 17-years-old, Kristiana Coignard of Texas and Jessica Hernandez of Colorado. The oldest was 87-year-old Lewis Becker from rural upstate New York.
Officers who cannot bring 17-year-old girls or 87-year-old men into custody safely have absolutely no business “protecting and serving” anyone. A person who cannot control a situation with a 90 pound high school girl or an elderly gentleman, and “fear for their life” so severely that they need to pull a trigger, is not a hero, they’re a coward.
It is time for the United States to get over its love affair with idolizing the badge.
Li Hui, Ambassador Extraordinary and Plenipotentiary of the People’s Republic of China to Russia (RIA Novosti/Andrey Stenin)
China’s ambassador to Moscow Li Hui says even though the ruble has lost more than 17 percent of its value this year it won’t significantly affect China-Russia trade and cooperation.
“It is understandable that the devaluation and volatility of the ruble have a certain influence on Chinese-Russian trade, especially with the considerable exchange rate risks for export companies that have signed agreements in Russian rubles, but the devaluation of the ruble doesn’t have much effect on the large-scale trade partnership between China and Russia,” Li Hui told RIA Novosti in an interview.
The value of the Russian ruble started to slide again after the Central Bank of Russia decided on Friday to cut the key rate by 200 basis points to 15 percent. The currency was trading at 70 against the US dollar on the Moscow Exchange at 2:00PM MSK Monday.
In 2014, the ruble lost almost a half its value against the dollar due to plummeting oil prices and Western economic sanctions.
According to Li, regardless of the devaluation of the ruble and falling oil prices, Russia and China still believe in “growth despite existing trends.”
“I believe that we can contain and increase the volume of our bilateral trade by using the joint efforts of our government organs and businesses,” Li added.
Russian Deputy Prime Minister Igor Shuvalov suggests that after the dramatic depreciation the Russian currency would start recovering soon.
The Chinese ambassador said that trading in yuan is very forward thinking, and Russian businessmen are ready to trade in the Chinese currency.
In late 2014, Russia and China agreed a national currency swap deal to shore up the depreciating ruble and said they are working to increase the number of mutual payments in rubles and yuan.
China is Russia’s second-biggest trading partner after the EU, which hit a record $59 billion in the first half of 2014. The two countries are planning to increase bilateral trade to $200 billion by 2020.
The World Seen Through a “Progressive” Western Keyhole versus a Panoramic Lens
One of Castro’s closest comrades, the Argentine-born guerilla Che Guevara, had been in Guatemala in 1954 and witnessed the coup against Arbenz. Later he told Castro why it succeeded. He said Arbenz had foolishly tolerated an open society, which the CIA penetrated and subverted, and also preserved the existing army, which the CIA turned into its instrument. Castro agreed that a revolutionary regime in Cuba must avoid those mistakes. Upon taking power, he cracked down on dissent and purged the army. Many Cubans supported his regime and were ready to defend it. (Emphasis, jw)
The stark choice that confronted Castro and Guevara is faced by every nation seeking independence from the U.S., a far more powerful nation with enormous resources in terms of “soft” power, economic power and military power. The more open the society, the more opportunities for CIA-engineered regime change. This was the lesson Arbenz learned in 1954 and Mossadegh before him in 1953, lessons that brought so much pain, death and destruction to their peoples in the decades to follow.
Judged by that outcome, the Castros made the right decision and as a result have presided over a healthy, educated and secure people. The drawback was that the Empire isolated Cuba economically, stifling the possibilities of more development and a higher standard of living. The Empire wants nations charting an independent course to be politically open to the regime change schemes and NGOs of the West but economically closed, shut off from more advanced economies. It is as simple as that.
For some defiant states the sort of regime change operation used against Mossadegh and Arbenz may be the only option which the United States has. This is certainly the case for China and Russia. All out war on these countries is out of reach – although the U.S. is trying to change that. The modus operandi of the Empire for the moment is to put Russia and China on the horns of tried and true dilemma. Open up politically, permit the development of forces that favor regime change – or remain less open and face criticism, especially criticism from Western governments and Western intellectuals, including the “progressive” or liberal intellectuals. This is crucial because “progressives” are the very people who – until Obama – were most likely to oppose imperial warfare – both military and economic. The Democracy Crusade is designed to neutralize them.
This criticism from the West is one lever, and an important one, that is used to force a society to be more open in its governance than its survival permits. Let us be clear. Without a rapacious West at the doorstep, the possibilities of openness and democracy are much greater in scope. Conversely, the more rapacious the West, the more restricted are the possibilities for a besieged nation if it wishes to survive and prosper with its sovereignty intact. Without sovereignty there can be no democracy. Rule conditioned on approval by a foreign source or by a puppet regime is never self-rule. So it is never democracy.
It follows that the best way to crusade for openness and democracy is to work against Western interventionism, whether that interventionism takes the form of armed attack, economic sanctions or the work of NGOs like the NED (National Endowment for Democracy). This is absolutely crucial to understand. A criticism of a besieged country will increase the pressure on that country and hence lead to a decrease in political openness. Paradoxically, this is true even if the criticism is one that calls for more democracy.
The recent events in Hong Kong are but the latest example of this dynamic. There the NED had long been actively involved in promoting “democracy,” along with other U.S. NGOs and the U.S. Consulate, with its staff of 600. These forces recruited very young “activists,” with high school students at the forefront. (A Chinese friend of mine noted with disgust that easily manipulated high school students were also in the forefront of the Cultural Revolution.) The movement sought elimination of the screening of candidates by a committee of 1,200 Hong Kong residents for the next election of the CEO, a position akin to governor. The composition of the committee was open to negotiation. (It went unmentioned in the West that there was no election when Hong Kong was a colony of the UK. The governor was appointed by the Queen – period. It also went unmentioned that there is a similar sort of “screening” of candidates in the U.S., with the major parties serving in the role of screeners. If you do not believe that, ask the Greens or the Libertarians or Ralph Nader.) Most importantly the leaders of the movement and their U.S. backers made no secret of their hope that the disturbances in Hong Kong would spread to the mainland and provoke a movement against the Chinese government. They are advocates of regime change in China as are their mentors at the NED.
What has the current government of China, led by its Communist Party, done for China? It has led China out of colonial domination by the West. It has forged a level of economic development with a rapidity unseen before in all of human history. It has ended poverty for 600 million people and continues on the quest to raise millions more out of poverty. For the world it has meant a power, China, which is sufficiently strong to provide a multipolar world. That in turn means that the countries of the world have an alternative to Western domination, which has been the fate of most of the world for hundreds of years. Russia and Iran, for example, can trade with China when the West slaps sanctions on them. As a result at this moment there is the possibility of genuine decolonization (or de-neocolonization, if you will) – after centuries of the planet’s domination by a small fraction of the world’s population.
In short, the current government of China is the agent of the most stunning defeat of Euro-American colonialism that the world has seen to date. After all the Chinese are almost one-fifth of humanity. One would think that this fact would be part of the evaluation of Western progressives when they looked at the Hong Kong affair. With few exceptions it was not. And this is a big problem. The world is going through a major upheaval as colonialism and neo-colonialism are suffering major defeats. That upheaval, that shift, is a lens through which Western “progressives” should look at the world. They rarely do. In failing to do so, they see the world through the ideological eyes of the West, that is, “the 1%“ at the top of the heap (or at least the 10%) if one may put it that way. China has achieved what the West hates most. It is relatively closed politically to the intrigues and machinations of the West – but economically open. This is the recipe for sovereignty and development.
The difference between the two views is the difference between looking at the world through a panoramic lens, with history in the background, and looking through a keyhole. In the latter case of tunnel vision one may only see a patch of grey through the keyhole, whereas a mighty elephant stands beyond the door.
Afterthoughts: Old China Hand. One “progressive,” and an “Old China Hand” to boot, even charged the minority on the Left with “neocolonialist” attitudes when they criticized him for siding with the NED in Hong Kong. He claimed that the dissidents in Hong Kong were too sophisticated, too “smart,” to be taken in by the NED, NID, U.S. Consulate officials and other detritus with whom they regularly consort.
But what about the cases where we now know that the CIA et al successfully deceived the population – sufficiently to overthrow an anticolonial government, as with Mossadegh or Arbenz or Allende? Does Old China Hand mean to say that the people of Iran or Guatemala or Chile were “stupid”? And is that not neocolonialist arrogance? No, Old China Hand is defending tunnel vision, the view through the keyhole, not the people of Hong Kong. And if ever there were an unwitting agent of neocolonialism, it is sadly the likes of Old China Hand.
John V. Walsh can be reached at email@example.com.
Credit rating agencies are predicting quite a storm for the Russian economy, and they are therefore threatening to lower the country’s status to ‘junk’ level. Just as a weatherman may be incorrect about their storm predictions, so too may a ‘financial meteorologist’, except the latter has ulterior motives in doing so.
S&P has joined Moody’s in launching an attack on the Russian economy, hoping that the threat of lowing Moscow’s credit status will somehow translate into political changes in Eastern Europe. Although such an idea may seem plausible in theory, in practice it’s absolutely disjointed from reality and merely symbolizes the third wave of the economic war on Russia. This coming economic storm, cooked up in the West, is going to come up against the multipolar storm breaker of Russia and China’s own Universal Credit Rating Group (UCRG), expected to become active later this year. When the waves inevitably crash, the West may find that it has unwittingly and irreversibly damaged its own unipolar economic defenses and opened up a flood of multipolarity.
The Third Wave
There have thus far been two major waves of economic warfare waged against Russia, with the third one well on its way. They are as follows:
The US and the EU enacted selective and then generalized sanctions against the Russian economy and certain individuals, apparently under the false belief that Russia is Zimbabwe and can somehow be bullied via these means. They weren’t successful in this attempt and thus decided to escalate the conflict to the next level.
This wave brought about the oil and currency war against Russia, opening up a Pandora’s Box of repercussions that may unintentionally spell the end of fracking in the US (or at least its suspension), among other things. Nonetheless, the main objective here was to destroy what is inaccurately viewed as the lynchpin of Russia’s economy (oil and gas) and create the conditions necessary for a Color Revolution. As with the first wave, the second one also failed to achieve its goals.
Enter the third wave, which is what Russia is on the cusp of experiencing. The strategy here is to use institutional ratings agencies to damage Russia’s international economic reputation in the hopes that this can help ‘isolate’ it from the non-Western markets that it has recently (and quite eagerly) engaged. This plan is dead in its tracks, since Russia’s rating was worse in 2005 but it was consistently growing at around a 7% average during the period 2000-2008, showing the inherently political (and economically ineffective) nature of Western ratings.
The Multipolar Storm Breaker
Shielding Russia and the multipolar world from the West’s politically minded economic ‘ratings’ is the formation of an alternative agency constructed in cooperation with China, the Universal Credit Rating Group (UCRG). This forthcoming buffer, if it can build the necessary trust and objectivity, could realistically help the non-West weather the oncoming ‘financial storm’ that the Western agencies are all hyped up about.
The underlying idea behind this initiative is that the West has a unipolar monopoly on all manners of international ‘ratings’, be it economic, political stability/fragility, or terrorism. Given that there is a realistic and clearly discernable trend towards geopolitical multipolarity, it’s natural that this would eventually transition over into the economic sphere. The BRICS Bank and China’s Asian Infrastructure Investment Bank are examples of this, with the UCRG being the next institutional progression. If the non-West can free itself from the subjective ‘ratings’ and dictates of Western institutions, then it will be at liberty to pursue multipolarity as it sees fit.
When The Waves Finally Crash
The ‘financial meteorologists’ may be in for a surprise when their politically constructed storm hits the multipolar breakers, as the resultant back-splash may reverberate with unintended consequences. Although it is still a relatively far time away in the future, especially considering the rapid and somewhat surprising transformations that have been taking place in all spheres over the past couple years, an increasingly possible scenario is beginning to take shape, and that’s the macro-structural division of the world into entities (not necessarily states) supporting the retention of the unipolar world and those advocating the construction of the multipolar one.
This is seen in all spheres (as was earlier touched upon), and the creation of the UCRG, especially given the current ‘New Cold War’ context, must be understood as being the next logical extension of this. As the world divides itself into either the pro- or anti-multipolar camp, the emerging dichotomy will come to define international relations for the entire century or until one side capitulates. Given this dynamic, it is a very realistic possibility that certain states will ‘switch sides’, just as occurred during the ‘Old Cold War’, either by force (whether covert or overt) or by choice.
Something that may sway various states towards multipolarity could be the creation of regional agencies and institutions to complement inter-regional (‘Greater Multipolarity’) ones, for example, a credit ratings institution specifically for Latin America. Likewise, if the unipolar world continues its political designations of supposedly impartial topics such as the economy and does so in favor of geostrategic on-the-fence states, it could find itself gaining new allies. No matter how things play out, though, it’s evident that a global competition is definitely taking place between the unipolar and multipolar worlds, and that this is being fought on all levels, including the financial institutional one described within this article.
The West is poised to launch the third wave of its asymmetrical economic war against Russia, but it’s predictably bound to fail in inflicting the damage it has in mind. Russia and China, the two anchors of the multipolar world via the Russian-Chinese Strategic Partnership, are taking the initiative in creating an alternative institution to counter the West’s politically motivated economic ratings. This creates more openings for the actualization of full-spectrum multipolarity, whereby this concept makes the leap from the geopolitical to the institutional, with the long-term potential of rivaling (and perhaps unseating) the West’s ‘supremacy’ in the targeted fields. Importantly, however, this entire episode portends the division of the world into two camps, with the unipolar and multipolar worlds slated for their inevitable face-off sometime later this century.
The UK government has refused to reveal whether the National Security Council approved or discussed China’s investment in a proposed £24.5 billion nuclear power plant in the UK, Hinkley Point C, citing “national security.”
Despite a BBC Freedom of Information request for information regarding China’s expected 30-40 percent stake in the new nuclear site in southwest England, the government denied further disclosure.
Cabinet Office official Roger Smethurst told the BBC: “There is a general public interest in disclosure of information and I recognize that openness in government may increase public trust in and engagement with the government. There is a definite public interest in members of the public being able to understand decisions taken on investment in critical national infrastructure.”
“I have weighed these public interests against a very strong public interest in safeguarding national security.”
The National Security Council’s job is to review and debate foreign investment projects and then to approve or deny them.
Derek Smith, head of communications for the NSC, told the BBC: “The government has put in place an approach which enables it to assess the risks associated with foreign investment and develop strategies to manage them.”
“The NSC brings together the economic and security arms of the government and is the forum that ultimately balances the risks and opportunities of inward investment decisions.”
In June last year, the government announced the civil nuclear agreement signed by the UK and China, which could be “worth hundreds of millions of pounds to British companies over several years.” This paved the way for Chinese companies to invest in Hinkley Point C.
Energy and Climate Change Secretary Ed Davey said at the time: “China and the UK stand united in our plans for more collaborative working that will help to achieve long lasting energy security in our own countries.”
The plant would be the first overseas venture for the China General Nuclear Power Corp.
Meanwhile, the French nuclear power developer EDF is expected to sign an investment agreement with Chinese partners for the new reactor at Hinkley Point by the end of March, to secure investment for the project.
According to the World Nuclear Association, the UK has 16 operational reactors generating around 18 percent of the country’s electricity. All but one of these will be retired by 2023.
China is reportedly negotiating plans to build four new reactors in Turkey. One-third of the nuclear reactors currently under construction worldwide are in China.
The nuclear plant is not the only UK energy project that China co-finances. The state-owned China General Nuclear Corporation is reportedly prepared to pay £100 million for an 80 percent stake in three UK wind farms.
China is in the midst of its second ‘cultural revolution’ in a half century. While the first (under Chairman Mao Tse Tung) was intended to ‘revitalize socialism’; the current is directed to ‘moralizing’ capitalism.
The first CR was a frontal attack on the hierarchy of power and privilege inside and outside of the Communist Party, launched from above by Mao Tse Tung, but taken up from below by Red Guards in order to bring about a more egalitarian society.
The current ‘cultural revolution’, launched by President Xi Jinping, is directed at ending widespread corruption, theft and pillage of the Chinese economy and society by high and low officials in government and the capitalist sector.
The two cultural revolutions are linked by Deng Xiaoping, the Chinese leader who officially put closure on the first and set in motion the policies and slogans (“Getting Rich is Good!”), necessitating a second cultural revolution three decades later.
The Socio-Economic Roots of the Cultural Revolution Today
Deng’s call to ‘get rich’ was directed at the Communist Party elite, their family, friends and overseas backers; it was an open invitation to the multi-nationals of the world to freely exploit China’s resources, infrastructure and labor – educated, nurtured and organized through the collective efforts of the preceding Communist regime. Deng ‘liberated’- or privatized – the means of production and rapidly turned public control and appropriation of earnings over to emerging private capitalists. The corollary was the elimination of all social rights, benefits and protections of labor. The dual incentives were designed to maximize private profits in order to attract long-term, large-scale investments and to achieve high growth in the shortest time possible. Deng telescoped a century of growth and exploitation into a few decades.
His strategy succeeded.
Profits soared. By the late 1980’s and early 1990’s millionaires multiplied like mushrooms after a downpour. Then came the billionaires. Aided and abetted by the wholesale privatization of lucrative industries and public lands, a new class of real estate speculators and so-called ‘developers’ emerged , closely linked to corrupt local municipal, regional and national state officials. Millions of peasants were dispossessed and barely (if ever) compensated; hundreds of millions of workers were employed at starvation wages without the free housing, medical care, education, recreational benefits and lifetime employment of the past, socialist system.
China’s GNP exploded at a double-digit rate for three decades – an unprecedented performance. Most of the profits circulated among a narrow elite of party – state officials and capitalists, while a smaller share ‘trickled down’ to middle and low level functionaries. The seizure of public wealth, followed by three decades of intense exploitation of labor and the private land grabbing of farmland and homesteads, spurred the boom in real estate profits and laid the basis for all pervasive and large-scale corruption .The pillage of the public treasury led to large-scale conspicuous consumption – of imported luxury goods, multi-tiered mansions in gated communities, multiple purchases of luxury condos for offspring, mistresses and bribe-takers and givers.
By the mid 2000’s the concentration of wealth, property and privilege had reached astronomical heights: hundreds of billions accrued to the top 2%, millions to the top 10%, and hundreds of thousands to the top 15% – the self-styled ‘middle class’ who thrived on lesser but equally pervasive corruption and theft and who aped the elite and imitated their life style of luxury consumerism.
Beginning in the mid-2000s, hundreds of strikes by exploited factory workers demanded and secured higher wages; millions of households, farmers and peasants fought against municipal party officials, linked to real estate capitalists, who were attempting to ‘grab’ their land, homes and neighborhoods. Hundreds of millions of Chinese in the countryside protested exorbitant medical and educational costs, induced by the privatized health and educational system, which had bankrupted millions of households. They quickly became aware of the luxurious private medical facilities and specialized clinics for the rich -capitalists and corrupt officials. The internal migrant workers, who built the hyper-luxury condos and mansions, lived in paper shacks, far from the twelve-course banquets celebrating the ‘grand openings’ by business swindlers and ‘bought officials’. As wealth grew among the elite, so did the people’s hostility and rejection of the Party and the State, which they personified.
The ever-cautious klepto-capitalists and public pillagers, fearing for their illicit fortunes, smuggled out enormous wealth. Big swindlers, with big fortunes engaged in massive money laundering while publicly demanding the ‘de-regulation” of the financial sector (i.e. to make it easier to launder and hide their fortunes in overseas accounts). Between 2005-2011 China hemorrhaged over $2.83 trillion in illegal overseas financial outflows.
Part II: The Consequences of Corruption, Pillage and Exploitation
The illicit flow of Chinese wealth overseas resulted from the elite’s savage and illegal exploitation of labor (failure to meet minimum official standards concerning pay, work safety, child labor, excessive hours). Wealth from bribes, kickbacks on government contracts, speculation on illicit seizures of land, and making false invoices overpricing imports and underpricing exports, flowed upward and outward. While China was profiting from double-digit growth the regime could ‘tolerate’ corruption and illicit outflows. However, by the beginning of the second decade of the 21st century, when China’s economy de-accelerated to about 7 – 7.5%, the regime became less tolerant of wholesale corruption accompanied by capital flight.
Moreover, the new billionaires, millionaires and affluent middle class indulged in what Thorsten Veblen described as “conspicuous consumption”, the purchase and ostentatious display of superfluous luxury products as status symbols of “success”. According to a Special Report on “Luxury” in the Economist (12/13/14, p.8 -10) “nearly one-third of all personal luxury goods sold worldwide are bought by Chinese consumers.” Since the global crises of 2009, 70 – 80% of global growth in the (luxury) sector has come from China.
China’s emerging private-public ruling class has advanced from concentrating wealth, to consolidating political power to seeking prestige and social status – recognition from their domestic and foreign peers. Ideologically, they are decidedly neo-liberal and pro-Western – as evidenced by the billions they spend in the top-end real estate markets of North America, Europe and Australia as well as the millions they spend on their pampered offspring for ‘elite’ private education. Their children live in half-million dollar condos in Cambridge, Massachusetts, Oxford and Cambridge (England), Toronto and Vancouver (Canada), Sydney and Melbourne Australia. The Chinese oligarchs “make the market” for six-figure Swiss watches, five figure handbags and four digit French cognac.
Corruption, conspicuous consumption and class polarization has delegitimized the ruling Communist Party elite in the eyes of the great mass of the Chinese working class, as well as the professionals and salaried employees who make-up the lower middle class.
The ‘political rot’- the privileged social networks derived from kinship ties-is leading to a relative closed ruling class – excluding the mass of urban workers and rural peasants, with potentially explosive social consequences.
Already thousands of local protests, strikes and other forms of direct action occur every year, even as they are repressed or resolved.
In addition to the social and political dangers resulting from the massive illegal, ‘squandering and theft of wealth’, the illicit outflow of wealth is undermining domestic investment and productive overseas investments, and corruption is preparing the way for stagnation and financial crisis.
The stars are lining up for a ‘perfect political storm’ – which has unfolded in the form of President Xi Jingping’s launch of China’s second cultural revolution (CR).
Xi Jingping’s Cultural Revolution
From the start of the 2nd CR in 2012 to mid-2014, the Chinese Communist Party’s internal corruption body has prosecuted and punished 270,000 cadres. That figure includes both the “tigers” (high officials) and the “flies” (low level functionaries). “Over three dozen officials with ranks of ministers or above, including former security Tsar and Politburo Standing Committee member Zhou Yongkang”, have been arrested and jailed (Financial Times 12/4/14, p. 4). Earlier, the former Railways Minister was arrested and sentenced to death for rigging contracts worth about $26 billion dollars over his seven-year tenure. Hundreds of thousands of private business people, paying bribes, have been arrested and sentenced.
President Xi’s campaign has attacked bribes, ‘gift giving’, frequent ostentatious banquets serving expensive delicacies, and high Party officials’ lodging in five star hotels for weeks on end, ostensibly “tending to business”, but more frequently ‘cavorting with their mistresses’.
To be precise, President Xi is attacking the triple evils of corruption, conspicuous consumption, and pillage of public wealth. The new austerity agenda and the public revelations of ill-gained wealth are focused on exposing public officials and private business people in order to regain public legitimacy. And it is succeeding,…. as far as it goes. Public indignation at the revelations is matched by high approval for the Xi leadership’s anti –corruption campaign.
What makes this far more than just a “power struggle among privileged elites” as the Wall Street Journal and the Financial Times have routinely claimed, are: 1. the duration of the campaign of over 2 years, 2. the scope of the campaign, covering top officials and Chinese business equivalents of Wall Street moguls, 3. The nature of the punishment including long prison terms and even death sentences (rather than the mere ‘slap on the wrists and paltry fines’ that US regulators have given to Wall Street’s billion-dollar swindlers), and 4. the ongoing nature of the process. The sweep and magnitude of Xi’s campaign has all the makings of a ‘cultural revolution’ – not the episodic ‘blowing off steam’ or ‘scapegoating of rivals’ described in the Western press.
The Nature of Xi’s Cultural Revolution
Xi’s ‘cultural revolution’ is directed and driven from above – established legal authorities are in charge – the masses are excluded, and preemptory justice is eschewed: regular court proceedings decide guilt and sentencing.
Secondly, Xi’s ‘cultural revolution’ does not, in any way or place, call into question capitalist property relations, foreign investors, or large-scale inflows and outflows of investment or legally registered speculative capital. Nor has Xi called into question existing capital-labor relations.
Xi’s ‘cultural revolution’ is an attempt to sanitize existing capitalist relations, and to infuse a new capitalist ethic. He wants to ‘revise’ Deng’s famous precept “Getting Rich is Good” to read “Get Rich Lawfully . . . or Face Jail”. China is rated number 100 out of 175, on a corruption scale published by Transparency in 2014 (Financial Times 12/4/14, p. 4). Xi’s war on corruption is based on the premise that corruption undermines China’s status as a global power – it ranks with Algeria and Surinam. Secondly, Xi hopes that he can ‘reform’ the public sector in order to privatize it and he wants the sale to go to the highest bidder, not the biggest bribe giver.
His campaign attacks privileged elites, who accumulate and dispose of wealth illegally but he has never sought to diminish the class system, the hierarchy and inequalities which concentrate political power and forms the basis of corrupt bribe giving and taking.
Xi’s ‘cultural revolution’ is continuing and corruption may lessen. Ostentatious public spending is declining. But this layer of ‘new morality’ is spread thinly over a system of power that can easily revert to the ‘old system’ once the ‘revolution’ ends.
Xi’s noteworthy ‘cultural revolution’, the moralization of public administration and private capitalism, can only succeed if it is accompanied by a social transformation: ethics at the service of social justice and equality and by a democratization of the economic decision-making process. The problem is that Xi, by family, social ties and political allegiances is deeply embedded in a milieu which absolutely rejects any such ‘deepening’ of Xi’s ‘cultural revolution’.
His cultural revolution is strictly guided by a singular objective: to force ‘morality’ on the ‘captains of capital’ in order to facilitate the smooth transition to fully liberalizing China’s economy. President Xi, along with his anti-corruption campaign, is steadily loosening state control over foreign financial investments in Chinese stocks and financial sector; he is moving strongly to expand China’s overseas investments; he is accelerating the privatization of public enterprises and increasingly opening financial services to Wall Street and the City of London. He is also internationalizing the use of the yuan-the Chinese currency- in global transactions, displacing the dollar.
In other words, his cultural revolution is a bridge to a new stage of Chinese capitalist expansion; it will lessen the crude open plunder of the public treasury, but it will not lessen the exploitation of labor nor slow the increasing concentration of wealth and privilege. That will require a different kind of ‘cultural’ revolution- one led from below by workers, peasants and salaried employees. A real ‘cultural revolution’ that realizes the ethical ideals of ‘good government’ through a transformation of class relations.
Xi’s anti-corruption campaign confirms what many workers already knew – but it also unmasks the systemic decay and forges an elementary class consciousness: counter-posing honest, hardworking workers to corrupt privileged oligarchs. Xi is aware of the danger that his campaign could ignite a popular fire: That is why he has kept a tight hold on the process. He is trying to navigate the liberal capitalist transition around the shoals of existing capitalist rot without arousing mass unrest.
Economic ties appear to be at the top of the agenda, as Egyptian President Abdel Fattah al-Sisi prepares for a state visit to China this week.
At a December 18 press briefing for Chinese official media, Sisi announced, “we are looking forward to developing our strategic relations with our friends in China,” reported Xinhua news agency.
“Cooperation between Egypt and China is not new, and the purpose of the visit is to confirm and develop this cooperation and discuss Chinese investment chances in Egypt,” the president reportedly added.
During the visit, which is scheduled to run from December 22 to 25, officials expect to sign 25 bilateral agreements, mostly concerning economic and investment plans, according to Egypt’s State Information Service.
The president’s visit is preceded by a delegation including the ministers of trade and industry, transport and international cooperation. The delegation set off for Beijing on December 19, and is scheduled to meet with Chinese companies interested in investing in Egypt. They are also set to discuss ways of boosting trade, investment and cooperation in industry and transport.
Trade between Egypt and China was worth around US$10 billion in 2013, a figure officials expect to exceed $11 billion in 2014. However, the balance of trade is overwhelmingly in favor of China. Egypt’s exports to China have historically made up around 10 percent of the total trade volume.
China’s investments in Egypt amount to $8.4 billion, according to The China Global Investment Tracker, a project of the US based Heritage Foundation. These investments include the North West Suez Special Economic Zone, a joint Egyptian-Chinese venture near Ain Sokhna. The project is part of a 2006 plan by China to internationalize its economy by developing 50 such zones in strategic locations around the world.
Sisi is hoping to increase investment and boost exports to China during his visit, which comes ahead of a March summit for international investors in Egypt. As a sign of the state’s hopes for Chinese involvement in the summit, one potential date was nixed due to a conflict with the Chinese New Year holiday.
During his meeting with the Chinese press, Sisi mentioned the Suez Canal Development Project as a potential area for Chinese investment, as well as plans to redevelop Egypt’s road network.
Sisi’s predecessor, Mohamed Morsi, made a similar state visit to China in 2012. For his first state visit outside of the MENA region, Morsi traveled to Beijing, along with a delegation of seven ministers and 80 businessmen. Whilst he was there, China agreed to grant Egypt US$69 million in development assistance, and to facilitate access to a multi-billion dollar credit line for development projects in Africa. Private companies claimed to have secured billions of dollars worth of deals.
At the time, Morsi’s decision to visit China was viewed as an assertion of independence from the United States and other Western powers.
Despite its hostility to the regime it ousted from power, the Sisi administration appears to be continuing this policy, courting aid from foreign powers like Russia and China, as well as from the United States and its allies in the Arab Gulf.
Sisi has praised China, in particular, for separating economic aid from political issues. “China has balanced policies and does not interfere in other countries’ domestic affairs, which is one of the reasons for China’s success,” Xinhua quotes Sisi as saying.
By contrast, Western powers like the United States and the European Union are more likely to tie aid money to human rights and other political concerns. The United States has suspended hundreds of millions of dollars in aid until Egypt can meet democracy and human rights benchmarks, although earlier this month it allowed an exemption in the case of national security interests.